Andrew Peller is a leading producer and marketer of quality wines in Canada. The company owns wineries in British Columbia, Ontario and Nova Scotia and operates 101 independent retail stores across Ontario. These stores are company owned and only sell Peller wine. Andrew Peller’s products are primarily sold in Canada and the company also earns income from export sales to the United States

Andrew Peller’s premium brand portfolio includes Peller Estates, Trius, Thirty Bench, Wayne Gretzky, Sandhill, Red Rooster, Black Hills Estate Winery, Tinhorn Creek Vineyards, Gray Monk Estate, Raven Conspiracy, and Conviction. The Peller Estates brand is the best-selling wine in the English Canadian wine market. Some of the main budget brands are Hochtaler, Domaine D’Or, Schloss Laderheim, Royal and Sommet. The company offers a wide range of products from high-end premium wines to low-end budget wines.

Andrew Peller entered the spirits category through his strategic alliance with Wayne Gretzky. The company now makes artisanal beverage alcohol products including No Boats on Sunday Cider, No. 99 Wayne Gretzky Red Cask, No. 99 Ice Cask, 99 Proof Canadian Whiskeys, and No. 99 Canadian Whiskey Cream.

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Investment data

Sales growth and market exposure

Andrew Peller is one of Canada’s most respected wine producers in all major price segments. It produces a wide range of wines and spirits and is known for its branded products such as Icewine, Chardonnay and Riesling, as well as premium and ultra-premium red wines.

Andrew Peller currently has over 10% of the English Canadian wine market. The company also offers personal winemaking products to customers through its wholly owned subsidiary, Global Vintners Inc., recognized as a leader in personal winemaking products.

With a 50 year history, Andrew Peller has developed an in-depth knowledge of the alcohol industry in Canada. The company’s reputation and quality products set it apart from its contemporaries. A broad network of Ontario proprietary retail stores and award-winning wineries form a wide moat around the company’s business.

Andrew Peller continues to introduce new wine and other craft alcohol brands to capitalize on rising wine consumption in Canada. The company also invests in improving the quality of grapes, wines and spirits, winemaking and distillation.

Andrew Peller is expanding its product portfolio to include cider, craft beer, whiskey and distilled spirits. The alcohol for beverages category is considered essential by the government in the context of the ongoing COVID-19 pandemic. Most of Andrew Peller’s liquor and retail stores and manufacturing facilities remained open during the lockdown. However, sightseeing, winery tourism and special events were closed for this period. Both restaurants and wineries were open for roadside pickup.

Andrew Peller saw revenue grow last quarter thanks to a stable retail channel network and the launch of a new e-commerce portal, www.thewineshops.com. In fact, both sales and earnings have grown due to the pandemic.

However, hospitality-related sales, licensee sales, and duty-free export sales all fell due to COVID-19 closings and travel restrictions. Andrew Peller acquired the Riverbend Inn and Vineyard with 17 acres of vineyards and a hotel and restaurant with 21 rooms in February 2021. This acquisition will further enhance the offering of world class wine tourism in the Niagara area.

Dividends

Andrew Peller has paid dividends consistently every year since 1979. The company last increased its dividend by an impressive 19% in 2019, making it the seventh year of sustained dividend hikes. Andrew Peller has a payout ratio of just 12% on a dividend yield of currently ~ 2%. The company has posted dividend growth of 9.5% CAGR over the past three years. Andrew Peller has a solid track record of stable growth and strong financial performance. The result has increased by more than 9% per year over the past five years.

Andrew Peller makes strategic acquisitions from time to time that further support his business objectives. Since 1995, 17 acquisitions with a total investment of more than $ 200 million have been successfully integrated. The acquisition of three world-class and well-established wineries Black Hills, Tinhorn Creek and Gray Monk Estate in 2017 helped Andrew Peller become the largest producer and market leader for high quality VQA wines in Canada.

The integration of these three new wineries is now largely complete and Andrew Peller sees significant cost and operational synergies. Andrew Peller is also successfully expanding into new adjacent categories with premium Canadian craft brands such as No Boats on Sunday Ciders, Wayne Gretzky No. 99 Canadian whiskeys and No. 99 rye warehouse.

Andrew Peller can look back on successful growth and strong operational performance. A continuous review of the operational processes and the cost structure should further reduce costs and improve production efficiency. Andrew Peller aims to expand his sales channels and customer base by introducing new brands and entering new markets. The company is also investing heavily in sales and marketing to drive future growth. It is well positioned to take advantage of the favorable momentum of the Canadian wine market, which also offers a large market for higher priced premium wines.

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competition

Andrew Peller works in a highly competitive industry. The Canadian wine market offers a large market for inexpensive imported wines from abroad. Both the national and international wine industries are consolidating, which has resulted in greater competition for the company. The company competes with both national and international players. A strong product portfolio, a reputation for delivering value, and a loyal customer base are Andrew Peller’s strong competitive advantages.

Bottom line

With his expertise and a large base of loyal customers, Andrew Peller is in a good position to expand into new, adjacent categories. The gross margin should benefit from an increased focus on higher margin products and efforts to increase efficiency and reduce costs.

Alcoholic beverage consumption remains stable in Canada and, as one of the largest producers of quality wines in Canada, Andrew Peller has a good chance of benefiting from this growing trend. Given the defensive nature of the wine industry and Andrew Peller’s domestic reach and product portfolio, the company should continue to pay dividends going forward.

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