Star May Be Born With Constellation Bid
With its aggressive bid for Robert Mondavi Corp., Constellation Brands Inc. is aiming to go from mass to class.
Sixty years after it began churning out fruit wines in an old sauerkraut factory, Constellation stands as the world’s biggest vintner and is poised to join the ranks of international beverage-industry powerhouses.
The products it makes or distributes include Corona beer, Almaden wine in a box, Manischewitz kosher wine and Black Velvet Canadian whiskey.
If successful, the play for Mondavi would boost the Fairport, N.Y., company’s share of U.S. wine sales to nearly 20%, giving it a strong domestic foothold. Mondavi would also round out Constellation’s wine portfolio on the low end with $5 to $10 bottles for supermarket shelves, and on the high end with the credibility that would come with the Robert Mondavi Winery label.
“They’re now at that point where they’re going to be dealing with truly global spirits companies,” said Tom Pirko, president of Bevmark, a beverage-industry consultancy in Santa Barbara.
Mondavi executives said last month that they planned to sell the company’s high-end winery and luxury brands and to cut the Mondavi family’s voting shares stake from 85% to 40%. Constellation said it would pay a hefty premium for the entire company -- $970 million in cash and the assumption of $333 million in debt. Mondavi’s response is that it will consider the offer.
Constellation, which posted a profit of $220.4 million on $3.6 billion in sales in its fiscal 2004 year, which ended Feb. 29, said Tuesday that it had lined up financing for the Mondavi purchase.
The bid showed that Constellation executives saw holes in their portfolio and decided that they “want the whole thing, and they want it now,” Prudential Equity Group analyst Jeffrey Kanter said.
Constellation’s offer is the most recent example of the company’s custom of swooping in to acquire struggling wineries whose grapes may be sweet but whose fortunes have soured.
The Constellation story began in 1945. Fresh out of the Navy, Marvin Sands, the son of a winemaker, bought an old sauerkraut factory in Canandaigua, N.Y., and began producing cheap fruit wines for East Coast bottlers. Almost 10 years later, the firm, then known as Canandaigua Industries, had its first hit -- a wine “fortified” with 190-proof brandy that Sands named Richard’s Wild Irish Rose after his son, who would take over the firm as chief executive in 1993.
Canandaigua went public in 1973, rode the wine-cooler craze in the early 1980s and snapped up a string of winemakers over the next two decades, including Manischewitz, Guild Wineries & Distilleries, Vintners International and Franciscan Estates. It changed its name to Constellation Brands in 2000, the year after founder Sands died.
Sensing the growing importance of the Australian wine market, Constellation made its boldest move in January 2003 when it paid $1.1 billion for Australian vintner BRL Hardy.
With that, Constellation leapfrogged E. & J. Gallo Winery to become the world’s largest wine seller.
This summer, Constellation said it would team with Domaines Barons de Rothschild (Lafite) and the Huneeus family to take Chalone Wine Group Ltd. private and form a luxury wine company.
“It’s a company that’s really pulled itself up by its bootstraps,” said Jon Fredrikson, president of Gomberg Fredrikson & Associates, a wine consultancy in Woodside, Calif. “To gain the prestige of a Robert Mondavi acquisition really puts the final feather in their cap. This gets everybody’s attention globally.”
In an interview Tuesday, Richard Sands said Mondavi’s Woodbridge label would help fill an important part of Constellation’s portfolio, for $6 to $8 wine, and the expensive Robert Mondavi Winery bottles would complement the high-end business it was trying to build through the Chalone deal. He said Chalone and Robert Mondavi Winery would be run separately.
“We understand the long, rich history of your company, the Mondavi family and the Mondavi brand,” Sands wrote to Mondavi Chairman Ted W. Hall in an Oct. 12 letter released Tuesday. “Constellation will honor and protect that great tradition.”
Times staff writer Jerry Hirsch contributed to this report.