The Duckhorn Portfolio Announces Enhanced Distribution Relationships with Republic National Distributing Company and Breakthru Beverage Group

Rhea-AI Summary

The Duckhorn Portfolio (NYSE: NAPA) has entered into new distribution agreements with Republic National Distributing Company (RNDC) and Breakthru Beverage Group (BBG) to enhance its wholesale distribution network across the United States. This strategic move follows the acquisition of Sonoma-Cutrer, making Duckhorn the largest supplier of $15+ wines in the U.S. off-premise channel. RNDC will distribute Duckhorn's wines in 21 states, and BBG in 11 states, beginning this summer. The agreements aim to drive profitable growth, increase shareholder value, and enhance market penetration.

Positive

• Duckhorn has secured new distribution agreements with RNDC and BBG, expected to drive profitable growth.
• Acquisition of Sonoma-Cutrer positions Duckhorn as the largest supplier of $15+ wines in the off-premise channel in the United States.
• Enhanced distribution network aims to increase shareholder value and market penetration.
• RNDC and BBG have committed to greater focus and investment in Duckhorn's brands.

Negative

• Transition period for new distribution agreements may cause short-term disruptions in sales channels.
• Dependence on RNDC and BBG may increase operational risks if these partnerships face any issues.
• No immediate financial impact or revenue forecast provided, leaving uncertainty about the short-term financial benefits.

Insights

Financial Analyst

The Duckhorn Portfolio's announcement of enhanced distribution agreements with Republic National Distributing Company (RNDC) and Breakthru Beverage Group (BBG) is a significant move. Distribution agreements can have a direct impact on sales and profitability, especially in the competitive wine industry. By tying up with RNDC and BBG, Duckhorn can potentially increase its market reach and boost revenue.

Given Duckhorn's recent acquisition of Sonoma-Cutrer, this move is likely a strategic effort to capitalize on expanded product lines. The enhancement of distribution channels in multiple states can lead to greater sales volumes, benefiting from economies of scale. Investors should note that distribution costs might initially rise due to the transition but could be offset by higher sales in the long term.

Also, being the largest supplier of $15+ wines in the off-premise channel in the U.S. places Duckhorn in a strong market position. However, investors should watch for execution risks related to the transition of distribution responsibilities and any potential short-term disruptions in sales. Long-term, this could lead to improved profitability and market share, aligning with the company's goal of consistent profitable growth.

For retail investors, it's essential to observe quarterly financial statements post-transition to see if the strategic goals are being met.

Market Research Analyst

From a market research perspective, this expansion indicates a strong push into broader geographical areas. RNDC and BBG are well-established distributors and utilizing their reach can help Duckhorn tap into new customer bases across numerous states. Enhanced distribution relationships also suggest a targeted strategy to penetrate deeper into existing markets.

It's important to understand that the wine market is highly competitive and stronger distribution channels can provide a competitive advantage. This move could lead to better brand recognition and increased shelf space in retail stores, which are critical factors in consumer purchase decisions.

For investors, the key takeaway is that distribution effectiveness often translates to higher sales volumes and market share. Monitoring the performance in newly added territories will be essential to judge the success of this strategy. Additionally, watching the market's reaction to any potential changes in pricing strategies could provide insights into the company's adaptive measures.

ST. HELENA, Calif.--(BUSINESS WIRE)-- The Duckhorn Portfolio, Inc. (NYSE: NAPA) (the “Company”) announced today that it has entered into distribution agreements with Republic National Distributing Company (RNDC) and Breakthru Beverage Group (BBG). The Company’s entry into these agreements is the culmination of a comprehensive strategic evaluation of its wholesale distribution network across the United States, with the goal of driving the profitable growth of the Company’s sales through a substantial increase in focus and investment in the wholesale channel. It is expected that RNDC and BBG will begin distribution of Duckhorn’s wines in their respective new territories during the summer.

“With the recent closing of our Sonoma-Cutrer acquisition, The Duckhorn Portfolio has grown in both scale and scope, and we are now the largest supplier of $15+ wines in the off-premise channel in the United States,” ¹ said Deirdre Mahlan, President, Chief Executive Officer and Chairperson of the Company. “Acquiring Sonoma-Cutrer provided an excellent opportunity to evaluate and optimize our distributor network across the United States to strengthen our ability to drive consistent profitable growth and increase shareholder value.”

Recognized as a premier pure-play producer of luxury wine in the United States, The Duckhorn Portfolio includes eleven acclaimed winery brands: Duckhorn Vineyards, Decoy, Sonoma-Cutrer, Kosta Browne, Goldeneye, Paraduxx, Calera, Migration, Postmark, Canvasback and Greenwing. While the Company has worked with both RNDC and BBG since their respective early days in some states, the Company’s distributor agreements and new alignment will significantly expand the scope of these relationships. When the transition of territories is complete, the distribution of some or all of the Company’s winery brands will be handled by RNDC and BBG, respectively, in the following states:

Republic National Distributing Company:

Alaska, Georgia, Idaho, Indiana, Kentucky, Louisiana, Michigan, Mississippi, Montana, Nebraska, New Mexico, New York, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Virginia, Washington, and Wyoming.

Breakthru Beverage Group:

Arizona, Colorado, District of Columbia, Florida, Illinois, Maryland, Minnesota, Nevada, Pennsylvania, South Carolina and Wisconsin.

“Duckhorn has worked with RNDC and BBG for decades, and each organization has always been an excellent distributor that brings a spirit of cooperation to achieving the Company’s goals,” said Pete Przybylinski, Executive Vice President, Chief Sales Officer of the Company. “As we have expanded our geographic commitment to RNDC and BBG, they have expanded their commitment to us. This will mean greater focus and investment in our winery brands, broader reach and deeper market penetration, and a shared focus on the Company’s growth that we believe will help us all to continue to outpace the market. We see many benefits of these enhanced relationships, not only for us and our distributors, but most importantly, for our retail customers and consumers.”

About The Duckhorn Portfolio, Inc.

The Duckhorn Portfolio is North America’s premier luxury wine company, with eleven wineries, ten state-of-the-art winemaking facilities, eight tasting rooms and over 2,200 coveted acres of vineyards spanning 38 Estate properties. Established in 1976, when vintners Dan and Margaret Duckhorn founded Napa Valley’s Duckhorn Vineyards, today, our portfolio features some of North America’s most revered wineries, including Duckhorn Vineyards, Decoy, Sonoma-Cutrer, Kosta Browne, Goldeneye, Paraduxx, Calera, Migration, Postmark, Canvasback and Greenwing. Sourcing grapes from our own Estate vineyards and fine growers in Napa Valley, Sonoma County, Anderson Valley, California’s North and Central coasts, Oregon and Washington State, we offer a curated and comprehensive portfolio of acclaimed luxury wines with price points ranging from $20 to $230 across more than 15 varietals and 39 appellations. Our wines are available throughout the United States, on five continents, and in more than 50 countries around the world.

About Republic National Distributing Company

As a top beverage alcohol distributor in the nation, RNDC’s national reach helps suppliers by building strategic relationships with on- and off-premise customers to elevate their brands and reach their target consumers. RNDC currently operates in the District of Columbia and 39 states across the United States.

About Breakthru Beverage Group

Breakthru Beverage Group is one of the leading alcohol wholesalers in the United States and the largest broker in Canada representing a full total beverage alcohol portfolio of spirits, wine and beer. Breakthru is committed to diversity, equity and inclusion and supports a wide range of notable organizations as well as local charitable initiatives across its North American footprint. Across all markets, Breakthru aligns a nimble and insightful approach to sales, marketing and operations. Family ownership is active in the business and committed to being stewards of heritage and champions of innovation.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some situations, you can identify forward-looking statements by words such as “approximately,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and similar terms and phrases to identify forward-looking statements. These forward-looking statements include, among others, statements about the potential market opportunity resulting from the acquisition of the Sonoma-Cutrer and associated business strategy, the Company’s ability to better address certain markets, expand its capabilities and position in the industry and extend its product offerings to better serve our customers, as well as the potential synergies and other financial benefits derived by and financial impact to the Company from the acquisition. All of our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we are expecting, including: risks associated with transactions generally; the failure to consummate or delay in consummating the transaction for other reasons; the risk that a condition to closing of the transaction may not be satisfied; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the outcome of any legal proceedings that may be instituted following announcement of the transaction; failure to retain key management and employees of Sonoma-Cutrer; issues or delays in the successful integration of Sonoma-Cutrer’s operations with those of the Company, including incurring or experiencing unanticipated costs and/or delays or difficulties; unfavorable reaction to the transaction by customers, competitors, suppliers and employees; unpredictability and severity of catastrophic events, including but not limited to acts of terrorism, war or hostilities, as well as management’s response to any of the aforementioned factors; and additional factors discussed in the Company’s filings with the SEC.

The forward-looking statements contained in this press release are based on management’s current plans, estimates and expectations in light of information currently available to the Company and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting the Company will be those that the Company has anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control, as well as the other factors described in Item 1A, “Risk Factors” in the Company’s 2023 10-K filed with the SEC on September 27, 2023, and the Company’s 10-Q for the quarter ended January 31, 2024, filed with the SEC on March 7, 2024, and other documents the Company may file with the SEC from time to time. Should one or more of these risks or uncertainties materialize or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. Any forward-looking statement made by the Company speaks only as of the date on which it is made. All future written and oral forward-looking statements attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by the previous statements. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.

¹. Circana - Total US Food, Domestic $15+, Latest 52 weeks ending 05-12-24.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240524882906/en/

Investor Contact

Ben Avenia-Tapper

IR@duckhorn.com

(707) 339-9232

Media Contact

Jessica Liddell, ICR

DuckhornPR@icrinc.com

(203) 682-8200

Source: The Duckhorn Portfolio, Inc.

FAQ

What is the significance of The Duckhorn Portfolio's new distribution agreements with RNDC and BBG?

The new agreements are aimed at enhancing Duckhorn's wholesale distribution network, driving profitable growth, and increasing shareholder value.

When will RNDC and BBG start distributing Duckhorn's wines in their new territories?

RNDC and BBG will begin distributing Duckhorn's wines in their respective new territories during the summer.

How many states will RNDC and BBG cover under the new distribution agreements?

RNDC will cover 21 states, while BBG will cover 11 states under the new agreements.

How does the acquisition of Sonoma-Cutrer affect Duckhorn's market position?

The acquisition of Sonoma-Cutrer makes Duckhorn the largest supplier of $15+ wines in the off-premise channel in the United States.

What are the expected benefits of Duckhorn's enhanced distribution relationships?

The enhanced relationships are expected to result in greater focus and investment in Duckhorn's brands, broader market reach, and deeper market penetration.