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Brands transitioning to Gallo

Arbor Mist

Black Box

Blackstone

Blufeld

Capri

Clos du Bois

Cook's

Cribari Tables & Desserts

Diseño

Estancia

Franciscan

Hidden Crush

Hogue Cellars

J Roget

Le Terre

Manischewitz

Mark West

Milestone

Paul Masson Grande Amber Brandies

Paul Masson Wines

Primal Roots

Ravenswood

Rex Goliath

Richards Wild Irish Rose

Simply Naked

Taylor Tables & Desserts

Toasted Head

V. No

Vendange

Wild Horse

Source: Constellation Brands

In a deal that has been rumored for months, New York-based Constellation Brands Inc. (NYSE: STZ and STZ.B) on Wednesday announced it inked a $1.7 billion agreement to sell around 30 wine and spirits lower-priced brands and related facilities to E. & J. Gallo Winery.

The deal includes brands with a retail price largely of under $11 and facilities in California, New York and Washington. Subject to regulatory approval, the transaction is set to close at the end of the company’s first quarter of fiscal 2020, which is in May.

“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,” said Bill Newlands, president and CEO, in the announcement. “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. In turn, Gallo is acquiring a collection of great brands that complement their operational model and business strategy to provide quality products to consumers at every price point.”

Constellation’s remaining wine and spirits portfolio would include Robert Mondavi brand family; The Prisoner Wine Company brand family; Kim Crawford, said to be the No. 1 selling sauvignon blanc in the U.S. market; Ruffino, a family of Italian wines; Meiomi, the No. 1 selling pinot noir in the U.S.; and SVEDKA Vodka, the top selling imported vodka in the U.S.

Reuters in October reported that Mark West and Clos Du Bois were among the wine brands Constellation was looking to sell. Estimated deal value at that time was about $3 billion.

Constellation purchased the Mark West brand in 2012 from what's now Purple Wine + Spirits in western Sonoma County for $163 million and the Blackstone brand from Purple in 2001 for $144 million.

Purple Wine founder Derek Benham told the Business Journal in December that key to the sale of Mark West was a desire to move the company portfolio upscale, out of the $10- to $12-a-bottle "fighting varietal" brand model that had been successful.

And Constellation along with other major players in wine has been focusing on moving its own portfolio to higher-priced wines where sales growth has been faster, an industry trend commonly called "premiumization." The New York-based company also has been putting a bigger emphasis for its growth on craft beer and cannabis in the past couple of years, including a $4 billion investment last year in Canada's Canopy Growth.

Constellation’s remaining 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.

Gallo, too, has been positioning itself toward the higher end for more than a decade, including acquisitions of prime North Coast vintners and vineyards. Gallo's premium wine division includes Napa Valley's 600-acre prime Stagecoach Vineyard, acquired in 2017, plus J Vineyards & Winery, Orin Swift and Louis M. Martini Winery.

“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,” said Joseph E. Gallo, CEO, in Gallo's announcement of the deal. “We will continue to provide our customers and consumers with quality products at every price point.”

Brands transitioning to Gallo

Arbor Mist

Black Box

Blackstone

Blufeld

Capri

Clos du Bois

Cook's

Cribari Tables & Desserts

Diseño

Estancia

Franciscan

Hidden Crush

Hogue Cellars

J Roget

Le Terre

Manischewitz

Mark West

Milestone

Paul Masson Grande Amber Brandies

Paul Masson Wines

Primal Roots

Ravenswood

Rex Goliath

Richards Wild Irish Rose

Simply Naked

Taylor Tables & Desserts

Toasted Head

V. No

Vendange

Wild Horse

Source: Constellation Brands