Sunday, November 07, 2004

Oligopoly brief: Constellation Brands While consolidation in the beer industry is by now an old story, the wine industry has seemed immune. There are, after all, so many varieties, so many countries of origin, and so many vineyards that serious consolidation has seemed unthinkable. But the recent announcement of Constellation Brands' agreement to buy winemaker Robert Mondavi Corp. shows a big change in the market. Already the second largest wine marketer in the world, Constellation with this deal will control 20% of US wine sales. That makes the family owned Constellation company second in share only to E&J Gallo (30% share), which concentrates on lower-priced wines. But that in turn leads to the astonishing fact that half of the US wines sales are controlled by two companies. The deal is for a little over one billion dollars. Mondavi is historically important as the company that help create a market for California wines in the 1960s. A Wall Street Journal article "Constellation Sets $1.03 Billion Deal To Buy Mondavi", 11/4/2004) sees most of the benefits in terms of saving on packaging costs through economies of scale. We, on the other hand, see that far more important is power in the marketplace, the ability to grab shelf space for a wide variety of wines under different labels and therefore to elbow smaller rivals off the shelves and to effectively fight with Gallo (which concentrates on lower-priced wines primarily). A Sacramento Bee article ("Mergers reshaping wine trade", 11/5/2004) see this as a part of an ongoing process of buyout, with companies like Allied Domecq, Diageo, and Brown-Forman joining in the race with Constellation. In this, as in other areas, major acquisitions create a panic atmosphere where others accelerate their acquisitions. The Bee article quotes one consultant as saying "There is no question that the focus now clearly ... is on seeing what can be done to buy out some significant parts of the California (wine) business and making them part of a global enterprise….(California) is looking at some very major cleaning up of assets by international companies." Among the targets identified in the Bee article are such stalwart mid-level companies as Sutter's Home and Kendall-Jackson. One of the owners of a small winery in the area noted in the Bee article "As the big guys get bigger, they are going to demand even more attention from the distributors, meaning the less attention we get," He is hopeful that he can survive by "gathering the crumbs they eave aside, really the only strategy for small players in an tightening oligopoly. Constellation has made 15 acquisitions since 1990. A year ago it bought out NRL, Australia's biggest wine company, for $1.4 billion. Through a steady stream of acquisitions and cooperative marketing agreements, the company has become not only a major marketer of wines, it also imports some the US's most popular beers, especially #1 import Corona form Mexico. It is also a major distributor of spirits, often value brands. Constellation Brands brands (major brands in bold) Division Location Product Brands Canadaigua Brands US Wines Alice White (Australian), Almaden, Coastal Vintners, Covet Run, Inglenook, La Terre, Manischewitz, Nathans Creek, Paul Thomas, Ste. Chapelle, Talus, Vendnage     Desert and fortified wines Almaden, Cisco, Cribari, Richards, Taylor, Wild Irish Rose     Liqueur Paul Masson     Fruit-flavored wines Arbor Mist North Lake Wine US Wines Bellaire Creek. Cribari, Dunnewood, Estate Cellars, Farallon, Heritage, Italian Swiss Colony, Paul Masson, Taylor California Cellars, Taylor New York, Vino Casata, Vintners Ch, Widemer     Imported wines Kelly's Revenge, La Sierra, Marcus James, Vina Sanat Carolina     Sparking wines Chase Limogere, Cook's, Great Western, Henri Marchant, J. Bonet, J, Roget, Le Domaine, Mondoro, Taylor's New York     Cider K Cider Pacific Wine Partners US Wine US Blackstone, Estancia, Simi, Seventh Moon, (US) and U.S. importer of the Hardy Wine Company brands: Banrock Station, Hardys, Leasingham, Barossa Valley Estate, Chateau Reynella, Brookland Valley, Starvedog Lane and Yarra Burn from Australia, and Nobilo from New Zealand Matthew Clark UK Wines Stowells (France, Italy, Germany, etc.), Veramonte (Chile), Estancia, Paul Masson, Nathanson Creek, Ravenswood (US)     Fortified wines QC, Old England, Armadillo, Scotsmac, Stone's Ginger Wine     Alcopops Pony , Cherry B, Snowball, K Vodka Ice, Country Manor, Rougemont, Concorde Arbor Mist, Babaycahm     Cider Blackthorn, Gaymer's Olde English, Diamond White, Red C, K, Natch,, Special VAT     Mineral Water Strathmore Franciscan Oakville Estate US Wine Franciscan Oakville Estate Hardys Australia Wine Banrock Station, Bay of Fires, Hardys, Kanberra, Barossa Valley Estate, Brookland Valley, Houghton, Moondah Brook, Omni, Savy, Starvedog Lane, Stonehaven, The Lane, and Yarra Burn Nobilo NZ Wine Drylands, Fall Harvest, Nobilio, Selaks, Station Road Barton Beer US Beer Imports Corona, Modelo, Pacifico, St. Pauli Girl, Tsingtao Barton spirits Spirits Whiskey 1792 Ridgemont Reserve, Barclay, Barton, Black Velvet, Canadian Host, Canadian LTD, Canadian Supreme, Colonel Lee, Corby's, Fleischmann's, Highland Mist, House of Stuart, Imperial, Inver House, Kentucky Gentleman, Kentucky Tavern, Lauder's, McMaster's, Mr. Boston, Northern Light, Old Pulteney, Old Thompson, Schenley, Speyburn Ten High. Tom Moore     Vodka Barclay's, Barton, Crystal Palace, Czarina, Fleischmann's, Glenmore, Mr. Boston, Schenley, Skol, Thor's Ham     Gin Barclay's, Barton, Crystal Palace, Czarina, Fleischmann's, Glenmore, Mr. Boston, Pikeman, Schenley, Skol     Rum Barton, Calypso, Fleischmann's, Mr. Boston, Schenley, Skol     Tequila Capitan, El Toro. Montezuma     Mezcal Monte Alban     Brandy Barton, Fleischmann's, Hartley, Jacques Bonet, Mr. Boston     Liqueur and Schnapps 99, Amaretto di Sabroso, Barton, Caravella, di Amore, Heather Cream, Mr. Boston, Montezuma, Sabroso     Sparkling wine Vita Castelli Asti Spumante     Pre-mixed cocktails Barton, Chi-Chi's, Montezuma, Mr. Boston Robert Mondavi US Wine Arrowood, Byron, Io, La Famiglia, Opus One, Robert Mondavi, Woodbridge (US), Arboleda, Caliterra, Marchesi di Frescobaldi, Sena (Chile), Danzante, Luce, Lucente (Italy), Kirralaa (Australia) 5:59:58 PM

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