Dive Brief:
- Constellation Brands has bought the remaining stake in Austin Cocktails, a female-founded ready-to-drink cocktail company based in Texas. The alcohol giant first invested in Austin in 2018 as part of a broader commitment to devote $100 million to women-led start-ups within the next decade. It did not disclose how much it paid for the rest of Austin.
- Austin Cocktails, which is currently distributed in 28 states, will be integrated into Constellation’s Fine Wine & Craft Spirits Division.
- CPG companies in food and beverages have been working aggressively to increase their exposure to fast-growing categories like RTD drinks while doing more to promote inclusion and diversity in their businesses and within their portfolios.
Dive Insight:
As trends in alcohol evolve, even industry leaders like Constellation Brands are left to adjust their portfolios.
The latest data from IWSR showed while the cocktail/long drink category in RTD is still small, the segment surged more than 50% in 2020 due in large part to on-premise closures and a pivot to “drinks to go,” as well as more at-home consumption and outdoor socialization. The group predicted the broader RTD category, which includes the popular hard seltzer, to have a 22% volume share of total beverage alcohol by 2025, up from 9.6% share estimated last June.
Constellation, which has seen sales jump through its dominant presence in Mexican beer with its distribution of Modelo, Pacifico and Corona, is no doubt aiming to capture a larger portion of that growth with the purchase of Austin. In 2021, Austin “depletions” — defined as the number of cases that are sold by distributors to retailers —grew 135%, according to Constellation, as RTD offerings continue to rise in popularity among consumers.
The acquisition comes just three months after Constellation partnered with Coca-Cola to launch ready-to-drink cocktails through its Fresca brand. The new Fresca Mixed line will be made using real spirits and inspired by recipes created by Fresca drinkers around the world. Constellation will produce, market and distribute the line.
Constellation is not the only company in the industry to latch on to these trends, with many of its competitors turning to M&A to accelerate their presence. In 2020, Beam Suntory purchased RTD cocktail brand On The Rocks and announced ambitions to become the top spirits-based RTD maker in the market.
Last month, Beam Suntory, which makes Sauza tequila, and Boston Beer launched Sauza Agave Cocktails. It is the first RTD cocktail to be launched under the partnership established last year between the two alcohol giants. And early last year, Molson Coors announced it was partnering with Casa Komos Beverage Group to distribute Superbird, a 100% blue agave tequila-based cocktail. The agreement marked Molson Coors’ first entry into the premium RTD spirits category.
The purchase of Austin not only fits with the growing trend of RTD consumption, but mirrors a push by companies to focus more on diversity. One such way is by acquiring brands. Earlier this year, Diageo purchased 21Seeds, a rapidly growing flavored tequila infused with the juice from real fruits, founded by three female entrepreneurs. And Molson Coors made an equity investment in 2021 in a beer brand founded by a tech entrepreneur and rival gang leaders from the Bloods, Crips and GD.
While Austin is unlikely to keep growing 135% annually, the brand appears to have significant room for expansion in the U.S. simply by entering into the other 22 states where it is currently not sold, and deepening its presence in those where it is already found.
Austin has benefited from Constellation’s connections and insight into the alcohol industry.
“Constellation’s ventures team worked closely with us, providing top-tier resources and guidance, demonstrating their commitment to innovation, and making this initiative a success,” said Jill Burns, Austin’s co-founder. “We are proud to build on this and further develop our products alongside some of the most iconic beverage alcohol brands in the world.”
At the same time, Constellation has gotten a good enough feel for the brand, its founders and its growth potential since its initial investment that it is willing to double down and buy the remainder of the young company it doesn’t already own.
Source by www.fooddive.com
