A Look at how Constellation Approaches its Ventures Investments

Dear Client:

Last week, Constellation Brands announced it acquired a majority stake in Tennessee-based Nelson’s Green Brier Distillery, the first Constellation Ventures investment to be fully integrated into the portfolio [see WSD 05-02-2019]. It’s also the second craft American whiskey to join the portfolio, behind High West.

Your editor got Constellation chief Bill Newlands on the horn to get more color on the acquisition, plans for the company and their approach to these investments.

Nelson’s “exceeded everything that we had expected of them when we made the initial investment,” Bill tells WSD. You may recall, Nelson’s was the second investment made through its investment division Constellation Ventures in 2016.

When asked how long the deal has been in the works, Bill said pretty much since the initial investment was made. “We have discussions two or three times a year with all of our Ventures investments around the development, how it’s going, how they’re feeling about things, how we’re feeling about things, and we jointly came to the conclusion that now was the right time” for Nelson’s, says Bill, adding “it’s been an ongoing discussion for quite a while, but it’s all in the context of what’s best for the business and what’s best for them and for us.”  

CONSTELLATION’S THOUGHT PROCESS. Bill says there’s no one-size-fits-all strategy when it comes to these types of investments. But there is a similar thought process for each:

1) The first priority is looking at what Constellation will need to do to help the businesses succeed and what will be required; 2) how the entrepreneurs feel, e.g. “are they interested in becoming part of our organization sooner, later, somewhere in the middle”; and 3) growth expectations.

Others currently in the Constellation Ventures portfolio include Copper & Kings, The Real McCoy, Catoctin Creek Distillery, Bardstown Bourbon Co. and Black Button Distilling.

KEEPING THE FOUNDERS ON. As part of the agreement, the founders–brothers Andy and Charlie Nelson–and existing management will remain in place.

“They’re great ambassadors for their business and certainly have a strong family heritage and authenticity,” Bill says about the founders. “We’re glad that they’re going to stay part of the action.”

The Nelson brothers said in a statement that the investment “will provide more resources to encourage Nelson’s Green Brier Distillery to grow even further.” Currently, the distillery team is focusing on introducing their new flagship product, Nelson’s Green Brier Tennessee Whiskey, made from Charles Nelson’s (the founders’ great-great-great grandfather) original 1860 recipe and process.

LOOKING AHEAD. “We’re expecting that [Nelson’s is] going to continue to accelerate.” The new Tennessee whiskey is set to hit the market soon and the current portfolio is available in more than 20 states, and “we will be looking to take that to a greater number of states as that builds out,” according to Bill.

There’s “lots of exciting things coming from a product perspective and an increased distribution perspective that we’re pretty excited about,” he says.

HIGHER WINE IMPORTS PRICING DRIVES INCREASE IN VALUE IN 2018

In 2018, US wine imports were up 6% in value, but down 4% in volume compared to 2017, according to Rabobank’s recent Wine Quarterly. Rabobank’s Steve Rannekleiv notes that the increase in value “reflects higher average prices per liter.”

Bulk wine imports were down 15% in volume and bottled table wines were down 2% in 2018. Those declines were partially offset by sparkling wines (up 6%), sangria and coolers (up 15%) and vermouth (up 19%).

Imports from Italy were up 2% in volume and 8% in value for the year. Italy continues to be the largest supplier of imports to the US. Imports from France, the No.2 import supplier, was up 13% in value and 7% in volume.

Meanwhile, US exports were down 1% in volume and 5% in value in 2018. Bottled wine exports were down 13% in sales, and was almost entirely offset by bulk wine sales, which were up 12% for the year.

WSD BRIEFS:

SMWE NAMES NEW CMO. Ste. Michelle Wine Estates has hired Francis Perrin as cmo. In his new role, he will oversee the company’s brand management, digital marketing, innovation and direct-to-consumer functions. Francis joins the company from Bel Brands USA where he worked as cmo. Prior to that he held various marketing roles at Procter & Gamble, L’Oreal and Pernod Ricard. He will report directly to coo Dan Werth.

PERNOD RICARD REVAMPS THE GLENLIVET LOOK. The Glenlivet is launching a full portfolio redesign starting with a new bottle design that is bright and bold. The green glass bottle has been replaced with a clear bottle and a smooth-flowing curve was introduced to the label. In addition, renowned fashion and fine art photographers, Inez & Vinoodh, are producing a visual approach that highlights the new packaging.

STARWARD AUSTRALIAN WHISKEY MAKES ITS WAY TO THE US. Australian whiskey brand Starward is now officially available in the US, starting with Starward Nova, an Australian single malt whiskey matured in Australian red wine barrels. It is bottled at 82 proof and is available at a suggested retail price of $55.

PRESTIGE WINE IMPORTS NAMED IMPORTER OF VAL D’OCA PROSECCO. Prestige Wine Imports has been named the exclusive US importer of Val d’Oca Prosecco. Prestige will import and market four wines from Val d’Oca including Prosecco DOC Extra Dry (srp $13), Rose Sparkling from Valdobbiadene (srp $13), Millesimato Extra-Dry Valdobbiadene Prosecco Superiore DOCG (srp $18), and Rive di San Pietro di Barbozza Valdobbiadene Prosecco Superiore DOCG (srp $33).

MGP INGREDIENTS REPORTS SOFT Q1 RESULTS. MGP Ingredients’ distillery products segment eked out 0.3% sales growth to $74.6 million in the first quarter ended March 31. The softness was driven by declines in brown spirits, while white spirits were up 5.7% in sales for the quarter. “Sales of new distillate for the quarter were soft due to order timing with multinational and national brand owner customers,” says chief Gus Griffin, adding, “Aged sales reflect lower volumes but higher pricing as we transition from selling lighter aged whiskey inventory to older whiskey inventory.”

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Until tomorrow,
Sarah

“Even if you fall on your face, you’re still moving forward.” – Victor Kiam

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