E. & J. Gallo Winery, the world's largest family-owned winery, announced last Wednesday that it has entered into an agreement with Constellation Brands to purchase more than 30 wine and spirits brands, along with six winemaking facilities located in California, Washington, and New York. The sale, which is valued at USD1.7 billion, marks the successful execution of last month’s announcement by Bill Newlands, President and COO of Constellation Brands, to discontinue 40 percent of the company’s non-beer business (inside.beer, 1.3.2019).
The brands that will change ownership include Clos du Bois, Black Box, Estancia, Mark West, Wild Horse, Franciscan, and Ravenswood and are mainly sold in the highly competitive under-$11.00 retail category. They will be added to the Gallo’s existing portfolio of more than 100 brands, which are mainly higher priced.
“We will continue to provide our customers and consumers with quality products at every price point,” said Joseph E. Gallo, Chief Executive Officer of Gallo, in a statement. “While we continue to invest in our premium and luxury businesses, we see a tremendous opportunity with this acquisition to bring new consumers into the wine category.”
It is widely believed that the cheaper priced wines attract new customers to the wine category which can later be traded up to higher price offerings in the wine segment. Although margins are lower in this segment, they act as a door opener for new consumers.
However, Constellation argues the other way round. The company has now divested its low-end wine portfolio and stays with higher priced brands like the Robert Mondavi brand family, The Prisoner Wine Company brand family, Kim Crawford, the #1 sauvignon blanc in the U.S. market; Ruffino, a leading brand family of Italian wines; Meiomi, the #1 pinot noir in the U.S.; and Svedka Vodka, the #1 imported vodka in the U.S. The company’s portfolio also includes a collection of high-end brands such as SIMI, Schrader Cellars and Mount Veeder Winery wine brands, and High West Whiskey and Casa Noble Tequila, as well as new premium wine innovations such as Cooper & Thief and Spoken Barrel.
“This decision will help enhance organizational focus on a more premium set of wine and spirits brands that better position our company to drive accelerated growth and shareholder value,” said Bill Newlands in a separate statement.
As part of the agreement, Gallo will acquire the wineries Mission Bell, Turner Road Vintners, Clos du Bois and Wild Horse in California, Hogue Cellars in Washington, and Canandaigua in New York.
The latter was founded in 1945 by the MarvinSands and can be considered as the nucleus of the multi-billion business of today.CanandaiguaIndustries was selling bulk wine to bottlers in the eastern United States. In 1973 the company went public. In 2000, Canandaigua Wine Company changed its name to Constellation Brands to reflect the scope of the company and its range of brands.
Rob Sands, one of the sons of founder Marvin Sands, stepped down as CEO of Constellation Brands on March, 1 and succeeded his brother Richard Sands in his role as Executive Chairman. He made way for Bill Newlands as the first non-family CEO in the history of Constellation Brands (inside.beer, 19.10.2018).
The buyer, E. & J. Gallo Winery, was founded by the two brothers Ernest and Julio Gallo in 1933 in Modesto, California. Gallo is today the world’s largest family-owned winery with more than 6,500 global employees and distributes its wines and spirits in more than 110 countries around the globe. A pioneer in the art of grape growing, winemaking, sustainable practices, marketing and worldwide distribution, Gallo crafts and imports wines and spirits to suit a diverse range of tastes and occasions, from everyday offerings to boutique, luxury bottlings.
The Gallo portfolio is comprised of more than 100 unique brands, including Barefoot Cellars, Dark Horse, and Gallo Family Vineyards, as well as premium box wines The Naked Grape and Vin Vault. Premium offerings include Apothic, Carnivor, Chateau Souverain, Columbia Winery, Ecco Domani, Edna Valley Vineyard, J Vineyards & Winery, Louis M. Martini, MacMurray Estate Vineyards, Mirassou, Orin Swift, Talbott Vineyards, and William Hill Estate, along with imports, such as Alamos, Brancaia, La Marca, Las Rocas, Martín Códax, Whitehaven, and LUX Wines, importers of Allegrini, Argiano, Jermann, Pieropan and Renato Ratti. Gallo Spirits currently offers New Amsterdam Vodka and Gin, Familia Camarena Tequila, RumHaven, Lo-Fi Aperitifs, E&J Brandy, Argonaut Brandy, Germain-Robin Brandy, Diplomático Rum, as well as imported Scotch whiskies from Whyte & Mackay, including The Dalmore, Jura and John Barr.