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Constellation to offload 30 brands in $1.7 billion Gallo deal

US drinks firm Constellation Brands has agreed to sell approximately 30 wine and spirits brands to E&J Gallo Winery for US$1.7 billion.

Paul Masson brandy is included in the US$1.7bn deal

The deal includes brands “principally priced” at US$11 RRP or below and mostly relates to Constellation’s wine portfolio. According to the New York-based group, the sale will allow it to hone its premium focus.

In a statement, Constellation confirmed the sale includes its Paul Masson brandy and Black Box vodka brands. Paul Masson is one of the world’s largest brandy brands, selling two million cases. Svedka Vodka, Casa Noble Tequila and High West American whiskey remain in Constellation’s portfolio.

In terms of wine, Constellation has retained the Robert Mondavi, The Prisoner Wine Company, Kim Crawford, Ruffino and Meiomi brands, as well as “high-end” wines Simi, Schrader Cellars and Mount Veeder, and “wine innovations” Cooper & Thief and Spoken Barrel.

E&J Gallo confirmed it has acquired the wine brands Clos du Bois, Black Box, Estancia, Mark West, Wild Horse, Franciscan and Ravenswood. In addition, the firm has purchased six wineries in California, Washington and New York.

According to Joseph E Gallo, group CEO, the acquisition will allow the company to offer a greater ladder of product prices and recruit new drinkers.

He said: “We are committed to remaining a family-owned company focused on growing the wine industry. 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.

“We will continue to provide our customers and consumers with quality products at every price point.”

For Constellation, which is the third-largest beer company in the US with brands such as Corona and Modelo, the deal will replenish cash flow following its multi-billion-dollar investment in Canadian cannabis producer Canopy Growth Corporation.

Bill Newlands, president and recently appointed CEO of Constellation Brands, said: “One of the hallmarks of our success over the years has been our ability to evolve and stay on the forefront of emerging consumer trends.

“This decision will help enhance organisational focus on a more premium set of wine and spirits brands that better position our company to drive accelerated growth and shareholder value.

“In turn, Gallo is acquiring a collection of great brands that complement their operational model and business strategy to provide quality products to consumers at every price point.”

The deal is subject to regulatory approval and is expected to close in the first quarter of Constellation’s fiscal 2020 year. The group is set to announce its fourth quarter and full-year 2019 results later today, when additional information on the transaction will be given.

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