Andrew Peller Ltd
TSX:ADW.A
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
3.75
4.89
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Andrew Peller Ltd
You don't have any saved screeners yet
Good morning, Ladies and gentlemen. Welcome to the Andrew Peller Limited Second Quarter Fiscal 2020 Results Conference Call. I would like now to turn the meeting over to Mr. David Mills. Please go ahead, Mr. Mills.
Thank you and 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.
Thank you, Dave. Good morning, everyone. I'm here with Randy, our President; and Steve, our CFO, in Grimsby. Proud to tell you that snow is falling here. We're just wrapping up our harvest activities in both Niagara and in the Okanagan. We've had cooler harvest periods in both markets and while they present some challenges, we've done very well getting everything in that we needed to. And it was a bit of extra work for the team, but we've managed well.And the market for beverage alcohol in Canada remains very robust these days and we've -- after our first 2 quarters, our sales are relatively flat to last year, but we've had a strong overall performance. We've had significant success improving our gross margins and our earnings are up over last year and we're anticipating a strong performance for our bottom line for the rest of the year.We've had a lot of new marketing activity as we continue to push our way not only into the core segments of premium and value lines, but into craft refreshment including craft beer and craft cider. And we've had a significant investment in the ERP system. That's been a very significant project for management, but significantly it represents that we're committed to building not just our human resources, but our IT technical resources in a way that will provide us with competitive advantage for many years to come.So I don't recall ever in our Company's history when we have been busier than we are and we're investing for growth on our top and bottom line and we're very, very confident we're going to achieve these targets. We've definitely been challenged on the political level. The kind of 3 issues we're watching are the Inter-Provincial trade commitments that the governments make annually and have made annually for the last 30 years, but they've not budged on any of them significantly.We have an unbelievable WTO challenge from Australia that they brought an action where they are complaining about provisions of tax and support in our market that are identical to the ones they have in their own market. So it boggles the mind why they're doing this. But I'm not expecting anything to come of it.I think more significantly, 2 issues are the challenges of the Ontario government's ambition to increase convenience and access to the retail channel in Ontario. They've made some initiatives and they are still kind of negotiating, if you will, with the beer industry. I don't feel that the ambition to make significant change is there. Certainly no one has done any homework or analysis to support any significant changes. They clearly have no ambition to make any changes to the LCBO as they become increasingly more dependent on its dividend.And I wish I could provide a clear perspective, but it's not clear. Our focus is to continually bring to their attention the fact that our industry has the potential in Ontario to grow 2- and 3-fold from its current like to $6 billion to $7 billion impact towards a $20 billion impact in great jobs and investment in agriculture, manufacturing and tourism. And we lack the same basic policies that other jurisdictions have around the world. So we're trying to change the channel, if you will. We've a good new finance minister. He is confident and capable and a little more focused on the Ontario's potential economy in the future as opposed to kind of the blatant populist distractions and I think we will have some success there going forward as well.So with that, I will turn it over to Steve to take you through the financials.
Thanks, John. Sales through the second quarter and for 6 months of fiscal 2020 were consistent with the prior year as the introduction of new products and brands, and solid performance through the majority of our trade channels were offset by increased competition from subsidized priced import wines, market softness in the personal winemaking and reduced duty-free export sales due to trade and political disputes between North America and China.Our market share remains strong which reflects our compelling product portfolio, our reputation for delivering value and the loyalty of our growing customer base. We continue to benefit from the rationalization of our product lines, our increased focus on higher-margin products and our programs over the last few years to enhance efficiency and reduce cost.As a result, our net margin improved again to 44.7% of sales for the first 6 months of fiscal 2020 compared to 43% last year. The margin for the second quarter is even stronger, 44.8%, compared to 42.9% last year. As we've discussed in the past on our acquisition of 3 wineries in October of 2017, we recorded an increase of $10.4 million to inventory which represents the fair market value of goods acquired. This increase has been expensed to earnings as these goods are sold, thus reducing gross margin.Through the first 6 months of fiscal 2020, we recorded a charge of $1.2 million to cost of goods sold compared to $4.2 million for the same period last year. Our sales and admin expenses were lower through the first 6 months of the year due to a $1.8 million reduction resulting from the change in accounting treatment for lease obligations in accordance with IFRS 16 adopted in April of 2019. Partially offsetting this reduction of lease expenses are onetime expenditures related to the implementation of our new enterprise resource planning solution. Selling and administrative expenses as a percentage of revenue in the first 6 months of fiscal 2020 are consistent with prior year.Our EBITDA strengthened in the second quarter and first 6 months of fiscal 2020 due primarily to strong gross margins. Interest and amortization expenses increased through the first 6 months of fiscal 2020 due primarily to lease obligations as I mentioned earlier. Our expenses in fiscal 2020 include approximately $1 million in onetime early retirement incentive programs resulting from recent planned operation and succession planning.We posted an unrealized noncash loss for the first 6 months ended September 30 of 2019 of $68,000 compared to an unrealized gain of $1 million in the prior year. These reflect the market to market adjustments of our interest rate swaps and foreign currency contracts. Net earnings for the first 6 months ended September '19 were $16.4 million or $0.38 per Class A share consistent with the $16.4 million or $0.38 per share last year.Turning to the balance sheet, overall bank debt continue to decline, falling to $150 million from $155 at the end of March. Cash from operating activities through the first 6 months of fiscal '20 was $21.2 million compared to $29.3 million last year. The decline is a result of the timing of invoices and payments. Shareholder equity rose to $246.3 million or $5.57 per common share, up from $5.31 per share at March 31, 2019.At quarter end, we had capacity in our operating credit facility of approximately $49 million with another $108 million on our investment facility which provides us with ample liquidity and flexibility to fund our growth initiatives going forward.In summary, the first 6 months of fiscal 2020 was another solid period for the company. We're disappointed with the pace of change and the short-term impact it's had on our results. However, we remain confident that our strategy will generate growth and strong operating performance as we go forward.Thank you for your time and attention. And now I will turn things over to Randy.
Super. Thanks, Steve. Good morning, everyone. 2 years ago, we set out on an ambitious strategy to accomplish a number of things. One, to rationalize our underperforming and nonstrategic brands. Two, to premiumize our product portfolio. Three, to build our brand equity through aggressive consumer investment. Four, to enter and invest in meaningful innovation across all segment of beverage alcohol while driving efficiencies and significantly reducing our cost on a sustainable basis.It has been an intensive and powerful journey that has demonstrated some early results such as the significant strengthening in our margins. But there is much more to be gained from this strategy and we're just now starting to see some of the benefits that we'll continue to see over the next number of years. Although it has been a long period of change, the changes that we are undertaking are meaningful and we do believe that they will drive long term both sales and growth.So let me comment on a number of the initiatives that we've seen in the first couple of quarters of this year. As both Steve and John mentioned, we have begun a large project to implement the new ERP system across our entire operating platform. This will be material investment for the next 2 years that will enable growth potential, result in operational improvements and will be scalable for the long term. The project will transform our IT infrastructure and generate significant benefit for shareholders for many years to come.Now with the 3 large acquisitions made in October of 2017, that being Black Hills, Tinhorn Creek and Gray Monk are approaching the final stages of integration, we're seeing the significant cost and operating synergies we expected when we closed this transaction. Sales at the 3 wineries, as you know, last year were up 9%. They are up a further 4% this year with strengthening in gross margin. Our direct-to-consumer business, that being our estate and the wine shop businesses, continue to prosper with revenues up over 10% so far this fiscal year, driven by solid increases in visits to our state wineries in both Ontario and B.C. as well as shipments direct to consumers. Our estate wineries have always been an important brand builder for the company and will continue going forward.Our early entry in the craft side of business with our No Boats on Sunday brands continue to be very successful. Sales were up over 25% through the first 6 months of 2020 following an increase of 80% as you may recall last year. Over the next few months we will be introducing our largest cider initiative yet launching new flavors and formats across the country. We will also be increasing our media to ensure that consumers are aware of these great new flavors and varieties across the country.Our Gretzky partnership continues to show real benefit. Sales of the wines and craft whisky continue to grow and our recent introduction of Wayne Gretzky 99 premium lager has been very successful. Uniquely brewed with rye grain, this craft beer delivers against consumers' tastes. There is nothing like it on the market. After a small trial launch at the LCBO this past summer, we expanded the rollout in mid-September in Ontario at the beer stores and select major groceries, grocery stores. October we saw the expansion into Atlantic Canada as well as Manitoba and Saskatchewan. Alberta and B.C. will be rolled out early in the new year.Our Trius brand has long been a popular offering for the company, but largely in our estates. More recently we have successfully introduced 4 new Trius listings at the LCBO here in Ontario and expect to see sales growth over the quarters to come. Early indications are very encouraging with sales up over 10% in the first half of the year.One of our larger projects coming into fiscal '19 was the relaunch of Peller Family Vineyards. As we noted in the past, this is our #1 brand and we wanted to ensure that we continue to invest in it and delight consumers. We had product improvements across the portfolio, ranking it the #1 consumer-preferred taste profile in its competitive set. We relaunched in a striking new packaging and lastly increased consumer support dramatically including a return to television after a few decades. Early results are extremely strong with sales growth reaching new levels and we anticipate this growth is sustained as we sustain the consumer support.Finally, looking at our operations overall, we continue to drive cost savings and operational improvements across the entire platform. Earlier this year, we announced the consolidation of our one-key operation in the one plant here in Ontario. We're confident this will drive significant cost savings in this business when the project is complete this spring.In summary, the first half of 2020 has been very busy for all of us at APL as we focus on the key strategic initiatives outlined in our 5-year plan. We have invested in numerous foundational projects and innovations that we're confident will drive growth and financial performance going forward. The timing of the returns is never exact, but there is no doubt the impact will be meaningful over the months and years to come. The company has built strong and enduring brands and an enviable position over the past 50 years and we plan to continue that tradition going forward.Thanks for your time this morning. We'd now like to open up for any questions you may have. So I will pass it back to the operator.
[Operator Instructions]. The first question is from Amr Ezzat from Echelon Partners.
John, in your prepared remarks on the harvest, I guess with these challenges you've had, I seem to understand that you're still overall like satisfied with the quality of the harvest, specifically for your premium brands. Is that a correct assumption?
Yes, we're in good shape. We're in really good shape in the Okanagan and in Ontario. I would say 75% of our reds were good, but there was a few as a result of the late cool period that didn't ripe into what we wanted, but we planned for this in our business planning. In other words, we know we will have fluctuations in terms of quality and yield at the higher end so that we kind of overproduce. In other words, we still have wines from other vintages that will be top quality and it will have absolutely no impact on our financial performance.
I mean we spoke to the low-priced imports issue I think a couple of time. It seems to be persisting a little longer than I at least had anticipated. Do you guys like see any end in sight and does that make you rethink your pricing strategy at all or do you sort of stay the course with the pricing strategy you have?
I mean it's an infuriating issue and make no doubt about it, no other wine regions in the world tolerate other people coming in and dumping wine into their market. So for example, the Spanish product that the LCBO markets and supports at $7.50 a bottle, Spain doesn't even allow any Italian or French wine into its market at all. So why we're promoting products that are being sold below their cost and actually promoting them is completely mindboggling, but it kind of shows the disconnect that we struggle with, our industry with government. We have the same issues going on in the B.C. market as well where they're using kind of private label products at low prices to compete unfairly in the market when they are monopoly and don't even need to create that issue in the first place.So it -- but who is us to take our issues and of course we have to start with the attorney general in B.C. and when we go to the finance department, they are worried more about convenience stores, in other words the priority that this -- trying to get this to people who will support us. It's a difficult route, but come hell or high water we're going to be successful getting them thrown out and it's painful that we have to go through this process.
I agree it doesn't make a lot of sense. Then just like on the LCBO, I'm just confirming, I'm assuming that the issues are related to the warehouse management system we've had since Canada Day, right?
Yes, Randy is the better person to...
Sure. So yes, the Durham warehouse issue was significant in the first quarter. It lingered into the second quarter where we see the delta for us is what consumer off-take looks like versus what shipments look like and often that's a disruption within their warehouse. So we know that Durham has gotten better than first quarter, but it lingered into the second quarter. I suspect that for everyone's sake, it is nearing its last breath of challenges.
So you are not really seeing much slippage into your fiscal Q3?
Yes, I do not think we will see it meaningful into Q3. We saw, again, the gap for us to read for us, there is just the difference between what consumer off-take is at the LCBO which we get weekly versus what our shipments are. So we have seen them improve, but there is still a gap. We think we will be able to close that gap in Q3.
Then I'm interested to get your views I guess on your gross margin performance as it continues to creep up. I know you do not give specifics on your sales mix, but obviously your premium wine portfolio is growing in a very meaningful way relative to a few years ago. Then I'm just wondering if -- maybe if you could comment at a high level how much running room you feel your premium wines still have to take a larger part of your portfolio.
Sure. I think there is 2 parts that -- 2 things that really contribute to that. One of them is, as you pointed out, the increased growth in our premium -- our VQA and our premium wines. We have also seen even within ICB within that portfolio, we've seen sales increase in kind of our more premium-priced products within that, the 2 brands being Black Cellar and XOXO. So part of it is mix as you pointed out. The other part is continued efficiency that we are driving through operational effectiveness and that of course impacts both sides of our business, the ICB and the VQA. So between those 2, I think that we've seen a significant increase in our performance and it is our complete and total objective now to hold that performance from an increased margin perspective and leverage it with increased sale. So I would be -- although I can't comment on specific goals as we go further in, in margin, I think our margins are quite strong, very, very strong and I think our focus will be to continue to maintain them, but now leverage them with an increase in sales.
John here. Going back to probably our most significant political issue is that we make better margins when we ship direct to consumers, either from our estate wineries or through our retail store systems. And naturally, being a local producer, we would expect to have advantage shipping to retailers here and we do in British Columbia because the British Columbia government puts in -- has a program that acknowledges that when we ship in B.C. to a B.C. retail store, we should not be treated like an import product. In other words, here in Ontario, unfortunately we don't have that program. So when we ship to any LCBO, we are treated as if we are shipping from the Ukraine and it's quite ridiculous. In other words, even though I'm 50 yards from a retail store here in Grimsby, I can't ship my case of wine to the retail store in Grimsby, it has to go to Oshawa. And then once it is in Oshawa, it goes through all the same cost that an important product that's coming from a nonbonded warehouse and everything goes through.So there isn't anywhere else in the world where this circumstance exists. Every producer in every country around the world gets the benefit as having its local market advantage by virtue of its access to its -- closer access to its retailers. We don't have that in Ontario and I have made this kind of a cornerstone. Naturally the people in finance are not interested in entertaining this discussion with us because they'd like to scoop the same amount of tax from our products that they do when they come from all over the world. And this is something that we're making as a cornerstone right that we should have. We have it in British Columbia, it makes a huge difference to our business and that's why people have been investing in the market out there. And going forward this is something that should -- it will take us a while to drive this policy through.But it will have a significant, but it shows that when our gross margins are improving the way they have, a lot of it is because we are increasing sales through the trade channels where we have higher margins. And that's why the Inter-Provincial trade barriers are so critical. When we ship a product from British Columbia in the Okanagan, it comes into the LCBO and it gets treated like it comes from the Ukraine as opposed to being shipped with international border and receiving national treatment. It should come here and not pay. And they rake like 50 points from the products and that is why basically all the B.C. producers refuse to sell wine to Ontario because the Ontario government basically raised all the margins without any proper rationale for doing it.So this is obviously a big issue for our industry. It's kind of a coming-of-age issue. We are really in many ways a younger industry than many of the wine regions from around the world and this should be a sacrosanct protected right of a local industry to ship directly to its retail market and not be treated like it's an import product. So I'm hoping that will improve for us going forward.
Just a housekeeping item. On the OpEx, I'm not sure I got an aggregate number of the one-timers. I know you said $1 million is related to some early retirement benefits. But you also mentioned like ERP implementation. Can you give us like an aggregate number for the one-timers I guess for the quarter?
Sure, so you got the $1 million in early retirement benefits. ERP in the quarter was about $0.5 million and then the only other one-timer I would say -- it's not really a one-timer, but it would be the IFRS lease treatment, obviously an ongoing issue. But that's really to come in.
Then, I guess, like maybe one last one and I will pass the line. On the M&A landscape, I know like as you grow, there may be aren't a lot of opportunities in Canada. But are you guys like considering acquisitions beyond Canada, like south of the border?
I think first and foremost, there are lots of M&A opportunities in pretty much every segment, though I would say in the spirit segment because the market share is consolidated with 3 big, really big players. It's harder to see anybody doing anything impactful from an M&A perspective and spirit. But certainly in wine and refreshment and craft beer, it's an open market and there are lots of people who would love to sell their companies.Their pricing expectations are extremely high because we are in the probably the end of the longest bull market ever and there naturally the seller's expectations are fixed on the highest multiple that has ever been paid in the history of M&A. But we are active and I suspect that there will be lots of opportunities for us going forward. We work as hard on that as we have ever worked before, but we are waiting for the right opportunities in the right segments and we are looking at some opportunities outside the national border as well. And there is a very vibrant market and actually going into an international markets, we are probably more focused in terms of the U.S. than anywhere. One has to have their head up as well and make a sensible investment that can be leveraged going forward. So we're active in that as well.
The next question is from Nick Corcoran from Acumen Capital.
Just a couple of questions from me. The first is, in the past, you've given your English Canada market share. Can you provide an update on that number?
Was that the, sorry, English Canada market share?
Yes.
Yes, so we have held -- we're holding our share in English Canada. We've seen -- it has been relatively flat actually for the last year.
And then I guess one thing that took me by surprise a little bit was sales were flat year-over-year. I'm just trying to get a better idea what the significant factors had an impact on your sales. So can you maybe give an idea of how much of an impact the LCBO issues and the export issues with China might have impacted your top line?
Sure. We don't quantify, but it would be fair to say that there are kind of a couple of 3 that we hadn't anticipated. But see as -- but we've seen an impact. So I think the drag on the LCBO, which we've been very -- we've had enough kind of conversation and color on. But that is -- that has been a bit of challenge in the first half of the year, although I don't anticipate it going forward.I think that the challenges in, let's say, America really with China has impacted the number of Chinese tourists coming over into North America and that's a big part of our ice wine sales. And so we've been dented there. We -- I absolutely -- with that said, I absolutely believe that will be resolved and our ice wine sales will return to their very positive impact on our business. But in the short term, I can't predict that one other than to say we've been dented by that one.And then lastly, I think just our wine kit business, which we made note of, that market is a little softer than we've seen in the past. There're some dynamics within that that are changing as people have different ways that they buy the product today. They can buy it through everything from -- you can buy it through a Costco, you can go to Ferment on Premise, you can now buy direct online. So there're some dynamic -- changes in the dynamics that are going on there. And we didn't anticipate the softness in the -- particularly in the quarter, but let's see the first half on that business.
The next question is from Elizabeth Johnston from Laurentian Bank Securities.
Just wanted to touch again briefly on your last answer there on headwinds to top-line growth and revenue. I know you're not going to comment on the specific magnitude of these impacts. Maybe to help us by if you could rank them, so to give us an idea of what was the largest impact, whether it was the impact from lower-priced imports or Western Canadian weakness. So any help there would be great.
I'd just kind of make a couple of thoughts, Elizabeth. One is within those 3, I believe that our kit business and export were the 2 larger ones that we didn't anticipate. I would also like to -- though I don't want to lose the thought that it has -- as we've been undertaking a lot of new product innovation and investment that we've seen, it's probably taking a little bit longer to actually to hit. Like it takes a lot longer to get products listed for instance. I know it sounds absolutely silly, you come up with fabulous products and there're consumer tested and you can show that they are best in market or they will meet the consumer needs and want like no others. But it will take depending on, particularly with liquor boards, it can take 6 to 9 months to get a bloody product listed which can be a bit challenging.So we've seen a bit of a drag there. We have every belief that these new products will do incredibly well. I just use the example of beer. I mean, it took us, we -- it took us till really now to start shipping into our major customers. That product was kind of ready. We started presenting that product 6 to 9 months ago. It's only now shipping. So there has been a bit of a drag in getting our new products into distribution. So I don't want to overemphasize, I don't want to under, but I don't want to overemphasize the impact of some of these negative drags. I believe they will all resolve themselves as we go forward over time. But equally as important, I would say more important going forward is the impact of all this new innovation that we're bringing to market and we believe that will have a much better impact as we look for the next kind of 1 to 4 quarters.
And just maybe, again, when it comes to Western Canada, it was less of a focus in your commentary this period. Should we take that to mean that the drag from the economic regional weakness was less impactful in Q3 versus -- sorry, in Q2 versus Q1?
I think the markets came back a little bit. There's still a tiny bit soft versus what we've seen in the past. The real drive in -- or the real challenge we should say that we're having in Western Canada that remains was what John had commented on earlier, which is these low-cost imports that are being dumped in the market.They do go, I feel the same level of frustration as the industry does and that John articulated quite well. But these do tend to go in cycles, and we will certainly be in front of government to get them to recognize that the damage that they're doing to the western domestic market, that they don't need to do. So that has been -- that has increased since we last spoke, Elizabeth, the amount of product we see in there. On the other hand the market, although coming back a little bit, maybe hasn't come back all the way.Coming back to a question that Amr had said about our product portfolio or our pricing. We won't change our pricing strategy, but we do have a flexible product portfolio that will -- maybe we'll flex on some of our more value lines in Western Canada until such time as we can get the government to back away from these dump imports.
And just going back to some of the discussion on the ERP. On prepared remarks, you talked about the investments over the next couple of years. If you can maybe walk us through what exactly took place in this quarter and what we should expect for the rest of this year and into 2021?
Sure, Elizabeth. So we kicked the project off in the second quarter and the cost that hit our financial results in that quarter were largely attributed to the early planning stages of the project. And we're now into the early part. We passed through the planning stages and we're in the early stages of implementation. And so the project has been -- will continue as we go forward to be capitalized. I expect that it will take us a couple of years and that the overall capital investment will be sort of in the $20 million to $25 million range.
So the $20 million to $25 million be on top of any other CapEx that we've previously discussed?
I think we've budgeted and when we have a major initiative like this, we -- fortunately we've focused our last 3 year's CapEx on operational investment, new warehouses, new cooperage, improved crush and operational capital, we spent easily $30 million to $40 million in the last 2 to 3 years. And fortunately now we can maintain a similar budget to the capital by focusing on this one in the short term and I'm talking not in acquisitions, that's in a separate fund and capital pool. So I don't expect this to create an unusually large spike because we've kind of planned for it in the pipeline of our CapEx.
And then just on that $0.5 million in the period, just to be clear, that was the portion of cost related to planning that were not capitalized, correct?
Correct.
And then so really the -- my follow-up question is then, how much of noncapitalized costs like that $0.5 million should we expect going forward on a quarterly basis?
Very little, Elizabeth. The planning phases are over. So I would expect perhaps in the next fiscal year there may be some additional items that hit the P&L, but my expectation is that they'll be very low.
And my final question is just with respect to the Peller Family Vineyards campaign, which you have been running through a variety of means and channels this year. I'm cognizant that brand building is a multiyear exercise, but if you're able to give any kind of commentary, either quantitative or qualitative with respect to any pick up your seeing in sales in that particular product line, that will be great.
Yes, we would be happy to. Yes, we have seen it across the board do extremely well. It's a brand, this is a -- this is our biggest brand, as you know, Elizabeth, that's kind of $100 million plus brand and we are seeing growth rates that are well above the norm that we've seen for the last couple of 3 years. So it's meeting our expectations.Surprisingly I try to kind of prepare all of the markets for a long-term investment, for a long-term payback. We've actually seen -- surprisingly seen some nice lift associated with the campaign earlier than anticipated. I would say the part of that though, Elizabeth, is that the trade is very excited about it. They're very excited about the Peller Family Vineyards brand. The role it plays within their retail portfolio. So they love news. They love innovation and they love news, they love investments and that's what Andrew Peller has been doing.
[Operator Instructions]. Our next question is from Amr Ezzat from Echelon Partners.
Just a quick follow-up. On your October '17 acquisitions, I know Black Hills and Tinhorn are fairly close to each other. And I believe you had another one of your properties there as well. So I guess a few properties with the same [indiscernible]. I'm wondering if you guys have plans, and we spoke to that in the past, of optimizing and shifting maybe some capacity from lower-priced brands to premium or super-premium ones. Is that still something you guys are considering? Is it something you're working on or?
I mean for sure, it's an absolute total focus. So that's something we're considering. We're committed to it. And the best thing about the Tinhorn acquisition was in addition to the 50 acre of estate vineyard that the property is on, they owned another 100 acres which was adjacent to our Sandhill vineyard, in other words it shares the exact borderline, and is also adjacent to our Black Hills vineyard. So we now have something like 300 acres in the best growing region for cad and premium, ultra-premium reds in the country so that a lot of that fruit now goes into less expensive wine. And so our goal is to go from premium to super and ultra going forward. It will -- does not happen at the snap of the fingers. In fact we're having to invest significantly already in updating and replanning some of our vineyards there.But in terms of one of the company's significant strategic advantages is that between the Similkameen where we have another 100 acres, we're appropriately investing in and seeding the future growth of super-premium and ultra-premium wines from the best vineyard locations in the country.
Then Black Hills was capacity constrained, right? That's my understanding.
It was, for sure. It is no longer.
There are no further questions registered at this time. I'd like now to turn the meeting over to Mr. Peller.
Thanks, everyone, for joining us. We're optimistic with the second half of our year and the next few years to follow. And we'll stay in touch. Please call us if you have any questions or want to come down for a visit. And look forward to chatting with you all soon. Thank you.
Thank you. The conference has now ended. Please disconnect your lines at this time and thank you for your participation.