The Future of Wine Black Book today | Adding NAPA as a short (VWE, NAPA)
The wine industry is fragmented with 10,000 wineries, but it is on the path of consolidation. Since the pandemic, consolidation has accelerated. The public markets will facilitate the consolidation. Wine never left the public markets, but there have not been pure-play investment vehicles to publicly invest in wine growth in decades. Then last year four wine companies went public.
Many investors had come to believe that wine companies do not belong in the public markets, because there were not any. There are wine companies listed on foreign exchanges, small caps listed in the U.S., and wineries owned by much larger diversified companies. The market was missing wine growth companies, consolidators gaining scale advantages. Scale matters in wine like it does in many CPG categories. In most CPG categories a few large brands and private label dominate, while smaller and regional brands try to carve a niche. Where wine is unique is growing the raw commodity while also processing and marketing the final, differentiated product.
We will present a deep dive into the wine category. Our Black Book will cover:
- the current state of the market
- demographic trends
- channel power
- the importance of scale
- M&A
- and where we see the sector in five and ten years.
We will also present our investment case for Vintage Wine Estates (VWE) and The Duckhorn Portfolio (NAPA). Vintage Wine Estates is a long on our Position Monitor. We are adding The Duckhorn Portfolio as a short to our Position Monitor. See the separate note for details.
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CLICK HERE at 12:30 PM ET for our Wine Industry Black Book. |
Truck rates bounce (UTZ)
Refrigerated truck rates increased 1.7% for the week ended March 22 week over week. The average rate increased 6.6% from the recent low for the week ended March 1, but is still 5.8% below the recent peak seen during the week ended February 1. The average refrigerated rate is up 60% from a year ago, as seen in the chart below. Trucking companies generally pass through higher diesel costs with fuel surcharges in their contracts. The average fuel surcharge has increased from 19 cents at the start of the year to 43 cents (average fuel efficiency of 6.5 mi/gal). In comparison, diesel prices are up more than ~$1.50 per gallon from the start of the year. Higher truck freight costs have been one of the more significant headwinds for many CPG companies. Supply chain disruptions led to greater use of the spot market. Improved inventory positions will lead to better utilization of freight capacity.
Beer shipments decline (TAP)
Beer shipments for January and February are down 6% according to the Beer Institute analysis of Alcohol and Tobacco Tax and Trade Bureau tax paid estimates. Shipments from domestic brewers decreased 5.8% in February improving slightly from the 6.2% decrease in January. According to NielsenIQ off-premise beer category sales declined 2.5% while volumes declined 7.4% for the YTD period through March 19. The beer tax payments are a better picture of industry sales because it includes the on and off-premise channels.
