Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Sales of wine at grocery stores in Ontario has helped offset the losses of sales from now-closed bars and restaurants for Diamond Estates Wine & Spirits in Niagara-on-the Lake, Ont.

Courtesy of manufacturer

When the economy suffers, consumption of wine and spirits tends to go up. So, should investors take a look at the companies that produce alcohol in these uncertain times?

The shares of these producers have fallen along with the broader market in the past few weeks and are near their 52-week lows. But in good times and bad, there’s always demand for alcohol, which means a sound business and good cash flow.

“It’s true, the [wine and spirits] companies have sold off, but the valuations are compelling for different reasons,” says Nick Corcoran, an equity research analyst with Acumen Capital Finance Partners Ltd. in Calgary, which covers niche and small-cap Canadian companies.

Story continues below advertisement

He says the four Canadian publicly-traded companies in the sector hold promise for different reasons. But he also admits this downturn is different.

Bars and restaurants, which are a big source of demand for alcohol, are closed. Special events and dinner parties are being conducted over videoconferencing. And while sales may be up at liquor stores, consumers will have less money to spend as job losses pile up.

The two publicly-traded winemakers in Ontario – Diamond Estates Wine & Spirits Ltd. (DWS-X) and Andrew Peller Ltd. (ADW-A-T) – are benefiting from the Liquor Control Board of Ontario (LCBO), which centralizes sales and distribution in Canada’s largest alcohol market, thus cutting their costs. They’re also helped by the province’s decision last year to allow wine and beer sales in grocery stores.

“Given the circumstances, sales are holding up quite well,” says Murray Souter, chief executive officer of Diamond Estates, which is based in Niagara-on-the-Lake, Ont., and includes brands like Twenty Bees, EastDell and Lakeview Cellars. “If people can’t go out to a restaurant to eat, they still want to enjoy a glass of wine with dinner.”

Diamond Estates had revenue of $25.9-million in its latest 12 months. Mr. Souter says half of these sales come through the LCBO’s retail stores and grocery stores. The grocery store business has helped offset the sales losses from now-closed bars and restaurants, which usually account for a quarter of the company’s business.

Another quarter comes from conference and wedding venues as well as vineyard tastings and exports. Mr. Souter says Diamond Estates worked hard to build its export sales to China, but has seen that hurt by the COVID-19 pandemic. Still, he remains optimistic.

“Overall sales are down, but that could change very quickly,” Mr. Souter says.

Story continues below advertisement

Mr. Corcoran says Diamond Estates, Grimsby, Ont.-based Peller, as well as Kitchener, Ont.-based Waterloo Brewing Ltd. (WBR-T) and Corby Spirit & Wine Ltd. (CSW-A-T) of Toronto have their challenges and appeals.

All four have turned over some of their alcohol production to producing hand sanitizer, which is being distributed free of charge in their communities and to front-line health-care workers.

Peller is Canada’s second-largest wine producer with sales of $381.8-million in 2019. It has paid dividends for 41 years with the last increase in July. The stock yields 2.8 per cent at current prices.

“It is a great, well-managed company,” Mr. Corcoran says.

Its top brands include Peller Estates, Thirty Bench and Trius. Mr. Corcoran says Peller’s VQA wines are doing well, although its blended wines are under pressure from low-priced imports. Like Diamond Estates, exports have been hurt.

Mr. Corcoran also likes Waterloo Brewing because it sells a range of premium and value-priced beers and is moving into the pre-mixed cocktail segment. Waterloo Brewing had revenue of $50.1-million in 2019 and its 10-cent dividend yields 3.8 per cent.

Story continues below advertisement

Its beers include Waterloo Brewing, Landshark and Laker, but it also makes pre-mixed alcohol based drinks including Seagram Coolers and Mott’s Caesar. In December, it added pre-mixed Absolut vodka drinks.

“Waterloo has done a great job of building out its brands and the ready-to-drink market should help drive future growth,” Mr. Corcoran says.

Corby was founded in Corbyville, Ont., in 1859 but is now controlled by the France-based beverage giant Pernod Ricard. Its brands include J.P. Wiser’s Canadian whisky and Lamb’s rum. Through Pernod Ricard, it represents global brands including Absolut vodka and Beefeater gin as well as Jacob’s Creek and Campo Viejo wines.

Corby had revenue of $149.9-million in 2019. Its $1.32 dividend yields 5.7 per cent.

Daniel Sacke, vice president and wealth advisor with The Sacke Wealth Advisory Group at BMO Nesbitt Burns Inc. in Toronto, says wine and spirit companies are selling close to their 52-week lows, a similar pattern to the 2008 financial crisis.

“They’re not recession proof, but they are recession-resistant,” he says.

Story continues below advertisement

Mr. Sacke prefers large-cap companies in the current environment because their shares are more liquid and the companies have the scale and deep pockets to withstand setbacks.

He recently purchased Constellation Brands Inc. (STZ-N) of Victor, N.Y., for clients. Constellation’s brands include Robert Mondavi and Kim Crawford wines, Svedka Vodka and Casa Noble Tequila. It has also has a stake in cannabis producer Canopy Growth Corp. (WEED-T) of Smith Falls, Ont. Constellation has a market cap of US$28-billion and its US$3 dividend yields 2.06 per cent.

“I like [Constellation because it] has sustainable levels of debt and a sustainable dividend. But for somebody in the micro-cap space, both Peller and Corby might be attractive,” Mr. Sacke says.

Adam Mayers is a contributing editor to the Internet Wealth Builder investment newsletter.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to
Comments are closed

We have closed comments on this story for legal reasons or for abuse. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies