Publicly traded wine companies

Our discussion of the suitability of the wine industry for IPOs left me wondering: which publicly traded wine companies are on the market today?

I did some research... if you want a slice of the U.S. wine industry, here are the stocks to own. Unfortunately, your dividends don't come with a bottle of wine.

Constellation Brands (STZ, STZ-B): as discussed in class, a major alcohol conglomerate ($37B across the two listings) and the owner of Robert Mondavi Wines. A recent $4B investment in legal marijuana means this stock is a bet on buzz, regardless of which drug produces it!

Vina Concha y Toro (VCO-OLD): de-listed from the NYSE last year, citing the expense of remaining listed. The company had a market cap of $1.5B, but only a small portion of it was listed in the U.S. to begin with. (They remain listed on the Chilean market.)

Truett-Hurst (THST): a wine producer with a market cap of just $10M. Recently completed a stock buyback, and rumored to be considering de-listing or privatizing, so probably not a great case for wine industry IPOs.

Willamette Valley Vineyards (WVVI, WVVIP): another tiny wine producer (market cap: $40M), who required some legal creativity to go public via a crowdfunding-type model (Regulation A public offering) in 1989. The NASDAQ listing followed in 1994. Owners get substantial discounts on wine (in fact, if you buy in sufficient volume, ownership could be a good deal regardless of which way the stock goes).

Crimson Wine Group (CWGL): a Napa-based wine group with a $191M market cap. Owners of Pine Ridge Vineyards, Seven Hills Winery, and others.

Diageo PLC (DEO): primarily a beer and spirits company, but with some wine business lines, including an investment in Moët Hennessy. Their $93B market cap makes them a behemoth compared to most stocks on this list... but of course very little of that is in wine.

Brown-Forman Corp. (BF.A, BF.B): best known for Jack Daniels, but also the owner of wine brands like Korbel Champagne and Sonoma-Cutrer. A market cap of $23B.

That's about all I could find, so your options are fairly limited. They do span a wide range of company sizes. Performance, however, has varied dramatically. I charted the main listing of each company against the S&P 500 over the past five years, and I'm not feeling super exciting about putting my money into wine stocks.

Sources:

• http://investsnips.com/list-of-publicly-traded-wine-and-liquor-companies/
• https://www.investopedia.com/investing/wine-stocks/
• https://www.thestreet.com/story/12844252/1/six-alcohol-industry-stocks-to-consider-for-your-stock-portfolio.html
• https://seekingalpha.com/article/4186051-recent-portfolio-sale-vina-concha-y-toro
• https://www.equities.com/news/happy-shareholders-drinking-great-wine-wvvi
• http://www.crimsonwinegroup.com/

Social Lubricant

Last week, Jessica Kogan, from Vintage Wine Estates, lamented on why there isn't more press about the benefits of wine.

This got me thinking about an article in the FT that I read this summer, titled "Why drink is the secret to humanity’s success."

A summary of key points:

• The best predictor of happiness and longevity is the number of close relationships in a person's life. People with a good number of relationships are likely to be moderate drinkers; they're the type of people who will meet friends for a pint after work.
• Alcohol encourages us to open up and release endorphins "It isn’t just because alcohol causes people to lose their social inhibitions and become over-friendly with our drinking chums. Rather, the alcohol itself triggers the brain mechanism that is intimately involved in building and maintaining friendships in monkeys, apes and humans. This mechanism is the endorphin system."
• A study at the University of Oxford found that people who were regulars at a local pub were happier, more satisfied, and had more friends than both those who never drank and those who did not have a frequently visited local bar.

The article does not argue that alcohol itself is inherently beneficial. Drinking a glass of merlot alone in front of the TV, while perfectly enjoyable, won't bring you a lifetime of happiness. Instead, alcohol is a mechanism through which we forge meaningful relationships, and those are what make us happy in the long run.

So, on that note, who wants to meet up for a glass? 

Expensive Wine Tastes Better.... Kind of

Yesterday's class got me thinking about how wine is priced.  More specifically, one of us asked the question (I'm sorry that I forget who it was), "How does Far Niente decide where to price its wines. Some are hundreds of dollars and some are ~$50?" As I recall, the response to the question was about consumer WTP that is associated with a brand as powerful as Far Niente.

While I didn't expect Far Niente's $500 wine to be 10 times better than its $50 wine, I was a bit surprised to hear that the quality of the wine is all but a non-factor in the consideration of price for over $50 wine. So, I started reading online about how wine is priced and what correlation the price has to quality or consumer preference. I found this video to be a good summary (please watch till the end, rather than throwing tomatoes in the middle):  http://www.openculture.com/2017/11/expensive-wine-is-for-dupes-scientific-study-finds-no-strong-correlation-between-quality-price.html

There are a couple major takeaways from the video:
1. The distribution of wine awards is highly inconsistent.
2. The average consumer frequently prefers cheaper wine over expensive wine.
3. #2 is true, unless the person knows the price of the wine, then they like the most expensive wine the best.

It's amazing to me that knowing the price of the wine actually causes a noticeable change in the enjoyment/preference of the consumer. If I tell you that you are drinking a $100 bottle, you will like it more. I suppose this is obvious if you think of nice wine as a luxury good, but if you think about it was a beverage, it's nuts.