Constellation takes minority stake in ‘Breaking Bad’ actors’ Dos Hombres mezcal

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In days when celebrities often have side businesses, alcohol is getting to be a popular one. These brands not only carry the cachet of having famous names attached to them, but many of them also receive high marks from aficionados. This combination can look like a good investment for larger alcoholic beverage companies trying to profit in a changing market.

Sales of mezcal, a smoky, high-ABV spirit made from agave, have been growing in the United States. According to IWSR statistics cited by Constellation, the category grew 14% last year, and ultra-premium mezcal — costing more than $30 per bottle — is projected to be the largest and fastest-growing segment.

Because of the way it is made, almost all mezcal is considered to be a premium spirit. Some agaves used for the spirit need to mature to a certain age, and the process has been compared to that of making wine. Dos Hombres says its mezcal comes from a remote village in Oaxaca, Mexico, and is made from hand-selected espadín agave cooked in underground pit ovens, crushed in a round mill powered by a donkey, fermented for about a week with spring water and double distilled. The description of the process sounds like it has not changed in generations, providing a unique backstory.

But the celebrity angle also attracts drinkers to the brand. Cranston and Paul co-starred as an unlikely team of drug kingpins in the popular television series “Breaking Bad.” They started the mezcal brand as a way to continue their partnership after the show ended. 

Spirits in general are a good investment for alcoholic beverage makers, who are seeing sales of traditional beers erode as consumer preferences change. According to statistics from the Distilled Spirits Council of the United States, 2020 sales to suppliers rose 7.7% to be worth $31.2 billion. The spirits segment gained 1.3 percentage points in market share last year, and now is reponsible for 39.1% of total beverage alcohol sales.

This investment makes sense for Constellation as a part of its premiumization strategy. The company has concentrated on divesting its less premium offerings — including several wine brands to E. & J. Gallo Winery for $1.1 billion and its Paul Masson Grande Amber Brandy brand to Sazerac for $255 million last year. Even with these divestitures, sales are doing well. According to the company’s most recent earnings report, sales increased about 2.2% compared to the year-ago period. Subtracting sales lost from divested brands, Constellation CEO William Newlands said in the April earnings call that the company’s wine and spirits portfolio grew 5% last year.

Constellation’s venture unit has been busy in the past couple years bringing trendy offerings into the company’s fold. Last month, it took a minority stake in Black-owned wine brand La Fete du Rosé as part of its Focus on Minority Founders initiative. La Fete du Rosé is targeted toward wine drinkers who aren’t the typical educated White female demographic, and the stake will help Constellation reach a wider variety of consumers. Constellation also took a minority stake in craft liquor maker Durham Distillery in 2019, establishing more of a presence in craft spirits. 

GlobalData beverages analyst Holly Inglis said in a written statement that Dos Hombres is a particularly interesting investment for Constellation, given that many consumers are looking to drink less alcohol. However, the brand’s celebrity ownership could provide an “easy win” for Constellation.

“In the long term, this has potential to highlight a shift in the alcoholic drinks market, which could see celebrities and large brands joining forces to create new, premium spirit ranges,” Inglis said.