Good Grape Wine Company

March 12 2008

Going Long on a Wine Stock

In investing you can either go long meaning you are buying a stock on the presumption that it will increase in price, or you can go short, meaning you can anticipate that a stock price will go down in value.  There may be a wine stock buying opportunity that goes “long” --long like the finish of a nicely crafted Pinot Noir.

I am talking about Willamette Valley Vineyards. 

Willamette Valley Vineyards is hot.  Red hot.  Hot like you read about.  Hot like Lebron James scoring 22 points and the go-ahead basket in the 4th quarter.

And, the great thing is, you can get in on the action.

Willamette Valley Vineyards is the albino elephant of winery stock market plays.  There are precious few stocks that you can get into if you are a wine lover—Constellation being one, but certainly not nearly as charmingly endearing as a winery that has production of just about 100,000 cases, still exhibiting a personal touch.

The hot streak started for Willamette Valley with their mention in the San Francisco Chronicle as one of the best selections of 2007, a distinction accorded wines that earn three stars from the Chronicle tasting panel.  Their Pinot Noir, at $24, bested wines at double the price point.

The next month, in January of this year, Willamette Valley Vineyards was the #1 hottest small brand of 2007 as named by Wine Business Monthly magazine.  This, perhaps, more than any other, is a meritorious distinction as the WBM staff seem to always be about 2-3 years ahead of the curve for brands that go on to achieve widespread and mainstream merit.

In WBM words:

From the beginning, the hottest small brands list has been about standing for something.  Most of the wineries represented are from up-and-coming wineries that have achieved success by delivering on quality.  Several represent apparent overnight success stories that were, in fact, years in the making.  We tend to highlight wineries and brands that represent market trends, are innovative or take a leadership position.

Next, Willamette Valley Vineyards was featured in a February issue awarded 90 points for a 2nd label Pinot Noir, the Tualatin Estate Pinot Noir.

Now, I am not a financial guru.  In fact, I am not giving any advice.  Nor, do I currently own any Willamette Valley Vineyards stock (though that may change).  That said, WVVI is traded on Nasdaq and has a share price in the $6 range and seems to be making all of the right moves.  Buying stock in a winery play is like being in the wine club, except with a little more skin in the game.

The Willamette Valley Vineyards site also has some special features for shareholders:

1. Admissions to special events at the winery.
2. Priority on the purchase of limited production wines, wine futures, discounted items and wines with personalized labels.
3. Discounted pricing of selections purchased through the Oregon Wine Guild.
4. Priority use of the Winery’s tasting and hospitality facilities for events (open dates only).
5. Personalized winery business cards, the initial set is complementary.
6. Reports on company developments seeking shareholder feedback and/or involvement.
7. Numerous opportunities to volunteer and increase wine knowledge through the non-profit group, Oregon Wine Enthusiasts.

In reading the 2007 Annual Report, tedious though it may be, you actually glean a couple of things that are of interest:

First, they use a technique called a “Geneva Double Curtain” for their trellising.  This reminds me of two things--#1 it sounds like a wrestling move and #2 when is somebody going to start writing an accessible blog on viticulture, the one that lightheartedly explains the “Geneva Double Curtain?”

More importantly, their strategy meshes with other moves that we have seen from Kendall-Jackson and Don Sebastiani & Sons in moving upstream in terms of price point.

They say:

Based upon several highly regarded surveys of the US wine industry, the Company believes that successful wineries exhibit the following four key attributes: (i) focus on production of high-quality premium, super premium and ultra premium varietal wines; (ii) achieve brand positioning that supports high bottle prices for its high quality wines; (iii) build brand recognition by emphasizing restaurant sales; and (iv) develop strong marketing advantages (such as a highly visible winery location, successful self-distribution, and life long customer service programs).

Now, make no mistake, their annual report certainly doesn’t read like an oratory from Warren Buffet, but for a wine lover, especially a Pinot lover, who happens to dabble in recreational gambling via the stock market and a personal brokerage account, buying some stock of WVVI, picking up the benefits of membership, and enjoying some wine while you watch a fledgingly winery grow seems like a lot of fun to me.

Perfunctory disclaimer:  I do not currently own WVVI stock.  I am not in the stock market advice business.  In fact, I was a journalism major in school and took “math classes for non-math people.” Any financial risk you make is yours alone.  The stock market is mercurial and I bought Amazon for $5 and sold at $25, while it was climbing up to the $70 range.  I am, generally, not that smart about betting on stocks.  That said, the P/E is high, but it looks like a better bet than losing a couple hundred of bucks on a blackjack table. 

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