World Stock Watch

Constellation Brands Shifts Focus with Svedka Vodka Sale

In a strategic move to optimize its wine and spirits portfolio, Constellation Brands has announced the sale of its Svedka vodka brand to Sazerac, a New Orleans-based spirits company. The transaction is expected to close in the coming months, although the financial details remain undisclosed.

Streamlining for Growth

According to Constellation CEO Bill Newlands, this sale is a deliberate step towards accelerating the performance of the company’s wine and spirits business. By shedding underperforming assets, Constellation aims to focus on its core strengths and drive growth in the industry.

Challenges in Wine and Spirits

Constellation’s wine and spirits segment has been struggling, particularly in the lower-priced segments. In the second quarter, shipments dropped 9.8% year over year, with net sales and operating income falling 12% and 13%, respectively. This decline has been a drag on the company’s strong beer portfolio, which includes popular brands like Modelo and Corona.

A Shift in Focus

Wine and spirits currently account for only 5% of Constellation’s volumes, but 17% of net sales. Notably, wine sales have dominated the segment, with an 86% share, while spirits have contributed only 14%. By divesting Svedka, Constellation is poised to refocus on its core wine business and high-growth opportunities.

Sazerac Expands Its Portfolio

Sazerac, a privately-owned company, will add Svedka to its impressive portfolio of global brands, including Buffalo Trace bourbon, Fireball Cinnamon Whisky, and Southern Comfort. Constellation will retain ownership of its remaining spirits brands, such as High West Whiskey, Mi Campo Tequila, and Casa Noble Tequila.

Market Reaction

Investors and analysts have welcomed the news, viewing the sale as a positive step towards revitalizing Constellation’s wine and spirits business. Bernstein analyst Nadine Sarwat praised the move, stating that it signals management’s willingness to make tough decisions to drive growth and improve corporate governance.