SHORT TERM ISSUES TO PLAGUE CONSTELLATION
Last week at the Goldman Sachs Investors Conference, Richard Sands told analysts that Australian wine prices are creeping upwards on reports of a lower 2007 grape harvest. However, UBS’s Kaumil Gajrawala warns against short term issues that could plague Constellation’s profitability.
While wine prices are indeed rising, along with demand from consumers, Kaumil warns that grape costs are up as well. So while the shrinking wine supply is great news for Australia, Kaumil says “margins could be under pressure near term because grape costs are already increasing.”
Other issues to watch out for in the near future:
1. A challenging UK market
2. Cannibalization and integration issues in the US
3. Retail pricing may stay below increasing grape costs
In the longer term, Kaumil maintains that a smaller wine supply will help improve profitability in the UK and benefit large producers like Constellation.
While wine prices are indeed rising, along with demand from consumers, Kaumil warns that grape costs are up as well. So while the shrinking wine supply is great news for Australia, Kaumil says “margins could be under pressure near term because grape costs are already increasing.”
Other issues to watch out for in the near future:
1. A challenging UK market
2. Cannibalization and integration issues in the US
3. Retail pricing may stay below increasing grape costs
In the longer term, Kaumil maintains that a smaller wine supply will help improve profitability in the UK and benefit large producers like Constellation.
posted at 12:59 PM
<< Home