Constellation Brands expands board to please investment firm

Constellation Brands has agreed to appoint two independent directors to its board and share more information with Elliott Investment Management as the latter says the drinks company’s growth potential is “not reflected in its stock price”.

Leading drinks company Constellation Brands, which counts Modelo and Corona beers, as well as Ruffino and Robert Mondavi wines among its portfolio, has agreed to add two new members to its board as part of an agreement with Elliott, a big investor in the beverage company.

Among the new appointees to the board, which now stretches to 13 members, are William T. Giles, former chief financial officer of AutoZone Inc., and Luca Zaramella, the CFO of Oreo maker Mondelez International.

The agreement stands until Constellation’s next annual shareholder meeting in 2024.

However, the board is still able to add one more member providing they meet “certain independence requirements” and are also “a current or former chief executive officer of a publicly-traded company,” according to a filing.

Constellation has also committed to sharing “certain confidential information” with Elliott ahead of a company investor day later this year, which the drinks company said would help “facilitate collaboration” with the investment firm.

Elliott said Constellation’s “meaningful growth potential, powered by its premier Mexican beer portfolio, is not currently reflected in the company’s stock price,” and said it felt confident in Constellation’s executive team.

Shares were up 3% following the announcement made on Tuesday 18 July.

Earlier this month, db revealed that Constellation had seen a 40% rise in eCommerce direct-to-consumer (D2C) sales in its first quarter of the year, causing two prominent analysts to raise their target prices for the drinks company’s shares.

Jefferies predicts a target price of US$300, while Wedbush has increased its target to US$270.

Much of the company’s recent growth has been spurred on by the stratospheric rise of Modelo beer, which overtook rival Bud Light to become the top-selling beer in the US in the four weeks leading to 28 May. The jump represents a 15.6% rise in sales for Modelo compared with its performance in the same four week period last year.

Constellation also upped its premium credentials when it acquired luxury Napa winery Domaine Curry in June.