News

Constellation sells 30 wine brands to Gallo for $1.7bn

04 April 2019 By Lauren Eads

Constellation Brands has sold around 30 of its lower priced wine brands and related facilities to E&J Gallo in a deal worth US$1.7 billion as part of a strategy to streamline and premiumise its portfolio.

The New York-based drinks producer, which is also responsible for Corona and Modelo beers, has signed a deal that will see its wine brands priced at US$11 and below sold, including Clos du Bois, Black Box, Estancia, Mark West, Wild Horse, Franciscan, and Ravenswood, along with six winemaking facilities, to E&J Gallo.

Those wineries include Mission Bell, Turner Road Vintners, Clos du Bois and Wild Horse in California, Hogue Cellars in Washington, and Canandaigua in New York.

Commenting on the sale, Joseph E. Gallo, chief executive officer of 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,” adding: “We will continue to provide our customers and consumers with quality products at every price point.”

The deal follows rumours that Constellation had been preparing to sell off up to 40% of its portfolio, in February, having reported weaknesses in sales of its low-end wine business.

The move, according to Bill Newlands, CEO and president of Constellation Brands, will allow the company to focus on its premium brands which he said are performing better in a statement confirming the deal on Wednesday.

“One of the hallmarks of our success over the years has been our ability to evolve and stay on the forefront of emerging consumer trends,” said Newlands.

“This decision will help enhance organizational focus on a more premium set of wine and spirits brands that better position our company to drive accelerated growth and shareholder value. In turn, Gallo is acquiring a collection of great brands that complement their operational model and business strategy to provide quality products to consumers at every price point.”

Constellation’s remaining wine and spirits portfolio includes: Robert Mondavi; The Prisoner Wine Company; Kim Crawford; Ruffino; Meiomi; and SVEDKA Vodka, as well as high-end brands like Schrader Cellars, Mount Veeder Winery, Casa Noble Tequila and High West Whiskey, among others.

The deal follows Constellation’s near $4 billion additional investment in Canadian cannabis company Canopy Growth last year, pushing its stake to 38%. The company acquired its initial stake in October last year for £141 million (US$179m), back when, according to the Wall Street Journal, Canopy Growth had a market value of £1.3 billion (US$1.6bn).

The transaction is subject to closing conditions and regulatory approval, and is expected to close at the end of the first quarter of the 2020 financial year.

See below for the full list of brands being sold to Gallo: