Winc Inc. (NYSE-Amer: WBEV) snapped higher by about 3% ahead of its earnings call on Wednesday. It will be the first time WBEV reports earnings as a publicly-traded company after completing its $22 million IPO last month. It’s also the first time investors get a glimpse behind the scenes at a public WBEV, with a growing base anxious to get the first word on where 2022 will take them. If pre-IPO trends are any indication, they may be in for an intensely bullish ride.
Keep in mind that WBEV is already a respected player in the DTC wine industry. At the same time, they aren’t anything like the DTC companies they are compared to. WBEV is different. In fact, they are changing the DTC landscape, approaching the business with a heavily personalized business model that generated more than $55 million in DTC revenues last year. That personalization also helped its subscriber base surge, serving over 125,000 active monthly users contributing to a recurring and growing revenue stream. The better news- those users stay engaged with WBEV, which is the driving force behind the company’s impressive growth.
To date, the interactive component of the DTC platform has enticed users to post more than five million Winc wine reviews. Winc embraces each one. In fact, those comments and reviews act as the primary source of data that fuels Winc’s innovative and personal approach to wine sales. The more excellent news is that the model’s working.
Its subscription-based service has sold more than 400,000 bottles of wine in the United States market this year alone. Over the past decade, more than 18 million bottles have been sold. And while it’s a testament to how Winc can leverage its DTC business model to create an impressive recurring revenue stream, it’s only one part of its mission to drive value through an omnichannel business model.
Omnichannel is a big word that means revenues come from multiple places. Winc investors, though, only need to know the strategy can be a revenue-generating game changer.
Expanding Its Market Presence
That’s because it takes the company well beyond its DTC roots, giving its wines a presence in several of the largest consumer markets by integrating its brands into wholesaler networks like WholeFoods Market Inc. and Walmart Inc. (NASDAQ: WMT).
That’s not all. Its omnichannel model also makes its products available in thousands of restaurants across the country. Put simply, WBEV brings its message and products to multiple markets. The intention is to create awareness and build a brand following. Once they do, history shows Winc can convert a taster into a subscriber.
For investors, that’s good to know. And to make sure its wines can get into the hands of consumers, it’s also good to know that Winc has secured significant relationships with several of the largest distributors in the country. Notably, Winc has been strengthening its market position and margins by leveraging the power from the same Tier-one distributors and retailers used by Constellation, Diageo, and Gallo. But, Winc does so with an edge through a digital presence that embraces customer feedback.
That results in Winc developing only the products that connect with a generation of consumers in a way that even the industry giants can’t or are unwilling to do. The excellent news there- they sell products. And that earns more attention from distributors who can make much more money selling Winc products than warehousing them. And that’s not all.
Beyond Winc’s ability to impress distributors with excellent products that sell, Winc’s omnichannel approach to sales diversifies risk and expands revenue streams. Strangely enough, they are one of the few, if only, DTC wine companies leveraging such a model. Investors aren’t complaining. After all, it keeps the competitive landscape thin and the growth trajectory steep.
Growth Is No Coincidence
That growth is happening. And it’s not by coincidence; it’s the result of a process. Here’s how it works. Winc aggregates data from its DTC network and combines that with trend research to create a brand that will appeal to consumers. From there, it produces in-house the product and places it on its DTC platform. After that, they aggregate and extract data from reviews and monitor sales. Finally, its product winners are introduced through press releases and partnerships with retailers like Target Corp. (NASDAQ: TGT), while poor performers are either tweaked or canceled from production.
On paper, it sounds simple. However, being simplistic in the process doesn’t mean it’s easy to do. It’s grinding work. But, Winc believes it’s worth the effort, and the results of its data collection can have a compelling impact on a brand’s future.
Here’s an excellent example. After following its processes, Winc’s Summer Water brand garnered a gross profit return 32X greater than its average development cost. That’s an excellent return. And it’s not an exception. Winc notes that each brand typically generates a gross profit 4.6X greater than its development cost.
Here’s the best part. It only takes approximately 2 months to get from bottle to consumer, with operating costs significantly lower than industry standards. Competitors can’t do that. In fact, most don’t even try. Instead, they sell consumers what they want when they want. The difference in business models doesn’t stop there.
Being Different Is Good
A considerable difference in Winc from its competition is that its process’s simplicity presents a repeatable and actionable model. By actionable, they can turn on a dime to meet specific consumer demands. In fact, managing its own wine production from several of the world’s most fertile wine-growing regions, Winc’s process can help create a near-limitless number of concoctions and brands and can do so cheaply and efficiently. Better still, they produce what their consumers want.
Remember, while Winc has the ability to produce a vast number of wines, it’s frugal about where to put its attention. Careful analysis and following the data lead Winc to grow its brand label by 1 to 2 per year. Those new labels add to a well-tended list of modern cuvée’s, including Cherries and Rainbows, Summer Water, Lost Poet, and Folly of the Beast. Each has earned an impressive degree of consumer loyalty.
And that loyalty is driving growth. Winc posted wholesale revenue growth of 90% in the first half of 2021 compared to the first six months of 2020. Expanding the time frame also shows impressive results. Winc said it earned 66% year-over-year growth in wholesale depletions, 75% omnichannel volume growth, and 88% total omnichannel revenue growth in 2021.
Accelerating Into 2022
The better news is that Winc isn’t slowing down. Instead, they are in hyper-growth mode. And remaining true to its omnichannel model, Winc is pursuing additional growth through wholesale-retail partnerships with Amazon.com Inc. (NASDAQ: AMZN) and Instacart. Acquisitions are also a big part of its strategy. Thus, investors may want to pay close attention to its earnings call, especially future guidance. Expectations, as noted, are for the bulls to run.
Indeed, there’s a lot to like at WBEV. Historical growth is exceptional, its sales model is unrivaled, and its consumer engagement is best in class. Moreover, after completing a $22 million IPO, consider this story just getting started. Still, while growth is in the cards, it’s also the perfect time to knock Q3 earnings out of the park. Based on the knowns, they very well may.
Disclaimers: Level3Trading is responsible for the production and distribution of this content. Level3Trading is not operated by a licensed broker, a dealer, or a registered investment adviser. It should be expressly understood that under no circumstances does any information published herein represent a recommendation to buy or sell a security. Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The information made available by Level3Trading is not intended to be, nor does it constitute, investment advice or recommendations. The contributors may buy and sell securities before and after any particular article, report and publication. In no event shall Level3Trading be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or made available by Level3Trading, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information in this video, article, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. Level3Trading strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D. For some content, Level3Trading, its authors, contributors, or its agents, may be compensated for preparing research, video graphics, and editorial content. As part of that content, readers, subscribers, and website viewers, are expected to read the full disclaimers and financial disclosures statement that can be found Level3trading.com/disclaimer.
The Private Securities Litigation Reform Act of 1995 provides investors a safe harbor in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be forward looking statements. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as projects, foresee, expects, will, anticipates, estimates, believes, understands, or that by statements indicating certain actions & quote; may, could, or might occur. Understand there is no guarantee past performance will be indicative of future results. Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investors investment may be lost or impaired due to the speculative nature of the companies profiled.