Constellation Brands update: sale of wine brands confirmed to E. & J. Gallo
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Constellation Brands update: sale of wine brands confirmed to E. & J. Gallo

Constellation Brands, the company behind some of the world’s favourite alcoholic beverages (including Corona Beer) has confirmed that it’s selling about 30 of its less-expensive wine brands to E. & J. Gallo winery. The sale, which has been in the offing for the last month or so, will bring in $1.7 billion for Constellation, which will be looking to reinvest in other areas.

Constellation Brands’ share price has appreciated by 17% so far this year

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Source: Yahoo Finance

Constellation’s president and CEO, Bill Newlands, made the announcement last Wednesday, saying that the company could now devote itself more fully to the success of its premium wine brands – a more lucrative area. The company, which also makes Modelo beer, Svedka vodka, Kim Crawford wines, and more, is not alone in finding that modern drinkers have a preference for pricier tipples.

Newlands said: “One of the hallmarks of our success over the years has been our ability to evolve and stay on the forefront of emerging consumer trends,” adding that “Gallo is acquiring a collection of great brands that complement their operational model and business strategy.”

The premium side of Constellation’s business is outperforming. Corona Premium, Corona Familiar, and Modelo Especial gained significant market share among high-end beers last Labour Day and Thanksgiving, with Newlands calling Corona Premium a “phenomenal success”. More generally, premium alcohol is surging in popularity. According to the Distilled Spirits Council, super premium liquors (defined as costing $35 per bottle or more) grew by double digits last year.

Disclosure

Dominion holds Constellation Brands in its Global Trends Luxury Fund.


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