Constellation Brands’ Richard Sands Takes Aim at California’s Top End.
Richard Sands runs the second-largest wine company in America—one that sells some of America’s best-known wine brands—but few wine enthusiasts have heard of him or of his $3-billion company. That’s by design. Unlike many executives in the ego-driven wine business, Sands keeps a low profile, shunning the spotlight that others seek. "I don’t need the attention," he says. "I’d rather let the winemakers be the focus."
Sands is chairman, president and CEO of Constellation Brands, formerly Canandaigua Brands. The company, once known for low-end wines like Cribari and Jacques Bonet (if it was known at all), has been on a buying spree for the past few years, gobbling up such respected California wineries as Franciscan, Simi, Estancia, Mount Veeder and Ravenswood. Its fine wine business is as big as Mondavi or Beringer and, thanks to its financial muscle and marketing skills, continues to grow rapidly.
Born Into A Business
Though Sands is outgoing, even loquacious, when talking about his business and hobbies (see sidebar), he shuns attention. He regards his company as a business, not an extension of his personality. A third-generation wine seller, he didn’t even intend to enter the family business—he wanted to be a clinical psychologist. That ended, he jokes, "when I decided I was too neurotic to be a psychologist."
Sands’s grandfather, Mack, entered the wine business in the late 1940s, bottling wine in Greensboro, North Carolina, in the heart of the teetotaling Bible Belt. Richard’s father, industry legend Marvin Sands, joined Mack in the wine-bottling business when he returned from World War II and college. Soon afterward, they bought Canandaigua Industries, a small bulk winemaker in New York. Their timing was terrible: By war’s end, wine prices had dropped 50 percent. "They were insolvent from day one," notes Sands.
In the early ’50s, Marvin decided that the company needed a proprietary product to escape the bulk-wine commodity rat race. His creation—a sweet, high-alcohol rosé blend of Catawba wine and Port—became Richard’s Wild Irish Rose. The firm’s Irish sales manager suggested part of the name from the sentimental song "the Wild Irish Rose," and Richard’s mother added the "Richard’s" for her first son, who was born in 1953.
The fruity pink wine was a bestseller through the late ’70s, before changing consumer tastes left it behind. Marvin Sands was again inspired to develop new products: J. Roget, a cheap sparkling wine, and Visalia, the company’s first California-brand table wine, were born. Sun Country Coolers followed, at the height of the wine-cooler craze.
Psych or Wine?
As an undergraduate, Richard studied math at the University of California at Berkeley, then transferred to Washington University in St. Louis. There he realized the technical curriculum didn’t match his interest in people—"especially girls," he admits. So he switched his major to social psychology.
After graduation, Sands entered the graduate program at the University of North Carolina. By coincidence, the social psychology department was across the hall from psychometrics, and he soon found his real love—modeling and statistics. "It was a good background in motivation and mathematical models," says Sands, noting that he never took a course in business or accounting.
After five years of graduate school and a PhD in social psychology, Richard decided to join his father Marvin in the family business. He spent his early years at Canandaigua gaining hands-on experience, working in almost every area of the company’s business. The skills that Richard learned in college and from his father served him well: "The math modeling and practical experience," he says, "put me in a position to drive what became a major part of our business: acquisitions."
Agustin Francisco Huneeus, the bright and aggressive head of Constellation’s Franciscan fine wine group, agrees. "He is amazingly analytical. He’s terribly intelligent and fast." Huneeus, whose father was formerly president of Franciscan, says the main reason he stayed with the company after it was acquired was to work with Sands, although Huneeus had plenty of opportunities to work elsewhere.
In 1981, when Richard was only 28, his father became seriously ill, and spent an extended stay in the hospital. Before Marvin left, he told his managers, "Tell Richard everything, and he’ll help you solve any problems." When Marvin recovered from his illness, he never assumed full control of Canandaigua again. Instead, the father and son managed the company together.
|Over the next few years, Canandaigua developed new products like Cool Breeze, and began buying other companies. The company bought New York-based Manischewitz and Widmer and began importing Mateus, then developed the import brand Marcus James. The modern era of Constellation, however, really began a decade ago.|
Canandaigua Wine Company (Popular premium-priced wines) President: Jon Moramarco
Taylor New York
Taylor California Cellars
Taylor New York
Constellation’s New Era
In 1991, Canandaigua took a major step into California, acquiring Guild Wine Company and its Cook’s, Cribari and Dunnewood labels. "That gave us a strong foothold in California," notes Sands. That acquisition was major, yet the company immediately began looking for a bigger California wine company. Instead, it acquired Barton Brands, a spirits producer and beer importer with a similar corporate strategy and culture.
Soon, however, two big California wine companies came on the market. Sands bought Vintners International in 1993, with its Paul Masson, Taylor and Great Western brands. Then 10 months later, he acquired Heublein’s, Almaden and Inglenook. As it acquired these popular wine brands, Canandaigua’s strategy was to consolidate production, focus on a few offerings and expand marketing.
Almaden, for example, specializes in boxes of wine, while Paul Masson sells jugs. The company dropped the high-end products that had once been flagships for the companies, while developing new brands, such as Mystic Cliffs and the fruit-flavored, low-alcohol Arbor Mist—a sort of 21st-century answer to the wine cooler.
By 1998, Canandaigua had digested its earlier acquisitions and was on the prowl again. This time, its sights were set even higher. It acquired Alexander Valley’s respected Simi Winery, then Franciscan Estates (which also included Estancia in Alexander Valley, Mount Veeder Winery in Napa Valley and Veramonte in Chile). As part of that agreement, Canandaigua also represents Napa’s Quintessa Vineyard. The most recent acquisition is Sonoma Zinfandel specialist Ravenswood Winery, which was purchased in April 2001.
Reflecting the changes in the firm, the corporation became Constellation Brands last year. It maintains the name Canandaigua for its "premium popular-priced" division—industry jargon for wines that sell for $3 to $7 per bottle. The Franciscan Estates division, headed by Huneeus, emphasizes more expensive wines. With these two wine groups, Constellation has adopted divergent strategies.
Franciscan’s Fine Wine Focus
Unlike the market-driven wines from its Canandaigua group, wines from Constellation’s Franciscan Estates group are made to reflect specific terroirs. To support these efforts, Franciscan has purchased extensive vineyard acreage along the California coast. To expand production of moderately priced Estancia wines, for example, Franciscan bought large tracts in the Central Coast regions of Monterey and Paso Robles, where acquisition costs are low and quality is high. In turn, grapes from its prime Alexander Valley vineyards once used for Estancia now supply upscale Simi.
With talents like Jon Moramarco (Canandaigua) and Huneeus running his wine operations, Sands keeps his hands off. "Our divisions are very independent," he says. "They’re responsible for their sales and marketing and we don’t interfere with day-to-day activities."
Huneeus agrees. He says Sands works with him to develop long-term strategic vision, but leaves execution to him. "I get to make all the decisions," he says, though "sometimes I wish I got more guidance from him." He concedes, however, that Sands is always open to discussion. Whatever they’re doing, though, it’s working: Franciscan has maintained a 15 percent annual growth rate, reaching almost $90 million this past year. Huneeus claims growth second only to Kendall-Jackson, and vows to double sales from existing operations within five years.
All In The Family
Of course, hiring talented wine people does not mean that family takes a back seat. Richard’s younger brother, Rob, also works at Constellation. He is group president with responsibility for Canandaigua and supervises the U.K.-based Matthew Clarke division. "Rob is the major force driving our international efforts," Sands says.
And before long, there may be a fourth generation of Sands joining the wine business: Richard’s 27-year-old son, Hudson, is finishing his MBA at Loyola University in New Orleans, and completed an internship at Franciscan last year. He has also studied hospitality and restaurant management, which will clearly give him a leg up in the wine business. "He’s very interested in fine wine," notes his proud father.
Sands’s second-oldest son, 24-year-old Bill, may also end up carrying the family’s wine-business torch. He worked in sales and merchandising at Canandaigua, but for now, he’s getting his MFA in theater. "I advised him to pursue acting while he’s young and has the patience to endure its frustrations," says Sands, ever the supportive father. There’s a good chance that many of Richard and Jennifer’s other children will end up working for the family business, but some of their futures remain to be seen. They’ve got six children, the youngest of whom is only 12.
Constellation’s acquisition of such respected wine brands as Franciscan, Mount Veeder, Simi, Estancia and Ravenswood (and its commitment to maintain and build their quality as well as volume) has jolted into action the fine wine producers who previously underestimated the powerful marketer. "Most people never thought they’d see us this aggressive in the fine wine business," notes Sands. Solomon Smith Barney beverage analyst Mark Swartzberg agrees. "A lot of people were skeptical about Constellation’s ability to compete in fine wines—they aren’t anymore."
What we still don’t know is Constellation’s next move. Whatever that is, its competitors aren’t likely to welcome it. With growth rates above industry averages and deep pockets, Constellation is sure to pay a major role in ongoing wine business consolidation—most likely at someone else’s expense.