Willamette Valley Vineyards Inc. (WVVI) Copes with Large Grape Harvest in 2009, Sees Return to Quarterly Profit SoonWednesday, June 30th, 2010
As the stock market continues its swings up and down investors may want to consider looking in slightly differing spaces for investments. A gold stock is a gold stock, dry and bland. Other investments, however, are a bit more rewarding from a personal perspective. Having one or two smaller positions in these types of investments offers a certain amount of pleasure. If it grows and profits great, and if it does not you are enjoying it in a stressful time.
Willamette Valley Vineyards Inc., an Oregon base vineyard, operates and markets a wide variety of wines from its own domestically grown grapes. Among the wide variety of wines it ages and markets are Pinot Noir, Chardonnay, Merlot and a selection of Oregon themed house wines. The company was founded in 1983 and considers its vines as established.
Although one might consider the sales of wine as a rather stable industry, they must also consider the blending of wine manufacture with the realities of economics and a product that does actually degrade over time. Some find aged wines to be a blessing while the business of wine sales finds that wine does tend to degrade over time and become less desirable for mass merchants and retail outlets. In this regard, Willamette found a rather difficult time during the 2009 period.
2009 was a prolific grape season generating quite a bit more product than it was able to place with mass merchants and retailers suffering through current economic conditions. Because of this convergence of economic conditions and increased costs associated with the recession, the company experienced a loss in the first quarter 2010 as compared to a gain for the same period a year earlier. From an overall perspective, and judging from on-site sales combined with a slightly differing product mix, the company does feel that a return to profitability in the near-term is very likely as consumers return to their preferred wine preferences.
In coping with current conditions, the company has instituted several key programs to weather the storm. Aged wine on hand has been reduced, freight surcharges have been instituted and a reduction of purchased wine has occurred. The first quarter 2010 loss of approximately $185,000 is generally considered to be an anomaly due to economic conditions but one that needs to be considered. Going forward there are several key bright spots to consider. The winery in-store sales rose substantially in 2009 (10%+) while a program to increase out-of-state sales also began. The company has also received several favorable wine oriented kudos and awards in leading wine magazines.
Wine making is a commodity business subject to all market conditions. It is also subject to weather and a variety of variables that management can only react to from season to season. It is, however, a business that offers a certain amount of joy as compared to other investments that can often come off as rather dry and antiseptic. There may be many variables that make vineyard stocks risky but Willamette Vineyards does seem to be established, well run and profitable for the investor looking to infuse a bit of diversity.
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