Bill Newlands on the ‘bold moves’ of Constellation Brands

29th January, 2018 by Amy Hopkins

Constellation acquired Utah-based High West Distillery in 2016

Rumours of a potentially transformative bid surfaced in May this year, when CNBC reported that Constellation had approached American whiskey behemoth Brown-Forman with a takeover offer. The report also said the offer was rejected by the family-owned Jack Daniel’s maker. When asked about the speculation, Newlands politely declines to discuss it: “Well we never comment on rumours around here, so I’m not going there.”

True or not, even the whisper of an acquisition of this size can sustain industry gossip for some time. Is Constellation even in the position to make such a purchase? With a market cap of US$40bn and a budget for significant acquisitions – Newlands describes the US$245m Canopy deal as a “relatively small investment” – it seems possible.

“I would say the acquisition of the beer business from Modelo with Corona was game changing,” says Newlands, referring to Constellation’s 2013 purchase of Grupo Modelo’s US beer unit from Anheuser-Busch InBev for US$4.75bn. “So while we don’t rule those things [minority acquisitions] out, our general strategy is certainly to make sure we are doing the things to build our existing portfolio, to do smart acquisitions, and to do outstanding innovation.

“But one of the talents of this company has always been that it is at the forefront of opportunities when they present themselves. So while we wouldn’t rule it out, it’s certainly not where the focus of our attention is.”

Craft appeal

One area where Constellation has focused its attention in recent years is on the fast-growing American whiskey market, and in particular small ‘craft’ distilleries. In October 2016, the group acquired Utah-based High West Distillery for about US$160m. “High West to us was outstanding product in the bottle, it was high growth, it was growing exponentially, but like many earlier-stage companies, it was somewhat constrained just because of the capital needs,” says Newlands. “It costs a lot of money to put down products that need to age for a period of time. So we saw this as a great chance to get one of the high flyers.” Constellation is now funding an expansion of High West Distillery.

The group has also secured a number of minority-stake acquisitions in the American whiskey market. It is now part-owner of Tennessee-based Nelson’s Green Brier Distillery, Kentucky’s Bardstown Bourbon Company, and Catoctin Creek Distilling Company, based in Virginia. According to Newlands, these purchases are part of Constellation’s “existing desire” to grow its footprint in American whiskey, and spirits more broadly.

“Rob Sands [president and CEO of Constellation Brands] often talks about our strategy to be a total beverage alcohol (TBA) player, and that is really important across a couple of dimensions,” explains Newlands. “First of all, it’s what consumers are doing today. So if you look at how consumers act, there has been a tremendous growth in both spirits and wine consumption versus what occurred 20 years ago. We already have an extremely strong play in beer – we have the number-one and the number-two imports – and our wine portfolio is the number-one premium wine portfolio, so we are in a good position there. We have been working to build additional strength in spirits, to create the third leg of the stool. The consumer trends are very good in spirits and we expect that’s going to be an increasingly important part of our business going forward.”

Leave a Reply

Subscribe to our newsletter