Anheuser-Busch to Acquire Fast-Growing Cutwater Spirits

Anheuser-Busch InBev is finally making an acquisition in San Diego, but it’s not a craft brewery.

The world’s largest beer company today announced the purchase of fast-growing Cutwater Spirits, a craft distilling venture that was originally born inside of Ballast Point Brewing & Spirits.

Specific financial terms of the deal – A-B InBev’s first in the spirits space — were not disclosed. The transaction, which is for 100 percent of the Cutwater business, is expected to close this spring, a spokesperson told Brewbound.

Founded by former Ballast Point Brewing executives Yuseff Cherney (then-COO), Earl Kight (then-CCO) and Jim Buechler (then-CEO), along with investment from Ballast point founder Jack White, Cutwater operates a sprawling 50,000 sq. ft. distillery, tasting room and kitchen in San Diego’s Miramar neighborhood, which is home to numerous craft breweries, including Ballast Point.

The company manufactures 14 different ready-to-drink canned cocktails, which carry a suggested retail price of as much as $16.99 per 4-pack, and distributes to 34 states. It also makes 16 types of spirits, according to a press release.

Speaking to Brewbound, Brendan Whitworth, A-B’s vice president of sales in North America, said the acquisition of a spirits company would help the beer giant better compete in non-beer categories.

“We are first and foremost a beer company,” he said. “That being said, we want to be sure we are present where all consumers are. That includes adjacencies within beer, and different segments that are emerging.”

Whitworth, who expressed excitement about the future growth possibilities of the Cutwater’s canned cocktails, said he was drawn to the acquisition opportunity because of the company’s “innovative and disruptive approach.”

According to off-premise retail data from Nielsen, dollar sales of Cutwater’s spirits products grew 203 percent during the 52-week period ending January 26.

Meanwhile, dollar sales of the company’s RTD cocktails grew a whopping 356 percent and far outpaced the single-serve spirit-based cocktails segment (+66.2 percent) during the same period, Nielsen added.

Kight, who serves as Cutwater’s chief sales and marketing officer, attributed the company’s rapid growth in part to a retail-driven expansion strategy.

“We went where the chains were asking for us,” he told Brewbound. “If consumers are looking to buy it, I am going to be there.”

For his part, Cherney said Cutwater’s fast success was a “perfect storm,” pointing to hiring the right people to push an in-demand product at the right time.

“I think it is a magical team that puts stuff like that together,” he said.

After manufacturing and selling a variety of products under the Ballast Point Spirits label, Cutwater was formally established in mid-2016, about one year after Ballast Point sold to Constellation Brands and all four of the smaller spirits company’s founders departed the New York-headquartered alcohol company.

In 2017, Cutwater opened its production facility, which includes a continuous column still, barrel-aging capabilities, a high-speed canning line capable of filling 350 cans per minute and a bottling line that can fill 70 bottles per minute.

“Yuseff and the operations folks can drown me in booze if they want to,” Kight said jokingly.

Cutwater will be part of A-B’s Beyond Beer portfolio, which was created last July and includes the company’s Ritas, Bon & Viv spiked seltzer, Babe Rosé and HiBall brands.

There are no immediate plans to alter Cutwater’s current distribution footprint, Whitworth said, noting that the company would look to use A-B wholesalers for future market entries.

“Right now, the near-term objective is to keep the current route to market and minimize disruption,” he said. “As we expand, we obviously believe in the power of the A-B network, and state-by-state that is the preference.”

Although this is the first spirits acquisition for A-B, the company isn’t totally unfamiliar with the space. Two of its U.S. craft breweries – 10 Barrel Brewing in Oregon and Devils Backbone in Virginia – also have distilling capabilities.

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