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Constellation’s $3 Billion Wine Sale: What’s On The Block

January 4, 2019

Last fall, multiple reports surfaced that Constellation Brands is exploring a selloff of several wine labels—among them Clos du Bois, Cook’s, Arbor Mist, and Mark West—as it looks to continue premiumizing its portfolio in line with market trends. In a statement to SND, Constellation declined to confirm that a sale is in the works, noting only that it’s “considering a variety of potential options to optimize and continue to grow our wine portfolio and profitability.” Still, with the brands in question valued at up to $3 billion—and combining for annual pre-tax earnings of $260 million—it bears examining what’s said to be on offer.

From a volume perspective, Arbor Mist, Cook’s, and Clos du Bois are all among the largest brands in the Constellation portfolio, but only Clos du Bois retails at above the $10 mark, where the drinks giant is increasingly targeting its wine business. Averaging just under $14 a 750-ml. at retail, Clos du Bois is now at around 1.9 million cases, according to Impact Databank, and has added approximately 200,000 cases since 2010. A year ago, Constellation extended the Sonoma-sourced label with Lightly Bubbled Rosé and Chardonnay wines, but may prefer to allocate resources elsewhere amid rising competition in the $10-$15 segment. Clos du Bois grew 0.8% by volume in IRI channels in the year-to-date through December 2.

Mark West, which Constellation acquired from Purple Wine + Spirits for $160 million in 2012, sells for about a dollar less than Clos du Bois on average. Known for Pinot Noir, Mark West nearly doubled in size from 2010-2016, topping 900,000 cases, before losing momentum the past couple years. The brand slipped 7.6% by volume in Nielsen channels in the 52 weeks through October 6.

Arbor Mist ($4) and Cook’s ($8), meanwhile, are volume drivers in the sparkling category, but both retail at the lower end of the market. The two brands have been headed in opposite directions lately, with Cook’s climbing by more than 400,000 cases since 2010 to crack 2 million cases, and Arbor Mist surrendering more than 1 million cases over the same time period, to stand at around 2.7 million cases. It’s unclear who might acquire the Constellation labels reportedly on the block, but The Wine Group and Bronco—both of which have made opportunistic plays over the years—could be among those interested.

In a recent interview with SND, incoming Constellation CEO Bill Newlands noted, “In wine and spirits, the premiumization trend is critical. In wine, our entire focus is on the $11-and-up segment, where the significant growth is. All of our recent acquisitions and innovations are centered on premiumizing and upweighting our portfolio at the higher end of the price ladder.”

Divesting these below-$15 brands—which total about 7.5 million cases—could mark a significant step in that premiumization process. Meanwhile, Newlands said that continuing to grow more recent high-end acquisitions like Meiomi, Schrader, and The Prisoner will be at the top of Constellation’s agenda in wine. “Meiomi is now almost quadruple the size of when we bought it,” he noted. “We’ve been able to lead and capitalize on the growth of the Pinot Noir category. Another would be Schrader. It’s one of the absolute premier Napa Valley Cabernets, and it gives us a crown jewel at the top of our wine business.”—Daniel Marsteller & Danny Sullivan

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