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 invest in wine growth in decades publicly. Then last year, four wine companies went public.
Many investors believed that wine companies did 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 labels dominate, while smaller and regional brands try to carve a niche. Where a 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.
CLICK HERE for the event
CMG Menu Prices (REDDIT)
The timing of the menu price increase is interesting given it is just at quarter-end, as Inflation pressure must be growing in 1Q22. CMG is a Short.
I'm going to guess that a Chicken burrito bowl/burrito was around $6.95 when brian Niccol took over as CEO of CMG in 2018. Prices now look to be settling in around $9.00-$10.00 depending on where you live, suggesting that the prices of CMG chicken items is up 30%+ in the past four years. Most red meat items are likely to settle in at around $10.00++ Can CMG raise prices fast enough to cover all the inflationary pressures and not impact demand? At the very least, there will be a channel shift away from delivery (20% of sales), which carries a much higher cost (30-50% including all the fees/tip) for convenience.
