Amid ongoing pressure on the wine category, one of the market’s biggest players, Constellation Brands, could be preparing further divestitures centered on its wine unit. A source familiar with the situation told SND that bankers have been shopping lower-tier wine brands from the Constellation portfolio, such as Woodbridge and Robert Mondavi Private Selection. Last year, Constellation executives acknowledged that more streamlining and premiumizing of its portfolio may be necessary, even after the company has markedly downsized at the lower end in recent years.
The rumor mill went into high gear yesterday after Wine Business reported that Constellation could sell off its entire wine business, with sources telling the outlet that the company’s coastal California brands and assets could go to Duckhorn while its Central Valley assets could end up with Delicato. Constellation, Duckhorn, and Delicato all declined to comment on market rumors when contacted by SND.
According to Impact Databank, Constellation’s wine portfolio totaled 15 million cases in the U.S. last year, across brands including big-volume Woodbridge by Robert Mondavi as well as premium-and-above labels Robert Mondavi Winery, Kim Crawford, Meiomi, The Prisoner, Schrader, Lingua Franca, Booker, and Simi, among others.
Constellation’s wine and spirits division saw depletions decline 4% in the company’s fiscal Q3 through November, but shipments fell a more substantial 16% to 5.1 million cases, leading net sales to decrease 14% to $431 million. Operating income for the unit was down 25% to $95 million. The declines were “mostly driven by ongoing weaker consumer demand and continued retailer inventory destocking across most price segments in the U.S. wholesale market,” the company explained. The wine and spirits division is expected to see sales decrease 5% to 8% for Constellation’s full fiscal year ended in February, with operating income falling 17% to 19%.
Duckhorn, acquired by private equity firm Butterfly for nearly $2 billion last year, has been open about its desire to continue building through acquisition. “We were able to acquire this business (Duckhorn) at a meaningful discount to where wine assets like this typically trade, and we think that’s because of the dynamics in the industry today,” Butterfly co-CEO Adam Waglay told SND in an interview earlier this year. “So this is when to lean in. We also see this as an M&A platform where we think we can roll up other incredible assets in the business.”
Duckhorn CEO Robert Hanson previously led Constellation’s wine unit, before departing early in 2024. Duckhorn plays in a wide range of quality wines across the premium and above tier and has volume of approximately 2.7 million cases, according to Impact Databank, with 2024 sales of $475 million.
Delicato has also been no stranger to M&A activity, onboarding Francis Ford Coppola’s wine assets in 2021. Delicato is among the volume leaders in the U.S. wine market with annual depletions of approximately 16 million cases, across brands including Bota Box, Diamond Collection, Three Finger Jack, Z. Alexander Brown, 1924, and others.—Daniel Marsteller
