Bad news in the market means good news for Constellation Brands Inc. (NYSE: STZ) which manufactures and markets spirits, wines and beers under a variety of labels. Brands include Robert Mondavi wines, Corona beer and Black Velvet whiskey. When the economy is good, folks drink to celebrate. When the economy starts to tank, people drink to commiserate. Constellation benefits either way. The company just released 1Q 2009 results. Profits jumped 50%! Diluted (no pun intended) EPS was $0.20, up from $0.13 in 1Q 2008. Consoldiated net sales increased 3%, with wine sales up 15% and spirit sales, led by vodka, up 9%. Constellation offloaded several lower profit margin lines including Almaden and Inglenook wines, and added higher product margin line wines Clos du Bois and Wild Horse.

Investors, whether drinkers or tea-totalers, like the numbers. The stock is up over 5% in the last two days, closing on July 2nd at $21.22

When the Swedish government put Vin & Spirit, parent company of Absolut Vodka, up for sale more than a year ago, industry experts estimated it would fetch over $4 billion.

Now, Pernod Ricard, a French liquor company, is buying the brand for $8.89 billion. Absolut is the third largest spirit brand in the world, and the sale attracted the interest of many of the industry's top players: Fortune Brands (NYSE: FO), Diageo and Bacardi.

What makes the high valuation afforded to Absolut so interesting is that Pernod Ricard is paying nearly $9 billion for a brand that only really came to prominence in its current form in the 1980s.

With its racy and provocative ads (like the one on this post), Absolut was one of the first mainstream brands to aggressively target the gay community. Back when the sale effort was first announced, I opined that targeting gay media outlets was a decision that paid off, as this large, and often affluent population group, now counts Absolut as its vodka of choice. Perhaps a company like Budweiser, which has been widely criticized for spending money on ads (such as the Super Bowl) that have done little for the brand, could learn something from Absolut's edgy marketing.

The M&A field is in a rough patch right now, struggling from a tough debt market and general economic malaise. But apparently, strategic buyers are still able to pay up for strong brands.

Any heavy drinkers with deep-pockets may want to get in touch with the management of Absolut Vodka, which recently put itself up for sale. As the number 3 premium spirit in the world, the company is expected to fetch over $4 billion, but it could be a bargain. In the highly competitive world of premium alcoholic beverages, Absolut has distinguished itself with its creative, even brilliant, advertising campaigns over the years. Suitors include Diageo plc, Pernod Ricard and Fortune Brands, and there may be more. Some expect that Brown-Forman will take a look, and it's also possible that private equity might bite, although the price is likely to make it more suitable for a strategic buyer.

One interesting thing about Absolut is that it was one of the first brands to actively target the gay community in its ad campaigns. It was a decision that paid off, as this large, and often affluent population group, now counts Absolut as its vodka of choice. Perhaps a company like Budweiser, which has been widely criticized for spending money on ads (such as the Superbowl) that have done little for the brand, could learn something from Absolut's edgy marketing.