Diamond Estates Wine & Spirits Stock Price, News & Analysis

Diamond Estates Wines & Spirits Inc. (traded on the TSX Venture Exchange under the symbol DWS) is a beverage alcohol company in the Beverages – Wineries & Distilleries industry within the consumer defensive sector. According to company disclosures, Diamond Estates is a producer of high-quality wines and ciders and also acts as a sales agent for over 120 beverage alcohol brands across Canada.

The company reports that it operates four production facilities, with three located in Ontario and one in British Columbia. These facilities produce predominantly Vintners Quality Alliance (VQA) wines. Diamond Estates highlights a portfolio of well-known wine and cider brands, including 20 Bees, Creekside, D'Ont Poke the Bear, EastDell, Lakeview Cellars, Mindful, Shiny Apple Cider, Fresh Wines, Red Tractor, Seasons, Serenity and Backyard Vineyards. This combination of owned brands and agency relationships positions the company as both a producer and a distributor within the Canadian beverage alcohol market.

Business model and operations

Diamond Estates describes its business as having two main components: a winery and cider production division and a commercial agency division operated under the name Trajectory Beverage Partners. The production division focuses on creating wines and ciders, particularly VQA wines, through its facilities in Ontario and British Columbia. The agency division serves as a sales agent for a broad range of international and domestic beverage alcohol brands, helping those brands access retail, on-premise, and other channels across Canada.

Through Trajectory Beverage Partners, the company states that it represents a wide range of international wine brands. Examples disclosed by the company include Fat Bastard and Gabriel Meffre from France; Kaiken from Argentina; Kings of Prohibition and McWilliams Wines from Australia; Yealands, Kono, Tohu and Joiy Sparkling Wine from New Zealand; Talamonti and Cielo from Italy; and Porta 6, Julia Florista, Boas Quintas, Catedral and Cabeca de Toiro from Portugal. The agency portfolio also includes California and Napa Valley producers such as C.K Mondavi & Family, Charles Krug, Line 39, Harken, FitVine and Rabble.

In addition to wine, Diamond Estates reports that it represents a range of spirits and beer, cider and ready-to-drink (RTD) brands. The spirits portfolio includes Tag Vodka, Ginslinger Gin and Barnburner Whisky from Ontario; Cofradia Tequila and Hussong's Tequila from Mexico; Islay Mist and Waterproof blended Scotch whiskies from Scotland; Glen Breton Canadian whiskies from Nova Scotia; Five Farms Irish Cream Liqueur and Broker's Gin from the United Kingdom; Tequila Rose Strawberry Cream, 360 Vodka and Holladay Bourbon from the United States; Giffard Liqueurs from France; and Becherovka from the Czech Republic. In beer, cider and RTD, the company notes representation of brands such as Bench Beer, Henderson Beer, Niagara Craft Cider, TAG and Ginslinger RTDs and Darling Mimosas from Ontario, as well as Rodenbach beer from Belgium, La Trappe beer from the Netherlands and Warsteiner beer from Germany.

Capital markets and corporate developments

Diamond Estates indicates that its common shares trade on the TSX Venture Exchange. The company has reported various capital markets activities, including issuances of common shares as part of contingent consideration for the acquisition of Perigon Beverage Group and share issuances to service providers such as 2RL Capital Inc. It has also discussed the use of deferred share units and stock options as part of its security-based compensation arrangements, subject to TSX Venture Exchange policies.

The company has disclosed that it entered into a Second Amended and Restated Credit Agreement (SARCA) with Bank of Montreal and that this agreement has been amended multiple times. Notable terms described in recent disclosures include the establishment of a temporary bulge amount credit facility, changes to interest rates, and the addition of a limited recourse guarantee by Lassonde Industries Inc. in favour of Bank of Montreal in an amount not exceeding the bulge amount outstanding. Diamond Estates has also described a forbearance period and discussions with holders of convertible debentures regarding potential rollovers and replacement debentures.

Strategic relationships and brand licensing

According to company news releases, Diamond Estates has a relationship with entities associated with the Lassonde Group. The company has described a license agreement between its wholly owned subsidiary, Diamond Estates Wines & Spirits Ltd., and 3346625 Canada Inc. (Lassonde Holdings), a holding company of a control shareholder of Lassonde Industries Inc. The license agreement relates, among other things, to royalty rates based on sales of D'Ont Poke the Bear brands and options for Diamond Estates to acquire the D'Ont Poke the Bear trademarks at certain times. Shareholders have approved and ratified this license agreement at a special meeting.

Diamond Estates has also reported the acquisition of Perigon Beverage Group, which is described as a sales agency business. The company has issued earnout shares to the principals of Perigon based on gross margin targets, and it has indicated that the acquisition of Perigon is part of its commercial agency platform.

Financial reporting and non-IFRS measures

In its financial news releases, Diamond Estates provides discussion of revenue, gross margin, EBITDA and Adjusted EBITDA. The company defines gross margin as gross profit excluding depreciation on property, plant and equipment used in production. It describes EBITDA and Adjusted EBITDA as supplemental financial measures used to assess performance before financing decisions, depreciation, amortization, certain non-cash expenses and specified non-recurring items. The company notes that these measures are not recognized measures under IFRS and cautions that definitions may differ from those used by other companies.

Diamond Estates has linked changes in its reported gross margin and EBITDA to factors such as sales volumes in grocery and convenience channels, enhancements in VQA and wine sector support programs, and the performance of its winery and agency divisions. It has also referred to turnaround initiatives and investment decisions in management commentary, while emphasizing that non-IFRS measures should not be considered as a replacement for measures presented in its consolidated financial statements.

Corporate governance and shareholder meetings

The company regularly holds annual general and special meetings and special meetings of shareholders to approve matters such as amendments to stock option and deferred share unit plans, license agreements with related parties, and potential replacement convertible debentures. Voting results disclosed by Diamond Estates show high approval levels for director elections, auditor appointments and amendments to security-based compensation plans, with specific resolutions requiring the exclusion of votes from interested or related parties in accordance with securities regulations and TSX Venture Exchange policies.

Diamond Estates has also engaged external firms, including Atrium Research Corporation and ImpactDeck, to provide equity research coverage and investor relations services. These engagements are described as subject to TSX Venture Exchange approval and are intended to increase the company’s visibility within the investment community through research distribution, broker outreach and related activities.

Regulatory and trading status

The company has disclosed that trading in its common shares on the TSX Venture Exchange was temporarily suspended due to a delay in the filing of financial statements, and that the exchange later accepted the reinstatement of trading after those filings were completed. Diamond Estates has also provided information regarding related party transactions, such as purchases of apple juice from Golden Town Apple Products Limited, and has described how it relies on exemptions from formal valuation and minority approval requirements where the fair market value of such transactions falls below specified thresholds relative to its market capitalization.

FAQs about Diamond Estates Wines & Spirits Inc.

• What does Diamond Estates Wines & Spirits Inc. do?
  Diamond Estates Wines & Spirits Inc. states that it produces high-quality wines and ciders and acts as a sales agent for over 120 beverage alcohol brands across Canada. It operates production facilities in Ontario and British Columbia and manages an agency division under the Trajectory Beverage Partners name.
• Where does Diamond Estates operate its production facilities?
  According to company disclosures, Diamond Estates operates four production facilities, three in Ontario and one in British Columbia. These facilities focus predominantly on producing VQA wines under various brand names.
• What are some of Diamond Estates’ own brands?
  The company lists several owned brands, including 20 Bees, Creekside, D'Ont Poke the Bear, EastDell, Lakeview Cellars, Mindful, Shiny Apple Cider, Fresh Wines, Red Tractor, Seasons, Serenity and Backyard Vineyards.
• What is Trajectory Beverage Partners?
  Trajectory Beverage Partners is described by Diamond Estates as its commercial division. Through this division, the company serves as a sales agent for a wide range of international and domestic beverage alcohol brands, covering wine, spirits, beer, cider and ready-to-drink products.
• Which international wine brands are represented by Diamond Estates?
  The company reports that Trajectory Beverage Partners represents brands such as Fat Bastard and Gabriel Meffre from France; Kaiken from Argentina; Kings of Prohibition and McWilliams Wines from Australia; Yealands, Kono, Tohu and Joiy Sparkling Wine from New Zealand; Talamonti and Cielo from Italy; and Porta 6, Julia Florista, Boas Quintas, Catedral and Cabeca de Toiro from Portugal, among others.
• What spirits brands are included in Diamond Estates’ agency portfolio?
  Diamond Estates lists Tag Vodka, Ginslinger Gin and Barnburner Whisky from Ontario; Cofradia Tequila and Hussong's Tequila from Mexico; Islay Mist and Waterproof blended Scotch whiskies from Scotland; Glen Breton Canadian whiskies from Nova Scotia; Five Farms Irish Cream Liqueur and Broker's Gin from the UK; Tequila Rose Strawberry Cream, 360 Vodka and Holladay Bourbon from the USA; Giffard Liqueurs from France; and Becherovka from the Czech Republic.
• Which beer, cider and RTD brands does the company represent?
  The company has disclosed representation of Bench Beer, Henderson Beer, Niagara Craft Cider, TAG and Ginslinger RTDs and Darling Mimosas from Ontario, as well as Rodenbach beer from Belgium, La Trappe beer from the Netherlands and Warsteiner beer from Germany.
• On which exchange are Diamond Estates’ shares listed?
  Diamond Estates states that its common shares trade on the TSX Venture Exchange under the symbol DWS. The over-the-counter symbol DWWEF is associated with the same underlying company for certain markets.
• Has Diamond Estates experienced any trading suspensions?
  The company has reported that trading in its common shares on the TSX Venture Exchange was suspended due to a delay in filing financial statements and that the exchange later accepted the reinstatement of trading after those filings were completed.
• How does Diamond Estates describe its use of non-IFRS financial measures?
  In its financial communications, Diamond Estates defines gross margin, EBITDA and Adjusted EBITDA as supplemental measures used to assess performance. It explains that these measures are not recognized under IFRS and cautions that they should not be considered as replacements for IFRS measures and may differ from similar measures used by other companies.