Conviviality takes another step into wholesale

May 3 2016

Conviviality vs. Majestic: Beer, Wine, and the High Street’s decline

We note that Conviviality has been busy since IPO’ing at 145p in September 2013.
Now at c208p, via highs of just under 240p, with two significant acquisitions under its belt in the past year (Matthew Clarke for c£200m and, today, Bibendum for £60m).
The Bargain Booze operator represents an interesting contrast to former darling stock, Majestic Wine.

Online vs. Wholesale

In the red corner, we have CVR. Current market cap of c£330m,
- FY17 forecast (ex-Bibendum): sales of £1.28bn, PBT of £37m.
- Recent acquisitions: Matthew Clarke (c£200m), Bibendum (£60m).
In the blue, WINE. Current market cap of c£311m.
- FY17 forecast: sales of £387.57m, PBT £15.24m. Recent acquisition: hitherto loss-making Naked Wines (online) for up to £70m.
Red has unfashionable fascia (Bargain Booze) and is diversifying away from the High Street into boring old wholesale.
Whereas Blue, in its Naked and Majestic glory, might catch the eye more with its move into the Brave New World of online wine retailing.
Both are interesting, both are trying. Where do we stand?

To paraphrase Peter Lynch: ‘Boring and Unfashionable is good’

Wholesale is alive and well and could be set to prosper, if pub industry changes lead to a larger number of independent pub operators looking to source their own drinks.
While online is exciting, we wonder as to the size of the potential market for online wine retailing. We don’t know anyone who gets their wine online.
Entire books have been written about being wary of hyped up growth industries, tried + tested vs. exciting + unknown. This school of thought might prove pertinent here.