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Wine Prices Stay Relatively Low Because Of Sluggish Economy

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WINE PRICES LOW ECONOMY
Wine still is relatively cheap because of the sluggish economy. | Getty Images


* Volume seen rising 3.5 pct to 4 pct this year

* Company launching new-flavored Svedka vodka

* Shares down 2.6 pct, market down 1.2 pct (Adds quotes, background, bullet points)

By Martinne Geller

NEW YORK, May 4 (Reuters) - The U.S. economy remains too delicate for Constellation Brands Inc to lead any attempt to raise wine prices, even as a smaller harvest is expected to make grapes more expensive, a senior executive said on Friday.

As a result, the world's largest maker of branded wine, with names like Robert Mondavi and Ravenswood, does not expect to raise prices this year -- unless other producers do so first.

"We're not going to lead the charge," said Constellation Brands Chief Financial Officer Bob Ryder in an interview.

Ryder said Constellation was paying close attention to what competitors were doing about prices, but said that as of yet, it was hard to see any big price increases this year. That could squeeze margins for the whole industry.

The latest evidence of how fragile the U.S. economic recovery is came Friday when the April employment report showed that the pace of hiring slowed.

Still, Ryder said consumers could see fewer discounts or promotions on wines as producers seek to offset expected increases in grape prices due to the smaller harvest.

While Constellation owns some vineyards, particularly in California's Napa and Sonoma regions, the vast majority of the wine it makes comes from purchased grapes.

Wine volume for the industry should grow about 3.5 percent to 4 percent this year, and Constellation expects to keep up that pace, Ryder said. He added though that more expensive wines are selling more swiftly than cheaper bottles.

Silicon Valley Bank, a banker to the wine industry, said last month that it expected vintners to raise prices as the supply of grapes declines.

Constellation last month forecast earnings for the fiscal year that were below Wall Street estimates as it spends more to market new products.

As opposed to growing primarily through acquisitions, as Constellation had done in the past, Ryder said the upstate New York-based company was now focusing inward on driving its own profitable growth organically.

In addition to new wines like Simply Naked and Primal Roots, Constellation is launching more flavors of its Svedka vodka, Ryder said.

Constellation shares were down 58 cents, or 2.6 percent, at $21.13 in morning trade on the New York Stock Exchange, slightly underperforming the wider market, which was down 1.2 percent. (Editing by Gerald E. McCormick and Leslie Gevirtz)

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