Did Constellation Brands Pay Too Much for Meiomi ?

July 28, 2015 § Leave a comment

Many wine industry insiders were surprised at the lofty price Constellation Brands paid for Caymus’ Pinot Noir powerhouse, Meiomi. A deal that did not include any vineyard land or grape resources, from what we understand. However, if you believe that on-premise distribution is the benchmark of brand equity (build brands on-premise, build volume off-premise), then there may be some justification for this tidy sum.

Winemetrics is about to release a new report introducing its Wine Equity Quotient™ (WEQ) and Brand Equity Quotient™(BEQ). Both of these valuations are based on a wine’s (or brand’s) on-premise distribution characteristics which include:

  1. total number of listings (either by-the-glass or by-the-bottle, there is a separate WEQ for each)
  2. total number of chain/restaurant groups where it has distribution
  3. The diversity by chain type (Casual, Upscale Casual, Fine Dining) of its distribution
  4. Average Price

When Winemetrics compared the top 3 Pinot Noir By-the-Glass by their WEQ values, we came up with the following numbers.

  • Meiomi          WEQ – 29
  • Mark West    WEQ – 19
  • Mirassou       WEQ – 21

Constellation paid $160 million for Mark West in 2012. While we are unable to precisely determine Mark West Pinot Noir WEQ for this year, we do know that since it’s purchase this wine has increased on-premise distribution by about 40% since  2012. Using that number of total listings with Mark West’s current WEQ calculation, it would yield a WEQ of 13.

Let’s use this Wine Equity Quotient™ value with Mark West’s purchase price to estimate what Meiomi might be worth in today’s market:

160/13 = p/29 where p would be the purchase price of Meiomi in millions of dollars

p = 357 or $357 million dollars.

Certainly Constellation Brands used far more sophisticated analysis than this to determine Meiomi’s fair market value, but I don’t think they overpaid.

Winemetrics Wine Equity Quotient™ (WEQ) and Brand Equity Quotient™(BEQ) will be introduced in Winemetrics’ new 2015 Wine Buyer’s Report, our first report targeting wine buyers, beverage managers and wine professionals who sell to this group. This report will be released August 1, 2015.

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