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MARKET COMMENT
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An occasional glass of wine with a meal is about the limit of my alcohol intake. I reckon I drink no more than a couple of bottles a year, which is well below the national average. According to industry experts, Britons consumed around 1.3b bottles of wine a year in 2001. That equates to 20 litres per head of adult population a year. Furthermore, wine consumption is expected to grow steadily at about 4% per year. For that reason, investing in wine deserves a second look. There are various ways we can invest in wine. For example, there are various wine funds. Alternatively, it is possible to slowly stock your own wine cellar by investing in a case or two every month. After all, it is said that wine prices can climb by as much as 15% per year provided you buy the right wines, at the right price and at the right time! Personally, I am not enthused by the idea of investing in wine funds. Nor am I thrilled by the idea of humping crates of speculative grape juice into the cellar. Thankfully, though, there are alternatives. Majestic Wine (LSE: MJW), UK's largest wine warehouse, has successfully tapped into the British consumers' thirst for wine. The company recently reported a 42% rise in interim profits to £3.9m on sales that climbed 22% to £69m. Sales almost doubled from £68m in 1999 to £126m in 2003. Revenues for its latest full year are expected to come in at £147m, rising to £163m in 2005. That puts the company on a price to sales valuation of 0.9. Earnings per share are forecast at 45p, which values the company, whose shares stand at 833p, at 18 times earnings. Blavod Extreme Spirits (LSE: BES), better known for its Black vodka, is another player in the wine market. The company owns the distribution rights to Baron de Rothschild's wines in the UK. However, this yet-to-be profitable distributor could be one to avoid until its recent takeover of Extreme Beverages beds in. The last company in this quick look at the UK wine market is Allied Domecq (LSE: ALLD). The world's second biggest wine and spirits company was a relative late entrant into the global wine market. However, over £1b of acquisitions since 2001 has made Allied Domecq a formidable player in the wine sector, boosting its ownership to more than a dozen wine makers around the world. Additionally, wine sales now account for almost a third of its drinks sales by volume. Allied Domecq is pencilled for pre-tax profits of £524m this year, which suggest earnings per share of 35p. That values the company at 12 times prospective earnings, which is below the market average. The dividend yield of 3.6% based on today's share price of 431p is not too bad either. The writer has a beneficial interest in Allied Domecq.