Constellation offers more wine brands at great prices
The beverage giant wants to compete in the premium sector for wines and spirits.
Cheap wine is bad business. Look no further than Constellation Brands’ dramatic wine reduction in the past three years alone, which continued this week as it sold more lower-end brands.
In 2009, Constellation was the largest wine company in the world according to Wine Business Monthly. It has sold 104 million cases of wine worldwide per year (43 million domestically) after a buying spree that began with Robert Mondavi Winery. At the time, Constellation wanted every wine brand possible.
As of February 2019, Constellation was still the third-largest wine sales company in the United States with around 50 million cases per year, behind Gallo and The Wine Group.
Not anymore. Constellation is a publicly traded company, so its moves are a great harbinger of the near future. And right now, Constellation says spirits and cannabis have a better future than cheap wine.
By February 2022, Constellation had fallen to fifth in national wine sales with just 15 million cases sold. The company has reduced its wine production by more than two-thirds in just three years.
It will get even smaller after selling its brands Cooper & Thief (Bourbon barrel-aged wines), 7 Moons, The Dreaming Tree, Charles Smith Wines and Monkey Bay this week to the aforementioned Wine Group. You and I don’t drink these wines. (Well, I don’t know.) But business trend is important.
In other words: Constellation’s cannabis investment has cost it $1.06 billion in losses so far this year – $1.06 billion! – but Constellation is not selling its shares in the cannabis business. Cheap wine brands, however, are the product of the last decade.
How different from 15 years ago. Constellation became the largest wine company in the world after buying Robert Mondavi Winery, Vincor and Beam Wine Estates in three years. In a 2009 interview with Wine Business Monthly, Jay Wright, then president of Constellation, said, “We see the heart of the wine industry being wines that retail for $5 to $15, so that’s the core of our strength – this is where we lead and where we see our leadership position expanding.”
In a decade, Americans have fallen in love with wines under $11. Sales have been plummeting for years and Constellation moves with the times, like a savvy public company does.
Here is the public statement Constellation released this week: “Constellation has divested the majority of its popular and consumer wine and spirits portfolio in 2021 and is focused on competing primarily in the premium and fine wine and spirits segments. artisanal.”
Constellation has also reduced its beer portfolio to Mexican brands Corona and Modelo. In 2015, Constellation paid $1 billion for Ballast Point craft beer. But craft beer isn’t the future either, apparently, and in 2019 Constellation sold the brand for less than $100 million, according to Credit Suisse.
Constellation needs to sell a lot of Meiomi Pinot Noir to continue suffering those billion dollar losses.
So what is the future? Don’t be surprised if Constellation buys more brands of spirits. He has High West whiskey, Svedka vodka and Casa Noble tequila, but none of them are the huge global success he is looking for. There’s plenty of room for growth there: as far as I can tell from its website, Constellation owns several brands of so-called craft American whiskey, but doesn’t own any brands that specifically make gin, rum, or spirits. aperitif (its brandy producer Copper & Kings also makes gin.) Of course, that says a lot about Constellation’s belief in these spirits.
And Constellation is not made with wine. Sommeliers will grumble but Meiomi and The Prisoner are two of the most popular wine brands in the United States. Constellation won’t let enophiles complain about too much residual sugar in its results. Americans love sweet wines that claim they’re dry, and Constellation has figured out how to get consumers to spend $50 instead of $5 on them. His Kim Crawford brand is big because New Zealand wines are still big.
Constellation bought Lingua Franca earlier this year: a small, premium brand of chardonnay from Oregon that wouldn’t have been on the company’s radar 10 years ago. He still runs Robert Mondavi Winery, and he makes more money for the same grapes by putting some of them in Schrader, which he bought in 2017. However, Constellation doesn’t want you to know he owns Schrader: the brand is not listed on the company’s website. The idea is probably to keep the brand from losing its Parker-era 100-point shine.
Constellation’s disinterest in cheap wine means more space at the bottom of the shelf for The Wine Group, a quietly efficient producer originally launched by executives of Coca-Cola’s failed entry into the wine business. wine in the 1970s. The Wine Group made its own high-end forays with Benziger and Imagery, but like Gallo – which is also still in the bargain wine business – it is privately owned, so it has no to respond to shareholders.
One wonders if a global recession could make cheap wine popular again and fill the accounts of Gallo and The Wine Group with truckloads of pennies. If so, Constellation can always pivot and take advantage of it, because that’s what it does.
But in the short term, The Dreaming Tree was taken down.
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