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Constellation spirit sale prompts Foster's speculation

Monday 12 January 2009
by Richard Woodard

Constellation Brands is selling two-thirds of its spirits business, fuelling speculation that it is planning more acquisitions to consolidate its position as the world’s biggest wine producer.

Although the US company said it will use the proceeds from the US$334m sale to reduce debt, some analysts suggest Constellation might bid for Foster’s wine business, currently under strategic review.

Another possible target could be Ste Michelle Wine Estates. The future of the North American business, which includes Stag’s Leap Wine Cellars in the Napa Valley, has been in doubt since the acquisition of parent company UST by tobacco giant Altria last year.

Constellation’s spirits sell-off to New Orleans-based Sazerac Company covers more than 40 low-end spirits brands, including Barton, Skol, Fleischmann’s and Montezuma Tequila.

The brands sold more than 10m nine-litre cases in 2008, generating revenues of about $200m.

Constellation Brands president and CEO Rob Sands said the deal was consistent with the company’s strategic focus on premium, higher-growth and higher-margin products.

However, the company is retaining three main spirits brands with combined annual sales of nearly 5m cases – the fast-growing Svedka Vodka, Black Velvet Canadian Whisky and Paul Masson Grande Amber Brandy.