At the start of 2020, we uncovered an interesting brewing company nestled in small town of Kitchener in Ontario. We first wrote about this under the radar craft brewing company in January 2020 at around $3.57, and a whole pandemic later, shares of Waterloo Brewing (TSX: WBR) have surged 124%, hitting a high of $8.00 on recent positive first quarter earnings report and increased price targets.
In a recent Forbes article entitled “Soaring Pandemic Alcohol Sales Cause Concern For Doctors”, the author stated that sales of alcoholic beverages have increased 34% during April and June of 2020, rising 21% over the same period in 2019. Although the data is based on 70,000 households surveyed in the US, alcohol sales in Canada have also seen an increase with the largest increase coming from online sales which surged 300% in 2020. During the pandemic, people have turned to alcohol as a means to cope with the added stress, anxiety and depression due to recent lockdowns. Tim Stockwell, Scientist at the University of Victoria’s Canadian Institute for Substance Use Research (CISUR) stated “The spike was particularly high immediately after March’s lockdown, where we saw sales jump 40 per cent the week after measures were introduced.” It’s clear there is a direct correlation between locking citizens in their homes and increased consumption of alcoholic beverages.
Sales of alcoholic beverages from WBR have seen an increase as of late and as a result, WBR revenues have soared during the pandemic as consumers consumed more beverages at home. On May 27th 2021, WBR reported strong net revenues of $22.5 Million for its first quarter, up 51.5% or $7.7 million from $14.8 million for the same period the year prior. Waterloo Brewing reported gross revenues of $39.1 Million, and the company also saw its EBITDA increase 52.4% to $3.2 Million when compared to the $2.1 million in EBITDA WBR reported last year. Waterloo Brewing’s CEO Mr. George Croft was quoted "Our owner brands' volume continues to grow at double-digits and our co-manufacturing of high-value global beverage brands more than doubled. We are growing in all sales channels and significantly outpacing the balance of the industry”. Waterloo Brewing’s portfolio of brands has continued to see increased growth, with LandShark reporting 83%, Seagrams at 40%, Waterloo 32% and Laker 8%.
WBR continues to launch new innovative products for consumers, and late into its first quarter, the company launched four new products including LandShark Seltzer, Seagram Island Time Coconut Lime and two new radlers, including Waterloo Watermelon and Tart Cherry. The Board of Directors at Waterloo Brewing have also approved a quarter dividend of $0.0276 per share as of the record date of July 21st 2021, and distributed on August 4th 2021.
Summer in Canada is set to kickoff in the coming weeks, and with residents eager to celebrate the reopening with a drink on a patio at their local pub, the reopening may help fuel more revenues for Waterloo Brewing over the course of the summer. The pandemic is far from over and it may be possible that Ontario enters another lockdown if cases begin to worsen. However, as we have seen, lockdowns or not, citizens will continue to consume alcoholic beverages whether it be on a patio or in the comfort of their own home.
Waterloo Brewing does not have a whole lot of volume, although investors who don’t mind stocks with lower liquidity might want to keep WBR on their radar since we believe its revenues will continue to grow and that the company’s dividend is also safe at a yield of 1.4%. WBR is also liked by analysts, with both Canaccord Genuity and Acumen Capital giving WBR a buy rating and raising their price targets on WBR to CAD $9.00 from $8.50 and $8.25 respectively.
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