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Duckhorn Sees Robust Growth As On-Premise Reopening Accelerates

June 8, 2021

In its first quarterly results update as a public company, Duckhorn Wine Co. revealed that net sales jumped 32% to $90 million in its fiscal third quarter ended in April, with its adjusted EBITDA up 5.5% to $33 million. Gains continue to be led by the Decoy label, an Impact “Hot Brand” that rose 27% to just under 1.1 million cases last year.

“As consumer mobility increases, we’ve seen considerable momentum in our on-premise business, roughly three times the growth rate seen in off-premise,” noted CEO Alex Ryan, who will be among the speakers at this fall’s 45th Annual Impact Marketing Seminar. “This was led by nearly 50% growth in our wholesale to distributor channel, which in all fairness did compare to a prior-year period when distributors showed some initial hesitation in making purchases as the pandemic began. Nevertheless the results well exceeded our expectations.”

While the on-premise has come back stronger than Duckhorn initially anticipated, the off-premise has remained resilient, with Ryan telling analysts that “consumption habits acquired during the pandemic will remain somewhat sticky.” In particular, he said, “our unique California direct-to-retail model delivered over 20% net sales growth” in the quarter. On the DTC side, Duckhorn saw sales accelerate even amid continued capacity restrictions at its eight tasting rooms, including a recently opened venue for the Migration brand in Carneros.

Overall, Duckhorn Wine Co.’s volume jumped 41% in the three months through April, as Decoy and the namesake Duckhorn brand continued to surge. Depletion growth is running just a few points behind net sales, added CFO Lori Beaudoin. In the first three quarters of the fiscal year, Duckhorn’s wholesale sales to distributors accounted for 64.4% of the business, up from 59.4% a year earlier, while its California direct-to-retail and DTC channels both shed a few points of share, at 16.5% and 19.1% respectively.

Moving forward, Duckhorn plans to continue stoking growth for Decoy, referring to it as “the gateway duck,” while furthering its progress through innovations such as the well-received Decoy Seltzer and M&A opportunities as they arise, exemplified by its purchases of Calera and Kosta Browne in 2017 and 2018, respectively. “While we don’t see M&A as necessary to our growth, we do see it as another lever at our disposal to accelerate growth, expand our margins, and bolster our luxury wine portfolio,” said Ryan. “We believe that there’s a strong pipeline of winery brands, vineyards, and standalone production assets that will become available in the next few years.”—Daniel Marsteller

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