Salad Bowl of America.” The area produces 70% of the nation’s lettuce and is home to two of
the four largest orchid growers in the U.S. There are also 46,000 acres of wine grape vineyards
in the county. Monterey produces the most Chardonnay grapes of any county in the United
States and is also known for its excellent Pinot Noir wine grapes.
Scheid Vineyards owns or leases the land of close to 4,000 gross acres of vineyards in Monterey
County and contract farms another 740 acres for one of the world’s largest wine producers. The
company also owns and operates a state of the art winery that covers nearly three acres. This
facility commenced operations with the harvest of 2005. The capacity has been increased
almost annually and most recently expanded in 2016. It processes over 30,000 tons of grapes
each harvest, which represents over 2 million cases of wine. The company also owns and
operates a small, boutique winery in which its best premium wines are produced. The company
has invested over $75 million developing these facilities.
The company is completely vertically integrated. From growing the grapes, to crushing, to
fermentation, blending, and on to the bottling and shipping; Scheid does it all. It is important to
note that only a few mass market wine producers have similar control from the field to the
bottled product. This means Scheid can control quality and quickly react to take advantage of
opportunities in the retail wine markets.
Scheid Has Been Growing Its Private Labels
Despite its puny market cap, Scheid is not a tiny company, nor is it a slow growing one. The
company posted revenue of $62.3 million in fiscal 2017 (ended February), up 27% from the
previous year and up almost 50% from fiscal 2015. Cash flow (EBITDA) jumped 37% to almost
$15 million year over year. Net income was up 75% from prior year.
Why? The company has transitioned from just selling grapes and bulk wine to other bottlers, to
creating its own brands and private label brands for retailers. Scheid has partnered with several
large retail chains to create wine labels that are exclusive to that retailer. For example, there
are brands that are exclusive to the largest grocery chain in the U.S.
Another example is a partnership with the famous TV personality, Kathy Lee Gifford - called
GIFFT - which Kathy Lee promotes. And, if you are in first class on one of the largest airlines in
the world, you are likely drinking Scheid Vineyards wine made just for that airline - you just
wouldn’t realize it.
Specifically, Scheid is producing the quality of a $20+ bottle and then delivering it into retail for
a $12-$16 price point. And it is proving to be very, very successful. This segment of the business
has grown from $8 million to $23 million in annual revenue in just two years. Scheid also
produces high quality wines that retail for up to $70 per bottle.
Retailers are clearly loving the private label strategy, as it enables them to capture some of the
margin that they have been giving up to branded wine companies. The private label business