Vintage Wine Estates FQ1 results
Revenue grew $1.9M or 3.4%, driven by contribution from acquisitions of $2.6M. Overall case volumes decreased 15% due to constraints in the supply of bottles, somewhat offset by DTC growth.
- DTC grew $4M or 36.9% with a $2.1M contribution from acquisitions. Volume grew 13.2%.
- Wholesale grew $1.2M or 7.7%, with a $0.5M contribution from acquisitions. Volume grew 3.5%, while depletions increased 1%.
- B2B decreased $1.3M or 5.2%, with $7M of shipments delayed to the remainder of the year due to glass shortages for private label products. The $7M of delayed shipments would have driven growth of 20%. Volume decreased 39.8% from the delayed shipments.
Gross margins expanded 24bps to 42.1%, driven by the favorable mix of DTC growth. The $7M of delayed shipments also boosted gross margins as the ASP for the private label product was considerably lower. Price increases would likely be tested in the 2H of the year, but the company has numerous initiatives offsetting higher costs from inflationary pressures. Operating expenses increased 23.6%; about half the growth was due to public company expenses.
Revenue guidance was maintained at $265-275M, and EBITDA guidance was maintained at $63-65M. Management’s guidance now reflects the expected contribution from announced acquisitions rather than projected acquisitions.
Vintage Wine Estates also announced its second acquisition of the year in ACE Cider. ACE Cider has about $20M in annual revenues and has been growing at a double-digit rate for the past five years. The acquisition brings Vintage Wine Estates into the RTD category and a new distribution channel.
Vintage Wine Estates continues to execute on its multi-pronged growth strategy while sourcing several acquisitions in a short period since coming public. Vintage Wine Estates is on our long list.
Lowering the sales outlook (OTLY)
Oatly reported a loss of $.07 in Q3 compared to consensus expectations of -$.10. Revenue grew 49.2% and was 8% below consensus expectations. The increased supply during the quarter came from the plant in the Netherlands, while the Ogden, Utah plants had issues in late August, which impacted revenue by $3M. Production reached 131 million liters in the quarter, up 77% YOY and 24% sequentially. The foodservice channel represented 35.8% of sales, 8.5% higher than the prior year’s mix. The EMEA region grew 23.1%, driven by the recovery in the foodservice channel. The Americas grew 87.3% due to increased production. In the Americas, volume averaged 37 million liters per month, three million less than expected. The Asia region grew 98.2% due to increased shipments from EMEA.
Gross margins contracted 510bps and were 300bps below expectations. Higher logistical expenses in EMEA and the Americas, higher shipping container rates to Asia, mix in the Americas, production issues in the Ogden plant, and customer mix in Asia were the headwinds. The price per liter was up 2.6% to $1.55. SG&A grew 110% YOY due to employee expenses, public company expenses. In addition, marketing costs increased $3.1M while distribution costs increased $5.6M. Corporate expenses increased from $21M to $31.2M, driven by overhead and stock compensation.
The company disclosed a quality issue at one of its European plants that will result in inventory being destroyed and lost sales in the region. Management was pleased with the production levels at the Ogden plant for the Americas region so far in Q4. Oatly is in the planning stages of additional plants in the U.S., U.K., and China in 2023. Oatly expects to service all Starbucks network in December and January and 85-90% of the total Starbucks network in 2022.
Management guided for the year to exceed $635M, down from $690M previously, representing 51% growth. Management revised lower the pace of revenue growth in EMEA, which management believes is timing due to the pandemic re-openings. In Asia, the pandemic has also been a headwind due to strict restrictions on the 75% of the business that is in the foodservice channel. Oatly plans to raise prices to offset a 500-600bps impact to COGS in 2022 from input inflation of 300-400bps, 100bps from freight, and 100bps from other costs.
Oatly’s growth plans across three continents while building new manufacturing facilities to enable that growth is rare and ambitious. However, the company’s plans laid out in the IPO documents were best-case targets, without room for real-world issues. The company’s valuation is too high for any questions about demand growth in its oldest markets which will likely continue to weigh on the multiple. SunOpta remains our favorite choice to invest in the secular growth in oat milk.
Shelf space gains (SNAX)
Stryve Foods reported Q3 revenue growth of 105%. Wholesale grew 198%, driven by distribution gains. E-commerce grew 50% through DTC and Amazon. Gross margins only contracted 10bps. Selling expenses deleveraged 130bps due to increased marketing spend. The company reported a loss of $8.7M compared to $4.4M in the prior year.
The nearly $3M increase in marketing spend was more than the increase in e-commerce of $0.9M. However, the marketing spending supported more than just e-commerce sales in the quarter, as seen in the growth in wholesale distribution. Management announced expanding distribution into two additional Costco regions in the coming months. Costco will also roll out a limited-time nationwide distribution of Stryve in 2022. Walmart will roll out the Vacadillos product nationwide in 2022. Management understands the need to build the brand and product awareness at this stage in the company’s growth. Management reaffirmed sales growth guidance of 82-100% for the year. Operations expense leveraged by 300bps while labor expense leveraged by 250bps. Management also announced the construction of a new manufacturing facility to support future growth.
Last week we removed Stryve Foods from our long list due to concerns about manufacturing issues and the co-CEO departure that, in hindsight were premature. We believe the manufacturing issues were small in scale and the co-CEO left for personal reasons. The company is entering an exciting stage of product distribution in 2022. Performance on the shelves will be the focus, but the current momentum should provide visibility in the sales velocity on the new shelves.
