Lucy Nicholson/Reuters
- Angela Aldrich, one of Sohn’s rising stars, revealed her fund’s short in Treasury Wine Estates, the world’s third-biggest wine producer.
- The company trades on the Australian stock exchange and owns popular American wine brands Beringer and 19 Crimes, as well as one of the most popular wine brands in China, Penfolds.
- Millennials’ preference for liquor over wine and beer will hamper Treasury’s ability to grow. The company has tried to boost sales by expanding into discount dealers like Costco and 7/11, but has been forced to cut the prices of their popular brands, Aldrich said.
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Millennials are not killing the wine industry, but they certainly aren’t helping it.
The largest generational cohort prefers liquor to wine and beer, and a growing percentage of millennials are choosing marijuana over alcohol, said Angela Aldrich, founder of Bayberry Capital Management, during her presentation at the Sohn Investment Conference on Monday.
This shift away from wine is only part of the reason Aldrich pitcher her firm’s short of Australian wine company Treasury Wine Estates, which owns popular American brands 19 Crimes and Beringer as well as popular Chinese brand Penfolds.
While the company and its stock have grown steadily over the last five years, Aldrich suspects a slowdown is coming as Treasury struggles to retain its top talent and has oversaturated distribution channels as millennials turn away from wine.
Popular American brand 19 Crimes, for example, has been pushed through discount distribution channels like Costco and 7/11 in the US, but has had to lower its price to do so, Aldrich said. A bottle on 7/11’s website is listed at less than $10 despite debuting in the U.S. at over $18 a bottle, Aldrich said.
A Blue Ridge alum, Aldrich believes what sets her firm apart is her ability to short. Her fund has been backed by Blue Ridge founder John Griffin, and she said in a previous interview with Business Insider that she learned to short from Griffin.
Additional headwinds Aldrich noted include the fact Treasury has churned through four CFOs and five division heads in the last five years, and the dangers ecommerce have for specific brands. In China specifically, there are several knock-off labels that look nearly identical to Treasury’s Penfolds brand online that are cheaper options.
Bayberry believes the stock price, which is currently trading around 16 Australian dollars, could be cut in half.
A Treasury spokeswoman said in response to the presentation: "We are pleased with how business is performing across all regions and across the portfolio."
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Source: Business Insider – bsaacks@businessinsider.com (Bradley Saacks)