Good morning, ladies and gentlemen. Welcome to the Andrew Peller Limited second quarter fiscal 2019 results conference call. I would now like to turn the meeting over to Mr. David Mills. Please go ahead, Mr. Mills.
Thanks, Melanie. Good morning, everyone. Before we begin, let me remind you that during this conference call, we may make statements containing forward-looking information. This forward-looking information is based on a number of assumptions and is subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those disclosed or implied. We direct you to our earnings release, MD&A, and other securities filings for additional information about these assumptions, risks, and uncertainties. I'll now turn things over to Mr. John Peller, Chief Executive Officer.
Good morning, everyone. Nice to be with you. We're here in Randy's office in Grimsby on a cool fall day. It's clear winter's on its way, and in fact, we're just finishing our harvest both here and in the Okanagan. We've had good harvests in both areas. We're pleased with everything. We definitely have the quality we need to maintain the momentum and strength in our premium programs. We had a long, hot summer that had a lot of humidity. That was a bit of a challenge in our harvest this year, but we were able to manage things. Out west, they've had a bit of a cooler fall. It's quite unusual that we actually still have red grapes hanging in the vineyards in Okanagan, but they'll be coming off shortly. With me is Randy and Steve Attridge, who is our new CFO.
Steve comes to us via Mastronardi and Maple Leaf. He's had a distinguished career in both companies. We're thrilled to have him as our CFO. You'll hear from him very shortly. We've had a very good quarter and first half of the year, where our sales are up 10% and our adjusted earnings or EBITDA is up 16%. Most importantly is our gross margins are up to 42% as a result of a lot of capital investment, a lot of investment in people, in the strengthening of our HR profile, a lot of investment in our brands and what we've articulated as a kind of a Canadian premium craft strategy for our company that is not just in wine, but also in craft spirits and craft refreshment. Let me start with just a few comments on things that have changed in our industry in the last year.
Most noticeably, it's been the legalization of cannabis. Easily one of the most significant kind of disruptive events in the business landscape of Canada for as long as I can remember. It's off to a very big start financially, certainly in the markets. I'm sure you're familiar with the story of the market cap of cannabis is quite phenomenal. As well, the fact that while there's federal oversight, there's a great deal of provincial responsibility for distribution and even municipal policies. It has been a lot of work and effort to try to sort things out. I think based on the experience that we've witnessed in the U.S. over the last five years, it's reasonable to expect that going forward, cannabis will impact beverage alcohol. They are substitute products at some point in time.
We would factor in maybe a 5%-10% impact on We already think wine will continue to grow, maybe just at a less rate as a result of cannabis going forward. We also feel staying focused in premium segments keeps us away from what we think the beverage alcohol segment that will be hurt the most is beer, because younger consumers who are the heaviest consumers of cannabis are also the heaviest consumers of beer. I think one of the things that is of most interest to us is the fact that governments do not have their head around treating beverage alcohol and cannabis equitably. Coming out of the gate, the taxation scheme around cannabis is marginal compared to the tax levels on wine.
I think it's in and around the 15% level of wine is what they're proposing to tax cannabis so that they're ending up with an anomaly where wine drinkers are subsidizing pot smokers. We don't think that that's reasonable or fair or sustainable going forward, so that we will be ensuring as we make representations to government that they deal with some of these anomalies going forward. The other issue is obviously the retail profile for cannabis and imposing rules and regulations on the two substances that are different so that it creates a different business foundation and success factors. I'll go to that as next is the overall political landscape in Ontario. The Ford government has made commitments to increase retail access to beverage alcohol. They're now in the process of reviewing what their options are in terms of delivering on that commitment.
I think it's fair to say that when they made the, I'll call it, a fairly big commitment to increase retail access, they were not highly informed on the complexity and the challenges that are involved in changing the rules. In particular, the current system was designed by government for government. In other words, the system is designed heavily in favor of ensuring that government controls and financially benefits from the system, so that as they start to dismantle it, they are going to end up with significantly less control. Even more relevant from their financial position, they're going to have to give up some of their financial benefits. As they look at that now, it's a significant concern because they really don't have a lot of financial wiggle room these days.
They're involved in looking at alternatives, and we are heavily engaged with government and all ministries, in an organized industry approach, working with the growers, all the wineries, small, medium, and large. We've definitely made them aware that the wine industry is a critical contributor to the economic well-being of Ontario, it has a great future, and that they need to be mindful as they go forward that they're not implementing policies that will weaken what it is we currently deliver to the province. They are aware of it. The premier's been down, and he's visited the wine region, and he's aware of our employment profile. They've assured us that their goal is to strengthen their support to our industry, not weaken it. But this is definitely a very complex issue. They've put the minimum wage back a bit from CAD 15 to CAD 14.
You'll see in our statements the current increase in the minimum wage has, I think, been around roughly a CAD 2 million hit to our P&L. But I think the fact that they've brought back a lot of the employment legislation that the Liberal government had put in place was a good thing for the business community. It was getting a little too aggressive and becoming constraining for employers, and I think that the fact they repealed that legislation was a positive thing for the province. On the NAFTA, USMCA or whatever they're singing, the YMCA song, well, with the title. I think the bottom line is that despite all the fury and vitriol, not much has changed with NAFTA in the end. The changes even in auto and IP might have been 1% or 2%, but it certainly wasn't more. Even the amount of dairy impact is really marginal.
That we were carefully monitoring and involved in the negotiations because we were severely injured at the last time NAFTA was negotiated, and we're relatively pleased that there'll be very little impact on the new agreement going forward. On the inter-provincial trade, which we've talked to you about, there's been no progress. We let them know that we think it's shameful that we're not allowed to sell our products across the country like every other country in the world can do. While they've promised to address it, they've made the same promise for 25 years and done nothing. I don't think it's reasonable to expect a lot of that is going to change in the short term.
Faced with all those challenges and changes in our landscape, we've stayed focused on what we do best, which is making great products and looking at the future and ways that we can invest in it to improve our business. With that, I'll turn things over to Steve, and he'll give you our financial update.
Thanks, John. Good morning, everyone. It's great to speak with you all for my first time today. Turning to our results, following another record year for the company in fiscal 2018, the second quarter and the first six months of fiscal 2019 continued to build on this strong momentum. Sales were up just over 10% for the six months ended September 30th, 2018, with second quarter sales rising even higher, 12.5%. Our growth this year has been driven by contribution from the three VQA wineries we acquired in October of 2017, as well as strong performance across the majority of our product lines and trade channels. In particular, we saw very solid growth in our Ontario retail outlets, all our estate wineries in Ontario and BC, and our two wine importing and marketing agencies.
With this growth in revenue, our focus on higher margin products and cost efficiencies, gross margin has been strengthened in fiscal 2019, rising to 43% through the first six months of the year from 41.2% last year. You will note that our gross margin includes a charge of CAD 4.2 million through the first six months of fiscal 2019, related to the write-down of inventories acquired with the purchase of the three wineries last year. We believe these acquired goods will be sold in the fiscal year and expect the remaining balance of the fair value adjustment of CAD 3.3 million will be charged to income through the balance of the year. The last few years have seen the company build and enhance our team with experienced new people, as well as investing in new and successful sales and marketing programs to drive our growth.
As a result, sales and admin expenses have increased through the first six months of fiscal 2019, as well as due to the addition of three new wineries acquired last October. The increase in minimum wage in Ontario has impacted our costs, increasing expenses by approximately CAD 1 million so far this year. Looking ahead, we expect investments in our people and our sales and marketing programs will continue to grow as we drive innovation and build on our strong brand equity, factors critical to maintaining our track record of delivering value to our shareholders. EBITDA was CAD 32 million for the first six months of fiscal 2019, up from CAD 30.7 million last year, the result of our increased sales and improved gross margin, partially offset by the increase in sales and admin expenses and the inventory fair value adjustment being taken this year.
Our adjusted EBITDA, which excludes the one-time acquisition-related charges, rose to CAD 36.1 million for the six months ended September 30th, from CAD 31.3 million last year. Interest expenses increased due to the long-term debt incurred to complete the acquisitions in October of 2017. Amortization expense was also higher due to the addition of the three new wineries and to the completion of the Wayne Gretzky Estate Winery and Craft Distillery in June of 2017. The net unrealized non-cash gains in both years continue to reflect mark-to-market adjustments to our interest rate swaps and foreign currency contracts. We believe these programs help to mitigate the impact of potential future interest rate changes and changes in foreign currency exchange rates. Net earnings for the first half of fiscal 2019 were CAD 16.4 million, or CAD 0.38 per Class A share.
Adjusted net earnings, again, removing one-time costs related to last year's acquisitions, rose to CAD 20.2 million or CAD 0.47 per Class A share, up from CAD 17.8 million or CAD 0.43 per share through the first six months of last year. Turning to the balance sheet, overall debt reduced to just under CAD 160 million on September 30, 2019, down from CAD 172 million at the March 2018 year-end. The reduction is due to our strong earnings so far this year, positive working capital management, and our regular debt payments. Cash from operating activities through the first six months of fiscal 2019 rose to CAD 29.3 million from CAD 22.8 million last year. Working capital was stable at CAD 149 million, consistent with year-end. Shareholders' equity rose to CAD 233.4 million or CAD 5.28 per common share, up from CAD 4.99 per common share at March 31, 2018.
At September 30, we had capacity on our operating credit facility of approximately CAD 51.4 million, with another CAD 98 million on our investment facility, providing us with ample liquidity and flexibility to fund our growth programs going forward. The board of directors was also very proud to announce an almost 14% increase in the company's common share dividends in late June, the fifth increase over the last five years. Importantly, the company has consistently paid a common share dividend since 1979. In summary, the first half of 2019 was another very strong period for the company, with solid increases in sales and improved gross margins. We look forward to these trends to continue going forward. Thank you for your time and attention this morning. I will now turn things over to Randy to discuss how we will build on this positive momentum.
Great. Thank you, Steve. Good morning, everybody. As both John and Steve mentioned, we have had a good first half, which was built on a pretty strong last fiscal year as well. Both of those are driven by the strategy that we implemented about 18 months ago. Just to maybe touch on some of the key highlights of that strategy, it is really about driving efficiencies and then building significant growth versus prior years. From an efficiency point of view, our operations have gleaned over CAD 20 million worth of cost savings, really being derived from the capital spending that we have been putting in for the last number of years. We will continue to invest in capital where we can drive long-term efficiencies and benefit.
We have also gone into the portfolio, as we have mentioned in the past, and continue to go into that portfolio and make sure that we are rationalizing any of the products that are not delivering at as high a level as our best performers. That really leaves us the opportunity to take that time, money, and attention and put it on those big brands that you see starting to really solidify in their growth. We have taken approximately 20%, culled 20% out of that portfolio in the last 18 months. From a growth perspective and really building on growth, as John had mentioned, we are very much focused on our brands. It is one thing to say that, it is another thing when you measure the actions.
When you measure our actions, we've seen us double our investment in each of the last 2 years in our equity building activities, and we're starting to see that really pay back in our brand shares as we start to move forward. Another platform for growth is obviously innovation. I mentioned a few at our AGM with regards to last year in the first quarter. As you look through kind of the top 5 or 6 innovations that we have put forth in the last 6-12 months, they're quite inspiring. We have high double-digit growth in our Gretzky Spirit business. We have doubled our No Boats business on the back of the new launch of our cranberry product. We have relaunched really our Rosé platform, where we're seeing 30%-40% growth, depending by brand.
With two or three new SKUs that we added to our XOXO business, it's up 35%. We've most recently launched our Whisky Oak Aged Gretzky wine, red wine, both Gretzky and Black Cellar, which are doing just superb. There was a comment made earlier about our three acquisitions. They're obviously part of our growth strategy. The good news is that we have seen solid top-line and bottom-line growth, which isn't always the case when you first make an acquisition. Often, when you're onboarding the new team members and bringing the brands into the portfolio, it's not uncommon to see a little slippage on both the top and bottom line. I'm proud to say, mostly because of the terrific people we have at this company and the terrific people in the companies that we acquired, we've been able to show sustained growth on both the top and the bottom line.
Just a side comment, coming out of our last analyst call, there was questions regarding how our core business was doing versus the acquisition business. I'm happy to say that our core business is kind of back on trend with market growth when it comes to our core business, and of course, we've seen some substantial gains to our growth year-over-year because of the acquisitions over and above that. I think overall, the message that I wanted to convey was just underpinning what both John and Steve said, which is we've got a terrific strategy we believe is serving us well. It's the early days into that strategy, but we will continue to execute against that and believe we'll continue to get strong results going forward. At this point, I will hand it over to all of you for any questions you may have.
Thank you. We will now take questions from the telephone lines. If you have a question and you're using a speakerphone, please lift the handset before making your selection. If you have a question, please press star one on your telephone keypad. If at any time you wish to cancel your question, please press the pound sign. Please press star one at this time if you have a question. There will be a brief pause while participants register. Thank you for your patience. The first question is from Amr Ezzat of Echelon Wealth Partners. Please go ahead.
Good morning, gents, and welcome to the team, Steve. Randy, appreciate your comments there on the core business versus the acquisitions and how they've evolved. I'm not sure if you guys are willing to share that, but how much growth, I guess it's been a year since these acquisitions, have you had for the three wineries specifically?
Yeah, we don't break out any brands, so we wouldn't break them up for that. All three have seen growth, as I said, on the top and bottom.
Understood. On the organic side or the core business, the last few quarters we've seen volumes a little, I guess lower, but then your pricing was very healthy, and I'm just wondering how that's evolved during the reported quarter.
Yeah, your observation's absolutely right. The reductions that we saw in the core were planned. You can never exactly nail how much they'll go up or down, but there's a couple of things that we did. Remember, we rationalized about 20% of our SKUs. Although that's volume on the top line, it wasn't necessarily profit or very high profit on the bottom line. That's out of there. You're right, we took some pricing that the brands deserved and clearly could carry, but as a result of that might suppress a bit more of the revenue. We are lapping that as we go forward. We'll start lapping that this coming quarter, the third quarter.
Great. Thanks. Maybe just on the general and admin expenses. I know we saw it uptick a couple of quarters ago, then last quarter it was a downtick, and now we're back to an uptick. I understand part of it is the minimum wage. The other part that you guys mentioned is the investment in marketing and sales supports. There, I'm just trying to get a sense of what specifically you guys are doing. Is it specific marketing programs? What should we expect going forward?
Well, I think that we've always been a strong believer in brands. With the consolidation, if you will, of the brands and the focus that we're putting on them, we have started to increase our brand building, our equity building activity. I think you can expect us to continue to do that. I would also say that there's a couple other things in there, though. One that John mentioned, which is as we have a healthy objective going forward. We've increased some talent elsewhere in the organization. We're building systems and processes that will take us to the next level, and that's going to cost us a little bit of money, but all of these are well-placed medium and long-term investments.
Understood. The current general and admin expense, a good run rate to use going forward?
We don't comment on those specifically, I would say that we will continue to invest where we think we can get strong returns.
Understood. Maybe one last one, I guess, to the extent that you can you comment on how the M&A landscape evolved since your acquisitions, both in terms of pricing and the pipeline of opportunities you're looking at?
Sure. We continue to look at M&As, the M&A opportunity and the landscape. It's funny because we were just at our board meeting yesterday. As we were updating the board, I would say that there's certainly no less, maybe more, but certainly no less of the many opportunities that cross our desk. We're active there, as we have always been. As we demonstrated last year, three of them hit. Now, will any hit this year? We don't know. We continue to look for opportunities that strategically fit into our portfolio, for sure.
Understood. The pricing still out of whack, like what sellers are expecting?
Well, there's a bunch of criteria. Price is clearly one of the criteria. First and foremost, we're looking for brands that fit well into our strategy and our long-term portfolio. Once you tick that box, it's a matter of negotiation. Certainly, there are expectations that have been set in our industry across the board for fairly healthy prices. If they fit well into your portfolio, sometimes that's not such an issue. I will tell you that the three that we bought last year, as we reflect back on it now, look like they were of great value to both the seller, but also to us as the buyer. Again, it all comes down to the brand and the quality of the assets we can bring into the company.
Great. Thank you very much. I'll pass along.
Thank you. The following question is from Brian Pow of Acumen. Please go ahead.
Good morning, gentlemen.
Hi, Brian.
A couple of questions. We saw a change of government in Quebec. Any thoughts in terms of how that might change your strategy on getting into that market?
Yeah, I think that the issue in Quebec is they've, in addition to a government change, they had some rule changes in their grocery part of their wine business. Now there have been some subsequent changes in the policies of the SAQ. The theme is quite consistent across the country, that in addition to cannabis, there have been initiatives with the liquor boards as well. It contributes to an unstable footing in distribution policy, to be frank. I'm not sure what the new government is planning to do there. We've been trying to watch the Quebec market to see signs of whether they'll open up their market more to inter-provincial shipping, whether they'll change their strategy with the SAQ and grocery. There are certainly some evidence, some cracks, but it's not unlike the situation in Ontario.
They rely heavily on the contribution of that system to their finances. I point it out to people, the anomaly that it's always kind of interesting to me that the governments do hundreds, make that thousands, of different things that lose them money and are very inefficient. The one thing they do that is constructive to their finances is their engagement in beverage alcohol. Everybody wants them to get out of it. Of course, it's because of its profile more than anything. We definitely have looked at the Quebec market, and we're monitoring it, and if we see opportunities there, we'll look to invest going forward.
I think like in all the markets right now, the amount of change everywhere, Saskatchewan is changing, New Brunswick, and the impact of all the cannabis policy and how they'll end up having to maybe adjust beverage alcohol as a result of that, has people kind of waiting to see a little bit how the dust settles, if you will, over the next six to 12 months before it's clear where you might go and why.
Okay, thanks. Randy, this question's for you. In terms of the rationalization you spoke to, you sort of said about 20%, where are you in that process? Was that sort of the easy part of it, now it just becomes more a sort of a supply and demand thing? How should we think of your rationalization strategy?
Well, I think that a healthy portfolio is always being reviewed. I would think that we have probably, at that first cut-through, would have taken what we believed at the time to be the majority of the opportunity. I just want to be careful to make it sound like it's done, because any good portfolio is always rationalizing. There's kind of a rule of thumb that you're always looking at your bottom 10%-15% to see, is it productive. Now, sometimes that can be productive, so of course you don't take it out for the sake of taking it out. In an environment like ours where there's so many brands in the marketplace, you've got to be making sure that you're focusing on your big brands and really investing in them, that usually does create opportunities on the bottom to rationalize.
Brian, I would say that first cut-through was a pretty good cut.
Okay, thanks. On the pricing side, obviously your goal is that premium end. When you look at your pricing strategy, would you say that you've made a pretty good gain on that side of it'll be much more selective going forward?
Yeah, I think that the numbers show that the gains were well-earned for those brands. I think we're in a good place in the market today with our pricing.
Okay. Just back to John's comments at the front, just regarding the harvest and that. Depending on wineries, I've sort of heard mixed reviews. Would it be fair to say that maybe the quality's good, but the volume won't be as high this year? How should we think of it?
Yeah, we've lost a little of the volume in Ontario, the key is as long as we can protect the volume we need for our premium programs, we can easily balance in our value segments how we blend to offset that. Our biggest concern was smoke taint out in the Okanagan. It's turned out to be less of a factor than even what we were concerned about. That was positive, and like I said, it was a late summer, cool fall, they feel good about the quality that they have, and the yields were pretty much where we wanted out west. I think around the world, just to comment on that, because we're a large bulk wine buyer, volumes have come up around the world to very healthy levels so that our pricing in that regard is positive and protected.
All in all, we've come out of the year very well.
Okay. Randy, you've made a comment just about system investment, things like that. How long will that take, or how should we think of your investment in the backbone of your business?
Well, it's an ongoing investment, as you know, Brian, these things tend to go in cycles. I think that the system we have today is more than adequate for the business we have today. With the aspirations we have moving forward, we will continue to invest, and we'll have to probably increase our investment for whatever that shoulder period is when you start to build out your system. I think as we look forward, we'll start to put our plan together that will dimensionalize what the next phase of investment will look like in systems and process.
Okay. Thanks so much.
Thanks, Brian.
Thank you. The following question is from John Chu of Laurentian Bank. Please go ahead.
Hi, good morning.
Morning, John.
The first question I have is just on the organic growth. Randy, I know you touched on earlier saying that it's on trend with market growth. Is that in that 3%-4% range? Can you quantify that a bit for us?
I know you want this for your modeling, John. I appreciate that. Just keep in mind that we're in English Canada, so kind of 2%-3% is where English Canada growth is to the market, and we're in that range.
Okay, perfect. Any comment on how the grocery store sales are going? I think, John, you mentioned last time that your net is different with having your own retail stores versus moving it into the grocery stores. I'm just kind of curious if there's been any change to that view.
Yeah, I would think that we're still learning our way through grocery, John. There was a pretty significant change that was made a couple of years ago with the Wynne government and Ed Clark. We're still kind of getting the learnings. Believe it or not, there's still a few of those still going in. Until we have more information, it'll be difficult to really see the full impact. I will tell you that we're very pleased with our stores. They continue to do well, and we do well across all our major channels. Grocery right now looks like it's in line with the same movement that we've seen elsewhere.
Okay, great. Just wanted to get some clarity on I think it was John's comments on the global grape volumes. It sounds like they're up, but I think last year they were down, and the talk was one of the lowest global volumes of grapes in 50 years or so. It's self-corrected, I'm assuming, and no impact in terms of pricing and sourcing of juice. Is that fair?
I think the pricing is more favorable because there is significant surplus around the world generally. What happens is there's bad weather events, whether they're in Chile, Argentina or in Europe, had a poor year last year, then people who've been sourcing certain varieties from certain areas have to make adjustments, there's kind of a short-term pricing blip that put pressures upward last year. There still were a few challenges around the globe this year. I know France in particular had an unusual amount of storms and hail, but it wasn't enough to offset, which were many much stronger harvests around, supplies generally went up. They're up significantly in California after a very, very good harvest this year. Pricing became more favorable immediately.
Okay, great. I was curious in terms of some of the investing you're doing on the sales and marketing side, how quickly can you see some of that benefit come through in terms of building that brand equity then seeing higher sales? Is it fairly quickly where you do a marketing campaign, you can actually see the sales within a quarter or so? Is there a bit more of a longer game here to see those benefits?
John, you're starting to sound like every CFO I've ever worked with. Look, every campaign is different. Look at the campaign that we did with Gretzky this past Father's Day. It was phenomenal, the impact. That was both kind of an equity building campaign and some promotional activities. I would say that's more of an outlier. Typically, when you're building brand equity, it rarely pays back in the quarter and even the year that you invest. It tends to be a longer-term investment. When it starts to pay back, John, that's where, I guess, the word equity comes into play here. It's a longer-term investment without doubt. There are exceptions, like I said, I think our sales and marketing team have done some terrific work to get these one-time pops. By and large, it tends to be a longer term.
We always think of it as a longer-term investment.
Okay.
Candidly, even sometimes with capital. Sometimes capital takes a little, by the time you buy it, you put it in, you get the first round of efficiency out of the equipment, then the team takes a while to drive full efficiency out of it. Again, the investments we're making, John, and we've said this many times, we're very, very confident in. Some of them, not all of them, but some of them do tend to have more of a medium and long-term sustainable impact.
Okay. The discussions that the company's having with government officials on Ontario's potential new retail model, any sense on the timing of when we might see alcohol, wine, and everything sold in convenience stores and corner stores? Can we see it in 2019, or is it something that's going to take longer?
It's a $64 question. I think the bottom line is what we're trying to do is encourage government to do proper financial due diligence. Because naturally, the people who want the change, they want it to happen without that.
They want to just let the horse out of the barn. We're encouraging them to, you better be aware when you sign up for change, what the impact on your finances is going to be. I think if they do the due diligence, it will sober them up quickly.
Right.
As I said, the system was designed by them, for them, the debt levels in Ontario are huge, and they've gotten worse, not better, their wiggle room is less, not more. I still think there are options for them to increase access to consumers, and I think they should pursue them. If they choose to go, I'll call it nuclear. In other words, knock the whole system down to create a new system, there's going to be significant dislocation. If I were them, and I will strongly encourage them to realize, look, this is a CAD 40 billion-CAD 50 billion economic ecosystem, and to try to make those kind of changes to gain political, for the next election, to gain some political capital, you could end up being in a worse position. How the gas plants ended up impacting the Liberal government.
Big decisions made by people who didn't look at any numbers or do any due diligence, this system is slanted in their favor already. They can make adjustments and improvements, they're going to put themselves at significant risk if they make wholesale change in a very short period of time.
Okay, great. One last question. In the M&A, in terms of talking about growing the company in the wine and spirit markets and whatnot. There's a line that talked about continued growth in new wine-related markets. Can you just elaborate on that?
Well, I think just a good example is craft refreshment. There's a lot of crossover now when you look at craft breweries adding wine aspects, wine ingredient, and wine process, and similarly, the craft cider business, which has been historically, the cider you used to buy at the country fair in a jug, it's now becoming a much more refined product, and they're adding wine to cider, and similarly, the spirit products are looking at lighter alcohol, call them what we used to look at as sherry and port products. There are interesting opportunities in wine cocktails and wine spirit products so that, and then throw in some cannabis, you got yourself full-scale party going on here. We just saw how Francis Ford Coppola in California has launched his own cannabis product, and it's
Right
He packaged it in an aluminum wine bottle to provide labeling and product presentation so that you twist the aluminum wine bottle, it opens up, and the product's inside. What's interesting is how he's used all the cues of premium wine marketing to profile a quality image for his cannabis so that there's lots of opportunities, just in the way that we've now aged some red wine in whiskey barrels, and there are lots of innovation opportunities in the seams between the different categories.
Okay. That's great. Thank you.
Thank you.
Thank you. Once again, please press star one at this time if you have a question. There are no further questions registered at this time. I'll turn the meeting back over to Mr. Peller.
Thank you. Our next board meeting and results come in the third quarter in early February. We don't have a conference call till our year-end results come back out in late April. If you, in the interim, have any questions or comments that we can be of help, please don't hesitate to call us, and we look forward to staying in touch and seeing everybody soon. Thanks. Thanks very much.
Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.