We recently compiled a list of the 7 Best Wine Stocks To Buy Now. In this article, we are going to take a look at where Brown-Forman Corporation (NYSE:BF-B) stands against the other wine stocks.
Over the last few decades, winemaking has become immensely popular in America as both a business venture and a hobby. When prohibition passed in 1920, the popularity of winemaking plummeted and would stay relatively obscure for half a century. However, the turning point for American wine occurred on May 24, 1976, when some California producers entered their vino in a blind tasting, comparing California wines with French. The judging panel was exclusively French, so it was a shock when Californian wines were ranked the highest in both of the competition categories – Chardonnays and Reds. The results of what became known as the Judgment of Paris were reported in Time Magazine, thus attracting international attention towards premier wines from the Golden State. That year marked the beginning of an American wine renaissance, and today there are over 11,600 wineries in the U.S. that offer an incredibly diverse selection of wines.
READ ALSO: 20 Largest Publicly Traded Liquor Companies in the US
Global Wine Market:
Wine is one of the Most Consumed Alcohols in the World. It is also gaining huge popularity among millennials and youngsters, owing to its refreshing appeal and low ABV offerings. The rising demand for premium and luxury wines, increasing consumer awareness about the health benefits of wine, and the growing popularity of wine tourism are some of the key factors driving the growth of the wine market.
As we mentioned in our article – 15 Biggest Wine Companies in the US – the global wine market size was valued at $441.6 billion in 2022 and is projected to reach a value of $698.54 billion by 2030, with a CAGR of 5.9% over the forecast period.
According to the 2024 BMO Wine Market Report, the actual dollar sales of all wine sold in the U.S. market reached $107 billion in 2023 – an all-time high. Considering that wine dollar sales in the country were just over $73 billion in 2018, the market has witnessed a staggering increase of 46% in the last few years. The report also indicates that the largest U.S. wine companies account for more than 80% of the overall wine production in the country. Here are the U.S. States that Drink the Most Wine.
State of the American Wine Industry:
The American wine industry has always assumed that younger generations would naturally increase their consumption of wine as they grew older, but the truth is that it’s not happening. A report by the Silicon Valley Bank shows how wine hasn’t gained the same traction among those under 60 as it has for baby boomers. Of survey respondents aged 35 to 44, 29% said they were more likely to bring beer to a party, while 28% said they would bring wine. Even younger drinkers, aged 21 to 34, were more likely to bring beer, spirits, a flavored malt beverage, or hard seltzer over wine. But ask a 65-year-old what he or she plans to bring to a party and 49% are likely to grab a bottle of wine.
Winemakers and advertisers are missing out on younger consumers by failing to produce wines that fit their budgets and neglecting to reach out to them with targeted marketing campaigns. The notions of health, sustainability, and responsibility are essential to buying decisions for Gen Z and millennials, and although many wineries are already addressing this, their messaging is only sometimes connecting to these young drinkers. In order to appeal to these whole new demographics of consumers, the wine industry as a whole has to take steps to inspire curiosity and intrigue about wine and to highlight the aspects that would appeal to them.
Trends of Global Wine Consumption:
The global wine consumption in 2023 was estimated to be 221 million hectoliters, marking a decrease of 2.6% compared to the previous year. Since 2018, wine consumed around the world has decreased at a regular rate and 2023 marked the lowest volume recorded since 1996. This negative trend can be mainly attributed to the decline in consumption in China, which has lost an average of 2 million hectoliters per year since 2018. It was further accentuated in 2020 by the Covid-19 pandemic, which negatively affected many large wine markets.
The war in Ukraine and the associated energy crisis, together with the global supply chain disruptions, have led to a spike in costs in production and distribution. This has resulted in significant increases in wine prices for consumers.
Methodology:
To collect data for this article, we scanned Insider Monkey’s database of 912 hedge funds and picked the top 7 companies operating in the wine sector with the highest number of hedge fund investors as of Q2, 2024. When two or more companies had the same number of hedge fund investors, we ranked them by the revenue of their last fiscal year. Following are the Wine Stocks Held by the Most Hedge Funds:
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A brewery worker pouring bottles of freshly brewed beer into boxes, representing the company’s alcoholic beer beverages.
Brown-Forman Corporation (NYSE:BF-B)
Number of Hedge Fund Holders: 32
One of the Best Alcohol Stocks According to Hedge Funds, Brown-Forman Corporation (NYSE:BF-B) engages in the production, distillation, bottling, import, export, marketing, and sale of a wide range of alcoholic beverages, with a special emphasis on spirits. This puts the company in a commanding position in the American market where spirits are gaining more and more traction every day.
Brown-Forman announced in May that it had completed the sale of Sonoma‑Cutrer Vineyards and related brand trademarks to The Duckhorn Portfolio, in exchange for an ownership percentage of approximately 21.5% in the premium winemaker and $50 million in cash. When the deal was first announced last year, Lawson Whiting, president and CEO of BF-B, stated:
“Adding Sonoma-Cutrer to The Duckhorn portfolio will enhance one of the most respected wine portfolios in the industry. Moreover, we believe an equity stake in The Duckhorn Portfolio will be a valuable investment for Brown-Forman, allowing us to maintain a presence in the wine category while focusing resources on building our premium and super-premium spirits brands.”
BF’s Jack Daniel’s brand is included among the Most Popular Whiskey Brands in the World and contributes significantly to its revenue. However, the iconic brand has been facing some headwinds recently due to a hike in prices, as consumers look for cheaper alternatives. Sales of Jack Daniel’s Tennessee Whiskey dropped by 6% in Q4 ending April 30th 2024, building on the already 6% sales decline in the previous quarter. As a result, Brown-Forman’s revenue for its fiscal year 2024 declined by over 1% to reach approximately $4.28 billion. This also caused its stock price to plummet by over 20% since the beginning of the year. The company is facing challenges mostly due to a subdued, inflation-driven consumer demand and hence also increasingly cautious retailers and distributors. But this is not something that is unique to Brown-Forman Corporation (NYSE:BF-B), with CEO Lawson Whiting calling fiscal year 2024 ‘a challenging year within the spirits industry.’
There was good news from the Ready-to-Drink (RTD) category though, with sales going up 2% during the year. Moreover, the declines in the US market were largely offset by growth in emerging markets (up 8%) and travel retail (up 6%).
Brown-Forman Corporation (NYSE:BF-B) is a great wine stock for dividends and the company paid $404 million to stockholders through its regular quarterly dividend and returned $400 million to stockholders through its share repurchase program in fiscal year 2024. BF is a member of the prestigious S&P 500 Dividend Aristocrats index and its 10-year compound annual dividend growth rate comes in at 7.86%.
Overall BF-B ranks 2nd on our list of the best wine stocks to buy. While we acknowledge the potential of BF-B as an investment, our conviction lies in the belief that some AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BF-B but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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