December 22, 2016

Diamond Estates Wine and Spirits, a Canadian operator of two wineries in the Niagara region and Ontario and distributor of more than 120 brands of wines and alcohol, announced that is has closed a private placement offering for total gross proceeds of $8.8 million with agents Paradigm Capital Inc. and GMP Securities LP.

Proceeds from the sale of up to 40 million common shares will be used by Diamond Estates to fund the expansion of the company’s main wine production operations through the addition of warehouse and bottling space and cooperage (barrel storage).

The efficiencies and increased capacity garnered from these improvements are expected to lift the company’s wine processing, ageing, and bottling operations by 50 percent. Any additional funds will be allocated to the reduction of debt and for general corporate purposes.

“The resulting economies of scale are expected to produce significant operating leverage that is anticipated to translate into higher margins on incremental sales volume,” said the company in a recent statement.

Currently 130 grocery stores are licensed in Ontario to sell domestic and imported wine along with beer and cider, while 70 are licensed to sell domestic and imported wine according to Grainews. However, the province has expressed plans to expand these numbers to 450 grocery stores that can sell beer and wine of which 300 will be licensed to also sell wine.

This is good news for Diamond Estates whose portfolio includes domestic wine brands 20 Bees, EastDell Estates, Lakeview Cellars, Dois Amigos, Dan Aykroyd, Benchmark, and Seasons. Additionally, through its partnership, Kirkwood Diamond Canada, the company is the sales agent for some of the world’s top selling international brands including Fat Bastard wines from France, Kaiken wines from Argentina, Charles Wells beers from England, Hpnotiq Liqueur from France, Anciano wines from Spain, Francois Lurton wines from France and Argentina, Blue Nun wines from Germany, coolers and spirits from Independent Distillers in New Zealand, Brick Brewing from Canada, Evan Williams Bourbon from USA, Flor de Cana rum from Nicaragua, and Iceberg Vodka from Canada.

Antifreeze

Canadians consumed 32.7 million cases of foreign wines in 2014, according to data from Vinexpo, making the country one of the world’s top consumers of red, white, and rosé wines by volume and the sixth top wine drinking country overall, reports The Star. Furthermore, this consumption is expected to increase by 7.8 percent by 2018. Of total consumption, red wine accounts for the lion’s share of the market with 60 percent of consumption – a factor that is expected to increase by 4.1 percent reaching 16.4 liters per adult by 2018.

“The Canadian market is doing better than most. It’s really a target for all major producers in the world,” Vinexpo chairman, Xavier De Eizaguirre told The Star.

Meanwhile, sales of imported spirits in Canada have risen in value by $450 million between 2010 and 2014/15 reaching $4.92 billion according to Statista.

“Our business is benefiting from a number of very positive factors, including our strong brand portfolio, broad industry growth, our strength in the VQA segment, the introduction of wine into the Ontario grocery channel, and robust export growth,” said Muray Souter, president and CEO of Diamond Estates, adding,” With the increased capacity, we will be well positioned to meet the increasing market demand, which will generate stronger returns for shareholders.”

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Lynda Kiernan