'All the big growth in wine is in higher price points like The Prisoner': Constellation Brands

Constellation Brands' portfolio now includes The Prisoner and Meiomi. Pic:iStock/SilverJohn

Constellation Brands has announced it will acquire The Prisoner Wine Company brands, a portfolio of five super luxury wine brands, while the company emphasizes the continued growth of premiumization and craft. 

The five wine brands  (The Prisoner, Saldo, Cuttings, Blindfold and Thorn) have grown volumes at an annual rate of 30% over the last three years to reach 175,000 cases in 2015.

The $285m deal builds on the 2015 acquisition of luxury wine brand Meiomi, and the 2012 acquisition of Pinot Noir brand Mark West.

'Super luxury' opportunities

Constellation Brands president and CEO Rob Sands said the acquisition of The Prisoner Wine Company brands is aligned with its premiumization strategy. The transaction is expected to close by the end of April 2016.

“Similar to the Meiomi wine brand acquisition, the Prisoner acquisition aligns with our portfolio premiumization strategy and enables us to capitalize on a US market trend that favors high end wine brands with accretive margin profiles,” he said, speaking in yesterday’s earnings call for the company’s fiscal 2016 results.

“In particular, it strengthens our position in the dynamic and margin enhancing super luxury wine category and can be easily integrated into our existing portfolio of brands.”

In July last year Constellation Brands acquired luxury wine brand Meiomi for around $315m. Sands champions the growth of the brand so far and well as seeing plenty of room to expand. 

“The brand delivered depletion growth of almost 60% in fiscal 2016, a trend which has accelerated since we first acquired the brand last summer. Its excellent margin profile is one of the contributing drivers of the margin expansion for the wine and spirits business in fiscal 2016.

“Meiomi Pinot Noir was one of the hottest wines of the year, listed as number 20 in the Wine Spectator's Top 100 for 2015, and number 1 on wine.com's Top 100 list, which is based entirely on consumer preferences. We believe the brand has plenty of room to continue driving healthy growth for our business.”

Craft beer, craft spirits 

Premiumization is a trend seen across numerous beverage categories, and for Constellation Brands this also takes notable relevance in beer, with the acquisition of craft brewer Ballast Point Brewing in November last year.

“Clearly premiumization is an important part of the strategy whether it's wine, beer, or spirits. Margin enhancement is important to us as we look at various opportunities across the three segments, which goes back of course to the premiumization element of the strategy.

“You look at wine, and clearly all the big growth in wine right now is in these higher price points like The Prisoner. You look at beer, it's almost the same in that it's better beer and higher price points that are driving that market,” he said, referencing Ballast Point as an example of this.

Turning to spirits, in August 2015 Constellation Brands acquired a minority stake in Chicago-based Crafthouse Cocktails – a brand Sands believes “has the potential to be a very fast growing, high margin business.”

“Craft spirits, much like craft beers is pretty interesting, but much more developmental in that the craft spirits business is much less developed than the craft beer [segment], and the brands are even smaller than in craft beer.”

Related News

Anheuser Busch's craft division now includes Four Peaks, Goose Island, Golden Road & Devils Backbone. Pic:istock/Maksymowicz

Anheuser-Busch acquires Devils Backbone Brewing Company

Constellation Brands' CEO said the acquisition of wine company Meiomi & craft beer Ballast Point coincides favorably with a consumer shift to premium beverages

Constellation Brands CEO credits upbeat Q1 sales to its premium wine and beer brands

Constellation Brands turns its attention to premium craft whiskey. Stock picture: iStock.

Constellation Brands acquires High West Distillery

Constellation Brands today announces Pic: iStock/kolae

Constellation Brands sells Canadian wine business; buys US-based Charles Smith Wines

What's brewing for Constellation Brands - and its newly acquired craft brewery Ballast Point? Pic: iStock

Constellation Brands outlines plans for Ballast Point and overall beer business

Photo: iStock

Premium brands could boost profits in China’s high-volume beer market

A cafe culture continues to boost the global coffee market. Pic: iStock/Easy_Company

Premium and organic boost for global roast and ground coffee market: Technavio

Napa Valley vineyards in California. Pic: iStock

California wine exports see record 2015