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Overview Constellation Wines is the largest wine producer in the world by volume. It is headquartered in New York but markets and sells many different types of wines all around the world. Constellation Wines is made up of 65 brands in the United States alone. Constellation It operates global individual brand-owning companies that maintain their own production, home market selling, and marketing organizations. Revenues 2005 revenues: $4087.6 million History Founded in 1945 as Canandaigua Industries, by 21 year old Marvin Sands, this company began with 8 employees who aimed at selling bulk wine in barrelrs to be bottled my companies on the East Coast. Ever since, Constellation Wines has been constantly expanding through mergers and acquisitions. It went public in 1973 as Canandaigua Wine Company. In 2000 the parent company changed its name to Constellation Brands, to which Constellation Wines belongs. Known as “The Consolidator,” when Constellation Wines acquired the Australian giant BRL Hardy LTd. in 2003 it took the first step in becoming a global wine producer given the fact that before this acquisition competition solely consisted of countries competing against each other rather. Constellation Wines thus became te firt truly international wine company. Most Well Known Brands Almaden defines the high volume, popular priced segment of the United States wine industry. These wines are packaged in a bag in a box which avoids bottling costs. The most sensitive and important aspect of Almaden is brand management, especially because supermarket sales are the most important. Franciscan Wine Estates defines the high price, high quality segment of the market. Its main points of sales are restaurants and fine wine shops. Competitive Advantage Constellation Wines is so large that it has a very significant advantage from economies of scale benefiting the entire global value chain (link). It can target all segments from popular to premium and fine wine, from its domestic United States consumer market to increasingly expanding foreign markets. Furthermore, its large size gives it an advantage when working with large retailers especially given retailer consolidation that has resulted in slashing inventories and reduced bargaining powr for wine producers. Constellation wines has decentralized sales but centralized production and inventory management which allows it to efficeitny cut costs. Struggles Australia has been a very difficult competitor because of its ability to provide low cost bulk wine. This has resulted in a weakening in the U.K. market which is a very strong source of revenue. Furthermore there were predictions that sales would fall in 2008 given such strong competition from Australia and such fierce competition for the consumer market. There is currently speculation that proftis in the U.K. will fall as well. Such investor concerns led Constellation Brands to be te second-worst performer on teh S&P 500 Index. Current Strategy Constellation Wines plans to continue expanding its size through further consolidations. It also hopes to decrease diluted capital by repurchasing shares. Constellation Wines plans to maintain its market lead by routinely introducing new wines that tailor to well monitored changes in consumer tastes and behavior. Becoming Global In the Fiscal 2007 Wine Plan Constellation Brands announced its plan to joint venture with the largest premier drink supplier for the U.K. This is a step towards providing better customer value because distribution will be more efficient in the U.K. and European market. For suppliers it will give a faster and more efficient path to the on-trade industry of hotels, pubs, clubs and restaurants. Aside from improving distribution networks, Constellation Brands is also improving its bottling facilities in the U.K. This is meant to reduce production costs due to savings on transport and manufacturing. Further cost cuts will come from the reduction in the need for multiple satellite warehouses because wine bottles will go from manufacture to point of sale. To tap into the Australian market, Constellation Wines has streamlined certain wine operations to Australia in order to strengthen its position. The process involves buying out grape supply and processing contracts. |
