Constellation Brands Inc. is in late-stage talks to sell its cheaper brands of wine to California-based wine producer E. & J. Gallo Winery Inc., CNBC reported March 15, citing people familiar with the situation.
The New York-based maker of beer, wine and spirits disclosed Feb. 20 its plan to sell off or discontinue its wines priced under $11, which, according to President and COO William Newlands, account for up to 40% of the company's total wine and spirit profitability.
According to the report, Constellation earlier expected the sale of its low-priced brands to fetch about $3 billion, but one of the sources told the news outlet that the range could sell for only about $2 billion or less. Discussions are reportedly ongoing but could still fall apart.
CNBC said among the points being considered in the talks are which brands will be part of the deal. Constellation's low-end wine range includes brands like Clos du Bois, Mark West and Arbor Mist.
In January, the company reported that the slow performance of its cheaper wines segment contributed to a negative net sales forecast for wine and spirits for the full fiscal year as consumers turn to higher-priced alternatives.
Constellation and Gallo declined to comment on the matter, the news outlet added.