In my investment portfolio, growth stocks are prominent, but wine-oriented investments are notably absent. Wine stocks are not commonly discussed in investment circles, likely due to limited options available. Some popular investments in the wine sector include Treasury Wine Estates, The Duckhorn Portfolio, LVMH, and Constellation Brands, which own wine-producing brands as part of their luxury goods or beverage portfolios.
Many individuals interested in investing in wine choose to buy physical wine instead of stocks. This alternative investment strategy involves purchasing wine with the intention of storing and selling it later, believing that its value will increase over time.
One English wine growth stock that has caught my attention is Chapel Down (LSE:CDGP). This company is a leading player in the English wine scene, producing more bottles than any other UK vineyard. In 2023, UK winemakers produced approximately 12.3 million bottles, with Chapel Down producing around 3.4 million bottles. The company’s production has seen significant growth, thanks in part to a successful grape harvest.
Despite its relatively small size compared to supermarket brands, Chapel Down offers a range of affordable wines due to its scale compared to other UK producers. The company also competes in the premium market segment, with award-winning wines like the 2016 Kit’s Cote blanc de blancs priced at £125.
However, investing in Chapel Down comes with risks. As a small-cap stock with a market capitalization of £111 million, it is more volatile than larger companies. Additionally, the stock is not cheap, trading at 70 times earnings for 2023. While detailed forecasts are scarce, management has projected double-digit revenue growth for 2024.
Chapel Down offers a unique value proposition for investors holding shares. Those with 1 to 1,999 shares receive a 25% discount on wines, while those with over 2,000 shares get a 33% discount. This investment could potentially pay for itself in discounts, especially for those planning events like weddings.
Despite its current valuation, Chapel Down is on a path of impressive growth, expanding its brand awareness and market presence. The company’s plans to tap into the tourist market further indicate its potential for growth. While the price-to-earnings ratio may seem high, Chapel Down boasts valuable assets, including freehold land, buildings, and a significant stock of wine. For wine enthusiasts like myself, Chapel Down remains an attractive investment option.