Most of the brands being purchased are retail at $11-a-bottle or less.
Wines at this price point had proved a drag on the overall sales in the US, as reported in January.
By selling these lower end brands, the company can focus on more premium labels.
‘This move will help us drive focus on a smaller set of premium, high-growth brands that have gained significant momentum in the marketplace,’ says Constellation Brands’ president and chief executive officer, Bill Newlands.
‘These brands more closely align with consumer premiumization trends, as they continue to shift to higher-end, higher quality products like the Prisoner, Kim Crawford, Meiomi, Schrader, High West Whiskey, Casa Noble and SVEDKA Vodka to name a few.’
Gallo sees the deal as an opportunity to attract new wine drinkers.
‘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,’ says Gallo’s chief executive officer, Joseph E. Gallo.
Black Box, Clos du Bois, Cook’s, Estancia, Franciscan, Ravenswood and Toasted Head are among the brands being purchased by Gallo, along with six winemaking facilities in California, Washington, and New York.
Polyphenolics—Constellation’s concentrate grape seed extracts and colour business—is also part of the acquisition.
The deal is expected to close at the end of next month, pending regulatory approval.