Good enough (NAPA)
The Duckhorn Portfolio reported FQ1 EPS of $.18 vs. consensus of $.14. The upside was driven by both top-line and margins. Sales grew 3.8%, with volumes up 9.2% and price/mix down 5.4%. The decline in price/mix was mostly attributed to the timing shift of Kosta Browne and to a lesser extent the growth in Decoy. Wholesale was 7.9% points greater as a percent of the mix while California direct to trade and DTC were lower. Management said wholesale depletion was up in the mid-teens%. The company’s sales focus is on wholesale door growth. Gross margins expanded 20bps YOY. SG&A grew 10.9% due to growth investments. EBITDA decreased 6.4% YOY and as a percentage of sales deleveraged 360bps.
Management reaffirmed revenue guidance for the year of $393-401M and EPS guidance for the year of $.62-.64. Q1 may have pulled forward demand from Q2, but management believes the year will be in line with the original expectations. Management’s gross margin expectations have now improved to flat to down 50bps from contracting 50 to 100bps. The company’s CFO announced her retirement in the Spring. The Duckhorn Portfolio is exceeding the wine industry trends which have seen little pricing power while costs continue to rise. We still have concerns about the company’s ability to add wholesale doors while raising prices.
Alcohol imports Pickup (STZ)
Total beverage alcohol imports grew 12% over the 12 months that ended in October. Over the last three months, imports grew 13%, accelerating from +7% in the three months that ended in September.
- Imported beer grew 3% by volume and 5% by value over the last 12 months. Over the last three months, beer imports grew 4% by volume and 6% by value decelerating from +5% and 7% respectively for the three months that ended in September. 80% of imported beer comes from Mexico. Constellation Brands represents a majority of Mexican beer imports and 60% of imported beer.
- Imported packaged wine for the last 12 months decreased by 11% by volume and increased by 4% by value. Over the last three months, volumes decreased by 11%, and by value increased 6%.
- Imported packaged spirits grew 24% by value over the last 12 months. Over the last three months, volumes grew 12% and value grew 23%. That compares to 7% volume growth and 18% value growth over the three months that ended in September.
- Exported beer grew 33% by value over the last 12 months. Over the last three months, exported beer decreased 4% by volume and grew 9% by value. Exported packaged wine fell 5% by volume and fell 3% by value over the last three months, negatively impacted by the stronger dollar.
Constellation Brands’ shipments grew 12% for the quarter that ended June, outperforming other imported beer. Management expects shipments to match depletions for the remainder of the year.
MALK attracts funding (STKL)
MALK Organics, a super premium plant-based milk company, raised more than $9M in a series B round. The company has raised $17M to date. The company’s products include a line of unsweetened, flavored almond and oat milks. MALK recently launched a line of chocolate oat milk nationwide in retailers, including Whole Foods and Sprouts Farmers Market. MALK’s plans are to increase the marketing spend and prepare for new products like almond milk chocolate and new customers like Publix. New brands and new product innovations are helping drive plant-based milk's growth at the expense of dairy milk. The marketing and innovation are driving consumers to the category, which as a supplier for the industry, is a tailwind for SunOpta.
