### Company Overview:
- Fratelli Vineyards Limited, previously Tinna Trade Limited, is one of India’s leading wine makers and the second-largest Indian wine business.
- The company was founded in 2007 in Akluj, Maharashtra, by seven brothers from three families and two countries.
- Focused on producing high-quality wines and vineyard tourism, with a commitment to quality farming.
### Business Transition:
- Transitioning from a trading business to a singular focus on wine production and vineyard tourism.
- Trading activities contributed approximately ₹100 crore in revenue during Q1 FY25 but will cease by Q3 FY25.
### Strategic Performance:
- The company emphasizes the importance of the vineyard in wine production, stating, “good wine is made in the vineyards and not in the cellar.”
- Complete ownership of the grape-to-bottle value chain, which is a unique model in India.
- Strong relationships in the HoReCa (Hotel/Restaurant/Café) segment with 22,000 touch points across India.
### Financial Highlights:
- Q1 FY25 revenues were approximately ₹45 crore, slightly down from ₹46 crore in the same quarter last year due to election-related permit challenges.
- Revenue guidance for FY25 remains above 15%.
- EBITDA margins have improved, with a current margin of ~13.5%, expected to continue an upward trend.
### Growth Strategy:
- Focus on premium and luxury segments, with a diversified portfolio ranging from luxury wines priced above ₹2,000 to value segment wines priced between ₹250-₹550.
- Plans to introduce new brands and renovate existing ones, particularly in the Super Premium and Luxury categories.
- Expansion of vineyard acreage and ramping up winery operations to support growth in premium wine production.
### Vineyard Tourism:
- Investing in a 40-key multi-use property on 170 acres at Akluj to enhance brand visibility and profitability through vineyard tourism.
- Expected occupancy rates of 40% in the first year, increasing to 60-70% in subsequent years.
- Anticipated construction costs for the hospitality project around ₹50 crore.
### Market Position and Competition:
- Currently holds a 30% market share in the Indian wine industry.
- Competing effectively against established brands like Sula and Grover Zampa by focusing on quality and brand development.
- Unique selling proposition includes the cultivation of Fratelli-owned grape clones better suited for Indian conditions.
### Challenges and Outlook:
- Facing challenges due to natural calamities impacting crop yields; mitigating risks by acquiring land for diversified farming.
- Management remains optimistic about growth prospects, citing a robust operating model and strategic investments.
- The wine market in India is expected to grow at about 15%, with Fratelli aiming for a higher growth rate of 25% CAGR based on past performance.
### Innovations and New Products:
- Recently launched Pinot Noir and renovated the Master Selection range.
- Plans for further innovations and product launches to cater to diverse consumer segments.
### Margin Guidance:
- Currently experiencing EBITDA margins of 10%-12%, with an expectation of gradual improvement.
- Focused on maintaining a steady stream of premium brands to sustain leadership in the market.
### Capex Plans:
- Anticipating a capital expenditure of approximately ₹30 crore for capacity expansion and brand building.
- Additional ₹5 crore planned for expanding vineyard acreage and ₹45-50 crore for the hospitality project.
### Export Markets:
- Currently, exports contribute less than 3% to overall revenue, but there is a plan for a 20% increase in exports this year.
- Focus remains primarily on building the domestic market, with exports to about 10 countries.
### Conclusion:
- Fratelli Vineyards is positioned for growth with a strong focus on premiumization, vineyard tourism, and innovation in product offerings. Management is optimistic about the future, backed by a solid growth strategy and market positioning.
Disc: Invested, bullish and therefore biased
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