Beer Marketer's Insights - California Curveball Catapults Hand Family Cos Over 50 Mil Cases, $1 Bil Revs; Buying Stone Dist and Classic

There's a new player in CA distribution, entering the state with a bang. Sunset Distributing, a subsidiary of Hand Family Companies of TN (led by JR Hand) will buy 2 distribs, craft-centric Stone Distributing and NA-bev oriented Classic Dist. Both in one fell swoop. They total about 15 mil cases, about one third NA. Deal expected to close in about 60 days. Before this deal, HFC selling over 35 mil cases, mostly in IL (Lakeshore in Chi metro). But Hand Family Cos also owns several locations in TN and KY. So CA will be its 4th state. And HFC will sell over 50 mil cases total, with over $1 bil in sales in all, including sizable NA and craft books as well as AB in its other mkts. This move puts HFC among largest beer and bev wholesaler groups in US. "This strategic move marks an exciting step forward, improving sales execution and route-to-market service for beer, wine, spirits and non-alcoholic beverage suppliers and customers throughout Southern California," said co in release. With this deal, Hand Family Cos is taking a big leap across US. And it will be going to mkt with a smaller share and different portfolio than it typically has. But clearly co is putting a stake in the ground out West, and telling suppliers it's open for business. No doubt it has other moves in mind, just like it gradually assembled distribs and brands throughout metro Chicago with Lakeshore over last decade-plus. Its ambitions likely include acquiring AB's branches in CA somewhere down the line if AB decides to divest. Plus, Classic previously worked with another indie SoCal distrib, Scout Distribution. "The combination of the Hand Family Companies' scale and expertise with the local knowledge and proven talent of the SDC and Classic team creates a powerful route to market in Southern California," said HFC prexy & ceo JR Hand in announcement.Could HFC's Arrival Improve AB Distribs' Chances for Statewide Brands? HFC is primarily an AB distributor elsewhere, but it will be competing against AB branches in SoCal. Yet Hand's purchase could paradoxically help the entire AB network in CA (and potentially beyond). How? By alleviating bottlenecks that branches often create when AB distribs try to get new brands statewide. The AB network is typically competing against (nearly) statewide giant Reyes Bev Group and to a lesser extent Southern Glazer's and Breakthru. HFC already competes against RBG every day in Chicagoland. Strategically this move seeks to create more effective competition in SoCal, RBG's largest market.Recall, 6 CA AB distribs and Stone formed CA Bev Solution in 2023 to offer "a single source of beer distribution" for beer, wine, spirits and NA brands throughout CA. That helped the group score brands like AriZona hard tea and Jumex hard nectar among others. HFC should enhance CA Bev Solution's prospects, both as a more sizable, committed indie alternative in LA and San Diego and because it can offer Chi coverage too. At same time, gotta note AB One was recently instrumental in getting the Guayaki Yerba Mate brand for the AB network in the state, including branches, tho reportedly not for AB branch in San Diego.Meet Overland Advantage from Wells Fargo and Centerbridge Partners Hand Family Cos is doing this deal thru Wells Fargo in conjunction with its new mezzanine financing arm, Overland Advantage. Overland is a "strategic relationship" between giant PE firm Centerbridge Partners (with $41 bil under mgt, according to its website) and Wells Fargo, said release. Overland also participated in recent KW Beverages deal by Southern Crown in SC (see Mar 14 issue). If a deal is too rich to be supported by conventional financing, then acquiring distribs can turn to Overland Advantage to borrow more for a period of time, typically at a higher rate (low double digits) to fill the funding gap. There is a lot of consolidation currently cooking.What Will Happen to Cutwater in CA? Could Hand Family Co's appearance on scene give AB another way to finally get its indie distribs Cutwater in state? Recall, AB branches cannot sell Cutwater, according to CA law. So Cutwater is sold by RNDC in brand's largest state by far. That remains a sore spot for CA AB distribs. But RNDC has recently lost big brands in CA, like Tito's and Jack Daniel's (to RBG). AB could move too. While AB has other options besides its own network, would AB really consider going to Southern Glazer's or Breakthru? Between what's happening at RNDC and this bold move, there's once again a lot of change percolating in California. HFC's purchase of Stone and Classic plays into several developing threads.Recall, Stone Distributing is entirely owned by private equity company VMG, which had stake in Stone Brewing. Tho sizable in its own right, selling millions of cases of craft in SD alone, Stone Dist on the block since before Sapporo bought Stone Brewing for $165 million in August 2022. (Stone Distributing was not part of Sapporo deal.) Meanwhile, Sapporo already took $90 mil writedown on its purchase of Stone Brewing. INSIGHTS doesn't know purchase price for Stone Distributing arm, but it's likely a lot less than originally sought. Stone Distributing sale advised by Arlington Capital Advisors.

California Curveball Catapults Hand Family Cos Over 50 Mil Cases, $1 Bil Revs; Buying Stone Dist and Classic

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