To say that 2007 was a remarkable year for Fairport, N.Y., USA-based Constellation Brands is a bit of an understatement. The leading international producer and marketer of beverage alcohol brands hit the ground running as its newly formed joint venture with Grupo Modelo, Crown Imports, began operations in January 2007 as the sole US importer and marketer of six of the Top 20 imorted beer brands.

In March 2007, Constellation acquired Svedka Vodka, the fastest-growing major imported premium vodka in the US, and the company capped off the year with its US$885 million acquisition of Fortune Brands’ wine business, Beam Wine Estates, further strengthening its super premium and luxury wine portfolio. With a broad portfolio that encompasses wine, imported beer and spirits, Constellation is not only the world’s largest wine maker by volume, but also the largest multi-category beverage alcohol supplier in the US and Canada, a leading producer and exporter of wine from Australia, New Zealand and Canada and a major producer and independent drinks wholesaler in the United Kingdom with 2007 net sales of US$5.2 billion.

With a strategic focus on solidifying its position as the largest premium wine company in the world as well as expanding its premium spirits offerings, Constellation continues its aggressive growth strategy and is now well positioned to satisfy consumers’ needs in every usage occasion. While Constellation has the scale and resources of a global company with more than 250 brands, the company’s successful business model is inherently built on an entrepreneurial approach, where each division has an independent sales and marketing team that can rapidly respond to changing consumer trends.

“I think managing our portfolio of products is really the key to our success,” remarks Robert Sands, Constellation Brands’ president and CEO. “We’ve got a large portfolio that is designed to meet all consumers’ needs and managing that portfolio is a difficult task and it’s something that we do superlatively.”

Originally named Canandaigua Industries Co., the company was established in 1945 by Marvin Sands, Robert and chairman of the board Richard Sands’ father. During more than 50 years in the business, Marvin Sands established a legacy of growing the company through strategic acquisitions and product innovations, including Richard’s Wild Irish Rose and Arbor Mist wine brands and Sun Country Cooler wine coolers.

With an effectively managed growth strategy, Constellation’s acquisitions have increased the company’s breadth and depth of product lines and its geographic reach. The company now operates 60 wineries, distilleries and distribution facilities around the world and markets its brands in 150 countries.

Constellation Wines North America, the wine division of Constellation Brands, produces 110 million 9-liter cases of branded wine annually and is steadily increasing its focus on the fine wine market, taking advantage of the ongoing consumer trend of trading up to higher quality wines. With the addition of the Beam Wine Estates portfolio, including top super-premium brand Clos du Bois, Constellation now offers wines that represent a comprehensive spectrum of wine styles and price points.

Earlier this year, the company sold the Almaden and Inglenook wine brands and the Paul Masson winery to increase its focus on faster-growing, higher-margin wines. On a dollar basis, Constellation’s wine portfolio is now 85 percent premium, notes Sands.

The company’s commitment to being the leader in the US premium wine market extends to its Project Genome consumer research project that examines premium wine consumers’ buying habits (for more on Project Genome, visit beverageworld.com).

“Insight into the premium wine consumer is important given our recent growth and the divestment of our value wine business,” notes José Fernandez, Constellation Wines CEO. “We pride ourselves on not only having this rich and diverse portfolio of wines and wineries, but also on our customer service and this industry-leading research can help us in many areas from marketing to consumer education.”

During the Fortune Brands integration, CWNA reorganized its sales and marketing structure into three business units, each with a distinct focus on specific consumer segment opportunities. Vine One focuses on premium and super premium wines, anchored by brands such as Clos du Bois, Blackstone and Ravenswood. Icon Estates is the fine wine division and Centerra Wine Co. is the specialty, fighting varietal and value brands division.

“The reorganization eliminated some overlap and has enabled us to be more specialized in each of our sales forces in terms of the sales and marketing expertise that we have,” notes Sands. “For instance, the Icon division is focused very heavily on on-premise and white tablecloth, while not focused as much on the more mass merchandise channels, and the Centerra portfolio tends to be somewhat different channels and it takes different skills to sell that portfolio.”

Dallas-based Glazer’s Family of Companies has benefited from its long-standing partnership with Constellation, reporting robust growth with the company’s wine brands it markets.

“We applaud the strategic direction Constellation has taken with their new divisions,” remarks Louis Zweig, Glazer’s senior vice president, corporate strategy and business intelligence. “We will be working with Constellation to create the most efficient route to market for their brands that will maximize our collective businesses.”

A Crowning Achievement
Constellation’s import beer business generated US$2.4 billion in net sales last year, despite the fact that it was a transition year for Crown Imports, the 50-50 joint venture with Mexican brewer Grupo Modelo. Prior to the joint venture, Constellation-owned Barton Beers handled the Modelo portfolio across 25 US Western states, while The Gambrinus Companies handled the Eastern markets. Crown Imports now has a commanding 35-percent share of the US import market.

“We spent a lot of time last year developing a sales and marketing organization that would cover the entire US, not just the West where we primarily had it. We’ve hired a lot of people and that organization is up and running and I think it’s running pretty smoothly at this stage,” says Sands.

Along with strategically aligning Modelo’s importation business into one single organization, the joint venture allows Crown Imports to implement a consistent and focused marketing effort for the import portfolio, which includes Corona Extra, Corona Light, Negra Modelo, Modelo Especial and Pacifico brands from Modelo, as well as No. 1 Chinese import brand Tsingtao and Germany’s St. Pauli Girl.

“We’ve been able to take advantage of the synergies that have been involved in being able to unify the West and the East, things like being able to buy national advertising and being able to call on chains that cut across states with one central organization,” Sands remarks. “I think it’s been a pretty successful first year.”

Distributor partners now have access to national advertising as well as new packaging and product innovations on a national basis, according to Aldo Madrigrano, president of W.O.W. Distributing in Wisconsin and a member of the Crown Imports Distributor Council.

“It makes it a lot easier for us in terms of being able to have one-stop shopping and they’re able to move a lot quicker versus how long it took with having two groups,” Madrigrano notes.

He also adds that Crown Imports welcomed input from distributors, and not just from the sales and marketing side, but the inventory management side as well, in order to improve its operations.

“They were very honest and said they weren’t going to do everything right 100 percent day one, but they wanted to get as much right as they could. I think they did a great job,” he adds.

While volumes for the import beer business flattened last year due to price increases, Sands expects the business to return to solid growth, thanks to the continued momentum of the premiumization trend.

The Right Mix
In an election year marked by aggressive primary campaigns, a racy fembot plastered on the sides of buses and billboards cheekily reminds Americans to “make cocktails, not war.” The eye-catching ad campaign for Svedka Vodka featuring the Svedka Grl has been a major success for the edgy brand. Constellation’s purchase of Svedka, the fifth largest imported vodka, as well as Holland’s Effen Vodka, which had been part of the company’s Planet 10 Spirits joint venture, provides the company with a platform for expanding its premium spirits offerings. 

“Svedka is an absolute phenomena; it’s a fast--growing, leading brand and when the opportunity came along to buy it, we bought it,” remarks Sands. “With Effen, we saw a small brand that had a lot of potential and therefore we bought it as a brand that we could add to the portfolio in an early stage and use our marketing expertise and strength as a company in the marketplace to turn it into a more important brand.”

Constellation’s spirits division, previously known as Barton Brands and now named Constellation Spirits, also has been strategically developing new premium brands, such as 1792 Ridgemont Reserve Bourbon and 99 Bananas Schnapps.
The company also continues to grow its international business through its UK, Australian and New Zealand subsidiaries and has identified countries where it has opportunities to expand its presence in wine and spirits. “We’re already in markets like Russia, China and India and while it’s not a big base of business, it’s growing very rapidly. We have organizations in those places focused on growing our business as those markets grow,” Sands says.

While Constellation is currently focused on growing its organic business and optimizing its expanded portfolio, acquisitions are a key part of the company’s growth strategy.

“Premiumization is an important part of our strategy and we’re focused on faster growing categories and faster growing geographies. As acquisitions become available and if they’re strategic, which means they’re the right categories and the right geographies, then we’ll consider those opportunities as they arise,” Sands asserts.

At Constellation, it’s all about having the right mix.

From Beverage World May 15, 2008