Duckhorn: Sonoma-Cutrer “Central To Our Strategy For Growth”

Napa Valley-based luxury wine player The Duckhorn Portfolio has made a key acquisition in upscale Chardonnay, agreeing to acquire Sonoma-Cutrer from Brown-Forman for $400 million in a combination of cash and stock, with Brown-Forman taking a 21.5% stake in Duckhorn and gaining two seats on its board. The deal is expected to close next spring.

Sonoma-Cutrer, whose average retail price is almost $30 a bottle, has been one of the fastest-growing wine brands in the U.S. recently, increasing 17% to 543,000 cases last year to earn Impact “Hot Brand” honors. In the 52 weeks through October 8, the brand was up 6% by volume in Circana/IRI channels.

In a conference call on the deal yesterday, Duckhorn interim CEO Deirdre Mahlan noted that Sonoma-Cutrer is one of the best-known luxury Chardonnay brands in America, and will be “central to our strategy for growth” looking ahead, adding that the move marks “a milestone for our company as our first winery brand acquisition as a public company.”

“The brand gives The Duckhorn Portfolio an enhanced presence in the Chardonnay varietal, which is by far the largest white wine varietal in the U.S. luxury wine segment at 17.6%,” said Duckhorn chief strategy and legal officer Sean Sullivan, referencing Circana/IRI data. “Duckhorn Vineyards has championed Merlot as a standalone luxury varietal in the United States, and Sonoma-Cutrer has done the same for Chardonnay. While our portfolio spans a range of major price points and varieties in luxury wine, Chardonnay is an area where we lack significant presence and believe we have natural room to grow without competing with existing wineries in our portfolio.”

With a strong national footprint both on- and off-premise, Sonoma-Cutrer is known for its Russian River Ranches Chardonnay, which is geared toward the on-premise, and its Sonoma Coast Chardonnay label aimed at the retail segment. Pinot Noir and Rosé are also part of the mix. Sullivan noted that 88% of retail sales are within the $20-$25 range, with 10% in the $25-$50 area. “Among the five largest luxury Chardonnay brands, Sonoma-Cutrer is the fastest growing,” Sullivan said, adding that he believes Duckhorn can accelerate its growth moving forward.

“We believe that the diversifying portfolio and varietal leadership that this acquisition brings will enable us to work with our distribution partners to increase our new account penetration and offer attractive new options to increase the number of portfolio SKUs at existing accounts, an outcome that will benefit our distribution partners and consumers and accelerate the growth of the Sonoma-Cutrer Winery brand and the existing luxury winery brands in our portfolio,” he said.

Duckhorn’s play for Sonoma-Cutrer is the latest in a series of significant M&A developments in California in the second half of this year. In August, SND exclusively reported another luxury Chardonnay deal, in which E.&J. Gallo acquired Napa Valley-based Rombauer, with depletions of around 220,000 cases and an average retail price of $42. And late last month Treasury Wine Estates announced a purchase of Paso Robles-based Daou Vineyards for up to $1 billion. Daou has U.S. volume just below 600,000 cases, according to Impact Databank, with 70% of sales between $20 and $40 a bottle, and 13% at $100 and over.

Duckhorn posted sales up 8% to $403 million for its full fiscal year ended in July, concurrently announcing the retirement of longtime CEO Alex Ryan and the appointment of Mahlan as interim chief executive. With its move for Sonoma-Cutrer, the Napa Valley-based winemaker has added another growth brand to its portfolio, alongside 1.4-million-case Decoy by Duckhorn, which has consistently been among the top-performing brands in the business in recent years. —Daniel Marsteller

Tagged : Brown-Forman, duckhorn, Sonoma-Cutrer

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