One of the wine world's biggest companies is partnering with one of its most colorful personalities, hoping to grow its digital footprint. Constellation Brands announced today that it is purchasing Empathy Wines, a direct-to-consumer (DTC) brand co-founded by media personality Gary Vaynerchuk and his business partners John Troutman and Nate Scherotter. The purchase price was not disclosed.
"What Gary and John and Nate have built is a highly distinctive brand," Robert Hanson, Constellation's president of the wine & spirits division, told Wine Spectator. Hanson added that Constellation was drawn to Empathy by its quality and price, but it was also interested in its consumer-engagement model and direct-to-consumer strategy. "It tucks quite nicely into the focus that we have on more bold, more innovative, more agile high-end wine and spirits brands."
Vaynerchuk, who founded VaynerMedia and Wine Library TV, partnered with Troutman and Scherotter, both former VaynerMedia executives, to launch Empathy in 2019. The brand works with California growers such as Scot Bilbro of Marietta Cellars in Sonoma and Clay Shannon of Shannon Ridge in Lake County to produce sustainably made whites and reds for $20, as well as a sparkling rosé in a can. Empathy sells its wines through its eCommerce platform and subscription service. The brand produced 15,000 cases of wine last year. (While the company works with growers who use sustainable farming, the wines are not certified sustainable.)
"I think this puts [Empathy] in a very strong position to being one of the more successful $20 wine brands in America," said Vaynerchuk. As part of the deal, Empathy's employees will join Constellation's wine and spirits team, with Troutman and Scherotter overseeing day-to-day operations. Vaynerchuk will stay on in a consulting role.
Constellation approached Empathy in fall 2019 as the company focused on dramatically growing its digital commerce channel to complement its on- and off-premise business. Hanson says the deal will also help with the acceleration in off-premise sales due to the COVID-19 pandemic. Constellation plans to grow the brand while leveraging the Empathy team's experience to help develop its DTC business and technology and scale it across its portfolio.
The sale is part of Constellation's shift toward higher-end wine brands. The company, whose roots were in value-priced wine brands, struck a massive $1.7 billion deal last year to offload 30 of its lower-priced wine labels, along with six production facilities, to wine giant E. & J. Gallo. But the deal was delayed when the U.S. Federal Trade Commission (FTC) raised competition concerns.
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The companies have revised the agreement to exclude Cook's California Champagne and J. Roget American Champagne as well as Constellation's Mission Bell facility from the sale. In December, it signed a separate deal with Gallo to sell its New Zealand brand Nobilo Wine for $130 million. And last week, it announced that it would sell its Paul Masson Grande Amber Brandy brand to Sazerac Company, Inc., for $255 million. Both deals require FTC approval and clearance.
For now, the company will focus on modernizing its DTC channel strategy for its higher end labels such as Robert Mondavi, Prisoner Wine Co. and Simi. One key to its strategy is building relationships with its consumers. Vaynerchuk says they will use elements of Empathy's model where they fit with other wineries in the portfolio. But he also notes that Constellation may also come up with new labels using a similar model to Empathy’s. "I like that everything is on the table."
For an interview with Vaynerchuk and Hanson and more details about the deal visit Shanken News Daily.