Andrew Peller FQ2 results (VWE)
Andrew Peller reported a 5% sales decrease in the quarter ended September 30. The company cited retail consumers returning to pre-pandemic purchasing patterns while hospitality trade channels remained heavily restricted. The company said previously closed channels, including estate winery, restaurant, and export businesses, are slowly returning to pre-pandemic levels. Although gross margins improved, increased costs due to global supply chain issues were a headwind in the quarter.
Vintage Wine Estates reports FQ1 results after the close on Monday. Unlike Andrew Peller, the company's growth plans for the next year are not driven by a recovery in the on-premise channel. The consensus EPS estimate is $.12. Revenue is expected to grow 15.7%. Our model is above consensus expectations on the top and bottom lines. Looking at each segment provides the visibility for our above consensus expectations for the year. Management expressed notable confidence in outperforming the industry's wholesale projections of 6% this year, driven by brand initiatives. The company has numerous plans in DTC, including HSN, Vinesse, tasting room programs, wine club tailwinds, and e-commerce growth providing visibility in exceeding long-term run rates this year. In B2B, we have the most conviction in our higher projections from new retail programs. Management guided revenue growth of 23% for the year, boosted by three acquisitions. The combination of 20%+ revenue growth and margin expansion in an environment of tremendous industry inflationary headwinds is not reflected in the current valuation.
We previously hosted a fireside chat with the management team of Vintage Wine Estates. We drilled into the company's business model, growth strategy, acquisition playbook, and management's background. For the replay, CLICK HERE.
Position Monitor changes (VWE, SNAX)
We are making two changes to our rankings in our position monitor. We are moving Vintage Wine Estates up to our #2 long idea.
In addition, we are removing Stryve Foods from our long list. We were enamored of the product and competitive moat, but the departure of co-CEO Jaxie Alt and manufacturing issues has us stepping to the sidelines.
Online grocery spending remains elevated after the delta variant (KR)
Online grocery sales in October were $8.1B, about flat compared to the prior year, according to a survey from Brick Meets Click and Mercatus. The pickup continued to be the most popular, with a monthly active user (MAU) base of 33.4 million households. Ship to home's MAU was 29.8 million but has declined every month since July. 26.2 million households used delivery. Spending in ship to home decreased from $2.2B last year to $1.7B this October. Delivery and pickup increased from $5.9B to $6.4B this October.
About half of US households in October purchased groceries online. In October, the average number of orders placed by monthly active users was 2.7, up 35% from pre-COVID levels. The average order value was up 12% to $80.88 for pickup and 18% to $85.13 for delivery compared to pre-pandemic levels, while ship to home was only 2% above 2019 at $45.57. The likelihood that an MAU will order again from the same online grocery service next month was 57.2%, down 4.2% points from the prior month.
Hershey ups its pretzel game (UTZ)
Hershey announced an agreement to acquire Dot's Homestyle Pretzels and Pretzels Inc. Dot's Homestyle Pretzels is the fastest-growing brand of scale in the category, and Pretzels Inc. is a co-manufacturer of Dot's as well as other brands. Dot's said it had represented 55% of the pretzel category's growth during the past year. The acquisition price of $1.2B represents 4.4x revenue. Hershey also owns SkinnyPop and Pirate's Booty in the salty snack category.
Utz Brands owns Utz, good health, HK Anderson, Bachman that compete in the pretzel category. A similar multiple would value Utz Brands' enterprise value 60% higher. Pretzels are only 11% of Utz Brands' sales, but Utz is #2 in market share for the sub-category. Pretzels have grown slightly faster over the past two years than the overall salty snack category (6.5% vs. 6.0% in the period ended 4/4/21) and are perceived as healthier than most types of salty snacks.
