While Constellation Brands is best known for its beers like Modelo and Corona, it has a lucrative wine and spirits business that includes Robert Mondavi and Svedka Vodka. Sales in the category totaled $2.7 billion in its most recent fiscal year, or roughly a third of the company’s overall sales. In the past few years, however, the New York company has been pruning its business to focus on its Mexican brews and its premium business.
Last month, Constellation revised a $1 billion sale where the company agreed to divest a portion of its wine and spirits portfolio priced at $11 and below in retail. The transaction, first announced in April 2019, has been revised at least twice following an FTC review. In 2016, Constellation sold its Canadian wine business to Ontario Teachers Pension Plan for about $775 million.
The divestiture of Paul Masson Grande Amber Brandy to the Sazerac Company for more than $250 million gives Constellation extra cash to pay down debt, invest its other beverages or spend on other areas where it is growing its business. Constellation has spent more than $4 billion to invest in Canopy Growth, the Canadian cannabis producer.
Sazerac is no stranger to acquisitions, having quietly built up a formidable collection of brands. Just this month, Brown-Forman sold its Early Times, Canadian Mist and Collingwood brands to the privately held company. Similar to Constellation, Brown-Forman said the sale reflects the evolution of the company’s portfolio to prioritize premium brands like Jack Daniel’s that ensure a long-term growth strategy. In 2016, Brown-Forman also sold its Southern Comfort and Tuaca brands to Sazerac.
Even as the big alcohol companies unload lower-priced brands, there is still a market to be had for well-known offerings like Southern Comfort. With a larger portfolio, Sazerac has more heft to market to consumers and work with retailers at supermarkets, liquor stores and other establishments. As big liquor companies like Constellation and Brown-Forman continue their push to premiumize, smaller operators like Sazerac can expect to have multiple opportunities to add to their portfolio in the future.