Preventing Loss at Constellation Brands

A proactive partnership


“Our job is to drive value for our shareholders, so maintaining productivity is essential,” says David Klein, chief financial officer at Constellation Brands. “And the way to do that is to create as much cash flow as you can with the assets you have while taking an acceptable amount of risk. A comprehensive understanding of the risks that are inherent at our physical plants helps us to optimize return and minimize risk.”

To gain that understanding, the company asked FM Global to do a business impact analysis (BIA). “The BIA takes an in-depth look at our financial exposures, operational priorities and continuity strategies. “The analysis defined our key concerns, strengthened our resilience, and focused us on where to invest our resources to reduce risk.”

Protecting share of mind

”The wine industry is very fragmented, so there is a lot of competition. Our challenge,” Klein adds, “is to stay top-of-mind for our consumers and to provide high-quality products at every price point. If our product is not on shelves, someone else’s will be. We would lose that share of mind with the consumer. It’s really hard to say that we would get that consumer back if we were out of production for a long time.”

”Prior to the BIA,” says Klein, “we spent a fair amount of effort evaluating how we could reduce our overall costs through consolidation in our wine business. While we realized a substantial financial benefit as a result of that decision, we also created a big risk by relying on a few facilities for much of our production.”

"The best strategy is to understand the potential impact of a catastrophic event and then build it into our way of thinking.”

David Klein, chief financial officer, Constellation Brands

A proactive partnership

“One valuable result of the BIA was to create a checklist of items to address before a catastrophic event,” Klein continues. “The process also opened our eyes to a few concerns that we hadn’t noticed. For instance, our wineries require cooling capacity, and we discovered that we didn’t have backup generators on site. FM Global identified those risks and provided alternatives. With or without the BIA, we would have come to an understanding that we had risks in some areas. However, we wouldn’t have had the quantification to justify capital expense for key areas to assure our sustained productivity and profitability.”