A-B InBev Buys Cutwater Spirits

Dear Client:

Anheuser-Busch InBev is making a big splash in spirits. Today the brewer announced it will purchase Cutwater Spirits. Terms of the deal were not disclosed.

Cutwater Spirits was founded in August 2016 by top brass at Ballast Point after its sale to Constellation Brands in November 2015, including brewer and distiller Yuseff Cherney, founder Jack White, cco Earl Knight and ceo Jim Buechler [see WSD 08-15-2016].

When Constellation purchased Ballast Point, Jack and his partner retained the rights to the spirits brands. So the company started with a pretty hefty portfolio as the Ballast Point spirits, including the likes of Old Grove Gin, Devil’s Share whiskey, Three Sheets rum and Fugu vodka products among many others, were moved under the Cutwater umbrella.

What A-B is most interested in though is Cutwater’s extensive line of canned cocktails, which includes: Fugu Cucumber Vodka Soda, Fugu Grapefruit Vodka Soda, Fugu Lime Vodka Soda, Fugu Horchata Cold Brew, Tequila Paloma, Tequila Margarita, Black Skimmer Whiskey Highball, Black Simmer Whiskey Lemon Tea, Fugu Vodka Mule, Old Grove Gin & Tonic, Spicy Bloody Mary, Mild Bloody Mary, Three Sheets Rum & Ginger and Three Sheets Rum & Cola.

Cutwater is currently available in 34 states through the likes of Young’s Market, Breakthru Beverage Group, Manhattan Beverage among others.

A SLOW BUILD UNDER A-B’S NEW BUSINESS BRANCH. It’s an interesting deal: As A-B’s vp of sales, Brendan Whitworth, explained it to us: “This partnership is part of our Beyond Beer strategy, but it will not be part of our current Beyond Beer organization. … Cutwater is its own entity, killing it by themselves. We’ll help them kill it even more. We’re trying to support and enable where we can, and where it makes sense.”

In fact, Cutwater is one of a handful of brands– including Babe wines and HiBall non-alc energy drinks– to be incubated by their emerging brands division, dubbed “New Business.”

That division is led in part by Marina Hahn, New Business co-founder. (Interestingly, Marina also has former ties to Constellation as well, having been a founder of Svedka vodka.)

WHAT’S CUTWATER GET OUT OF THE DEAL? Marina told us she was “excited for the potential to really nurture and grow this business so that it dominates” the still-nascent RTD category.

Where she says that A-B differs from other companies in incubating business: “We keep the team really tight,” she says, as she and Brendan, who work together on this team, “will be all over this business in ways that will be helpful, but not intrusive.” They have a team dedicated to helping with anything from strategy, to sales and marketing; “whatever gaps” are in their business.

Cutwater chief sales and marketing officer, Earl Knight says: “I’m an OK salesperson, I’m a horrible marketer,” he told us post announcement. But A-B is “really good at marketing.”

“I’ve got, like three marketing people; one guy just mails stuff for me,” says Earl, who is known for his humor.

Beyond that, of course A-B will help with things like chain relationships and execution.

But a huge opportunity includes getting the canned cocktails into more sports venues.

“It’s such a great format for large venues, stadiums, sporting events,” says Yuseff. “A-B folks have a lot of partnerships” there, and there are venues Cutwater has been “struggling to get into.”

But it’s been a no-brainer for many concessionaires, says Earl, who have found that cans provide “ease of execution, controlled ABV, controlled inventory… and they can still make a solid margin on it.”

HOW LONG WILL FOUNDERS STAY ON? Asked if they signed anything stipulating how long they’ll stay on with the brand, Earl joked that he lobbied for a 25-year noncompete. Official announcements ensure that the founders plan to stay on; Marina stipulated that there are indeed “no plans for them to transition off at this time.”

Cutwater founder Yuseff agreed with those sentiments, calling their new team much different from prior partnerships.

As for the question of distributor alignment: The answer seems to be eventually, but not immediately.

SLOW DISTRIBUTOR INTEGRATION. “I think for now, to minimize disruption … especially in core markets, our near-term plan is to not adjust route to market,” Brendan told us. “That said, our overall preference … is to be with A-B wholesalers” in the longer term.

But they won’t be making it at A-B.

Indeed, the Cutwater facility is a 50,000 square foot destination in Miramar, which includes a 250- seat tasting room, complete with restaurant and tours.

BECOMING A GLOBAL SPIRITS COMPANY FROM ORIGINAL MIRAMAR LOCATION. “We already had equipment on order prior to this deal being on works to expand production, and we’ve got a few tricks up our sleeve to get even more production outta what we have here with minimal added equipment,” said Yuseff. As it stands they’re setup to become what Earl calls “an emerging global spirits company.”

Marina echoed that sentiment, calling their current space an unparalleled “spiritual home” and embodiment of the brand. As a consumer touchpoint, “that’s a huge advantage to distinguish them from any other spirits company as we build this thing into powerful lifestyle brand.”

WSD BRIEFS:  

DISTILL VENTURES NAMES NEW INVESTMENT DIRECTOR. Drinks incubator program Distill Ventures has expanded its North American team, adding Nicolas Proszenuck as investment director. In his new role, Nicolas will lead new investments in North America and work with the existing portfolio, per a release. “As we continue to bring new entrepreneurs into the DV portfolio and nurture existing brands, Nicolas will play a vital role in ensuring we create the best possible partnerships and outcomes for our brands,” says founder and managing director Gonzalo De La Pezuela.

MUNDOVINO TO IMPORT BODEGAS VOLVER. MundoVino, a division of Winebow Imports, has been named the exclusive the US importer of Spanish producer Bodegas Volver. MundoVino will import the following wines: Volver, Tarima, Tarima Hill, Triga, Paso a Paso, Venta Morales, Juntos Merlot, Wrongo Dongo and Madame Bobalu.

TRINCHERO FAMILY ESTATES EXPANDS LUXURY IMPORT PORTFOLIO WITH SPANISH PRODUCERS. Trinchero Family Estates expanded its luxury import portfolio with Spain’s Finca Allende, Finca Nueva, Quinta Sardonia and Terras Gauda, supported by TFE’s Heritage Division. TFE will be their exclusive import, distribution and marketing representative in the US, per a release. The wines will be available in select retailers and restaurants starting next month.

WINE BY JOE ADDS TO CANNED WINE LINEUP. Wine by Joe is expanding its canned wine line, Joe to Go, with pinot noir. Joe to Go now includes pinot gris, rose and pinot noir. The cans are available at $7 a 375 ml. In addition, Joe to Go is also expanding distribution to 32 markets. The company’s portfolio is distributed nationally through a partnership with Delicato Family Wines.

Until tomorrow,

Sarah

“Every man has his follies – and often they are the most interesting thing he has got.” – Josh Billings   

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