Constellation Brands strategy to change

Rob Sands, president and CEO of Constellation Brands Inc. and the face of the world's largest wine company, was on television and radio last week, providing some gentle advice about sensible consumption of alcohol during the holidays.

That sort of public-service notice isn't unusual for wine, beer or spirits companies to deliver.

But Sands' relaxed appearance was another sign that the Victor-based company, which became an industry behemoth with a number of major acquisitions, is getting off the impersonal fast track and into the more personable business of promotion and marketing, of selling its premium brands aggressively, of finding efficiencies in-house and new customers for its huge portfolio.

And one should expect Sands to be at the center of this strategic shift, much as he was at the center of the holiday media spot.

In an interview last week in his office at Constellation Brands headquarters — big windows offer a generous view — Sands, 50, spoke about his company's direction, the ongoing effort to refocus corporate energies, his commitment to the Rochester region and his family's and Constellation's philanthropic endeavors.

"We will be focusing on organic growth and driving efficiencies in the business," Sands said. "It's a good time to take a break (from acquisitions)."

Even as Sands addressed a revised corporate strategy, liquor stores and wine sellers around the region were displaying that strategy with greater in-store promotions of Constellation wines. Moreover, TV, radio and other media buys are giving the company a higher profile among consumers.

Additionally, the company promoted Jay Wright, responsible for sales and marketing of the company's U.S. portfolio, to be president of Constellation Wines North America, in order to apply his marketing skills to a wider portfolio.

The idea, Sands said, is to step back a bit, to think economically in challenging times, and to build sensibly on the huge foundation the acquisitions have brought the company.

Constellation Brands spent a good part of 2009 doing what almost all companies were doing — trying to shake off the recession and reduce debt. At the same time, Constellation had to manage the tricky administrative issues that come with being a company with 50 production facilities worldwide, 8,200 employees, 200 brands of wine, beer and spirits (70 in the United States alone) and an impressive global footprint.

The company moved with more vigor to focus on premium wine brands including Robert Mondavi, Hardys, Clos du Bois, Ravenswood, Blackstone and Arbor Mist. The previous year, the company sold its Almaden and Inglenook brands and the Paul Masson winery in California as part of an effort to reduce its lower-priced holdings.

Last January, the company sold 40 liquor brands and in November announced that an Irish company had agreed to buy its Gaymer Cider Co.

The results thus far have been positive. Constellation turned a strong profit in its fiscal second quarter and, excluding one-time charges, earned 54 cents a share, well above Wall Street's estimate of 41 cents. Those profitability gains were made despite an 8 percent drop in sales.

In the interview, Sands — his brother, Richard, is chairman of the board — was candid about the effect of the recession on his family's business.

"It's been a tough year from an economic perspective. But contrary to a lot of industries, we've weathered it pretty well. They talk about businesses like this being recession-proof. I think it's more recession-resistant."

Sands said the depth of the recession has made it difficult to get company growth back where it was, but that Constellation hasn't had trouble with credit markets.

"The credit is there if we want it and I'm not categorically saying that there won't be more acquisitions. But right now the focus is on cash-flow generation."

Sands and Wright, who joined the conversation via telephone, said that it made sense for the company to keep the various distributor networks it acquired during its buying phase in order to avoid operational upheaval.

Wright said streamlining that part of the business will help advance the premium-brand strategy. The new go-to-market plan now encompasses 22 states, with eight markets remaining.

Sands said the relationship between Constellation and Mexican brewer and business partner Grupo Modelo remains strong despite a lawsuit Modelo filed alleging Constellation reneged on some marketing promises.

"We're still talking, we're still getting along," Sands said. "This is just one of those things that we couldn't resolve and will have to leave to the courts."

Sands, as he has in the past, said none of the company's plans will affect his commitment to the region — 700 people are employed in Victor and Canandaigua. The company has strong local roots, having been started by Sands' father, Marvin, in 1945.

The family, by itself and through the company, has been a civic and philanthropic force for years.

The company sponsors the popular CMAC — the Marvin Sands Performing Arts Center in Ontario County — and the family and company recently gave $4 million toward Rochester General Hospital's expansion plans.

"This is a great community," Sands said. "And we will be part of it."