Allied Beverages Inc., a major Southern California beer distributor, is being bought by the industry’s biggest player. Allied, which services more than 4,000 retailers from warehouses at its Sylmar headquarters and Camarillo, is being acquired by Reyes Beverage Group, a unit of Reyes Holdings LLC of Rosemont, Ill. Reyes has more than 32,000 clients and ships more than 100 million cases of beer annually, while Allied ships about 12 million cases each year. The purchase is being completed through Reyes Group’s Harbor Distributing LLC subsidiary in Anaheim and is expected to close in January. Neither company released financial information on the deal. But Benj Steinman, president of Beer Marketer’s Insights Inc., a New York consultancy, values it at roughly $225 million. “It’s an important deal in the California landscape,” Steinman said. “It makes Reyes an even larger entity. This takes them to a whole other level.” Steinman estimates Allied has a $200 million annual business, compared to Reyes with more than $20 billion in annual revenue. Reyes controls about 20 percent of the distribution business in the state, though it only operates in Southern California. Reyes is only rivaled in the distribution business by Anheuser-Busch InBev, which owns or controls much of its own distribution. Its business accounts for about 40 percent of the state share, though Steinman said that number is trending downward. Indeed, the acquisition comes as distributors nationwide are consolidating amid a drop in overall beer consumption, despite the strong growth of craft beers. Allied employs more than 400 at its corporate offices and two distribution warehouses. Molly Reilly, a spokeswoman for Reyes Holdings, said those jobs aren’t in jeopardy as the goal of the purchase is to gain market share. “There are no major changes planned beyond providing the Allied team more training, technology and any additional tools to help them do the best job they can,” she said. “We’re investing in Allied because we believe the San Fernando Valley is a great place to do business.” Southern California market Allied Beverages was founded in 1953 and runs sales out of a 90,000-square-foot warehouse at 13287 Ralston Ave. in Sylmar, where it has been for more than 30 years. In addition, the firm has a 220,000-square-foot warehouse at 13235 Golden State Road in Sylmar and a 13,000-square-foot distribution center at 2505 Pleasant Valley Road in Camarillo. The company also is in the process of constructing a 200,000-square-foot facility on Nicolle Street in Ventura. Reilly did not say when that facility would be finished, but the company will vacate its Camarillo building when construction is complete. But Allied has sold off property as well. In August, it unloaded 2.5 acres of land it owned adjacent to its Ralston Avenue facility to Finn and Fram Inc., a machine manufacturer in North Hills, for $2.15 million. And last December, Allied sold a 19,000-square-foot building on the same street to a private trust for $1.7 million. Allied did not respond to calls and emails seeking comment. But Kevin Williams, president of the distributor, whose family owns the business, said in a statement following the acquisition that the move would help Allied grow. “We are confident that the knowledge, commitment and expertise of the Harbor Distributing team will create even greater opportunities for our employees, brands and community,” he said in the statement. Reilly said once the purchase is complete, Mark Smith, president of Gate City Beverage Distributors in San Bernardino, another Reyes firm, will take over as president of Allied. It’s expected that Williams will leave the company at that point. Allied’s business is on par with another well-known Southern California distributor: Ace Beverage Co., a subsidiary of Topa Equities Ltd. Inc., the holding company of the late L.A. billionaire John Anderson. Anderson made a fortune off beer distribution after obtaining exclusive rights to distribute Budweiser and its brands in Southern California in 1956. The company also ships craft and import beers. Topa distributes about 12 million cases of beer a year, about the same as Allied. But unlike Topa, neither Allied nor Reyes count as a client Anheuser-Busch InBev, the Belgium conglomerate formed after InBev bought the St. Louis beer maker for $52 billion in 2009. The company commands some 48 percent of the market share for beer in the country, between its domestic and imported brands, which include Beck’s, Michelob, Rolling Rock and others, according to Thomas Mullarkey, an analyst who covers Anheuser-Busch for Chicago-based investment research firm Morningstar Inc. “Anheuser-Busch InBev distributors are wanted to solely sell Budweiser brands,” Mullarkey said. “And with many of their distributors, they own outright or have an equity stake.” Instead, rival Reyes has distribution deals with some of the other large beer makers in the country, including MillerCoors LLC and Heineken USA Inc. Also, Reyes and Allied both have a relationship with Crown Imports LLC, a unit of Constellation Brands Inc. of Victor, N.Y., which imports the popular Mexican brands Corona and Modelo, manufactured by Grupo Modelo in Mexico. Industry consolidation The Beer Institute, a trade association in Washington D.C., estimates that that beer consumption declined about 9 percent between 1994 and 2012, and the drop hasn’t slowed. Steinman, the consultant, said U.S. beer shipments peaked in 2008 at about 214 million barrels and have fallen 3 percent to 209 million by last year. He estimates that number to trend down another 2 percent this year. “One of the drivers of consolidation is that consumption is down. In the absence of absolute growth, the players that are getting bigger look to combine businesses,” he said. “But the higher end of the beer business is up, so the money in the industry is up.” According to the National Beer Wholesalers Association, a trade group in Alexandria, Va., there were about 4,600 distributors in the United States in 1980. By 2011, that number was down 27 percent to less than 3,400. Mullarkey, the analyst, said costs for distribution companies can be high, with the need for large amounts of warehouse space, trucks, drivers and more. “It’s all about scale,” he said. “If you have the scale, you’re more than likely going to be a more profitable distributor.” Reyes Holdings, which also has units that distribute food and beverages to McDonald’s Corp. and other restaurants, has been working to gain more market share in beer distribution. It has more than 10 distribution companies under its umbrella and 17 warehouses in 13 markets coast-to-coast. Last December, it acquired Windy City Distributing LLC, a firm that specializes in craft breweries and cider. That same month it bought Chesbay Distributing in Chesapeake, Va., a company that moves about 6 million cases a year. And a year earlier, Reyes bought Schenck Co., the largest distributor in Central Florida. Craig Purser, chief executive of the Wholesalers Association, said Reyes’ latest acquisition gives the company yet another distributor in a major market. “With their (Reyes’) presence with Harbor in Orange County and its proximity to the San Fernando Valley, this move makes a lot of economic sense,” he said. He also said that distributor consolidation wasn’t the only trend in an industry that has been energized by the craft beer movement. He noted there were fewer than 50 U.S. breweries in 1983 and more than 2,400 today. “The consolidation in distribution is (only) one part of the industry story,” he said.
Sale Brewing For Distributor
