Duckhorn CEO Explains What’s Driving the Luxury Wine Industry in 2022
Duckhorn Portfolio Chairman, CEO and President Alex Ryan joins Yahoo Finance Live to discuss pandemic trends in luxury wine sales, the wine industry and supply chain impacts on retailers.
Brad Smith: Let’s play a little reopening game or stay at home play with the wine industry. You could say it’s actually just the right place. It’s both. Premium wine sales rose 21% in 2021 after a strong 2020, when Americans were stuck at home drinking virtually every day.
Now comes 2022 and a record number of weddings and parties of all kinds. Let’s talk about what lies ahead with CEO and President of Duckhorn Vineyards, Alex Ryan, as part of our America Back in Business series sponsored by Straight Talk Wireless. Good to see you, sir. So do I understand correctly… you two are? And what drives sales in 21?
XANDER RIAN: Good afternoon. Thank you. Yeah, during the pandemic, you know, people still wanted to connect with friends. So they bought wines, drank them at home, according to their favorite brands. For 40 years, we’ve been building great brands that people trust. And during tough times, there’s no better time to really be able to explore these wines with your friends and improve things a bit.
What we see is that it’s sticky, right? People love their wines. They love the experience. And that seems to be continuing as we gradually withdraw from COVID, both in stores – in-store purchases that people take home and, as you well know, the new loosening of the world of people going to restaurant, people going to bars, people going to their favorite clubs and, again, still drinking their favorite brands. So we see that we see successes on both sides.
Brad Smith: When you think about the pandemic success that you’ve seen and the number of consumers who buy directly from you or buy from some of the many distributors who sell your product, at the end of the day, before the pandemic and before , it there was this change in tastes – if anything from that time and also in the learnings during the pandemic it caused you to internally discuss all types of new categories that you would be able to take advantage of the portfolio and the Duckhorn brand and operate in the future?
XANDER RIAN: Yes. It has been an exciting time during the pandemic for us. We released a lot of new wines. It was the perfect time to offer something new to these loyal fans – again, many have been following us for over 40 years. So we launched a new brand on our flagship Decoy brand called Decoy Limited. We brought out sparkling wines.
We took advantage of a whole new region of California, launching Central Coast wines under the Postmark label. You know, people like new things. They love excitement and something to talk about. And our brands and our company give them that.
And so during the pandemic, when people were at home trying to figure it all out, we were trying to give them new marks. And it was sticky. And it continues to go well for us. So new and exciting is popular. And it will remain popular in the future.
Brad Smith: California is also very cannabis-friendly. In the future, are you also considering cannabis-infused wine?
XANDER RIAN: I’m not sure– I’m not sure we’re going to go that route. There are great cannabis producers. And we are major producers of luxury wines. So we’ll leave it there.
DAVE BRIGGS: Fertile soil there, nonetheless. One of the big trends you see in the industry is single serve – every time I go to a gas station I’m amazed at the cans, boxes, single serve wine industry. How much does it grow? Is this something you have considered getting into?
XANDER RIAN: On a small basis, we got a single serve under a Decoy Premium wine seltzer. We got there in a very small way. It has been very interesting, rewarding and inviting Decoy consumers back into the fold. But really what I see on the luxury level – remember, we only compete on the luxury level. We are the only luxury wine company on Wall Street that is a pure-play wine company.
We only compete in the truly ideal realm of luxury. It’s about $200 down to about $20 at the retail price of the bottle. That’s what we want to focus on. We want people to share wine, to share experiences. The connectivity there is so deep that we will continue… I don’t see people sharing individual services. I see people sharing a bottle of wine with family and friends – the stories and the camaraderie that comes with it.
So we will largely continue to sell full bottles of wine to those who like to enjoy it that way. I think one-on-one service, if done correctly, really provides an entry level for many young consumers into the world of wine. So they have a place. And I think they help raise all the boats, if you will.
Brad Smith: I guess a good problem to have at this point is when I walk into any kind of retailer and they say an item is on allotment or out of stock I have some of these supply chain issues, which Duckhorn may have also encountered, have they been resolved so far?
XANDER RIAN: Well, you know, again, like I said, I have almost 100 years of tenure on my leadership team, right? So we’ve seen supply chain challenges. We have seen these kinds of problems in the past. We made some very nimble changes. We have very, very strategic partnerships with vendors to make sure that doesn’t happen.
It’s exciting for a second, and then it gets really annoying to see your favorite product, whatever it is, not being available to you. So we’ve worked really hard to diversify our overall production methods as well as our distribution methods to make sure that really doesn’t happen. People are brand loyal to a point, but running out of stock for us is really out of the question.
I think our business partners and channel partners respect that, because we’re all out to make money. So we want to make sure that if you want to find any of our wines in the many outlets available, it will be there at the price you expect and certainly with the quality and style you want.
Brad Smith: Joining us this afternoon is Alex Ryan, who is the Chairman, CEO and President of Duckhorn Portfolio. We’re enjoying the weather…maybe over a glass of wine next time, right, Dave? Perhaps.
DAVE BRIGGS: Please sir.