Wine Industry Financial Analysis Essay -- GCSE Business Marketing Cour

Wine Industry Financial Analysis DESCRIPTION OF BUSINESS Canandaigua Brands, Inc. (formerly Canandaigua Wine Company, Inc.) is a producer and supplier of wine and an importer and producer of beer and distilled spirits in the United States. It maintains a portfolio of over 130 national and regional brands of beverage alcohol which are distributed by over 850 wholesalers throughout the United States and selected international markets. Its beverage alcohol brands are marketed in three general categories: wine, beer and distilled spirits. Brands include: Paul Masson, Manischewitz, Monte Alban, Almaden, Barton’s Gin and Corona Beer. MANAGEMENT PERFORMANCE Management performance is good. Canandaigua’s return on assets is better than the industry standard for 1998, and just under the industry standard in 1997. The company’s management has been able to improve the company’s ROA by almost doubling net income from the prior year. Management has in the past done a good job of utilizing its assets, and by the latest results is doing an even better job. Canandaigua’s gross margin(25.62) is less than the industry standard(43.80%). It appears that the company’s production costs are greater than others in the industry. Profit margin(6.78%) is greater than the industry standard(6.64%) in 1998. Canandaigua is very good at controlling selling & general administrative expenses. Higher sales in 1998 resulted primarily from additional beer sales, largely Corona Beer sales, additional table wine sales and additional spirits sales. The company has increased its return on common stockholder’s equity(12.84%), compared to the industry stan dard of 10.89%. Canandaigua does a fair job of controlling borrowing. Interest expense was reduced by ... ...ompany’s operating cycle is very lengthy. Although, assuming most payables are due net 30, Mondavi appears to pay their bills on an average of 3.8 days early. LONG-TERM LENDORS From a lendor’s perspective, Mondavi appears very strong in its ability to repay long-term debt and interest despite having a debt to asset ratio 35% below the industry average. Mondavi has a very low probability of bankruptcy with or without the market cap being considered. Accordingly, Mondavi would be a good candidate for a general line of credit from lendors. INVESTORS Mondavi’s stock appears to be over valued by approximately 100% compared to 1997 and 1998’s per share market value. According to the EPS ratio, such over valuation appears to be consistent from ’97 to ’98, according to the EPS ratio. Therefore, it seems that investors would be hesitant to purchase Mondavi’s stock.