E-Malt. E-Malt.com News article: USA: Constellation Brands makes minority investments in two US craft distilleries

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E-Malt.com News article: USA: Constellation Brands makes minority investments in two US craft distilleries
Whisky news

Constellation Brands has been on a craft spirits bender.

The producer of Corona beer and Svedka vodka on January 5 announced that it made minority investments in Virginia-based Catoctin Creek Distilling Company and Kentucky's Bardstown Bourbon Company, which only began commercial production back in September. The deals add to a slew of recent merger and acquisition activity from Constellation Brands (STZ.B), which has recently fully acquired High West Distillery for $160 million, paid $120 million for the high-end portfolio of Charles Smith Wines, and unloaded the company's Canadian wine business for $780 million.$780 million.

All of those deals come as Constellation Brands aims to place a bigger bet on "premium" brands alcoholic beverages that command higher price points as they tout their higher quality and premium-focused marketing tactics. The beers that Constellation sells, including Ballast Point and Modelo Especial, are higher priced than mainstream American lagers like Bud Light or Miller Lite. The bets the company has been making in the spirits world are similarly positioned.

In fact, Constellation back in 2015 signaled it would be making more minority investments in alcohol companies under a project it calls Constellation Ventures. It focuses on smaller-scale stakes on emerging categories within beverage alcohol. Other deals have included an investment in Crafthouse Cocktails, a maker of ready-to-drink, spirits-based cocktails.

The investments in Catoctin Creek and Bardstown Bourbon are similar emerging bets. After all, Bardstown only started production last year but is already planning to expand capacity to 6 million proof gallons from the current 1.5 million. Catoctin Creek known for Roundstone Rye whisky isn't much older, only founded in 2009. Management at both companies are to remain involved in the brands.

The investments are the latest proof that bigger alcohol producers are seeing potential for disruption from craft distillers a segment that has grown to a little over 1,300 active distillers in the U.S., reportedly achieving $2.4 billion in retail sales last year. Pernod Ricard, Bacardi and other rivals to Constellation Brands have also made similar investments or full takeovers. That trend mirrors what has been seen in the world of craft beer, as well as the broader Big Food industry. The latest investments from Constellation Brands comes from a position of strength. The company on January 5 reported fiscal third-quarter sales increased by 10%, boosted by a 16% increase for beer.

06 January, 2017

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