It’s hard to know what to make of spirits markets forecasts these days. We reported recently that distilleries like MGP are cutting back on whiskey production due to what it sees as a softening market, while companies like Pernod Ricard and Proximo Spirits have reported declines in sales as drinkers cut back on expensive booze. Constellation Brands, on the other hand, just announced that it was selling the Svedka Vodka brand to Sazerac so it can focus on its higher-end brands. It appears that some in the industry are still betting on baller bottles.
Svedka certainly doesn’t fall into the high-end spirits category, given that this vodka, which comes in many flavors, is priced at less than $20 per bottle. Although it originated in Sweden, the brand has been produced in the U.S. for years now from a corn mashbill. Still, it has held its own in the vodka market, which is still the best-selling spirit in the U.S.—according to Vinepair, in 2022 Svedka was the fourth best-selling vodka in the U.S.
Constellation Brands is a major player in the drinks marketplace, with beer brands like Corona and Modelo in its portfolio, along with Casa Noble Tequila and High West. Sazerac is no slouch either—the family-owned business is the parent company to Buffalo Trace, which produces Pappy Van Winkle (in partnership with the Van Winkle family), Eagle Rare, and George T. Stagg, and also owns Myers’s Rum, Last Drop Distillers, and Fireball. The terms of the sale were not disclosed, but according to CNBC Constellation acquired Svedka for $384 million when it bought Spirits Marque One LLC in 2007. “The actions we have taken over the past several years to reshape our wine and spirits portfolio support our efforts to accelerate the performance of that business,” said Constellation president and CEO Bill Newlands in a statement. “This transaction is another step forward in seeking to ensure that our wine and spirits portfolio is optimized to succeed and to meet our growth objectives.”
Constellation has faced headwinds as much as any other spirits corporation in recent years. The company reported a nearly ten percent decline in wine and spirits shipments in the second quarter of this year, and overall wine has far outpaced sales of spirits in the portfolio. But according to Bernstein Research analyst Nadine Sarwat, the sale of Svedka is a good move for Constellation. “While the existing wine division remains, the divestment of Svedka is a clear positive for the segment’s future growth prospects,” she told CNBC. “It also signals that management is willing to make tough decisions to evolve the business, another positive for corporate governance.” Of course, it remains to be seen if this is truly a purge of a bottom shelf brand or the start of a larger unloading of spirits.
