Constellation Brands, a major player in the beverage industry, has built its success on calculated, results-driven decisions rather than emotional impulses. Despite a significant decline in stock value this year, Constellation’s shares are still worth about 175 times what they were in 1990 and 8.5 times higher than in 2012. The company has made missteps in the past, including a $4 billion investment in Canadian cannabis and a $1 billion acquisition of Ballast Point brewery in 2015, but it is known for pivoting quickly when investments don’t yield the desired results.
Recently, rumors emerged suggesting that Constellation may be preparing to exit the wine business entirely. According to a report from Wine Business Monthly, the company is in discussions to sell its entire wine portfolio to two rival wine producers. These assets could be acquired by Duckhorn for its coastal brands and by Delicato for Constellation’s Central Valley wine operations.
Though the story remains unconfirmed by named sources, the report raises significant concerns for the wine industry. Constellation’s potential exit may not be a loss for its wine operations, but it could signal deeper issues within the sector. If Constellation, a company known for its data-driven strategies, believes there is no future in wine, it may prompt investors to reconsider their commitment to the industry. Since November, Constellation’s stock has fallen 28%, a trend reflected across the broader wine market. Treasury Wine Estates, for instance, has seen a 15% drop over the past year. In contrast, spirits companies like Brown-Forman and Diageo have also experienced declines of 45% and 28%, respectively.
The beer industry, however, is performing better. Anheuser-Busch InBev has seen a slight 1% increase in its stock, while Molson Coors has seen a slight dip of 1%. Notably, brands like Budweiser have weathered market challenges better than smaller craft beer companies, such as Boston Beer Company, which is down 19% over the past year.
Constellation’s wine portfolio includes several top-tier brands such as Woodbridge, Meiomi, Kim Crawford, The Prisoner, and Robert Mondavi. Despite this, sales of Constellation’s top wine brands have been underperforming. According to Danny Brager of Azur Associates, none of Constellation’s nine largest wine brands are seeing sales growth, contrasting with the performance of the company’s beer business. Constellation has found success in cornering the market for Mexican beer, particularly with its ownership of Corona, Modelo, and Pacifico.
Historically, Constellation’s wine business was a staple of its portfolio. Founded in 1945 in New York state, the company initially focused on affordable mass-market wines before expanding into higher-end products. Over the years, it made significant acquisitions, including Franciscan and Simi in 1999, and the famed Robert Mondavi Winery in 2003. But as the wine market matured and growth slowed, Constellation expanded into other alcohol segments, such as cider and whiskey.
Today, with wine sales stagnating, Constellation’s focus has shifted. According to industry analysts, the beer business is far more profitable. As Azur’s Dale Stratton explained, the beer industry offers quicker returns on investment. Unlike wine, which requires years of production and aging, beer provides a steady cash flow and faster turnaround times from production to consumer. This makes beer a far more attractive option for a company like Constellation, which is focused on efficient capital use.
The potential sale of Constellation’s wine portfolio would mark a major shift in the landscape of the wine industry. The industry’s lack of growth, coupled with an overabundance of wineries, has created a competitive environment where profitability is harder to achieve. As Stratton pointed out, with the market not expanding, some wineries may have to exit the industry, and Constellation may simply be the first to act.
If Constellation, with its wealth of data and market insight, concludes that wine is no longer a viable business, it could signal a difficult future for the wine industry. The broader implications of such a move will likely reverberate across the sector, raising questions about the sustainability of other wine companies and the future direction of the industry as a whole.
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