Constellation Brands still has a wine business, you know

Constellation Brands still has a wine business, you know

The talk around Constellation Brands has been all about beer of late.

The US firm's full capture of Grupo Modelo's US business last year, as well as one of the now Anheuser-Busch InBev-owned company's Mexican breweries, has seen suds dominate discourse around the group.

But, this week, there was a sharp reminder Constellation has a wine business to nourish. Reports from Australia suggested Constellation has held “informal talks” with Treasury Wine Estates (TWE) to acquire the troubled Australian group's US unit.

Both firms moved swiftly to pour water on the rumour firestorm. TWE issued a denial to the Australian Stock Exchange. Constellation, meanwhile, said it is “focused on completing the expansion of its Mexican brewery, driving organic growth and paying down debt”.

This has not stopped analysts at CLSA from speculating on Constellation's plans. On any possible TWE move, CLSA says in a note today: “The timing of such a deal would be quite aggressive, given Constellation’s ongoing brewery expansion and net leverage still above 4x from that transaction.”

However, the analysts suggest that Constellation will “likely return to M&A in wine at some point”. The note adds: “We believe it is likely to favour deals that bring a greater mix of US$10- to $15-per-bottle wines to its portfolio, like Mark West.”

So, Constellation may have plenty of ideas brewing in the beer world. In the wine arena, meanwhile, possibilities still remain.