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Duckhorn Portfolio Represents a Pure-Play Luxury Wine Opportunity as Shares Pop

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·2 min read
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By Jarrett Banks and John Jannarone

California wine producer Duckhorn Portfolio Inc. (ticker: NAPA), backed by private equity sponsor TSG, saw its market capitalization surge above $2 billion on the first day its shares traded on the New York Stock Exchange. The shares opened at $18.60, a pop from the IPO price of $15.

The company, founded in 1976, is the largest pure-play luxury wine supplier and the 11th largest wine supplier by sales value overall in the U.S. Duckhorn is based in St. Helena at the center of the Napa Valley wine region.

“We work hard to perfect the blend of business and art in winemaking,” President, Chief Executive Officer and Chairman Alex Ryan told IPO Edge in an interview Thursday. “We remain focused on luxury and are interested in a lot of companies to fit into our family of brands.”

President, Chief Executive Officer and Chairman Alex Ryan

The company has as long track record of growth, with sales rising 500 percent since 2010. Looking to 2021, revenue is expected to rise 13 percent from a year earlier to $307 million, according to Renaissance Capital.

Duckhorn sells its wines in all 50 states and over 50 countries at $20 to $200 per bottle under a portfolio of brands including Duckhorn Vineyards, Decoy, Goldeneye, Paraduxx, Calera, Migration, Canvasback, Greenwing, Postmark and in 2018 acquired American Pinot Noir winery Kosta Browne. It now includes 600 acres of estate vineyards across California and Washington, four winemaking facilities and three visitor centers.

Mr. Ryan said he was proud of how the company handled the dual challenges of California wildfires and the Covid pandemic.

“We’re well-diversified in how we manage our supply chain,” he said. “We have the flexibility you need when you have to react to changing agricultural conditions.”

One major selling point: Luxury wines command strong margins and Duckhorn’s financials confirm it. The company has Ebitda margins of nearly 40 percent, considerably higher than a spirits company such as Diageo.

“When you come to our sites, you walk out an evangelist,” Mr. Ryan said. “We delight our old customers and add in new ones at a price point that makes them feel special.”

Duckhorn stands apart from other companies such as Altria Group, Inc. and Constellation Brands, Inc., which own some wine assets but not enough to significantly impact overall financial performance.

An important part of Duckhorn’s growth story is likely to be M&A. The wine industry is extremely fragmented and there can be opportunities to benefit from Duckhorn’s distribution platform when it acquires other winemakers.

“There’s an exciting amount of great producers out there,” Mr. Ryan said. “There are a lot of exciting regions we aren’t in yet.”

Mr. Ryan has spent his entire career at Duckhorn and will remain at the helm as the company begins its life in the public markets.

Contact:

Jarrett Banks, Editor-at-Large

IPO-Edge.com

Editor@IPO-Edge.com

Twitter: @IPOEdge

Instagram: @IPOEdge