In the fall of 2016, Utah-based craft distillery High West was acquired by wine, beer, and spirits conglomerate Constellation Brands for an estimated $160 million. At that time, it was a jaw-dropping price tag. High West, which had been founded 10 years before and relied almost entirely on sourced whiskey for its blends and barrel finishes, was a tiny brand — one with a good reputation, but still minuscule in comparison to more established American whiskeys. Constellation’s investment staked a sizable claim on the promise of craft whiskey at a moment when the category’s future was both bright and uncertain.
Six years later, there’s no doubt that craft whiskey, like craft beer before it, has established a permanent niche in the spirits landscape. The same year of the High West deal, a wave of acquisitions swept through the industry: Westland, Smooth Ambler, Catoctin Creek, Nelson’s Green Brier, and Bardstown Bourbon Co. all sold partial or full stakes to bigger companies, with several additional craft buyouts happening the year before and after. Simultaneously, new craft distilleries were opening by the score, rising from 1,439 in 2016 to 2,290 by August 2021.
There have been few major acquisitions since then, but a handful this year feel particularly notable. In February, Heaven Hill Brands acquired craft mini-conglomerate Samson & Surrey, a deal that included both FEW Spirits and red-hot Widow Jane, along with several other spirits. Then at the end of October, Campari Group agreed to acquire a 70 percent stake in Danville, Ky.’s Wilderness Trail, with the option to acquire the remaining 30 percent by 2031. And a few days later, Waco, Texas–based Balcones Distilling was sold to Diageo.
The price tag for only one of these deals was disclosed (Campari values Wilderness Trail at $600 million, and will pay $420 million for its stake) but none would have been cheap. These are mature craft producers, all at least a decade old, with strong national presence and brand recognition that they earned independently. Heaven Hill, Campari, and Diageo already have their own portfolios of American whiskey, but the acquisitions fill in key gaps and impart a certain halo — craft credentials that can’t be faked.
Digging into the specifics of each deal shows what else the buyers are potentially gaining.
Eyeing the International Market
Family-owned Heaven Hill is the second-largest whiskey distillery, after Jack Daniel’s, in the United States. It fills 1,300 barrels a day and has over 1.9 million of them aging in its warehouses. In other words, the company has no shortage of American whiskey. So why pick up Samson & Surrey, a company founded in 2016 whose portfolio includes both Chicagoland craft distiller FEW Spirits and Widow Jane, a mostly sourced bourbon brand with roots in New York?
It wasn’t just about the whiskey. Samson & Surrey’s portfolio includes other spirits, including tequila and mezcal — two categories that currently rival whiskey in both consumer excitement and sales growth. And across the board, Samson & Surrey’s brands — which also include a gin and a French single malt — fall into the super-premium tier, which Heaven Hill has clearly stated is a priority arena. The company has been building up its super-premium offerings for the last couple of decades: Witness the rise of brands like Elijah Craig and Larceny, and the emphasis on bottled-in-bond. This acquisition represents a big leap forward in that effort.
And Heaven Hill is setting its sights even higher, looking to convert international consumers — in particular Scotch drinkers — to bourbon and rye. Samson & Surrey was already present in more than 30 global markets at the time of the acquisition. “We see huge international opportunities for turning prospective Scotch whisky drinkers to American whiskey,” says Heaven Hill co-president Allan Latts. “With the current Samson & Surrey international markets, along with our legacy American whiskey portfolio, we see a tremendous runway for growth in the international space.”
Betting Big on American Whiskey
Established in 2012 by Pat Heist and Shane Baker, Wilderness Trail came out of the gate swinging. The founders’ first business, Ferm Solutions, launched in 2006, had given them nearly unparalleled expertise in the mechanics and day-to-day running of a distillery, as they offered trouble-shooting and other services to producers across the country, and thus knew exactly how to both avoid common problems and target specific flavor and quality outcomes. (The existing revenue stream from Ferm Solutions also gave Wilderness Trail the luxury to take a generous window for maturation, something that isn’t financially feasible for many craft distillers.)
After the initial, small-scale release of its bourbon and rye in 2018, Wilderness Trail quickly became known among whiskey drinkers as a distillery to watch, noted for its use of sweet mashing, low barrel-entry proofs, and other uncommon practices. (The distillery was named “Spirits Brand of the Year” in VinePair’s Next Wave Awards in 2021.) The brand built its distribution steadily, while also expanding its production facilities three times. But not all of that liquid was going into the distillery’s own bottles: It was also offering contract production for other companies. Under Campari’s ownership, however, that will cease.
Campari already owns Wild Turkey, which it purchased from Pernod Ricard for $575 million in 2009. But the Italian company has even bigger plans for the American whiskey space. When the Wilderness Trail acquisition was announced, Campari CEO Bob Kunze-Concewitz noted that it is “priming [our bourbon offering] to become Campari Group’s second major leg after the aperitif portfolio.” Considering that its two leading aperitif brands, Campari and Aperol, accounted for over 30 percent of sales in 2021 while Wild Turkey was at 7.4 percent, that’s a big play. But Campari seems fully committed: In a recent interview, Kunze-Concewitz expressed interest in acquiring more American whiskey brands in the future.
For now, it’s more or less business as usual at Wilderness Trail, as both Heist and Baker will remain at the helm day to day. Baker emphasizes that he and Heist view the deal with Campari as a partnership. “It is all about distribution and growing the Wilderness Trail brand into a global iconic brand it can become,” he says. “Look at it like an Olympic triathlon relay race: We have been able to complete the first leg, maybe a portion of the second leg, but in order to finish the race … we need someone on our team that specializes and is talented at the last leg” of global brand building.
A Regional Single Malt Play?
There was no question about the founder of Balcones Distilling, Chip Tate, staying involved following Diageo’s acquisition. He left the company in 2014 after a messy dispute with investors. Since that time, it has seemed inevitable that the Texas distillery would one day be acquired, so the purchase isn’t out of the blue.
What’s noteworthy, however, is Diageo’s explicit interest in Balcones as a producer of single malt whiskey. Diageo declined to make anyone available for an interview, but in a company statement about the acquisition, American single malt is mentioned multiple times and noted as a “driver of momentum” in the fast-growing super-premium-and-above whiskey segment. It’s an investment with precedent: Although American single malt remains a niche category in volume terms, Balcones is likely the second- or third- largest producer in the United States, led only by Stranahan’s (which was acquired by Proximo Spirits in 2010), with possible competition from Westland (acquired by Rémy Cointreau in 2016).
Diageo already had a stake in single malt distiller Westward Whiskey via its Distill Ventures subsidiary, but the outright acquisition of Balcones gives it full access at a crucial time for the style, as it sits on the cusp of official formalization. In addition, Balcones offers a foothold in American craft whiskey that Diageo — though it owns the Cascade Hollow and Bulleit Distilleries, as well as a third whiskey distillery in Lebanon, Ky. — previously lacked. It’s an archetypal American craft distillery, employing local ingredients and pioneering innovative techniques while also taking advantage of its central Texas climate, which impacts maturation in unique ways, to create products with a strong sense of place.
All of that adds up to a solid play by Diageo, especially if it’s looking to build out a portfolio of American whiskeys with regional identities, much as it has with its distilleries in Scotland. Texas and the Pacific Northwest, where Westward is located, are two of the most distinct emerging whiskey areas of the United States at the moment. Should Diageo be sniffing around for more regional single malt distillers, it might look to Colorado or New York.
What Lies Ahead
All this speculation is, of course, just that. But the uptick in major acquisitions after a few years of relative silence is noteworthy. Deals like this often close in the last quarter of the year, so it wouldn’t be surprising if another announcement is made before 2023.
Then again, these aren’t the heady days of yore: Inflation is rampant, supply chains remain snarled, and the threat of a recession looms. Ultimately, it’s anyone’s guess whether we’re in a new wave of craft whiskey buyouts or simply seeing a handful of strategic purchases at an opportune moment.