FRANZIA’S NEW WINE COULD BENEFIT THE INDUSTRY

In yesterday’s research note, Kaumil Gajrawala of UBS noted that Bronco Wine Company’s (owned by Fred Franzia) plan to introduce a $4.99 Napa wine in Trader Joe’s stores could end up being a good thing for the industry by “clearing out excess grape inventories.” And while it might initially hurt sales of Constellation’s premium and popular-priced wines in the near future, it could be “beneficial in the long-term,” especially combined with this year’s smaller crop (down 16% from last year).

“While Franzia's new product launch is priced more rationally ($4.99 vs. $1.99), we believe Constellation's below $9 wines (80% of volumes) could be at risk in the near-term,” said Kaumil.