This is Part 2 of our 1999 wish list.
Part 1 appeared yesterday.
Geerlings & Wade
: We hope for an end to the antediluvian direct-shipping laws that make it a felony for many Americans to buy wine directly from wineries. The ossified, anticompetitive and oh-so-obsolete three-tier system that allows distributors and wholesalers to extort a cut of sales in most states has long outlived its usefulness. Not only that, it's the reason my colleague
pays about 30% more for a bottle of wine than he should have to.
Until then, Geerlings & Wade's financial performance is crippled because it must comply with unnecessary and inefficient licensing, shipping and warehousing requirements that hobble it when shipping to the 34 states that allow it to do so legally. I hope the company will one day be able to ship into all 50 states (certainly it won't be 1999).
Golden State Vintners
: I wish for better support in the market for Golden State by its investment bankers (
), which shoved this IPO into the market at midyear and then stood by with their hands in their pockets while the stock tanked from 17 to less than 10. Analysts tried to blame the drop on a
article, but GSV had already left its crater before the article ran. The same underwriters let the same thing happen to
five years ago. Whether these offerings were overpriced or undersupported (or both), it makes you think the underwriters didn't pay as much attention to the IPOs as they should have.
LVMH Moet Hennessy Louis Vuitton
: We hope this company doesn't run out of champagne but does manage to find a home for all that duty-free merchandise that the Asian meltdown left on its hands.
New World Wine Group
: Here's hoping New World can figure out what it wants to be when it grows up. It started 1997 as Rivendell Winery, then changed to RWNY, a Hudson River Valley winery with some of the world's most transcendentally forgettable wine.
Late last year, it tried to morph into a media company with the purchase of
Wine Business Publications
(full disclosure: a company I founded) along with another name and ticker change. It had a vague idea for a chain of
-like wine bars and the notion of using the publications as an entree into more deals. The partners had a falling out; Starbucks beat them to the wine thing (wine bars as a whole have not taken off even in wine-epicentral cities), and the publications suffered as the old editorial conflict-of-interest issue reared its ugly head. This company is drifting and may or may not find a rudder in 1999.
: We hope this company continues with its refreshing, nonsnobbish advertising and, further, that it never runs out of wine again. Above all, we wish a vision would develop for this most prominent of American wine brands, a vision that seems to have left with founder Robert Mondavi's retirement.
: We hope it will manage to develop some brand recognition for its wines and that it will elevate the quality so the brand recognition is favorable. The company's journeyman-like wines, sporadic distribution and lack of recognition among consumers certainly keep a lid on the stock, as in R.H. who?
: We hope
doesn't sneeze. More than 81% of Scheid's revenues come from Diageo. Even with long-term contracts for grapes, a glut would probably mean broken or renegotiated prices, as has happened in previous oversupply periods. We also wish a vision for this company. While the IPO was primarily a way for founder and patriarch Al Scheid to cash out, and while his kids (COO Scott and CFO Heidi) are bright and likable, this is another company that seems not to know precisely where it wants to go.
: We hope
Edgar Bronfman II
doesn't keep fumbling. This cash-cow core of the family business should be spun off for its own safety - and the financial pacifier pulled from the entertainment baby's mouth. Selling the Mumm empire right before the biggest champagne sales period in 1,000 years is
: We hope that its outstanding brands, Chateau Ste. Michelle and Columbia Crest, will one day be rid of this smoke-filled room. Hope springs eternal that UST will be forced by the various tobacco settlements to sell the wine operation or to spin it off as a separate public company. It makes no damn sense at all for a company dominated by products that kill when used as directed to own one whose inherently healthy products can help you live longer when imbibed in moderation (as directed).
Vina Concha y Toro
: We wish it continued luck in making record sales in Asia while others around it were heading for the bomb shelters. We also applaud the company's
for shipping a $70 bottle of wine from a country better known for the under-$4 stuff. Finally, we wish that other wine stocks that trade as ADRs in the States would produce financials like this company's, which can be understood here and compared with other investments.
Willamette Valley Vineyards
: We wish for more fanatical stockholders who like to work for free -- in the tasting room, in the cellar, in the vineyard. They're about the only thing that keeps this Oregon operation afloat. It has the industry's worst interest coverage ratio (1.73 times) despite an average debt load, all of which indicates that it's not generating as much cash as it should. Not surprising that it is tied with
for the industry's worst ROA (2%) and has the worst ROE (3%). Nice people here, but a shaky biz.
Lewis Perdue has been involved in the founding of three technology companies in roles ranging from marketing to chairman/CEO. He has written widely on technology for InfoWorld, PCWorld, Interactive Week Forbes ASAP and many others. Perdue is also the editor and publisher of Wine Investment News. He does not hold any positions in the companies discussed in this column.