Vintage Wine Estates projecting aggressive growth (BSPE)
Last week Vintage Wine Estates agreed to a merger with Bespoke Capital Acquisitions Corp. (BSPE), a SPAC. The merger values Vintage at ~$700M and is expected to close in April/May. The company ships nearly 2M 9-liter cases annually and has a production capacity of 15M. The majority of the company’s production is in the $12-20 per bottle range, which is where the industry's growth is concentrated, as seen in the following chart. (Constellation Brands recently closed on the sale of its sub $11 per bottle wine brand portfolio to focus on the same price range.)
Revenue was $200M in its fiscal year ended June. The company is pursuing organic growth from direct-to-consumer (a combination of wine clubs, tasting rooms, and e-commerce), new brand/product innovation, and exclusive brands with retailers. The company also plans to continue to make acquisitions, utilizing its balance sheet and finding synergies. The company is projecting robust revenue and profit growth of 17.7% and 42.7%, respectively, over the next three years. The target valuation is 12.8x F22 EBITDA, certainly undemanding if the company can hit its projections.
Duckhorn Wine IPO (STZ)
Duckhorn Wine is planning an IPO as soon as this year. Duckhorn Wine is a vinter owned by TSG Consumer Partners. The brands include Duckhorn Vineyards, Paraduxx, Migration, Decoy, Goldeneye, Canvasback, and Kosta Browne. The company has 600 acres of estate vineyards across California and Washington, four winemaking facilities, and three visitor centers. The Decoy by Duckhorn brand, which retails at $25, grew 27% last year to 1.1M cases.
Since the closing of the Crown beer acquisition, we have learned to strongly favor Constellation Brands’ beer business over its wine business for several reasons. We do not think it was the fault of management, but the inherent business structure in wine. Brand power in beer is stronger, the competitive moats larger, and the purchase is more repeatable than wine. It also does not have the volatility of the crop that wine has. Constellation Brands would benefit from publicly traded wine peers besides Treasury Wine Estates (TWE-ASX), and we will spend more time on the newly public companies.
Wine app more scalable than Drizly (DASH)
Vivino is a wine app and online wine marketplace that provides tools to buy wine based on users’ tastes. The company raised $155M in a Series D round last week. The company has raised $221M to date. Wine sales on its platform more than doubled to $265M in 2020. Vivino has 50 million users across 17 countries. The company also sells some wine directly. Vivino’s sales are split evenly between the marketplace and DTC sales.
Last week Uber announced the acquisition of Drizly for $1.1B. As a standalone business, Vivino is more appealing than Drizly because it has lower variable costs. The retailers ship the wine ordered on its marketplace, and the app will be able to earn higher payments as the user base grows. DoorDash and Just Eat Takeaway are likely to look for additional order volumes to add to their platforms to achieve the necessary scale. The market will have to wait for Vivino to go public.
