Constellation Brands added to its burgeoning collection of premium wine brands, announcing this morning an agreement to purchase five Washington brands from Charles Smith Wines for $120 million. The sale is expected to close later this month. With this deal, Constellation says it will become the second largest supplier of Washington state wines.
The deal features five wines that Charles Smith calls "the five core brands" of his company—Kung Fu Girl Riesling, Eve Chardonnay, Boom Boom Syrah, Velvet Devil Merlot and Chateau Smith Cabernet Sauvignon. Altogether, the brands add up to nearly 500,000 cases per year, selling mostly at $12 to $15 a bottle.
Smith created these wines as separate brands, beginning with Kung Fu Girl in the 2006 vintage. The rest were added in 2007. The Riesling, the largest volume of the bunch ($12), reached 198,000 cases in 2014. Velvet Devil stands next with 150,000 cases and Boom Boom Syrah at 42,000 cases. Wine Spectator scores in recent years have ranged from 87 to 91 points.
"The idea was to have a strong portfolio where each wine was a winner," Smith told Wine Spectator. "The idea from the start was that I could always sell them off one at a time." But Constellation wanted all five.
"This is the right time to pass the baton," added Smith. He expects that Constellation's sales and marketing muscle can help grow the volume. "For the winemaking everything remains the same," he said. "But I realized that we would have needed more and more people than our team of seven. With Constellation, we don't have to change the company that we are. They get what I was doing."
Smith will also assist Constellation under a consulting winemaker agreement, helping the company further innovate across its wine portfolio.
“There were three or four things that stood out for why this is a great opportunity for us,” said Bill Newlands, president of Constellation’s wine and spirits division. “Charles has a unique perspective on how to make wines that appeal to people. He’s not a classically trained palate, but he understands how to make wines that … appeal to a millennial consumer. That’s important.”
The acquisition continues Constellation’s efforts to “premiumize” its portfolio. In wine biz-speak that means wines priced over $10. And it gives it a bigger stake in Washington.“You see a lot of wonderful wines there,” Newlands added. “They’re fruit-forward and palate pleasing, and Charles is at the forefront of that. His wines have high flavor appeal, and the brands are creative. We’re going to learn a lot from him.”
The wines are made at the Millbrandt winemaking facilities in Wahluke Slope and Ancient Lakes, using mostly grapes from Millbrandt's vineyards there. Millbrandt is not a partner in the brands.
The deal does not affect Smith's other brands, which total about 350,000 cases. These include his original K Vintners, the Chardonnay specialist Sixto and high-end bottlings under the Charles Smith label. Other brands include ViNO (which bottles Pinot Grigio and a Sangiovese rosé), Casa Smith (a partnership with his former wife, Ginevra Casa), B. Leighton (a partnership with winemaker Brennon Leighton) and his recently acquired Wines of Substance. Charles & Charles, a partnership with winemaker Charles Bieler, has grown to 240,000 cases.
Constellation has built a large stable of acquired brands, including Robert Mondavi, Simi, Clos du Bois and Mt. Veeder in California, Kim Crawford and Nobilo in New Zealand. Constellation also owns Hogue Cellars In Washington.
The new deal is part of a recent trend of Constellation looking for promising premium brands it can grow. Constellation bought two California brands in the past 18 months: The Prisoner from Huneeus Vintners for $285 million in April and the Pinot Noir brand Meiomi in 2015 from Joe Wagner for $315 million.