DTC wine sales remain robust (VWE, NAPA)
Overall wine DTC sales in over 400 tasting rooms tracked by Community Benchmark in California and Washington increased 3.2% YOY in April, decelerating from 15.4% in March. Visitation to tasting rooms increased 46.4% YOY in April, decelerating from 38.2% in March. Wine club sales increased 11.5% in April, decelerating slightly from 12.7% in March. Tasting room sales in Napa, Sonoma, and the Central Coast regions decelerated from March, but on a two-year basis accelerated markedly as seen in the following chart. The comparisons are more difficult, so we expect deceleration to a growth rate still above long-term trends. DTC will be the strongest channel of growth for many wineries this year, but the sales mix can differ greatly between companies.
Haleon sale averted (PRGO, NESN-SWX)
It was reported yesterday that Nestle considered purchasing GlaxoSmithKline’s consumer healthcare division. Nestle was said to have considered partnering with Reckitt to fund the £50B purchase around the same time Unilever was bidding for it. GSK was said to prefer a separate listing for the consumer healthcare business, now called Haleon, to a sale. The Haleon spinoff will be tax-free and is expected to be completed well before a sale could. GSK had targeted a spinoff in July, but that was before the current market volatility. Having other consumer healthcare companies as separate listings will draw more investor attention to the attractive defensive and visible growth drivers in the sector. Perrigo is nearly lost in terms of investor coverage currently, but that will start to change with Haleon’s spinoff followed by Johnson & Johnson’s next year. Nestle’s interest is an indicator that the new sector could see M&A activity in its early days.
Mini pill for heartburn (PRGO)
Perrigo announced that it has received final approval from the FDA for Omeprazole Magnesium Delayed-Release mini capsules. The company expects to launch the product later this year as a store brand for various retailers. The capsule is 70% smaller than the current tablet version. Omeprazole is the active ingredient for Prilosec OTC. Prilosec OTC sales peaked in 2006 at $387M, before private label products gained share and other heartburn products were approved. The 2H of 2022 is expected to have a number of OTC launches for Perrigo that are not currently reflected in estimates.
