According to the Wine Institute, Americans consume nearly 1 billion gallons of wine per year—roughly 3 gallons per person. Millennials are drinking more wine than other generations, and as more wine companies go public and millennials replace aging generations, the market could see significant upside.
Indeed, as millennials have gotten older since the first members of the generation turned 21 in 2001 or so, wine consumption among this group has risen by about 10%, even as beer consumption dropped. This bodes well for the small group of stocks of companies manufacturing and distributing wine, such as Truett-Hurst, Inc. (THST) or Constellation Brands, Inc. (STZ).
Wine Stock Performance in 2018
2018 was generally a difficult year for alcohol stocks across the spectrum. One primary reason for this shift is that sales growth has been eclipsed by the expansion of drink options, which is brought about by shifting consumer preferences.
Add to that the fact that brands have consolidated in many cases in recent years, and investors looking to take part in the wine stock game have few options. Those options which do remain are under pressure from difficult sales and profit margins. Nonetheless, there are some wine stocks which have managed to thrive early on in 2019.
- Although not many wine companies have gone public, the growing number of wine drinkers who are reaching a higher earning potential shows a strong potential upside for the sector.
- Average wine consumption per capita is rising, even as beer consumption is dropping.
- The top wine stock in early 2019 was not technically a wine company, but an ingredients manufacturer.
Individual Companies That Stand out
Here's a look at the top performing individual wine stocks. Given the small list of publicly traded wine companies, this list does not take into account market cap, and, as a consequence, there is a large discrepancy among some of these names in terms of overall size.
The list here is presented in order of monthly performance based on the opening stock price as of January 2, 2019, and closing price as of January 31, 2019.
The performance has been compared to the S&P Food & Beverage Select Industry Index (SPSIFB) average returns of 7.89% as a benchmark. Market caps were updated as of April 21, 2019.
MGP Ingredients (MGPI)
- Market Cap: $1.485 billion
- Performance vs. SPSIFB: 28.43%
The most successful wine stock for January of 2019 is not technically a wine stock at all. MGP Ingredients is a Kansas-based company specializing in both food and beverage ingredients related to the distilled spirits industry. The company also manufactures and distributes various spirits and other alcohol products.
Although MGP is not in the business of wine-making at the present time, it is nonetheless a noteworthy performer for the first part of 2019. This company saw its stock price climb by close to 30% in the span of the first month of the year. Much of the success of MGP is likely attributable to the company's dismal performance at the end of 2018. With the stock falling to notably low levels in the final weeks of the year, investors who bought MGP at the beginning of 2019 correctly assessed the company as being in need of an upward reversal.
- Market Cap: $10.606 million
- Performance vs. SPSIFB: 15.30%
California-based Truett-Hurst is a tiny (nano-cap) wine producer which typically trades at penny stock levels. The company produces mid-range wines under the T-H label out of its facilities in Healdsburg. Truett-Hurst also produces alcohol products under a small selection of alternative brand names as well.
The boost in Truett-Hurst's stock price in January came about in part as a result of the company's decision to buy back stock at liquidation prices in order to boost value for existing shareholders. This has helped to place Truett-Hurst in a debt-free position, allowing the company to build up a pile of cash. The outfit is considering delisting, which may reduce costs and further boost profits. On the other hand, the company could also be planning to go fully private.
- Market Cap: $97.2 billion
- Performance vs. SPSIFB: 8.72%
Diageo is one of the largest distilling companies in the world. The London-based company is the maker of many of the most popular distilled beverages, including Smirnoff, Johnnie Walker, Baileys, and many others. Although Diageo's business focuses on distilled spirits and beers, the company is also involved in the wine industry, with investments in Moët Hennessy and other makers.
In January, Diageo narrowly surpassed the gains of the S&P benchmark index. Late in the month, the company reported strong 1H results, including an operating profit of £2.43 billion, up from £2.19 billion in the previous year. Some of the positive figures can be attributed to one-time gains in organic net sales and operating profit. Per company reports, Diageo leadership is optimistic that growth will continue into the future as well.
Constellation Brands (STZ)
- Market Cap: $37.545 billion
- Performance vs. SPSIFB: 7.82%
Constellation Brands is a producer of beers including Corona and Modelo, distilled spirits including SVEDKA vodka, and wines by Robert Mondavi and other makers. The company has done quite well in recent years, with revenues increasing by more than 20% since the beginning of 2016.
STZ-B, the second offering of Constellation Brands, is another popular trade.
Constellation was one of the few alcohol producers to consistently generate positive headlines in 2018. The company invested about $4 billion in legal cannabis producer Canopy Growth Corp. (CGC) last year. In turn, Constellation may sell off a portion of its wine business as it shifts from one "sin" industry to another. Nonetheless, momentum from the CGC investment may be slowing, as Constellation failed to meet the S&P benchmark last month.
Wine-making is a costly and risky business venture, and it is no surprise then that investing in wine stocks is similarly fraught. While there are undoubtedly opportunities for growth in this small industry, investors may be best off exercising caution.