Duckhorn sees tough first quarter of 2024

Analysts have described the first few months of 2024 as being a “tough” quarter for Californian wine company The Duckhorn Portfolio, which saw sales volumes drop by 4.6%. However, its revenue still climbed modestly, db can report.

Despite falling sales volumes in the first quarter of the year, Duckhorn has revealed that its revenue is still up 1.4% on this time last year to US$92.53 million, according to the company’s Q1 results.

This performance has allowed Duckhorn to re-confirm its revenue forecast for the full year to be US$403 million.

Sales volumes of Duckhorn wines are down 4.6% compared with the same quarter last year, which the company attributed to “a challenging industry backdrop”. Interestingly, the dip is a reversal from the 3.5% year-on-year increase it announced 12 months ago, showing the unpredictability of the market.

However, volumes aside, the company’s revenue grew by 1.4% in the first quarter of this year, in line with Wall Street estimates, potentially evidencing a successful premiumisation strategy.

That would suggest that Duckhorn’s assertion in 2022 that consumers are “accepting” of price increases was indeed true, or at least for Duckhorn. In September 2022, chief financial officer Lori Beaudoin said that Duckhorn has seen very little resistance from customers to price increases.

“We think customers are a little more accepting of price increases right now,” she said. “They’re seeing it in so many of their other products, and that’s really helped us to maintain the margins that we expect to make.”

However, in the same statement Beaudoin also claimed that “The retailers would tell us if the wine is slowing down that we need to address the pricing”. Given the sliding volumes the company has seen in the first quarter of 2024, this may not strictly be true.

Looking ahead, Wall Street expects Duckhorn’s sales to accelerate from this first quarter of 2024, growing by 21.7% over the next 12 months.

The Duckhorn Portfolio currently trades at US$7.31 per share.

Acquisition trail

In November 2023, Duckhorn announced it was acquiring Sonoma-Cutrer Vineyards for US$400 million in a bid to up its stakes in the luxury Chardonnay market.

While at one point the mantra among wine fans may have been “anything but Chardonnay”, today collectors are prepared to fork out increasingly high sums for top-end expressions of this grape variety. You can read more about how the highest echelons of US-made Chardonnay are performing in this exclusive report for the drinks business.

Duckhorn’s Sonoma-Cutrer acquisition follows on from its 2022 purchase of the 107ha Bottom Line Ranch in Paso Robles, known for its first-rate Cabernet Sauvignon. At the time of the purchase Alex Ryan, former CEO and president of The Duckhorn Portfolio, revealed that wine produced at Bottom Line would be used to support existing Duckhorn wineries Decoy and Postmark, while “cementing” the company’s commitment to the Central Coast.

Prior to this, in January 2022 Duckhorn snapped up two vineyards in Napa Valley, one in Los Carneros and the other in St. Helena, to help meet demand for cool-climate wines. The company announced plans to uproot the Merlot blocks in the St. Helena site to be replanted with Sauvignon Blanc and Sémillon to support the growing demand for these two white varieties under its existing wine ranges.