Is There a New Opportunity in the Wine Industry?

There’s no denying that retailers were hit hard during the coronavirus pandemic. Many well-known companies, like Neiman Marcus and J.C. Penney, filed for bankruptcy. All told, 21 U.S. retailers were forced to file for bankruptcy, with 17 filing while the coronavirus pandemic raged across the country.

The reality is many companies were significantly impacted by the U.S. lockdowns, lack of foot traffic and store closures, which weighed heavily on revenue.

With most Americans stuck at home and doing their shopping online, we saw a surge in ecommerce. Digital Commerce 360 found that for 2020, ecommerce sales exploded to $861.12 billion, a 44% year-over-year increase from ecommerce sales of $589.02 billion in 2019. 21.3% of those sales came from online.

Interestingly, some alcoholic beverages also benefited from the ecommerce boom. With the shutdown of restaurants, bars, clubs and even sporting venues, off-premise alcohol sales are soaring. Historically, beer and spirits companies thrive in economic downturns, and 2020 was no different. As far as ecommerce sales are concerned, U.S. sales for 2020 are estimated to rise 42% to $24 billion. And by the end of this year, the U.S. is expected to have more alcoholic e-commerce sales than China.

With the U.S. now reopening, my InvestorPlace colleague and friend, Matt McCall, and I look for pent-up demand and the desire to return to normal to trigger a massive amount of spending into another part of the alcoholic beverage sector.

I’m talking about the wine industry.

The wine industry certainly took it on the chin in 2020, with overall wine sales slipping 9.9%. Digging a little deeper into the numbers, on-premise sales fell 45%. However, online sales actually rose 10% year-over-year. This was thanks in part to virtual tastings and buying popular wines in stores. For 2020, the top five wines were cabernet sauvignon ($3.2 billion), chardonnay ($2.8 billion), red blends ($2 billion), pinot grigio ($1.9 billion) and pinot noir ($9.8 million).

Now, the U.S. is the largest wine consuming market in the world, representing 15% of global consumption in 2017, and the number of wineries in the U.S. has nearly doubled over the past decade. U.S. wine sales have grown for 25 consecutive years. That market should continue to grow. According to Mordor Intelligence, the wine market is forecast to rise at a 1.47% compound annual growth rate from 2020 to 2025.

And to Matt and me that spells opportunity. It’s why we’re adding a wine company to our Power Portfolio tomorrow after the market close. If you’re guessing that it’s a big, well-known company like Constellation Brands, Inc. (STZ), you’d be wrong. The truth of the matter is STZ’s fundamentals are poor. For example, while the company posted earnings per share of $1.82 in the most recent quarter, which beat estimates calling for earnings of $1.55 by 17.4%, its earnings are still down 41.1% from the previous quarter.

So, it should be no surprise that STZ receives a measly D-rating in Portfolio Grader. Just take a look below…

As you can see in STZ’s report card above, the stock earns a C-rating for its Fundamental Grade, a D-rating for its Quantitative Grade and a D-rating for its Total Grade, making STZ a “Sell” right now.

The stock Matt and I like is much smaller, but still fundamentally superior. It holds an A-rating for its Total Grade, making it a “Strong Buy.” It’s also seen solid sales growth, including double-digit growth for its direct-to-consumer retail wine sales.

The truth of the matter is this is a fundamentally superior stock that is poised to skyrocket during the “Great Grand Reopening.”

For full details on what the Great Grand Reopening is and the stock, click here now. Matt and I see a lot of great opportunities lining up for 2021, 10 of which are already sitting on our Power Portfolio. But you need to be VERY selective with your money moving forward given everything that’s happened in the world. Tomorrow’s recommendation is just one way to do it.


Louis Navellier

Louis Navellier

The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

More Louis Navellier



RSS Feed

Little Book

InvestorPlace Network