Constellation to sell about 30 brands to Gallo in $1.7bn deal

Constellation Brands will sell about 30 of its wine and spirits brands and six US winemaking facilities to E & J Gallo Winery for $1.7 billion.

The move sees the Corona maker offload wines principally priced at $11 or less in retail stores, as it looks to focus on its premium beverage portfolio.

Brands included in the transaction include Clos du Bois, Black Box, Estancia, Mark West, Wild Horse, Franciscan, and Ravenswood.

Meanwhile, 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. 

Bill Newlands, Constellation Brands CEO, said: “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. This decision will help enhance organisational 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.”

Joseph Gallo, chief executive officer of Gallo, added: “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.”

In its most recent quarterly results, Constellation recorded a 9.5% rise in net sales, as its Corona and Modelo brands continued to drive growth. However, sales growth in the company’s wine and spirits segment was stagnant, up 0.4%

The firm predicted that for fiscal 2019 it expects net sales and operating income in its wine and spirits unit to decline low-single digits.

Following the divestiture, Constellation said its remaining wine and spirits portfolio represents a collection of “powerhouse brands”, including Svedka Vodka, Casa Noble Tequila, High West Whiskey, Mount Veeder Winery and The Prisoner Wine Company.

In February, it acquired a minority stake in US craft alcohol firm Black Button Distilling, in a move to fill white space in its spirits portfolio.