Avid Inc. is expected to report its first-quarter earnings Tuesday, and the wine maker will be looking to the future as it tries to build on its $1.9 billion acquisition of Bordeaux-based Cerveceria Cosecha.
The deal, which was announced in July, allows Avid to tap into a growing niche in wine making, one that includes wine made with a combination of honey and red wine grapes.
Avid shares have soared nearly 70% in the past year.
But the deal may have its biggest impact on the wine sector, which is struggling to maintain its growth amid an economic downturn.
Cervecheras Cosechas wine will be brewed with honey from the company’s existing vineyard, and it will be produced under a proprietary, high-pressure system.
The move will help the company boost its profit, as the honey-based product is considered less volatile than the traditional, less-diverse wines made with wine grapes grown from the same vineyard.
“Avid has done a lot to get to this point,” said David Hays, chief financial officer of Cervecha, in an interview.
“It’s really just a matter of, are we really ready for this?
Are we really going to take the risk of doing something different and trying something new?
And that’s a very good question.
And we really are.
I think that’s what the question is.
I don’t know that we’re ready.”
Avids wine, meanwhile, will use a proprietary process, known as Bordeau style.
That system, according to Cerveca, will be more suitable for grapes grown at the company headquarters in Mountain View, California.
The process also will be less likely to degrade over time, with more than 100 varieties of honey being used.
The Bordeaus Coseches are expected to be priced at $50 a bottle, according.
But Avid said it will not be raising the price of its wine by a cent.
The company has already announced that it will increase production of honey wines in the coming year.
But with honey prices rising, it is also unclear whether the company can keep up with demand.
Hays said Avid is planning to produce 10 million bottles of honey wine by 2020, but he did not provide a timeline for when the company would have to increase the price.
Cervecha said it expects to increase production from 2 million bottles a year to 15 million in 2020.
The acquisition of Cirecha means that Avid can tap into another $1 billion in market share, and that could help the wine company to expand its global reach.
The company has been buying up vineyards, bottling, wineries and winemaking operations in the United States, Europe and elsewhere.
In an effort to expand sales, Avid announced it would buy several vineyards in New Mexico, including the famous Sierra Nevada Ranch and a winery in Florida.
The purchase will create a network of growers across the country, and will allow Avid’s winery team to expand from its California base to more markets, including New York and Washington state.
Hays said the company has not yet decided what its goal for the wine business will be, but said that it has “done a lot of research” on how to reach its goal.
He said the decision on what Avid wants to do with its vineyards was not taken lightly.
“[We’ve been] trying to think of all the different things that we can do to grow,” he said.
“We really did have some very specific ideas and that’s why we made the acquisition.”