Constellation takes Italian risk to broaden wine portfolio

Related tags Wine Robert mondavi

A low dollar has hasn't helped sales of European wine, but
Constellation continues to bag the big brands.

Within the last month Constellation Brands have acquired 40 per cent of Tuscan Chianti producer Ruffino for $80m and the whole Robert Mondavi Corporation, including part-ownership of "Super Tuscan" Frescobaldi wines for $1.36bn.

Constellation's Franciscan Estates division announced the purchase of hallmark chianti producer Ruffino, last week. "The wine brands and rich heritage of Ruffino give us a much-desired place in the attractive Italian premium wine category,"​ said Franciscan estates CEO, Jon Moramarco.

The deal, which was announced last week, leaves the Folonari family in charge of the company with Constellation overseeing distribution of in the United States. "Our Tuscan estates and vineyards remain in the family, as well as our Friuli property Borgo Conventi,"​ said Ruffino president Marco Folonari.

The investment by Constellation comes only a month after it bought the Robert Mondavi Corporation, which part owns a number of the expensive "Super Tuscans" in partnership with the Marchesi de' Frescobaldi.

Natasha Cazin, drinks analyst at Euromonitor, told​ that Italian wine is not an obvious investment choice. "It has been priced out of many consumers' reach due to the high price of the Euro against the US dollar. If the high cost of importing continues many consumers will look for other, more affordable and good quality wines."

Constellation built up considerable debt in March 2003 when it bought BRL Hardy for $1.1 billion, gaining the big Australian brands Hardy's and Banrock Station, to become the world's largest wine producer.

The high profile acquisition of the Robert Mondavi Corporation last month gives it a crucial foot in the premium wine sector, which it did not have before. And, with access to Constellation's distribution network, Euromonitor are tipping the Mondavi Corporation for huge growth - particularly in markets where the brand is not yet fully established, such as the UK and Australia.

Euromonitor expect even further consolidation in the wine industry. In particular, Constellation's main competitor - the world's second largest wine producer, E&J Gallo, may wish to grow. Brands sighted to be potential targets in 2004-2005 include the Australian producers, Casella Wines and De Bortoli Wines and recently disgraced South African label, KWV.

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