We recently compiled a list of the 7 Best Wine Stocks To Buy Now. In this article, we are going to take a look at where SNDL Inc. (NASDAQ:SNDL) stands against the other wine stocks.
Over the last few decades, winemaking has become immensely popular in America as both a business venture and a hobby. When prohibition passed in 1920, the popularity of winemaking plummeted and would stay relatively obscure for half a century. However, the turning point for American wine occurred on May 24, 1976, when some California producers entered their vino in a blind tasting, comparing California wines with French. The judging panel was exclusively French, so it was a shock when Californian wines were ranked the highest in both of the competition categories – Chardonnays and Reds. The results of what became known as the Judgment of Paris were reported in Time Magazine, thus attracting international attention towards premier wines from the Golden State. That year marked the beginning of an American wine renaissance, and today there are over 11,600 wineries in the U.S. that offer an incredibly diverse selection of wines.
READ ALSO: 20 Largest Publicly Traded Liquor Companies in the US
Global Wine Market:
Wine is one of the Most Consumed Alcohols in the World. It is also gaining huge popularity among millennials and youngsters, owing to its refreshing appeal and low ABV offerings. The rising demand for premium and luxury wines, increasing consumer awareness about the health benefits of wine, and the growing popularity of wine tourism are some of the key factors driving the growth of the wine market.
As we mentioned in our article – 15 Biggest Wine Companies in the US – the global wine market size was valued at $441.6 billion in 2022 and is projected to reach a value of $698.54 billion by 2030, with a CAGR of 5.9% over the forecast period.
According to the 2024 BMO Wine Market Report, the actual dollar sales of all wine sold in the U.S. market reached $107 billion in 2023 – an all-time high. Considering that wine dollar sales in the country were just over $73 billion in 2018, the market has witnessed a staggering increase of 46% in the last few years. The report also indicates that the largest U.S. wine companies account for more than 80% of the overall wine production in the country. Here are the U.S. States that Drink the Most Wine.
State of the American Wine Industry:
The American wine industry has always assumed that younger generations would naturally increase their consumption of wine as they grew older, but the truth is that it’s not happening. A report by the Silicon Valley Bank shows how wine hasn’t gained the same traction among those under 60 as it has for baby boomers. Of survey respondents aged 35 to 44, 29% said they were more likely to bring beer to a party, while 28% said they would bring wine. Even younger drinkers, aged 21 to 34, were more likely to bring beer, spirits, a flavored malt beverage, or hard seltzer over wine. But ask a 65-year-old what he or she plans to bring to a party and 49% are likely to grab a bottle of wine.
Winemakers and advertisers are missing out on younger consumers by failing to produce wines that fit their budgets and neglecting to reach out to them with targeted marketing campaigns. The notions of health, sustainability, and responsibility are essential to buying decisions for Gen Z and millennials, and although many wineries are already addressing this, their messaging is only sometimes connecting to these young drinkers. In order to appeal to these whole new demographics of consumers, the wine industry as a whole has to take steps to inspire curiosity and intrigue about wine and to highlight the aspects that would appeal to them.
Trends of Global Wine Consumption:
The global wine consumption in 2023 was estimated to be 221 million hectoliters, marking a decrease of 2.6% compared to the previous year. Since 2018, wine consumed around the world has decreased at a regular rate and 2023 marked the lowest volume recorded since 1996. This negative trend can be mainly attributed to the decline in consumption in China, which has lost an average of 2 million hectoliters per year since 2018. It was further accentuated in 2020 by the Covid-19 pandemic, which negatively affected many large wine markets.
The war in Ukraine and the associated energy crisis, together with the global supply chain disruptions, have led to a spike in costs in production and distribution. This has resulted in significant increases in wine prices for consumers.
Methodology:
To collect data for this article, we scanned Insider Monkey’s database of 912 hedge funds and picked the top 7 companies operating in the wine sector with the highest number of hedge fund investors as of Q2, 2024. When two or more companies had the same number of hedge fund investors, we ranked them by the revenue of their last fiscal year. Following are the Wine Stocks Held by the Most Hedge Funds:
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up shot of a cannabis plant, showing its intricate details.
SNDL Inc. (NASDAQ:SNDL)
Number of Hedge Fund Holders: 12
SNDL Inc. (NASDAQ:SNDL) is the largest private-sector liquor and cannabis retailer in Canada, with retail banners that include Ace Liquor, Wine and Beyond, Liquor Depot, Value Buds, and Spiritleaf. The company prides itself on having a selection of over 6,000 wines, 2,500 spirits, and 2,200 beers, with its liquor retail segment being its largest revenue generator.
SNDL has shown massive growth over the last few years, with its revenue skyrocketing from $60.9 million in 2020 to just over $909 million last year. That said, the Calgary-based firm still hasn’t managed to turn a profit in its last four financial years. To help improve its profitability, the liquor and cannabis retailer announced a restructuring plan in July that would help slash its annual expenses by $20 million. The plan also includes a one-time $11 million investment spread over a year and a half and is vital for the company’s improved capital deployment, agility, focus, and profitability.
SNDL Inc. (NASDAQ:SNDL) reported an all-time record gross margin of 25.5% in Q2 2024 and remains debt-free and cash-rich. Moreover, the company also has a robust business strategy consisting of cultivation/product manufacture, retail cannabis, retail liquor, and cannabis investments.
SNDL Inc. (NASDAQ:SNDL) is also now positioned to fully benefit from the US cannabis markets and soon directly participate, as the company has recently announced the completion of NASDAQ’s review of its SunStream USA structure, marking a major milestone. The financial industry seems optimistic about SNDL’s growth, as the number of hedge funds in the Insider Monkey database holding a stake in the stock increased from 7 in Q1 to 12 in Q2, with the total stake value also rising by just over 55%.
Overall SNDL ranks 3rd on our list of the best wine stocks to buy. While we acknowledge the potential of SNDL as an investment, our conviction lies in the belief that some AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SNDL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.