Brewbound Frontlines: Ballast Point Leaders Discuss Taking Over Operations During a Pandemic

Justin Kindle [00:13] Hey everyone. Welcome back to Brewbound Frontlines, our weekly live stream check-in with beer industry leaders on the moves they're making in this ever-changing business climate caused by COVID-19. I am Justin Kindle and I am the editor of Brewbound, and I am joined by my colleague on this socially distant social hour, Jess Infante. Jess, uh, break the sad news to the people.

Speaker 2 [00:38] So this is the last time you'll get to gaze upon my mom's pineapple wall, cause I am going back to my house in Massachusetts this weekend, much to my husband's delight. It's been a month.

Justin Kindle [00:49] You just might beat the 14-day quarantine deadline if you do that.

Speaker 2 [00:54] Oh, we, so New Jersey is allowed in mass. Almost no one else though, yeah. All

Justin Kindle [00:59] right, well, we, we will be happy to welcome you back. We're happy you all joined us. Crack, crack open a pineapple sculpin because we're about to talk all about Ballast Point today. Many industry watchers know where they were last year when they received the message that kings and convicts were acquiring ballast point from Constellation Brands. I know where I was. I was in the middle of the street in Santa Monica, and I got a text that read, Who the fuck are kings and convicts? Well, they're here today. Joining us are Brendan Waters, the CEO of Ballast Point. Thanks for being here, Brendan.

Speaker 3 [01:40] Thank you very much. Good to be here.

Justin Kindle [01:43] And Chris Bradley, the CEO of Ballast Point, thanks for being here, Chris. Thanks a lot. This is great. To our viewers out there, if you have a question for these guys, shoot us a text at 617-336-8560. That number again is 617-336-8560. We will get them answered for you. So text us. Uh, before we get to today's show, we've got a couple of things that we gotta get out of the way, some, uh, housekeeping, if you will. On August 27th, Brewbound will be hosting its next Brewals virtual meetup presented by Dogfish Head. We're gonna do it right here in this space. Uh, it's gonna be two hours though, and we're gonna have two big panel discussions. Dogfish Head founder Sam Caledonia will be here. He'll be on one of the panels. On the other panel, we'll have the leaders from the Brewers Association, the National Beer Wholesalers Association, and the Beer Institute. They're all gonna be talking about how we've made it through the last 6 to 7 months of COVID-19, uh, what the future is gonna hold. The leaders from the trade groups, they'll discuss the federal excise tax relief, which is gonna sunset at the end of the year. So those efforts are very important. You can register for free on Brewbound.com. So hit up that link, register at Brewbound.com for free. Also, an in-house note, Rebound is moving to a paid subscription model in the very near future. Look, just like all of you, this pandemic has hit our business hard. In the past, we were able to provide our daily coverage of this great industry for free, because our company's revenue was and continues to be driven by events. COVID-19, uh, really put a damper on those things. And so, our parent company, Bednet has had to make some changes, and we hope you'll all come along for the ride and continue to support us. Uh, we would really appreciate it. It will keep pineapples on Jess's walls, oh, so, please consider a subscription. And Jess, why don't you plug next week?

Speaker 2 [03:55] Yeah, next week we've got a great show. Uh, we've got two different topics. So first we're going to have Dave Bracy, who's the founder of Freshfest. It's the country's first black beer festival. Happens every year in Pittsburgh. Uh, Dave will be joining us to talk about the event. Day is also. Uh, a podcaster, columnist, comedian, he's probably one of the funniest people, uh, adjacent to the beer industry. So definitely come check him out. And then we're gonna gather some leaders from Taproom breweries to discuss staff management during the pandemic, especially how they handle tipping and wages, which are really important topics.

Justin Kindle [04:24] Awesome. So let's get started here. Uh, this is a bit of an anniversary for the guys at Ballast Point here. Uh, your conversations with constellations began about a year ago this week. How did those talks even get started, Brandon?

Speaker 3 [04:41] Well, I'd known some of the, some of the crew from Constellation for some time and had played, uh, played golf with them every year and had a couple of beers with them, and it was around about this time last year that we had, uh, had a round of golf, and, uh, and Chris and I had been spending a lot of time out in San Diego. Here, you know, working, uh, working with, you know, going around looking at different breweries, because we were looking at building a bigger one back in, uh, in the Midwest, and we'd spent a lot of time at Ballast Point, you know, we didn't really, you know, have any idea what could happen, but we spent a lot of time at all of Ballast Point's locations and in their production site, and we just liked them. And then, so a year ago, over a round of golf and a couple of beers, actually more than a couple of beers, uh, it was quite a few at the end of it, and, uh, that's how it's all, all came about, that, Out of, sort of out of nowhere, the, the question was, you know, I asked, what are you guys doing with Ballast Point, and they said, why? I said, because we want to buy it, and they said, are you serious? And I said, hell yeah. And I thought, well, let's see what happens now, and it really happened like that.

Speaker 2 [05:45] So what were the months like before the announcement in between that, that conversation and the announcement? How did you guys keep this quiet and how did you start planning for the big takeover?

Speaker 3 [05:54] So we had to, we signed a, of course, a confit agreement, ah, non-disclosure after that period of time, so they connected us pretty close, uh, soon after that, when they, after they'd sobered up and I'd sobered up, um, they said, you, you know, they called and said, are you deadly serious? I said, absolutely. They said, how the hell do you think you're going to pull this off? I said, don't worry about that. We can, we can, we'll, we'll pull this off, don't you worry about it. Um, I said, but, but, but first, we've got to know more. We know about the, the physical locations, we know about the beer, we know some of the people, but now we need to dig in. So we then started digging in. So when Chris came back, he'd been on an overseas holiday, came back, he and I jumped, uh, jumped together. We, we were sitting in a Starbucks in Chicago, and I said, uh, all right, gear up. We've, I've got some news for you. He said, What the hell have you been up to? I said, you know how we love Ballast Point. Then, what would I, what would you say to me if I told you we can buy them? And he said, what are you talking about? And so after a couple of expletive-laden back and forths, he goes, Alright, what, what do we do now? I said, OK, we set up a data room. So we set up our war room, ah, got access to their data room, and we brought in, uh, an attorney, uh, we brought in our, our financial advisors and we sat down and we drilled like crazy through all of the, the data that was Ballast Point, part of Constellation, and worked out through all of the, all of the, uh, the financials, all of the distribution agreements, all the landlord agreements, you know, um, all of, all of the information that you'd want. Um, we started digging in, uh, to, to give a preliminary, uh, proposal. So that took about a month, actually, when we got through it all, and there was still some negotiation. We hadn't worked out all the details, and they needed to do a little bit of diligence on us and say, can these guys really pull this off? And, uh, so we, we started digging into that. There were Hiccups, there were ups and downs through that whole thing and we had to try and work out how the hell we're going to finance this. Um, and, and so, up until I'd say around about late October, it was still, it was still up in the air, likely, but unlikely. There were some things that we didn't really know were going to work for us or that were not going to work for Constellation. And, and so anyway, we then went into November and around about November we signed a binding agreement. Uh, it wasn't the final contract, but we signed a binding agreement, and then just before Thanksgiving, actually, we signed the binding irreversible contract to acquire Ballast Point out of, uh, Constellation. That was probably the hardest part to keep quiet because we'd signed. We had our hands tied, we weren't getting out of it, but it was just before Thanksgiving, so we had to wait about a week and a bit more. And so a lot of the senior team in Dallas knew about it. They'd figured out who the hell we were because we'd met with them now. And so that part was a little crazy because we had to shut the hell up and wait till all the communications people with Constellation came back, till everything we had, you know, after Thanksgiving, everything was sorted out. So, um, that was probably the hardest part to keep quiet, that time.

Justin Kindle [08:56] Going back to that day in December when you did finally announce, there, there was a lot of confusion, uh around that announcement. Uh, there were industry folks who were confused as I kind of laid out in, in, in the start. Um, there, there were journalists, myself who were confused, there were beer fans, uh, people were, were googling and trying to get to your website, the Kings and Convicts website to figure out who you are and, and what this meant. So, uh, it, it, it seems like, you know, it, it came down to trying to distinguish between Kings and Convicts, the brewery in Illinois, and this investment group that you had really put together. And so, uh, I guess, how did you pull that investor group together to start with?

Speaker 3 [09:46] Yeah, and, and believe me, we are not offended with people not knowing who the hell we were or who the hell we are now either. I mean, literally, we've got friends that didn't know that we had started Kings and Convicts. So it wasn't really a big deal, um, that people said, Who the hell are you bastards? But, um, what, ah, the, the, the way it came about, Chris and I have both had different businesses, and so when we got together and started Kings and Convicts, it was because we enjoyed home brewing, and we enjoyed hanging out and we wanted to, to do something and have some fun, but, you know, by our very nature, once you get into something, you either get into it and you dig your dig your teeth into it, um, and the craft beer world grabbed us. You know, we loved, um, you know, after we started doing this, we, we loved it. And so, part of how this came about, it, it truly is an independent group of people that got together, but it was Chris and I that brought it to them. And so every single one of the other investors that's in here is a private individual, um, or a, a small group, everyone owns under 25% of the company. And I just went to, uh, several of them I had done deals with before, uh, that had been as part of another company that, uh, that I was with, that, um, and I'd sold some time ago, and then others were known to Chris and I who'd come in and drunk beer with us, and we just went to them, um, confidentially and said, All right, so here's the deal. We've got an opportunity to buy this fantastic bloody brand. You're never going to believe it, but if we can do it, are you in? And then they signed the confidentiality agreement, we get it all in and ah they said, who is it? We said Ballast Point. So we went to 6 people, 6 people all said, don't you let this go without us being involved. And so it was an easy deal. So these are private investors that are, they're non-operational, they're on our board of directors now, so we can, we can request advice from them, and quite frankly they're people that have been in multiple different industries, they've got fantastic backgrounds, That, um, that Chris and I can lean upon now, so it's, it's, yeah, Chris and I are running the company, but we've got a, a, a very deep bench here when, you know, shit hits the fan, like, I don't know, a pandemic, um, that we can go back to and say, OK, here's our plan, any advice?

Speaker 2 [12:04] So, Chris, let's bring you in here. Why Ballast Point? Uh, why not target another top 50 craft brewery that might be in a different position?

Speaker 4 [12:11] If you just start simply, it's just, we love the beer. I mean, Ballast Point obviously has been in the industry for a long time, but it always comes back to, we had the connections. I've been drinking Ballast Point beer myself since Scripps Ranch and Sculpin came out. I used to spend a lot of time in San Diego, so when we started looking at expanding, They were one of the top 5 breweries in the country we looked at for advice. And it's one of the things that's great about the craft industry. People share that advice. People help you. So, we had a lot of help with Ballast. We understood it, but this was opportunistic, and, um, but it starts with Knowing the locations, the, the culture of Ballots Point, the connections, but it all comes back to great beer.

Justin Kindle [12:58] Constellation's vestiture closed on March 2nd. Your acquisition closed on March 2nd, um. It's March 2nd, you have a business with six on-premise pubs in two states. You now have 500 employees and you're staring down a pandemic that would do something probably none of us really could even imagine, you know, if, if you would have talked to us in February, January, you know, anytime before March 2020, um, and it's shutting down basically the entire on-premise. Um. Was there a point, like, where you two went to each other and you're like, oh shit, what have we gotten ourselves into?

Speaker 3 [13:43] Not, uh, so if you go back to that, that March 2nd point, the, the pandemic really hadn't blown up and shut down San Diego. It was, it was on the horizon, but even with, with everything going on, it wasn't something that, that was as intense and in your face as it was, let's say a week later, or 10 days later, and so, um, Yeah, wonderful timing to buy a brewery, you know, a week before a pandemic, um, but that first week, you know, we, we were sort of in the thick of things. We had our bus with employee employee faces around, this was gonna be a party, we'd, we'd done our new celebration beer. For the employees, we'd got our mask up and out the front of Miramaa and we got a new flag, and it was more of a party atmosphere, and then we went, oh shit. Now it was, um, we pivoted straight away from no more party, now we've gotta work out what the hell's going on. And so, I don't think we ever said, um, what the hell do we do now, um, between each other. We, we, we've been lucky because we got, ah, we inherited a lot of really good senior people at Ballast Point, so we sort of collectively got them together and have done every day since the pandemic started. And go, alright, we're all in this together now, um, we're gonna get to know each other in a, in a sort of a, a distance fashion here, but what the hell do we do? We're independent. We don't have the, the purse strings of a constellation anymore. Let's, ah, let's figure out how the hell we survive.

Justin Kindle [15:13] Chris, what was it like for sort of the celebration to end so quickly after getting this deal closed?

Speaker 4 [15:21] Um, It's sort of, I suppose, once the transaction went through, we were already into the thick of the separating of the entities. Operationally, there was a lot of things to do, so we were already starting to run fast. Once that hit, I mean, the perfect timing was we got the whole brew team from across the country together, the day that they were all in one room the day California decided to shut down. So we were just talking about planning for the future, but it just was one more challenge. I mean, it was nothing more than how we go forward. We Ball Point's in a great, was in a great spot because you've got the mix of package, draft, and on-premise. So it wasn't that everything shut down, it was just about how do we focus on the areas that we can keep going with and do well with.

Speaker 2 [16:11] Wait, so, when did it get real for you guys? Because I think, like, everybody kind of treats March 13th, like the day that the pandemic became a thing. But when did you in your head start having to think like, holy crap, we have a ton of taprooms, what do we do?

Speaker 4 [16:25] The Monday before, cause we were, we Introduced social distancing. So Monday the 9th was, we rolled that out across all our taprooms pre any requirements, because it was, it was on its way at that point. So we were into spacing tables out, doing all the things that you should be doing. Um, it was sort of, that was the start of it, coming together.

Speaker 2 [16:50] Wow, that's early. And then what was ballast on-premise exposure like? What was, how did your volume break down before? On to off.

Speaker 3 [16:59] Well, half of, half of Ballast's business is actually retail locations like our taprooms and restaurants, so it's, it, you know, part of the reason when we looked at acquiring Ballast Point, we said, oh my God, what a fantastic split of revenue, you know, you can really de-risk here. You've got these great cash earners in these on-premise retail locations that we've got, and then you've got the distribution that's split between, you know, uh, over on the distribution side between package at say 60 and draft at 40%, roughly. We thought, this is golden, and then all the taprooms shutdown, so there, half of that business walks out the door. Then you've got that other 40% that every other bloody bar and restaurant that we ship to, they shut down too, so that goes away. And so for us it was pivoting to make sure that we said, OK, um, we'd always looked at doing an analysis on how to make Ballast Point a stand-alone entity again, and think about an independent company focused on profitability as opposed to rapid revenue growth all across, across the country. So what it did for Chris and I was it fast forwarded our um time to change up operations and change up thinking for how to run the company.

Justin Kindle [18:10] Just a reminder to our audience out there, if you have a question for these guys, ping us at 617-336-8560. That's 617-336-8560. We are collecting those questions and we'll get them answered for you. Uh, I, I wanna take a slight step back here because there's uh a little more on the acquisition that I, I'd like to ask about. Um. Under Constellation stewardship, you know, it's no secret that the Ballast Point brand had, had been challenged. It lost volume, they've gone through several write-downs of that billion dollar purchase price, you know, the company had. But this is, this really presented an opportunity. I, I mean, without the challenges of that brand, I, I'm pretty sure that Constellation wouldn't have been eager to, you know, offload it at some point to, to you guys, you know, and, and, and so, uh, uh, we, we kinda had this conversation before. This, this was opportunity knocking for you guys, basically, that, so, What, what I'd like to know is, and not, not a knock on constellation at all, but where do you think the missteps were in the guidance of that brand under their stewardship, and how do you sort of right that ship?

Speaker 3 [19:33] I, I think, I think when you look at it first and foremost, um, look where Ballast Point came from. It's part of San Diego, and San Diegans are very proud, ah, of their craft beer world, and they, they, they love Ballast Point, they've grown up with Ballast Point, Carl Strauss, Pizza Portstone. They've grown up with it and they felt the connection to it. Like all craft beer, it, it tends to be more regional, and it tends to be more local, and people have an um an attraction to that brewery, because it's, it's from where they're from. And so when um when a Constellation, you know, they looked at this and Ballast was going through the roof, in terms of um sales with, let's say 80 to 100 distributors on the west coast, you know, of course, Constellation are a big company, they're gonna make billion dollar bets and they can make a billion dollar bet. Come off, it's a $10 billion deal and that's great, or it's a billion dollars and it doesn't come off. And this was one of those that didn't come off, and I think part of it was the fact that it's craft beer, I think the cultures are very different, there's a, there's a lot of proud people within Ballast Point itself that felt like, You know, they're now part of something bigger, and, and, and then plugging into a much broader distribution network across 370 distributors across the United States with Constellation, it still goes like that, but then you lose something. You lose a little bit of that uniqueness that is Ballast Point that people, you know, we, we would, we would, you sit in Chicago, you go, Man, I wish we could get. Sculpin. When you can't get something like that, when you come out to the West Coast, that's where you go back to you, I want that sculping. So I think it's just a, a, a differing, there was a definitely differing culture, but also just that bringing, uh, any craft brand to a national market, um, and expecting it just to go through the roof. Well, guess what? In Chicago, you've now got 160 great bloody breweries too. In the East Coast, you've got breweries that are brewing wonderful beer, and so to do that, you've got to catch lightning in a bottle, but then give up that sense of real craft. And I don't think Ballast Point could ever really give it up. I know the employees couldn't, and part of its DNA is still sitting down there in Little Italy in Home Brewmart, where they like to brew. Interesting, funky West Coast IPAs that never really gelled with Constellation. Constellation needed one or two brands to just go like a rocket, and that's what they wanted with Sculpin, but I just don't think it, it worked in terms of the, the culture and the nature of the craft. Brand, and especially coming out of San Diego, San Diegans felt like someone had given them a, a shot up the butt and they didn't like that, and so it's, it's one of our things that we always have to come back to is, we gotta, we gotta bring this back over the long-term and, and earn respect again in San Diego.

Speaker 2 [22:28] So what are the top 3 things that you need to do now that you're at the helm of Ballast Point to really get the brand back, you know, back on top of the hearts of San Diegans and just flowing again nationwide? What are your like top 3?

Speaker 3 [22:43] So number one is what no you go, Chris, because this is, I was gonna say the number one thing is what he's doing.

Speaker 4 [22:49] Bringing the innovation, it didn't, it never went away. Bowers Point, Little Italy brewed 130+ great beers last year. No one knew of them unless they went into that tap room. So, things like bringing out a brewer Series, which will go on draft just in San Diego, just bringing out some of the different beers. It's bringing some new beers to market and bringing back some of the, the great beers that didn't fit with the constellation strategy. It wasn't that there was anything wrong with the beer, it's just they wanted those 2 or 3 volume beers, whereas before, Ballast Point had 9 or 10 different types of beers out in the marketplace. So, bringing back Longfin and package, focusing on pushing some of the passing hazees a hazy IPA, and then, again, connecting back with the roots and bringing some of these beers out purely for that local market. Um, that was what made Ballast great was there was always something different or something. Um, new coming out of Scripps Ranch.

Justin Kindle [23:47] Is there a rebrand as part of that plan to kind of turn things around?

Speaker 4 [23:54] Go for it, Brendan.

Speaker 3 [23:56] Yeah, the, we, we've, so even prior to the close, we had worked with an ah an outside group, ah to do focus groups for us with employees, former employees and people in San Diego. And, ah, which Chris and I were completely separate from, but we got to watch all these, these meetings, and it was, we wanted to understand, not, we didn't want to come in and say, we know what to do here, cause we sure as hell didn't, ah, we're not from San Diego, we're now implanted in here, but we wanted to listen to them. And so these are employees that had been with Ballast for a long time and those that had left. And we did these focus groups, and from it came a lot of really interesting ins. Insights about what Ballast Point meant to them, what it meant to San Diegans, and what they felt really slighted by with the fact that it wasn't an independent brand again. And so part of what we have done is brought about a new brand awareness within the company and focused on how do we actually engage again with the community? How do we refresh the look and get back into the art that was Paul Elder's art, You know, we, a lot of the cans and the bottles, not so much the bottles, but the cans, became very corporate looking. And so Chris and I have brought in an outside group with the help of our marketing team to do refreshes on all the labels and really leaned back into that art that was Paul Elder, who's been with the company for the longest period of time, there's not too many places that have their own artist that has really embodies Southern. California, San Diego culture, surfs, fishes, paints, drinks beers every second day, and it's just, it's one of those things, it's probably every day, but, um, you know, getting back to that and bringing that sense of, listen, there's art on the can and there's art in the can. So that refresh, that brand refresh, has to be brought about by getting out in the community, being part of, Smaller, smaller groups as opposed to doing massive big, um, sponsorship agreements, you know, we love our Padres, um, sponsorship agreement, that's our heart and soul as Cubs fans, we're fast becoming right in behind the bloody Padres here, um, but it's also these smaller groups that embody what Ballast Point was in Southern California, so the brand refresh is actually a brand reset. So it's, Taking on what Ballast Point means in the market and then actually doing what we said we're going to do. And so, yeah, parts, like the, we, we mentioned before, the, the rugby, the rugby team here, it's smaller, it's niche, the legion, um, we want to be part of the legion. We've got the Ballast Point fishing team, we would love to do even more on that side, digging into stuff that is uniquely San Diego and Southern California, and being unapologetically so.

Speaker 2 [26:40] Great, and friendly reminder for everybody watching at home, if you have a question for these guys, you can text it to 617-336-8560. Got a great audience question that came in for Chris. Uh, this viewer is wondering if the core lineup of beers will remain the same with the same distribution and availability. So, what, what's going on with, with the portfolio?

Speaker 4 [27:00] In principle, um, yes, the core beers, the core line-up, obviously it'll evolve as we go forward. Some of this will come with expansion, but the sculping, grapefruit sculping, aloha sculping are the core to the Bowers Point brand. Um, but at the same time, the innovation gives us the opportunity to, to bring to market other alternates, um, some different beers to, into package, into distribution. Um, but with, to Brandon's point, the focus is bringing that back into San Diego, Southern California, focusing on where we're strong, and we'll build back, build from that.

Justin Kindle [27:39] Kind of building off that, we've got another audience question here. Uh, when will Ballast Point Lager get back in HEB grocery stores in Texas? Very specific.

Speaker 4 [27:53] So, um, well, Texas is one of those markets was part of the transaction. We had, um, some, not issues, but it takes time to run through transactions, setting up all our distribution and licensing. Texas was one of the slowest states for us to get back into. Um, it actually shouldn't be too far away. We got back into shipping to Texas about 3 or 4 weeks ago.

Justin Kindle [28:18] Right on. One of, one of the things that we kept hearing about Ballast Point was that they were hampered by some onerous contracts, uh, namely hop contracts. And, and I guess when you're digging through and, and you're taking over a company like this, How do you begin to sort of sort out what needs to be reworked and renegotiated and how, how do those conversations go when you're hitting up, you know, uh, uh, somebody about hop contracts or even that, you know, during a COVID-19 period, you have 6 pubs. Um, how do you work on The, the rent, you know, with your landlord. What, what are those conversations like?

Speaker 3 [29:03] So the, as, as soon as the, the pandemic hit, um, you know, we, we spoke to every single landlord, and, you know, by, by and large, they're all very understanding, and we did apply for the PPP loan, so that did help out, keeping our employees in place during that eight-week period, but we really needed help on the rent, and so our landlord, The boards, um, have been very accommodating. And so it's, um, it's a negotiation. We hit them early and fast, and we just said, Listen, here's, here's where we're at, um, and this, we, none of us know, this is not just a craft beer world problem. This is an all-world problem. And so they were, it, it wasn't like a surprise. So they were Very accommodating and they continue to be, so we, they, they have a, we have very long-term leases on all of our, um, all of our taverns and restaurants and our production facilities, and so it's, it's, we always think, if, if there's bad news, get to it quick, and so that's what we did, and then in terms of the Hops contracts, I think that, You know, it, it's hard to, you hear snippets of things, but, you know, Constellation had much grander visions of production volumes, and so they lined up these Hops contracts, ah, but during the acquisition, there are ways to mitigate those. And so Constellation were actually, um, great to work with. Might be hard to understand, but they were great to work with in working through these and helping us negotiate to exactly where we needed to be, um, pre-pandemic, you know, so, so there's, we've, we've got some things we've gotta work through now, cos we've got a bloody pandemic, but, but I have to say that, um, they were very helpful. They, they wanted to see ballast. Go to someone that was going to flourish in an independent world again. So, um, so there's, you get a lot of this with big public companies that don't give a crap about anything. I'll tell you, they actually did give a crap, they wanted to make sure that even though it didn't work for them, they didn't want to see ballast fall flat on its face.

Speaker 2 [31:06] That's so nice. So along the same kind of lines, you guys were coming from a much smaller operation. How do you now build relationships with multi-state wholesalers, international distributors, chain retailers, and on down the line? What, what does that relationship building look like?

Speaker 3 [31:21] So this is the easiest part. Yeah, that's right. That's right. We had bloody no one. There was Chris, myself, and about 7 other people. And, and so it's, it, we leaned on, we leaned on, um, the existing Ballast Point team. And so the only, the only real, um, things that we had, we had to build up the, the sales and marketing teams, but Chris walks into this and he's got a hell of a, a hell of an operations team.

Speaker 4 [31:48] Yeah, we had a very strong brew team, operations team, legal team, so it's that, it's relying on pulling good people in and um building from there.

Speaker 2 [32:01] Great. So I mean, so Ballast Points, now it's on it, on its third set of owners. How do you build a relationship with those employees who have been there since even before constellation, and what are you guys doing to keep the culture alive? It sounds like you've built a really good rapport with everybody, but how are you keeping Ballast culture, you know, living and thriving?

Speaker 3 [32:19] Well,

Speaker 4 [32:20] Zoom.

Speaker 3 [32:22] Yeah, that's right. We're all zoomed out. We're sick of this bloody Zoom. Sorry, Zoom, but we are. It, it, it's part of it, part of it is, honestly, is doing what we're doing. So we've engaged with the teams, we've engaged with the, the, uh, as best we can by being socially distanced, cause we have, you know, none of our, no one's in the head office at the moment, so no one's, you know, we're all operating independently. Um, you've got all the brewers, Chris's team is all in there, but we're all keeping very separate worlds and the, the Retail side, we've got to be careful about when we turn up. We don't want to just turn up to, to either have a meeting, um, or just, uh, have our faces shown, but I think long term, I think, honestly, the long, long-term way we build that up is go back to what we had always planned, is we're on the ground, we're part of San Diego now, um, and, and we have to just, we, we're going to make mistakes. We're We're Gonna have to change things because of pandemics, but as long as we communicate effectively and tell people what the hell's happening as best we can in this silly phase, um, I think that's all we can do. We just gotta, we just gotta be upfront. There's gonna be a lot of shit that people, you know, that, that isn't what anyone expected, but who, who is in this, you know, who knows in this current environment, so we just have to be frank, upfront and be present.

Justin Kindle [33:41] You've got at least one employee who I think loves you. We got a question in here that was not really a question, but how does it feel to be instantly beloved by the Ballast Point team and be a saving grace for so many devoted employees.

Speaker 3 [34:00] That was, I, I know someone, it must be Jeremy, because I was mad with him yesterday. No, no. So the, yeah, so it's, it, it's one of those things, and it's, it's, I will say it's nothing that Chris and I have specifically done. If you go back historically, back to prior to when we announced the deal, and you think about 500 employees not knowing if they're gonna have a bloody job. There were so many rumors going around, and so if you Operate in, you think of, you think of operating in an environment where you don't know if you're going to get fired, if they're gonna shut a brew pub down, if they're gonna change things up. It's not a real good way to live your life. And so, it's, it's, we wanted, we saw it, we sat in these taprooms, we sat there. They didn't know who we were, but we sat in there for months and months and we just thought, God, these people, we, if we could just tell them, Listen, it's gonna be all right, it's gonna be all right, but we couldn't. And so I think, I think part of it, it's Really not a lot more than, than just communicating well and coming in, and I think it's a relief. I think it was a relief for them. You know, initially, it was like, right, yeah, like you said, who the hell is Kings and convicts? Who are these, who are these buggers? And then we turn up and we've just, we've got a long way to go to earn that trust back, um, and make sure that we do the right thing. But I think part of it is just the circumstance, um, of, of being, being back to, um, Ballast Point.

Speaker 2 [35:29] We got another great audience question came in from Ruben Katz at Envision. Thanks, Ruben. Uh, how can a small brewery like Ballast Point execute marketing promotions effectively in 49 states? Will you be managing it yourself or will you be looking for outsource partners with a national footprint? Good question.

Speaker 3 [35:44] Ah, so the, the answer is we can't, and the answer is we're not going to. And the part of this is, in a larger company like Constellation, OK, that have this massive engine behind them and had a different view on, on being in 49 states, we wanna be in, in, in the states where we make money. As opposed to worrying about the top line, we want to be a profitable company, and we're still currently evaluating all of those areas, but part of what our marketing strategy actually is, um, is to engage again locally in our strongest markets. And so there is a social media, um, strategy there, but there's also a packaging strategy, but we don't, Have the, we, we never came in with this big, let's blow it up and make Ballast Point, you know, one of those TV brands, and we're not gonna do that. We're gonna go back to what made Ballast Point special by actually engagement at the community level. And so, it's gonna take some time. So you've gotta, you've gotta contract to grow again. And when that contraction means that We're not just gonna go out, and so we have a couple of partners that are based here in San Diego that have been helping us, um, very closely, and so this is a coordinated effort not to just go out and throw money left, right and center and just do something. We wanna come back and do it the right way, but it's gotta be a focus on the beer, and it's gotta be a focus on the local community, as opposed to doing campaigns.

Speaker 2 [37:15] So it sounds to me like you're gonna retrench a little bit because you can't be everywhere and be everything to everyone. So how many are we pulling out of states?

Speaker 3 [37:23] It's, it's not that we are pulling out of states, we've pulled out a couple of countries, so Chris has already taken the hatchet to, I think half of the countries on the international distribution, um, but, ah, but in terms of the states, it's not that we're retrenching, it's we're gonna be more focused on what the SKUs are and what they, what packaging they get, and then focus more intently on our home market, on California and the West Coast, in terms of, that's where we make the most money. So in the next couple of years, do that and then expand out, but, but think carefully about how we do it. So it's not so much retrenching, we're not cutting up, uh, distribution agreements or anything like that, it's gonna be that we're, we're gonna manage them in a much more coordinated fashion to make sure that we make bloody money when we're shipping beer across the country.

Justin Kindle [38:13] So, you guys now are the owners of, of 6 taprooms, and you are, 3 of those are in San Diego, 1 in Anaheim, 1 in Long Beach, and 1 in Chicago. So this pandemic has led to a lot of different regulations, uh, varying from city to city, state to state. What have been some of the challenges that you guys have been encountering? How are you keeping those operations going?

Speaker 3 [38:44] So, part of it is we've had to pivot every step of the way. So it's full closed down, partial reopen. Then a partial close again with only outside operations. So part of what we've done here, and we've got a great, um, ops team on the retail side, is, you know, we have, we're, we're fortunate, so knock on wood, Ballast Point's been fortunate because we can open up, ah, the outdoor areas, so the patios and some of the car parks, uh, because we do serve food. And so we have restaurants within all within our taprooms. And so, um, on each of the occasions, it has been working with our GMs and our assistant GMs at all of the, the retail outlets and our retail staff. We, we, we, we're with them on a, you know, we talk as a senior team on a daily basis about what we need to be doing. So, it, it, we just have to be reactionary, and you're not going to make all the, all the right decisions, but we've, we've brought in, That touchless ordering, we've, we've separated, we've taken tables out, we've made sure that the staff, ah, have got their PPE and we've made sure that people wear masks, and we, we've done everything in line with what, you know, the, uh, Governor Newsom and, ah, and back in the city of Chicago have asked of us. And so for us it's just been reacting because it changes every bloody day, and we're pretty sure it's going to change by next week too. So, everything that we've done has really been about making sure that the, the key people at the locations are kept abreast of what's going on and that just comes down to being on the ground, being, you know, communicating correctly and then adjusting as, as needed.

Speaker 2 [40:23] So we got an audience question and friendly reminder if you're watching at home, you can text the question to 617-336-8560. We promise we will not spam you. Um, we will just get that question on our end and be able to ask it to these guys for you. Um, got a question in from somebody in the Chicago area who wants to know how Kings and Convicts' existing beers are going to interact with the Ballast Point brand. Are you guys gonna have any crossover? Can we see any variety packs, uh, any Kings and Convicts draft presence in the Ballast Point taprooms? Any overlap there?

Speaker 4 [40:53] So, the, the starting point is that last one. we're starting to introduce sort of the crossover. Ballast Point beer is in the Kings and Convicts taproom, and vice versa with reopening the Chicago taproom. Um, I think at the end of the day, the first step was, is integrating the production side, the brewery side. So leveraging the Balls Point, um, team and experience. We are bringing out our first package of, um, Kings and Convicts beers produced and developed by the Ballast Point team in the next month. And, um, so it's running as one brewery, but with Kings and Convicts, we have the opportunity to Do some things that are a little different. Bowers Point has a style and has um a brand, and we want to stick to the strengths, but with Kings and Convicts, it's still very new, and there's a lot of opportunities with it. But, um, not so much mixing between brands, but we've got the ability to sort of bring out and bring forward some of the Kings and Convicts brand on a broader scale. But to the same point before, it's only doing it where it makes sense, both for the brand and for the business.

Justin Kindle [42:03] What's the status of your Kings and Convicts brewery that you guys are in the process of building in Wisconsin?

Speaker 3 [42:10] Slow. So, so it's, it's, it's one, because we, we've got another project that we're working on as well, and so in this, Again, we, um, we haven't got the, uh, the, the deep pockets of a public company, so, ah, you know, cash preservation and deployment of capital is something that we discuss daily, so we have slowed that down, just like we've slowed down another one of our projects, um, we just want to get through and see where the hell this pandemic is taking us, so that our existing operations are all, um, Under control, and, uh, and then we'll make, we'll make determinations about pulling the trigger and going hard again. But currently right now, it's just not prudent to go like a mad bastard to open up a bunch of additional production and taprooms, um, we just have to be careful, and so we're, we are pulled, pulled the reins back on both of those until we get a better visibility into what this looks like.

Justin Kindle [43:11] Got another audience question. They wanna know uh if Kings and Convicts beers are gonna roll out in other states.

Speaker 4 [43:18] So, um, yes, we're going to introduce in September, in the tap rooms in California, some of the Kings and Convicts beers, um, both in package and draft, and in the new year, we will, we will start adding a few of our beers into production, again, primarily into California, but into other markets as well. We're already in Wisconsin and Illinois, um, so it will expand out.

Justin Kindle [43:44] How onerous is it to basically lose, you know, most of your draft production and be forced to pivot into, you know, tiny cans and bottles? It is, how's the efficiency of your operations with that going on?

Speaker 4 [44:02] The team have done a great job. They were able to react very, very quickly. Um, it is not an easy task, because, yeah, draft is the, the simplest of the packaging options. But one of the benefits of ours point was, with the capacity that we have and the scale that we have, we weren't limited by an upside on it. So we were able to switch and having both bottle and canning production. Um, we were able to, um, to pivot very quickly. I mean, within days, we were able to switch over, um, our Padres swinging for ale production from draft for opening day into package for spring. So it wasn't easy, but the guys did a great job on that one. And, um, it's, again, having that capacity and the team to do that was a was a key element to it.

Speaker 2 [44:52] Have you guys run into any other supply chain issues?

Speaker 4 [44:56] Um, Nothing really out of the ordinary, just dealing with changes, as with anything when um demand increases, um, whether it's cans and supply or any of these things, it's just, again, dealing with that and, and um adjusting.

Speaker 2 [45:13] So speaking of cans and supply, we got an audience question, uh, asking if Ballast point will continue to be packaged in bottles and 12 ounce cans or if you see a shift in the future to 16 ounce cans, which we know are really tight right now, but is that in the plans at all?

Speaker 4 [45:28] So, we will definitely have um some of our specialty beers in 16 ounce cans in local supply starting in September. Um, as Kings and convicts, we, we've always stuck with 16 ounce cans. Um, but yeah, we see sort of, we've had Sculpin and Fathom in 16 ounce cans for the last year or two. we want to expand that out, but for the right markets, the right venues, and the right beers.

Justin Kindle [45:57] Another reminder, uh, if you have a question and you guys are firing questions in right now, the text line number is 617-336-8560. That's 617-336-8560. Uh, another question, wants to know, um, how much production did Ballast Point do in 2019? And what are your projections for for production amid COVID in 2020?

Speaker 3 [46:27] It was it 2019, I think that was just north of 200,000 barrels, and for this year, who the hell knows. Um, it's, it really is a case of, ah, causes draft has gone away, we've only started really getting back into the draft side, and, uh, and so it's, um, we really don't know, it's gonna be south of 200,000, that's for sure. And, and so part of it is just making sure, and again, because we didn't get into all the states because we had to reapply, so it's taken time to get back, but who the hell knows, as long as we're doing it profitably and we're thinking about it, um, we wanna make ballast be, ah, we don't care if it's a smaller company with a smaller footprint, just as long as it's a profitable company, um, in that footprint.

Speaker 2 [47:14] So since you guys really kind of were, uh, almost oracles in this situation, you were able to, to sense that we can, we can get Ballast Point from Constellation, we can bring it back to, to former glory. So an audience, uh, member has asked, what one brand or brewery currently not national, do you guys see as having the potential to scale to a strong national brand? It's a tough one.

Speaker 3 [47:40] Chris, you wanna, I, I'll, I'll say who, uh, so my, my person, who, who I think, I know they won't do it, but my personal one, because I love their beer, is Half Acre out of Chicago. I just, if they wanted to, I think they've got such a great brew team, they've got such a great management team. The beer is off the bloody charts, and if it kept, Going, I think that company, I've watched that company, ah, that brewery is, their beer is spot on, and, uh, and they're methodical. They don't do shit crazy. They actually think about stuff and every time I'm back, every time I'm back in Chicago, I'll, I'll get myself, uh, hands on, ah, Daisy Carter or any of their new stuff that they've got coming out.

Speaker 2 [48:29] Nice. Not, not doing shit crazy. What a novel concept. Chris, you wanna wager a guess?

Speaker 4 [48:35] So in terms of being able to scale up, I would have said half acre as well, but in Illinois, one of the brands that I think would scale rather than necessarily volume would have been Pipeworks. But for the complete opposite because they do all that crazy shit. Yeah, yeah,

Speaker 3 [48:49] right, but they do it so well.

Speaker 4 [48:51] They do it phenomenally well.

Justin Kindle [48:54] So, you said no crazy shit, so no mustard beers?

Speaker 3 [49:00] You know what, if, if, if, if, if Half acre brings out a mustard beer, that may be the only place I'll try it, right? Yeah, cause they're, I, I value or I regard their beer so highly that I'll go, alright, fair enough, I'll try it. I'm not gonna be happy, but I'll try it.

Speaker 4 [49:20] All right, Go try it once though.

Justin Kindle [49:22] Uh, we, we've got another serious question though. Um, uh, uh, you guys did get PPP money. We established that, uh, this, uh, texter wants to know, have there been any layoffs or furloughs at the company since March? Um, are you planning financially to not have people back inside your tap rooms for the rest of the year slash next spring? And what are you forecasting for as we go into August? A lot of uh questions all wrapped into one here. So let's break them down.

Speaker 3 [49:55] Yeah, so I, I'll, I'll give you the, the quick procession of, you know, how this, how this went about. You know, we bought the company. Global pandemic, holy crap, what do we do? We applied for the PP, so we put PP, uh, people on furlough for a week. We got the PPP, put everyone back on. We brought them all back on, and, and, and then, and then went down that, uh, that path. After that went, we were able to open up, uh, 3 of the, the, the 6 locations, and then we put, uh, a couple of people back up in Long Beach and Disney back on furlough, Chicago on furlough. We then brought, The back, and then we brought back the people of Long Beach, and Long Beach has been cracking. It's been doing a great job, even in the pandemic, because they have so much outdoor space. And then Disney has reopened in a small way too. So we do still have people on furlough. We didn't lay people off, we just furloughed them. And so for us, when we sat down and did our financial analysis throughout the remainder of this year, we were banking on or forecasting that half of our business in the taprooms was gone. And we had to budget for that. The, the fallacy is that you can still run a good operating taproom and, and, and let's say lay off half of the, the people, that doesn't work. You still have a level of service and the way that we serve now has, has changed, so we still have, um, the same number of people that are serving with a lower base of revenue, and so we are forecasting at the moment to be a lot lower for the remainder. Of the year, but we have to be fiscally prudent in all parts of the business to make that, to make that work. So, knock on wood, we're hoping that we can continue operating under this manner and then open up the, the, the taprooms in, in a bigger way, um, as opposed to the 50% of, uh, capacity that we're operating at at the moment. Um, and so the crystal ball is, we don't know. We just don't know, ah, we, so we have lost some people, but only, uh, not, not that many in terms of they don't feel comfortable coming back to work in a, in a taproom environment. They have either got, ah, they're, they're immunocompromised or they live with people that are immunocompromised, and so they're not willing to risk it, and that's, that's absolutely fine by us, we understand completely. Um, but, ah, but in terms of what we see coming back, we've got some pretty conservative forecasts for the remainder of this fiscal year, this financial year here, and, um, so we've budgeted for that. You get to the end of this year and you get to halfway through the, you know, get towards October, November, and we'll see where our distribution's going and where things have come back, and we may have to make different decisions, and that's just the way it will be.

Justin Kindle [52:43] Softer ball question, will calm before the storm be coming back in cans slash bottles? Um, maybe it's a harder question. Well,

Speaker 4 [52:54] it's not on, it's not currently on the plan, but that is because we're in the process of refreshing the current sort of portfolio across the board. Um, but as we come into the new year, then part of this is we are going to bring out more, um, of the historical beers in sort of limited release fashions as we go forward. So I wouldn't rule it out either.

Speaker 2 [53:17] What's up with the brew IPA? I know people like to say the style is dead, but I kind of like them.

Speaker 4 [53:24] So, yeah, um, we still have it on tap in most of our taprooms. We, it's a style that sells well. Um, we've been doing some similar things along that style with lagers and, um, just to try out different things out of Little Italy. So I think it's a style, I mean, calling it the Brut IPA sort of puts it in that box and you're right, it's sort of overlooked, but that fresher, lighter bodied IPA has its place.

Justin Kindle [53:55] Got a five-minute warning here. So, uh, if, if you got a text, send it here uh 617-336-8560. Um, Uh, one of our texters wants to know, how have you guys sort of evaluated, uh, your quality systems? Like, how much emphasis are you guys putting on that program right now?

Speaker 4 [54:21] Aldi's a huge part of Bowers Point. Um, for those that weren't aware, it's one of the big differentiators. The lab, the quality team is on par with just about any of the bigger breweries. It's always been part of Bowers Point. And so, coming in, we haven't made any changes to it. There's not been, there's not a need to invest because it's already sort of leading edge. Um, it is just part and parcel of it, all of the, going forward is just how we utilize it. Um, but as I said, we have a great team, um, probably our on the ground team, field sales has been a little bit under, um, staffed in the past, but again, through the pandemic, it's not really the, the right time for putting people out in the field. Um, so it's a key part of Bow's Point and it always will be.

Justin Kindle [55:11] How many sales folks do you guys have at this point?

Speaker 4 [55:15] 9?

Speaker 3 [55:16] We're at 9 now. We had, they were all recruited before the close, so we had this grand plan to go out and get 40 bloody salespeople, and so the 9 that we've got are located basically here in Southern California and Arizona, and ah and 1 back in Chicago, but it, ah, but we, we basically put a, put a hold on that until we understand, you know, where the world is headed.

Justin Kindle [55:42] If we have you guys back here, let's say next summer, um, and, and we'll send you an invite, um, what, what does success look like for, for Ballast Point, uh, in tangible terms, you know, whether it's numbers or accomplishments, how are you guys going to measure success for the future?

Speaker 3 [56:06] We have an, we have an internal saying that we, we've put together for, for our teams. Uh, we want to be a sustainable, profitable brand. And so those three words all have certain meanings. We have to look after the brand ballast point and we have to bring it back to being relevant in San Diego, first and foremost, and thought of as an approachable, really, really, um, meaningful brand in San Diego again. Um, sustainable means that everything that we do has a longer-term version or a longer-term view of being profitable. And so success for us in 12 months from now means that we have brought out a couple of different beers, we've, uh, rationalized our skews into the markets that makes sense. We've refreshed our packaging, and we are making money in the areas that we need to make money in. And so it's not about for us, in 12 months from now, if you said, well, you didn't get to this 1000 barrels, we don't care. We just don't care. This is about making sure that the brand is set up with a foundation for long-term success, um, and that comes back to brew good beer in San Diego. Ship it to places that we know we can make money, make sure that we've got a solid workforce that likes being part of the brand, and that, that we have 500 brand ambassadors out there, and then when you wander out into the market and you sit down on a beach down in PB and some bugger is there drinking a sculpin, that's, that's success, and they're going, now this is a bloody beer, that's success.

Speaker 2 [57:44] Along the same lines, got another audience question that just uh popped in. What's the strategy to overcome the reputation impairment? Um, I know things maybe have gotten a little sideways, uh, during the constellation years. Yeah,

Speaker 3 [57:57] and, and again, I think a lot of it is perception. We know because we've been in the company before the acquisition and after it, that the people within the company stayed with Ballast Point, even through all the shitty times, you know, it, it, that they were considered, you know, sellouts. All the people that were in the company, they weren't sellouts, they didn't get any bloody money. You know, these are people that were sitting in here, they stayed because they, they love Ballast Point, and there is a, there is a, um, a, a, a, a group within this company that have kept it together and kept that, that, uh, feeling alive. It just hasn't been given a voice. You know, so we, our, our job really is to keep fostering. That, and to then, and then to start to, to, to get out into the community and, and do everything that we say we're going to do. And so, it absolutely is something that will not turn around in 12 months. It may not turn around in 2 years, but it is something that we just have to keep going with, do the right thing, treat people differently, give a shit, and brew good beer.

Justin Kindle [59:02] Well, uh, uh, as far as strategy goes to, uh, now that you have the Ballast Point brand, you have a, a nationally known, recognized major craft brewery, why, why keep going with Kings and Convicts?

Speaker 3 [59:17] Good, that's a good question. It's a good question. It's for, for us, it's, it's an opportunity, um, to come up with some different stuff, to create another brand that can, can, beer that doesn't come anywhere near the ballast point. Like, they're different styles, different focus. It's a different feel too. Kings and Convicts is a little bit anti-authority, sort of tells a story, um, and whereas Ball. Is, has already told its story. So it's, it's an opportunity for us to, to maybe play around with some different styles. And, uh, and again, we're not precious about it. Chris and I aren't, even though, you know, he's the king and I'm the convict. Um, we're not that precious. We're, Listen, we got 600 barrels of beer here last year. Listen, it's, we're not setting the world on fire. And so, and so it's, it's more a case of opportunity. Chris,

Speaker 4 [1:00:13] Yeah, I think as long as it makes sense and we're having fun with it, it gives us a chance to do some different things. But, um, that's really the answer to it.

Speaker 2 [1:00:23] So, one last question, guys. If Netflix comes calling to make a dramatized documentary about Kings and Convicts with the little brewery that could bought Ballast Point from Constellation, who do you want to play you in the movie? Let, Chris, let's start with you.

Speaker 4 [1:00:38] I'm trying to remember who it was. Someone asked us that question on a Zoom call a couple of months ago. Um, Um, uh, let me think about that one. I.

Speaker 2 [1:00:50] I,

Speaker 3 [1:00:51] I'd want Telly Savalas, Kojak, but um, but he's not, and Pitbull can't act, so I'd want Danny DeVito.

Speaker 4 [1:00:59] I You didn't want Russell

Speaker 3 [1:01:01] Crowe. Nah, that crazy bastard's got too much facial hair.

Speaker 4 [1:01:06] Um, I'm having a mental block. It's, is it D'Onofrio?

Speaker 2 [1:01:11] Yeah, yes, yes, that was the

Speaker 3 [1:01:14] one. I mean, what the hell, you could, I mean, you could have said the Rock or something, or what about, what about Daniel Craig, English, you know, that would have been a good one.

Speaker 4 [1:01:27] I'm not that English.

Justin Kindle [1:01:31] That was the most Jess Infante question uh ever. This has been Brewbound Frontlines. Uh, thank you all for tuning in. Thanks to Brendan and Chris for being here. We're in overtime at this point. Uh, we gotta get out of here, but Jess, uh, send us home.

Speaker 2 [1:01:49] Yeah, next week we will be covering, uh, Fresh Fest, the country's first black beer festival back for its 3rd year, all on. Online founder Dave Ry will be with us to talk all about it. Then we'll be chatting with leaders of taproom breweries across the country about how they're really managing their staff and how they tackle, uh, tips and hourly wages right now at a really crazy time. So, come back and see us next Thursday, 3:00 p.m. Eastern, right there at Brewbound.com, Brewbound's YouTube channel and Facebook page, and we will see you next week.