After raising $22 million from its November IPO, Winc, Inc. (NYSE: WBEV) is in the queue to present its first set of financials as a publicly-traded company. Next Wednesday, after the market close, WBEV will present its Q3 data to a market thirsty for good news. WBEV is not planning to disappoint.
In fact, the suggested attire for the event includes rally hats. Why? Foremost, WBEV is showing an uncanny ability to do the right things in the right markets at the right time. Better still, by reshaping antiquated wine club models, WBEV is expected to prove that having an omni-channel approach to business that reaches multiple sales channels can generate meaningful, sustainable, and high-margin revenues compared to peers in its DTC market environment. In other words, by putting the traditional DTC sales model on steroids, WBEV is expected to show it can add multiples to an industry-standard single revenue stream.
Not only that, they have the brands, talent, and loyal client base to take their company to the next level. That could be why investors responded well to its IPO, with investors ponying up $22 million at a time when markets remain uncertain about the retail landscape in 2022. Of course, WBEV provides good reasons for investors to feel good about their investments. A primary attraction is that expectations are for WBEV to do more than change the DTC wine business landscape. Many expect they can dominate it.
Sure, it's a bold presumption. But, understanding how WBEV operates justifies the bullish sentiment.
Video Link: https://www.youtube.com/embed/orp34xBH19g
WBEV Is Different, And That's Good
To say that WBEV is different is an understatement. It's more on par to suggest that they are transforming the DTC wine industry. That's no exaggeration. For more than a decade, Winc has been on a mission to change the rules of what a DTC wine provider should be. And they have been doing things that could position them as unrivaled in a number of categories very soon. Customer engagement, best-in-class service, product quality, and brand growth are all included. The better news is that after its NYSE listing, investors can go along for the ride.
And with broader market weakness pulling good stocks lower, the WBEV value proposition has never looked better. In fact, as is often the case, a company's share price doesn't always reflect an accurate portrayal of performance. That appears to be true with WBEV, especially with the company doing all the right things to create shareholder value. Remember, despite its share price weakness following general market declines, WBEV is a company in motion. In hand, they have a surging client list, a retail and wholesale sales presence, a booming DTC business, and produce in-house an enormous volume of branded wines. It's more than enough to steepen its growth curve.
Keep this in mind, too, when evaluating the investment proposition- while the markets may be discounting value, customers aren't.
An Omni-Channel Business Model Drives Growth
Winc has sold more than 18 million bottles of wine to a customer list that surged over the past year. Moreover, customers are getting what they want. Winc has produced and offered over 736 wines from 62 grape varieties grown across 97 regions in the world's most fruitful grape-growing countries. Their modern cuvée's have led to exciting brand development, including Cherries and Rainbows, Summer Water, Lost Poet, and Folly of the Beast. But, that's only a small representation of its label list.
Winc has leveraged volumes of customer feedback to produce at least 65 appellations within brand categories, making them able to meet individual preferences and accelerate market traction through an omni-channel business model. That model extends its sales reach beyond DTC channels, putting its brands on shelves at markets like Whole Foods, Target, and Vons.
In addition, WBEV builds and serves a following by having its popular brands sold at thousands of local restaurants throughout the country. That helps keep current clients loyal and inspires new consumers to learn about and enjoy its varietal favorites. By the way, that's a big deal in the wine business. And for Winc, it's led to hundreds of thousands of bottles of organically produced wines to be enjoyed outside of its DTC model in the past year alone.
It's a result you won't see from competing subscription-only DTC wine businesses like Naked Wines and Blue Apron. But there's more to separate Winc from the pack. They don't require a subscription fee, and there are no hidden surcharges to mask costs that are, in reality, a sort of membership fee. In other words, you don't need to pay Winc to try their products. Instead, Winc sells its products to those that want them.
More importantly, they don't sell "guess the taste" selections. Winc clients receive brands and varietals based on personal taste preferences compiled from a data set unique to each client. In short, Winc is growing at near exponential levels by listening to its clients instead of telling them. There's a big difference.
Winc Listens Instead Of Telling
The differences don't stop there. Winc sells what it produces and sends it only to the customers that want it. They don't and never have utilized a one-taste-fits-all sales model. Instead, growth has been organic by listening to what clients and markets say, leveraging deep data and digital expertise to develop brands online through direct customer feedback. Then they take the next step to seed those products with consumers throughout the country and deploy those brands through a national wholesale distribution network and into premium retailers nationwide. The result is loyalty, fueled by mass brand awareness, availability, and client satisfaction.
It's an excellent strategy and one that's working, proven by WBEV's impressive growth over the past few years. But know this, too. Its approach is well-targeted and finds market success by connecting itself with the next generation of consumers, Millennials, and Gen X.
Those two groups now account for more than 75% of WBEV's DTC consumers. The excellent news is that Winc knows how to touch that base well beyond the doorstep, positioning their products in retail markets that create what the company calls a "flywheel effect" throughout a consumer's purchasing experience. More simply, Winc perpetuates a message that its target market can see and feel. Most importantly, when the message is strong enough and seen enough times to inspire action, it leads to tasting. After tasting, Winc expects to earn a new customer.
That's the beauty of the omni-channel model. Suppose an ad doesn't drive an immediate purchasing decision through enrollment. In that case, a message still resonates to inspire an offline purchase at Wholefoods, Target, Vons, and, as noted, even their favorite bar or restaurant.
Converting Consumers From Offline To Online
But that's not all driving the bullish proposition. Winc strengthens its market position and margins by leveraging the power of the same Tier 1 distributors and retailers used by Constellation, Diageo, and Gallo. However, even then, Winc has advantages through a digital presence that embraces customer feedback to develop only the products that connect with a generation of consumers in a way that the industry giants can't or are unwilling to do.
That benefits Winc in the sales channels as well. Winc's distribution partners understand how powerful data and a direct connection with consumers can be, watching at the same time a Winc strategy that is disrupting the status quo. In turn, those distributors want to be on a winning team too. After all, distributors make money by selling products that consumers want. Hence, when Winc offers products they can sell instead of warehouse, expect those relationships to strengthen.
Moreover, Winc is doing more than building distributorship relationships. They are getting increasingly stronger against competing digital-first brands in the industry, like First Leaf, Naked Wines, and others, that have a strategy of disintermediating this wholesale channel instead of embracing it.
Strangely, competitors' lack of interest separates them from a market that accounts for more than 90% of US alcohol sales. But, their disinterest can be fuel for Winc. Better yet, as Winc stays in contact with clients, markets, and trends, which they say is embedded into its Winc Constitution, the focus on that 90% can help transform a brand, message, and taste into a revenue-generating juggernaut.
Q3 Earnings A Prelude To better Q4 And 2022
Indeed, that's the plan. And while earnings next week may give a taste of what's happened during turbulent markets, guidance into Q4 and all of 2022 should be the focus. Remember, savvy investors trade through a forward-looking lens. While Q3 sets a historical record, the better news may be from guidance suggesting that Winc is better positioned than ever to maximize its current and future market opportunities.
Best of all, it may be good to know that revenue-generating momentum is at WBEV's back. That in and of itself can ignite a rally to send WBEV shares back toward more appropriate and higher levels. Here's what investors do know going into the call: WBEV growth curve is steepening. Its brands are well-received. And its business model generates revenues from multiple channels. That's a lot to like.
Thus, while Q3 earnings may impress, they may be the precursor of much better things to come. Indeed, that would be an excellent way to toast in 2022.
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