Constellation sells its low-end wine brands to Gallo

Constellation Brands, the 11th largest alcohol company in the world, has divested itself of approximately 30 brands, including its bestselling Black Box. The brands, along with six winemaking facilities, have been sold to E. & J. Gallo Winery for $1.7bn,. subject to regulatory approval.

A family tradition

Constellation Brands, the 11th largest alcohol company in the world, has divested itself of approximately 30 brands, including its bestselling Black Box. The brands, along with six winemaking facilities in California, New York and Washington, have been sold to E. & J. Gallo Winery for $1.7bn.

“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, the president and chief executive officer of Constellation Brands, in a statement.

Gallo now has another 30 brands in its portfolio, including Clos du Bois, Black Box, Estancia, Mark West, Wild Horse, Franciscan, and Ravenswood. The deal also includes Mission Bell, Turner Road Vintners, Clos du Bois and Wild Horse wineries in California, Hogue Cellars in Washington, and Canandaigua in New York.

“We are committed to remaining a family-owned company focused on growing the wine industry,” 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.”

The brands that have been sold largely belong in the under-$11.00 retail category, an increasingly challenging segment of the market. "The consumer is often trading up," Newlands told the Democrat & Chronicle newspaper(link is external). “The brands that we are keeping would be those that have greater potential for us over the course of time.”

Constellation’s remaining portfolio retains the Robert Mondavi brand family, The Prisoner Wine Company brand family, Kim Crawford, Ruffino, Meimo, as well as a number of spirits brands.

The transaction is subject to regulatory approval.

For a deeper insight into what this deal means for the US market, see Jeff Siegel’s analysis.

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