Constellation Brands Svedka vodka is sold at a liquor store on the Upper East Side of New York, USA, Friday, June 28, 2024.
Guan Bing | Bloomberg | Getty Images
Constellation brand announced on Tuesday that Sold its Svedka vodka brand to New Orleans-based spirits company Sazerac.
The deal is expected to close in the coming months, Constellation said in a news release. It did not disclose the value of the deal.
“The actions we have taken over the past few years to reshape our wine and spirits portfolio support our efforts to accelerate the performance of this business,” Constellation CEO Bill Newlands said in the release. “We are taking another step forward to succeed with our wine and spirits portfolio and achieve our growth targets.”
Constellation’s wine and spirits business has been a drag on the company’s strong beer portfolio, which includes Modelo and Corona.
“Our wine and spirits business continues to face increasing category headwinds, particularly in the off-price segment,” Newlands said on the company’s latest earnings call in October.
In the second quarter, the company The company reported a 9.8% annual decline in wine and spirits shipments. The segment’s net sales and operating income fell 12% and 13%, respectively.
So far this year, wine and spirits account for just 5% of Constellation’s sales but 17% of net sales. The majority of new sales came from wine rather than spirits, accounting for 86% and 14% respectively.
In 2007, Constellation acquired Svedka from Spirits Marque One LLC for $384 million.
Sazerac, a privately held company, will add Svedka to a portfolio that includes Buffalo Trace Bourbon, Fireball Cinnamon Whiskey, Southern Comfort and many other global brands.
Constellation will continue to have a portfolio of spirits including High West Whiskey, Mi Campo Tequila and Casa Noble Tequila.
Although Constellation shares were down slightly in early trading, investors and analysts appeared to welcome the news.
“While the existing wine division remains, SVEDKA’s divestment is clearly positive for the division’s future growth prospects,” said Bernstein analyst Nadine Sarwat. “It also suggests that Management’s willingness to make tough decisions to grow the business is another positive factor in corporate governance.”
Bernstein maintains a buy rating on the stock and maintains a $325 price target on the stock, which currently trades at about $237.
Bernstein called the news “a clear positive for Constellation” and said weakness in the company’s wine and spirits had weighed on its beer business.
The company said more details about the deal will be provided at the Morgan Stanley Global Consumer and Retail Conference on December 3.
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