On February 17th, it was announced that Warren Buffet’s Berkshire Hathaway had paid $1.24bn for 5,624,324 shares in Constellation Brands. The fact that Buffet, the man known as the ‘sage of Omaha’ for the brilliance of his investment strategy, had put his money into the owner of Mondavi, the Prisoner, Meiomi, Simi and a raft of other brands, reassured many in the wine industry. See, some said, in response to my frequent references to Pernod Ricard’s decision to dispose of Brancott Estate, Jacobs Creek and Campo Viejo, the French giant’s three big wine brands, some people believe in wine.
Except, if a new report in WineBusiness.com is to be believed, less than two weeks after the news of Buffet’s investment, the Constellation bean counters appear to be seriously looking at selling its entire wine portfolio to Delicato Family Wines and Butterfly Equity’s Duckhorn.
While none of the three companies is talking about any deal right now, the logic behind the disposal is uncomfortably clear. Over the last quarter of 2024, Constellation’s wine sales fell by 16.4% in volume and 14% in revenue when compared to the previous year.
Over the 12 months ending January 2025, NielsenIQ data suggests that total US wine sales value fell by 4% compared to under 1% for beer, the sector on which Constellation intends to focus its efforts. There are no reasons to expect US and global sales of conventional wine – as opposed to AF and RTDs – to do anything other than continue to fall this year.
Is the glass half empty or half full?
Of course, seeing an exit from wine by Constellation as a negative indicator, is to take a glass-half-empty perspective. An optimist might prefer to view Delicato’s and Duckhorn’s enthusiasm to invest more positively.
Regular readers of this column will know I have an aversion to this industry’s tendency to imagine that everything will turn out right, however challenging things might appear to be right now: that 8,000 years of history and tradition give wine an automatic right to survive and prosper.
The trouble is that nothing about the drinks industry in 2025 resembles the conditions anyone making or selling wine would have known even 50 years ago.
Intelligent professionals will not dismiss Diageo’s, Pernod Ricard’s and, apparently, Constellation’s disaffection for wine. But nor will they ignore Delicato and Duckhorn. My view, for what it is worth, is that the wine industry is in the early stages of a huge metamorphosis. The beast it will become will be smaller, leaner and far more profitable, and far more like the beer, soft drinks, spirits and luxury sectors. The supermarket FMCG part of the market – with its interchangeable private label brands – will survive, but it will be controlled by a limited number of increasingly big companies that are, like discount airlines, structured to operate on tight margins. Wine will follow the trajectory of the dairy and brewing industries in which smaller operations are swallowed by efficient giants with marketing and distribution skills.
Giants that, it seems, may not, however, include Constellation Brands.
