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Constellation To Sell Its Low End Wine Brands To E. & J. Gallo

Liquor brand Constellation is in advanced discussions with buyers to sell off some of its existing low-end brands of wines to E &J Gallo Winery said people familiar with the discussions. The Constellation Brands which has Corona and Modelo beers in its portfolio hoped to sell its low end brands at $3 billion but the sale is expected to bring in around $2 billion or less as talks are still on and if the prices discussions are not agreeable it could fall apart. Constellation is ranked as third largest beer company in US and put up its entire wine business in the country for sale last year to move out into cannabis business. The firm which owns popular brands like Arbor Mist, Clos duBois and Mark West, finalized investment of $4 billion in Canadian marijuana firm Canopy Growth.

In recent years’ sales of low-end wines beers have slowed down as millennial are now focusing on health and indulgences like cannabis. Their choice of liquor is now towards premium wine, spirits or craft beer and data shows that sales of wines below $9 fell by 9% in retail markets. Constellation also acknowledged that company analysts have been challenged by low end of its wine business that oscillates between flat and down. But amazingly its beer business is growing handsomely and Modelo brand in past five years has witnessed compound growth of more than 20 %. Its premium wine brands priced above $11 for a bottle are still doing well like Meiomi, Prisoner, Svedka Blue Raspberry and Kim Crawford. The shares of Constellation fell by 25% in one year and now the firm is valued at $32 billion. Though representatives of both firms failed to comment on these rumors as discussions are still on, this acquisition could be a boost to its portfolio as it is still the largest exporter of wines from California.

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George Morris

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