As consumers shift their spending habits more and more toward the premium side of the distilled spirits world Constellation Brands is shifting its product mix to follow the trend. (Not to mention their major investment in cannabis.) To that end Constellation has announced the sale of 30 of its sub $11 retail priced wine and spirits portfolio and related facilities to E. & J. Gallo Winery for $1.7 billion.
The brands joining the Gallo portfolio will include Clos du Bois, Black Box, Estancia, Mark West, Wild Horse, Franciscan, and Ravenswood. Gallo will also acquire several production facilities across the US. The included wineries are Mission Bell, Turner Road Vintners, Clos du Bois and Wild Horse in California, Hogue Cellars in Washington, and Canandaigua in New York.
Constellation CEO Wants to Increase Margin from 26% to 30%
Constellation Brands President and Chief Executive Officer Bill Newlands said, “This strategic action is a result of our ongoing efforts to identify value enhancing opportunities to better align our portfolio with consumer trade up trends and to strengthen the financial profile of this business. Our remaining wine and spirits business will primarily consist of wines at the greater than $11 price point and will include fast growing, high margin power brands like Kim Crawford, the No 1 sauvignon blanc in the US; Meiomi, the #1 US pinot noir; SVEDKA Vodka, the #1 imported vodka in the U.S.; The Prisoner, Robert Mondavi, Ruffino as well as iconic brands like Schrader.”
“With a tighter focus on this powerful collection of consumer loved brands we’ll be able to accelerate growth while increasing brand awareness consumer demand and household penetration.”
“I’m confident that this optimized portfolio of wine and spirits brands will enable us to consistently deliver growth exceeding the trends of the U.S. wine market while migrating to an operating margin profile of 30%, a significant improvement from the 26% margin achieved for this business in fiscal ’19.”
Gallo to Continue to Offer Products at Every Price Point
E. & J. Gallo Chief Executive Officer Joseph E. Gallo said, “We are committed to remaining a family-owned company focused on growing the wine industry. While we continue to invest in our premium and luxury businesses, we see a tremendous opportunity with this acquisition to bring new consumers into the wine category. We will continue to provide our customers and consumers with quality products at every price point.”
The sale to Gallo includes the following brands.
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The $1.7 billion agreement is subject to closing adjustments. The transaction is also subject to the satisfaction of certain closing conditions, including the receipt of regulatory approval, and is expected to close at the end of the company’s first quarter of fiscal 2020.
Constellation Brands is a leading international producer of and marketer of beer, wine and spirits with operations in the U.S., Mexico, New Zealand, Italy and Canada. The company’s Constellation Ventures include investments in Black Button Distilling, Catoctin Creek Distilling, Bardstown Bourbon Company, Nelson’s Green Brier Distillery, Real McCoy Spirits Corp. and Copper & Kings American Brandy.
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