Constellation Brands (NYSE:STZ) recently embarked on a divestiture program to shed low-priced beverages and struggling businesses. Now that it has completed the sale of its Paul Masson Grande Amber Brandy brand for $265 million, the last of the businesses it was selling, Constellation says it's ready to invest in the growth of its premium portfolio.
A better business model
The owner of Corona beer, Robert Mondavi wine, and SVEDKA vodka, Constellation acquired an agglomeration of brands, including Ballast Point Brewing, for which it paid $1 billion in 2015 at the peak of the craft beer trend, and Canadian pot grower Canopy Growth, in which it invested $4 billion in 2018.
But consumer preferences were changing as drinkers moved away from beer and toward hard seltzer and premium liquor. As the bottom fell out of the beer industry, Constellation sold Ballast Point.
To cash in on consumer willingness to pay up for alcohol, however, Constellation began selling off its low-priced brands. It sold its Canadian wine business, its Black Velvet Canadian Whisky operations, its Accolade Wine investment, and earlier this month it sold to E.J. Gallo some 30 brands of wine priced under $11 a bottle. It also completed the sale of its Nobilo wine brand and has now shed the Paul Masson brandy business.
Constellation president and CEO Bill Newlands said in a statement, "The closure of this sale concludes a series of transactions within our wine and spirits business designed to help accelerate revenue growth and operating margin performance by advancing our vision of building a winning portfolio of distinctive, higher-end brands."
He contends the beer and spirits distributor is now positioned to focus on a smaller portfolio of premium brands that is better aligned with current consumer tastes.