The just-drinks Interview - Constellation Brands International GM Philip Kingston

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On March 1, Constellation Brands implemented a new business model for mainland Europe as it pulled out of distribution partnerships and took control in-house. But, it was not the only shake-up for the wine, spirits and beer maker. At ProWein 2014, Andy Morton sat down with Constellation's international general manager & senior VP, Philip Kingston, to talk about the company's expanding global ambitions, including a new tie-up in China for its Robert Mondavi brand.

It has been a glorious few months for Constellation Brand's stock. The company's takeover of its Crown Imports beer JV, which made it the third-biggest brewer in the US market, has pushed its share price up from US$50 in July to above US$85 this week

And, with the latest IRI figures showing a 16% sales jump for Constellation's beer brands in the 12 weeks to 23 February - easily outpacing Budweiser (+3%), Heineken (+4%) and MillerCoors (+5%) - you can understand why some analysts have predicted the stock could be on its way to $100.

This headline-grabbing rise makes it easy to forget the limitations of the company's beer business, Crown Imports. Constellation's buy-out of Grupo Modelo's share of the JV may have given it full control of a portfolio that includes Modelo and Corona brands, but sales are restricted to the US. Constellation is, after all, a business with a far wider remit that, not so long ago, was much better known on Wall Street for its wines than for its beer.

Enter Philip Kingston, Constellation's GM for international, a region that encompasses the company's operations outside of North America, Italy and Australia. It's a small part of the business, Kingston admits, but one that covers a wide diversity of markets, from the BRICs to Africa, from the Middle East to Europe.

And, under Kingston's watch, it is expanding.

"We really want to be a serious part of Constellation," the New Zealander says of his International team. "Constellation is a big group and we are are a small part of that, but we are an important growth vehicle. To be relevant, we need to aggressively grow our business."

The unit has taken as its motto "double in three", which means it wants to double the size of its markets every three years. And, Kingston - a long-term "Con", as he calls it, with 18 years in the company - has already made major moves towards that goal since he took on his latest post 12 months ago.

On 1 March, Constellation announced it was taking control of distribution of its brands in mainland Europe. In the UK and Ireland, a partnership with former unit Accolade Wines, which Constellation still owns 20% of, will remain. But, across the rest of the continent, Constellation is for the first time offering its full portfolio directly to its clients.

The change has meant a raft of new appointments, part of a beefing up of the international arm's headcount that has seen staff increase from six people two years ago to 53 today.

"We've been busy," Kingston says.

Perhaps the biggest announcement was the one made last week in Chengdu, a hot and humid city in south-west China that hosts the country's Food & Drinks Fair. It was there that Kingston unveiled a new partnership with Chinese baijiu specialist Vats Liquor that will exponentially expand distribution of Constellation's Robert Mondavi wine brand into China's first- and second-tier cities. Mondavi already has a small foothold in the country, but Kingston says the new deal aims to make it China's top table wine brand.

That is a big ask for a Californian label in a country that so far has shown an overwhelming preference for French reds, but Kingston is optimistic.

"The difference," he says, talking to just-drinks ahead of the Chengdu announcement, "is that the agreement is very long term. We are talking decades. That gives us the confidence to invest."

What Constellation claims is different about its new partnership in China is that both sides will learn from each other. Vats, which has some 500 stores around the country, does sell some premium wine, but the deal with Constellation marks its first foray into the mainstream wine business. Constellation, meanwhile, is keen to tap into Vats' extensive network inside what one Bordeaux wine merchant last month called China's "grey" market - private networks, wine clubs and banqueting.

"It's a unique situation," Kingston says. "We can add value to Vats' wine section, and they know how to execute from a sales and marketing perspective. We see it as a really nice combination of the world's largest table wine brand and their aspiration."

It may be just the right time for a specialist baijiu retailer to jump into the wider world of wine, as anti-extravagance measures continue to bite in the country, taking a disproportionate lump out of the Chinese white spirit's sales.

The expert opinion is that wine should remain insulated from the crackdown. According to Kingston, its effect could even benefit sales.

"It forces everybody to focus on the consumer occasion and not just on the Government gift-giving," he says. "In the long run, it will be healthy for the category. And, while it could be a concern if wine is not seen as a prestige product (if government officials are not drinking it), it is still being consumed - just not from $1,000 bottles of first growth."

He continues: "The baijiu category in China is huge and, even if you get a small share of baijiu into wine, then that is a lot. There has been a period of everyone trying to get into the wine business, so there is a bit of mess at the moment. For us, we see it as an opportunity to try and build our brands."

Outside of China, Constellation is making other moves to ensure "double in three". There's a new office in Luxembourg that is part of its investment in Europe. In Brazil last year, the company consolidated its distribution in a deal with Interfood Importação. The firm is also preparing to move some of is bottling to come under the control of Finland's Altia Corp. While in Africa, an 18-month-old partnership with Rubis has bedded in.

It's about getting the company closer to its consumers, Kingston says, although, as in China, he claims to be in no rush to do so. "You don't break into these markets in just one year," he says. "It takes a lot of time and effort, and sustained investment."

The only worry Kingston will admit to is running out of supply of Californian wines if the Asian markets take off, particularly in light of comments from his company's head wine maker last month that suggested grape yields in the state will be down this year because of prolonged droughts. 

"In the commercial end, we're in good shape," Kingston says. "We are experiencing incredible demand across Asia and the US, so we do have some constraints. But, to have your brand selling well is not necessarily a bad thing. It's a challenge for us as a business."

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