Alcohol beverage company Constellation Brands Inc (STZ) on Wednesday announced the acquisition of online direct-to-consumer (DTC) merchant Empathy Wines, to help build its digital commerce business as the coronavirus pandemic led to store and restaurant closures and a shift in consumer shopping.
The U.S. distributor of Corona beer did not disclose the financial terms of the deal. Co-founded by entrepreneur Gary Vaynerchuk, Empathy Wines focuses on producing and selling wines through its e-commerce platform. Constellation Brands shares rose 2% to $178.50 in pre-market trading.
As part of the acquisition agreement, Constellation Brands will work with the Empathy Wines team to further scale the brand’s growth, while leveraging their digital technology to build DTC and digital capabilities across its wine and spirits brands.
“We are committed to transforming our wine and spirits business into a high-performing brand portfolio that consistently delivers growth and shareholder value,” said Constellation Brands president and CEO Bill Newlands. “Key to our strategy is being consumer obsessed – building a direct relationship with our consumers, meeting them where they are shopping and engaging today, and pushing beyond to meet their evolving preferences well into the future.”
Since its product launch in 2019, Empathy Wines has sold about 15,000 cases of its signature California-sourced wine and has more than 2,000 subscription customers to date.
“Our ability to understand and ‘empathize’ with the modern-day wine consumer’s behavior, wants, and needs has been proven through Empathy’s incredible growth,” said Vaynerchuk. “We are excited to replicate this modern-day, consumer-centric approach at a larger scale, working with a portfolio of some of the most iconic brands in the world of wine.”
As part of the transaction, the Empathy Wines brand will be integrated into Constellation Brands’ wine and spirits brand portfolio, which includes SVEDKA Vodka, Casa Noble Tequila, and High West Whiskey. Empathy Wines employees and co-founders will join Constellation Brands, while Vaynerchuk will continue to assist in a consulting capacity.
Jefferies analyst Kevin Grundy on Tuesday raised the stock’s price target to $224 (28% upside potential) from $215 and maintained a Buy rating, saying that STZ remains his favored large cap growth idea.
“With STZ’s shares trading at 15.5x EV/EBITDA vs. 22.5x/27.5x for high growth peers (MNST/BFB), we continue to see a favorable risk-reward heading into 1Q results,” Grundy wrote in a note to investors. “Management set expectations for the quarter in late May, so the print should bring few surprises with commentary on June/FY21 more important for the stock.”
With shares still down 8% since the start of the year, Wall Street analysts have a Moderate Buy consensus outlook on the company based on 9 Buys versus 4 Holds and 1 Sell. The $186.92 average price target puts the upside potential at 6.7% in the coming year. (See Constellation Brands’ stock analysis on TipRanks).
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