World’s largest wine company sells spirits business

Posted by Editorial on 13th January 2009

Constellation Brands, the world’s largest wine company and a leading international producer and marketer of beverage alcohol, has entered into an agreement to sell its spirits business to New Orleans-based Sazerac Company for US$334 million (A$492m). The transaction is expected to close by the end of February 2009.

Constellation, which is listed on the Australian Stock Exchange and owns the Houghton and Hardys brands among others, is retaining the SVEDKA Vodka, Black Velvet Canadian Whisky and Paul Masson Grande Amber Brandy brands. SVEDKA Vodka is the fourth largest imported vodka brand in America and one of the fastest growing major spirits brands in the world. Black Velvet Canadian Whisky and Paul Masson Grande Amber Brandy are mid-premium spirits that are each number two by volume in their respective categories.

“This transaction is consistent with our strategic focus on premium, higher growth and higher-margin brands in our portfolio, and allows us to continue the process of reducing debt, generating free cash flow, creating efficiencies and increasing ROIC,” stated Rob Sands, Constellation Brands President and Chief Executive Officer.

“Totaling almost five million cases, the three principal spirits brands we are retaining have scale in the marketplace, good margins, are at mid-premium price points and continue to grow ahead of their respective categories,” Mr Sands added. “These are exactly the type of scale brands that fit well within Constellation’s portfolio strategy.”

As a result of this transaction, Constellation is divesting more than 40 brands including Barton, Skol, Mr. Boston, Fleischmann’s, the 99 schnapps line, the di Amore line, Chi-Chi’s pre-mixed cocktail line, Montezuma Tequila, in addition to numerous other brands representing over 600 SKUs (Stock-Keeping Units). The total volume for brands being sold was more than 10 million cases for fiscal year 2008, with net sales for the divested brands totaling approximately US$200 million.