USA: Constellation Brands buys craft whiskey maker High West Distillery

Constellation Brands Inc. has acquired craft whiskey maker High West Distillery in a roughly $160 million deal that expands the alcohol company’s business into the fast-growing bourbon and rye categories, Wine Business reported on October 5.

Utah-based High West has grown double-digits annually over the past three years and now sells about 70,000 nine-liter cases annually. Though it remains a small competitor in the American whiskey category, it has become a favorite among aficionados for its distinctive, high-price styles like Bourye, a limited edition blend of sweeter bourbon and spicier rye whiskeys that sells for more than $75 a bottle.

Acquiring the brand fits Constellation’s strategy of increasing its focus on premium alcohol products in the U.S. It is the third such deal over the past year from Constellation, which also acquired luxury winemaker Prisoner Wine Co. and craft brewer Ballast Point.

The deal signals Constellation’s interest in building out its liquor portfolio, which currently includes Svedka Vodka, Black Velvet Canadian whisky and Casa Noble Tequila. The bulk of its revenue comes from its Mexican beer brands Corona Extra and Modelo and wine brands like Robert Mondavi and Clos du Bois.

“This (acquisition) is foundational for us to build a truly significant craft spirits business and fill out the third leg of our stool,” said Bill Newlands, Constellation’s president of wine and spirits. He said the company would make more liquor acquisitions and investments.

The transaction is expected to close later this month.

Constellation’s takeover brings an end to a roughly three-month sales process for High West. The Victor, N.Y.-based company beat out several other bidders for the craft distillery, including Pernod Ricard SA and LVMH Moët Hennessy Louis Vuitton, according to people familiar with the process.

Constellation is expected to help fund the expansion of the 30,000-square foot distillery and visitor’s center that High West opened in 2014 outside Park City, Utah. High West Chief Executive John Esposito said the company plans to add a second still capable of producing about 50,000 cases of whiskey a year.

High West’s 200 employees will remain with the company. Founder David Perkins will continue to serve as a brand ambassador and work on the product along with master distiller Brendan Coyle. Mr. Esposito, a former Bacardi Ltd. executive, will continue to run the business and assist Mr. Newlands in building out Constellation’s liquor business.

“The same people will be making it. The same people will be selling it. That’s one of the reasons we chose Constellation,” said Mr. Esposito.

Mr. Perkins added, “To afford the other stills, to put (whiskey) in wood, I saw toughness for us for the next 10 years, and a partnership sure makes sense.”

In 2004, Mr. Perkins founded High West—Utah’s first legal distillery since 1870—with a goal of creating a company that would be regarded as one of the world’s best whiskey makers. For help, he turned to Four Roses Bourbon’s then-master distiller Jim Rutledge, who recommended Mr. Perkins buy rye whiskey from a large alcohol producer now known as MGP Ingredients Inc.

High West developed a reputation for blending that rye and other whiskeys to create new styles and flavors. Brands like High West Double Rye! and High West Whiskey Campfire have been recognized with awards and positive reviews.

Rye whiskey sales rose 609% to more to more than $106 million in producer revenue between 2009 and 2014, according to the Distilled Spirits Council.

“No one bought rye back then,” Mr. Perkins said. “They said, ‘You’re going to lose your shirt. Nobody buys rye.’ We look like geniuses now.”

05 October, 2016