James Wilmore

A Word with Wilmore: Constellation Brands' CEO Rob Sands - Part II

By | 12 November 2012

Last week we ran the first part of an exclusive interview with Constellation Brands' CEO Rob Sands. In this second and final part here, Sands discusses the group's spirits portfolio, its pending move to take control of Crown Imports and his hopes for Modelo's Modelo Especial beer brand.

Big is no longer beautiful, appears to be the unsaid Constellation mantra. Or is it?

Sands admits that his group is no longer the largest wine company in the world by volume. But, he follows this up: “We are the largest premium wine company in the world ... we are the biggest in terms of what we call 'premium plus'. But, we sold off all our value, low-end business.”

Though Constellation remains very much a global business, the group clearly does not ignore what happens in its domestic market and other categories. Spirits are now a “significant” part of its business, says Sands.

Its three main brands are Svedka vodka, Black Velvet whiskey and Paul Masson brandy. Sands appears upbeat about all three: Svedka, he says, is a “very hot brand”, and the US' third biggest vodka; Black Velvet has had a “tremendous resurgence”, while Paul Masson is one of the brandy category's “largest” brands.

The only slightly downbeat note is on Svedka, as an export brand. “Vodka in terms of export is not one of the hotter categories because almost every country has its own white spirit version of vodka,” says Sands. “It's in its infancy outside the US.” 

The most likely thing to put a spring in the step of Constellation's CEO is the prospect of getting full control of Crown Imports. In June, Constellation agreed to buy the half of Crown it does not own from its JV partner Group Modelo for US$1.85bn. The Mexican brewer is being forced to sell, to avoid Anheuser-Busch InBev facing regulatory issues as part of its buy-out of Modelo. The Crown JV has not always been a smooth ride either for Constellation. Three years ago, Modelo filed a lawsuit against its partner over the amount of funding both firms were giving to the JV, but was eventually settled a year later.  

Back to the present, and the deal to get Crown. Who approached who? Sands explains: “A-B InBev approached us to discuss how that (the Modelo deal) would impact the Crown JV and dicuss what our position would be on puchasing their interest.” Despite rumours of a regulatory hold-up, Sands is confident Crown will become a wholly-owned Constellation entity by the first calendar quarter of 2013. And, it can't come soon enough, it would appear.

“It's a good transaction for us,” says Sands. “The imported beer category in the US is a robust category. We have the number one postion in that category (with the Corona brand), the brands are performing well, the business is performing well and so that makes owning 100% of Crown very favourable to us, so we can participate fully in that segment of the beer industry.”

Constellation's CEO sees no reason why the Modelo Especial brand can't shine as much as Corona, by exploding in the US. “It can definintely be the next Corona,” says Sands. “It's already the third largest imported beer brand in the US and it's growing double-digit.”

Could Modelo even overtake Corona, I venuture? “That's hard to judge because Corona is also growing in the US and right now it (Modelo Especial) is about 40% the size, so it has to double its growth. I don't see that occuring in the near future, but it's possible.”

As the old adage goes: never mix the grape and grain. But, this doesn't seem to when apply when you're selling wine, beer and spirits in the US. At least, not as far as Sands is concerned.

“The business is robust, we are in a good spot,” he offers as a parting shot.

Expert analysis

Constellation Brands, Inc. (STZ) - Financial and Strategic SWOT Analysis Review

Constellation Brands, Inc. (Constellation) is a wine company. The company undertakes production and marketing of premium wines and spirits. Through its joint venture business, Crown Imports LLC, the company also supplies imported beer in the US. Constellation also produces and exports wine to Australia and New Zealand. The company markets its products under more than 100 brands such as Robert Mondavi, Inniskillin, Clos du Bois, Kim Crawford, Franciscan Estate, Estancia, Ruffino, Simi, Corona Extraands, SVEDKA Vodka, Black Velvet Canadian Whisky and others. The company operates 40 facilities across the world. The company markets its products in over 125 countries of the world with major operations in the US, Canada, New Zealand and other countries. The company is headquartered in Victor, New York, the US.

Sectors: Beer & cider, Spirits, Wine

Companies: Constellation, Modelo, InBev

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