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 Willamette Valley Vineyards, Inc. (NASDAQ:WVVI) 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).
Aerial view of a vineyard, with sun setting in the background.
Willamette Valley Vineyards, Inc. (NASDAQ:WVVI)
No. of Hedge Fund Holders: 1
Named after Oregon’s iconic Willamette Valley, Willamette Valley Vineyards, Inc. (NASDAQ:WVVI) offers sustainably made classic Oregon wines including Pinot Noir, Chardonnay, and many more. The company has consistently increased its revenue over the last few years, from $27.31 million in 2020 to $39.13 million last year. However, its net income has been consistently decreasing in the aforementioned period, from a net profit of $2.28 million in 2020 to a net loss of around $3.25 million in 2023. This has been due to the continuously rising operating costs, which have more than doubled in the last three years, with the associated annual revenue not being able to keep up. The trend slightly changed in the Q2 of 2024, when the WVVI reported a YoY decrease of almost 9%. However, its revenue also dropped by 3.7% due to a setback in sales through distributors. The direct sales to consumers, on the other hand, increased primarily because of the opening of a new tasting room late last year. Another worrying factor for investors could be Willamette’s debt situation. At the end of Q2, the company had liabilities totaling $22.8 million more than its cash and receivables, combined. This is a significant deficit, considering that the winery had a total market cap of just over $18.6 million as of the writing of this article.
Although Willamette Valley Vineyards, Inc. (NASDAQ:WVVI) has been struggling financially and hasn’t seen any uptick in its stock price for a long time now, it has consistently increased its wine output over the last two decades, from 72,297 cases produced in 2005 to 206,954 in 2021. Moreover, the winery hasn’t been blind to modern trends and pays special attention to sustainability. All of Willamette’s producing vineyards are certified LIVE (Low Input Viticulture and Enology) and the company furthered its sustainability efforts this year when it introduced a new reusable bottle from Revino to its production line.
Jim Bernau, Founder and CEO of Willamette Valley Vineyards, Inc. (NASDAQ:WVVI), said:
“The Company is facing a rapidly changing market that we believe is influenced by interest costs, inflation and consumer trends. We have seen wholesalers and retailers reducing their wine inventories and reallocating their shelf space for alternative alcoholic beverages. We are also seeing retailers emphasize contract house wine brands in an effort to capture greater retail margins. We are hoping to address these challenges by increasing our direct contact with wine consumers, offering wine, culinary and hospitality experiences through our ten locations and increasing our interaction with our diverse wine enthusiast ownership. We believe our efforts will produce positive financial results in both our wholesale and retail parts of our business.”
Overall WVVI ranks 7th on our list of the best wine stocks to buy. While we acknowledge the potential of WVVI 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 WVVI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
