Constellation Brands Streamlines Portfolio with Sale of Svedka Vodka to Sazerac

Constellation Brands, a major player in the beverage industry, has announced the sale of its Svedka vodka brand to Sazerac, a New Orleans-based spirits company. This move is part of Constellation’s broader strategy to optimize its wine and spirits portfolio, with the deal expected to close in the upcoming months. While the financial details of the transaction remain undisclosed, the strategic nature of the sale was emphasized by Constellation’s CEO, Bill Newlands.

Newlands explained that the company’s efforts over recent years to reshape its wine and spirits division are designed to accelerate the growth and performance of the business. “This transaction is another step forward in ensuring that our wine and spirits portfolio is optimized for success and aligns with our growth objectives,” he stated in a press release.

This transaction comes amid ongoing challenges for Constellation’s wine and spirits division, which has been struggling, in contrast to the strength of its beer segment, including popular brands such as Modelo and Corona. The company recently reported a 9.8% year-over-year decline in wine and spirits shipments for the second quarter, with net sales and operating income from the division dropping by 12% and 13%, respectively. Despite wine and spirits representing only 5% of the company’s total volumes this year, the segment accounted for 17% of its net sales, largely driven by wine, which made up 86% of the segment’s revenue.

Constellation acquired Svedka in 2007 for $384 million through its purchase of Spirits Marque One LLC. Following the sale of Svedka, Constellation will retain other notable spirits brands, including High West Whiskey, Mi Campo Tequila, and Casa Noble Tequila, continuing to build its portfolio with premium offerings.

Sazerac, the privately-held company behind popular brands like Buffalo Trace bourbon, Fireball Cinnamon Whisky, and Southern Comfort, is adding Svedka to its extensive collection. This acquisition further strengthens Sazerac’s global portfolio and its position in the competitive spirits market.

The announcement has been met with positive reactions from analysts and investors alike. Bernstein analyst Nadine Sarwat has called the sale “a clear positive for Constellation,” believing that shedding Svedka will help address the challenges within the wine and spirits segment, which have impacted the performance of its beer business. Bernstein has maintained a “buy-equivalent” rating for Constellation shares, with a price target of $325, significantly higher than its current trading price of around $237.

Further details of the transaction are expected to be disclosed at the Morgan Stanley Global Consumer and Retail Conference on December 3, providing additional insight into the strategic direction Constellation is taking to refine its business and enhance growth moving forward.

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