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Constellation Selling Lower-End Wine Brands To Gallo In $1.7B Deal: Why It’s A Win-Win

One of the United States’ leading wine marketers, Constellation Brands, announced that it will be divesting 30 of its brands, mostly wines that cost under $11 a bottle, to the Modesto, California-based E. & J. Gallo.

The company confirmed the sale in a press release yesterday and says that the deal will be closing at $1.7 billion. The decision was made, according to Bill Newlands, Constellation Brands’ president and chief executive officer, to “better align portfolio with consumer premiumization trends.”

The company’s winemaking faculties in New York, Washington and California will also be part of the deal, according to the release. The transaction, according to the press release, is also subject to the satisfaction of certain closing conditions, including the receipt of regulatory approval and is expected to close at the end of the company’s first quarter of fiscal 2020.

The transaction will give Gallo about 22% market share by volume of the U.S. wine market, estimated Jon Moramarco, managing partner at bw166 LLC and editor and partner at Gomberg & Fredrikson, as reported in Wine Business Monthly.

The 30 brands includes some the U.S.’s top wine brands, such as Ravensood, Clos du Bois, Hogue Cellars, Franciscan and Mark West.  In many respects, this sale makes sense as Gallo is well known for marketing wines in the under $10 price point. In addition, according to the release, Constellation’s remaining wine and spirits portfolio includes higher-priced brands such Robert Mondavi; The Prisoner; and Kim Crawford, the leading Sauvignon Blanc in the U.S. market.

This article originally appeared on Forbes