Duckhorn Portfolio CEO Alex Ryan and his team discuss the journey to the IPO and the lessons learned after the first year

Alex Ryan, Chief Executive Officer and Chairman of the Duckhorn Portfolio

The Duckhorn Portfolio, Wildly Simple Productions

Duckhorn Portfolio Inc. (NYSE: NAPA) today released its third quarter results for the three months ended April 30, 2022. Since its successful IPO on March 18, 2021 with an initial share price of $15 per share, its portfolio of 10 luxury wine brands ranging from $25 to $200 per bottle has performed admirably. Today’s financial results support this trend with net revenue of $91.6 million, up 1.3% from the same period last year, and Adjusted EBITDA of $32.9 million, up 2.9% the previous year. The stock price closed today at $20.07.

As Duckhorn Portfolio is now celebrating just over a full year as a public company, Alex Ryan, President, Chief Executive Officer and Chairman of The Duckhorn Portfolio, and members of his leadership team met in Napa Valley last week for an interview to discuss how the IPO journey has impacted them. As the only “pure luxury wine company” on Wall Street, the Duckhorn portfolio currently includes the wine brands Duckhorn Vineyards, Decoy, Paraduxx, Goldeneye, Migration, Canvasback, Calera, Kosta Browne, Greenwing and Postmark.

“I’m one of those unusual people who’ve worked at the same company my entire life,” says Ryan. “I took a part-time job in high school in the early 1980s working for Dan Duckhorn. He paid me $4 an hour to remove football-sized boulders from a vineyard he was planting on Howell Mountain. When I graduated from California State University in Fresno with a degree in viticulture in 1988, Dan hired me to work full-time. I was the fifth clerk and he gave me the title of Administrative Assistant. That basically meant I did whatever he asked me to do.”

Ryan then worked his way up through a variety of positions within the company, starting as a vineyard manager and then moving into winery operations. Over the years he helped Duckhorn Winery expand with the development of other wineries such as Migration, Decoy and Canvasback. In 2005 he was appointed President and in 2011 CEO of Duckhorn Portfolio.

“From the start,” Ryan recalls, “Dan encouraged the entrepreneurial spirit within the company. He used to say, “behave like an owner,” which means “picking up cigarette butts in the parking lot at night.” When the tasting room closed, we used to do this as a couple. We also drank coffee together and read the newspaper every morning. Dan used to joke that one day he would take the company public.”

Benefits and learnings from the Duckhorn portfolio IPO

Although Dan Duckhorn and other investors sold a majority stake in The Duckhorn Portfolio to GI Partners in 2007 (which sold its stake to TSG Consumer Partners in 2016), he and Ryan were delighted to participate in the company’s IPO in March 2021. “It was one of the best days of our lives,” says Ryan. “We were there when the market opened and rang the closing bell on the New York Stock Exchange.”

In discussing the benefits and lessons learned from going public, Ryan jokes that he took a crash course in MBA in public offerings. “We spent about 5 years analyzing the ins and outs of going public and in the end it made a lot of sense. The main benefit of an IPO is the ability to make long-term decisions so we can plan further into the future. We may have the capital to replant vineyards or, if necessary, make acquisitions and other investments that we believe will create long-term value for shareholders. Luxury wine requires a long-term perspective and it is important to remember that the wine industry is a long-term business.”

Members of Ryan’s executive team agree on the benefits of going public and also discuss changes in operating as a public company. “We can now make the necessary investments,” reports Zach Rasmuson, Executive Vice President, Chief Operations Officer for the Duckhorn portfolio, “and have since replanted some vineyards and bought more land in Paso Robles.”

At the same time, the company remains focused on driving efficiencies across all ten brands. “Since the cost of grapes is the most expensive component of a bottle of wine,” explains Rasmuson, “every winemaker has a budget to buy grapes. We also share equipment and facilities if needed. For example, our Goldeneye Winery in Anderson Valley usually finishes harvest before our Napa Wineries, so we can borrow some of their tanks for fermentation.”

Renee Ary, Vice President of Winemaking, Napa Valley Duckhorn Vineyards, states, “As one of eight winemakers, I still have the freedom to make decisions about the Duckhorn Vineyards brand from a winemaking perspective. From the financial side, what is different about the IPO is that I have to deliver the end-of-month reports earlier and earlier. I used to have 12 days and now it’s 3 to 4 days. But that’s okay, and we’re all getting used to it now.”

Gayle Bartscherer, executive vice president, chief marketing and DTC officer for The Duckhorn Portfolio, recently joined the company and describes her role as “overseeing the integrity of the suite of luxury wine brands and assisting Alex in protecting the soul of the brands.'” According to today’s earnings report, Duckhorn Portfolio increased wholesaler ownership to 62% from 59% year-to-date. Also last year, during the peak of the Covid pandemic in 2021, Direct to Consumer (DTC) sales increased to 24.8% but have fallen to 21.4% in 2022 as consumers returned to buying more wine buy in restaurants – hence the need for more wholesale distribution. According to Ryan, “We’ve done well during Covid.”

“In the end,” says Ryan, “I had to take off my winemaking hat and put on my marketing and finance hat to go public – and then switch back to winemaking. If I’m not a winemaker first, I’ll let shareholders down.”

The ten major luxury wine brands in the Duckhorn portfolio

The Duckhorn Portfolio, Nat and Cody Gantz

Duckhorn Portfolio Culture focuses on employees, sustainability and entrepreneurship

In addition to a focus on producing high quality, luxury wines and serving the needs of shareholders, Alex Ryan also firmly believes in workers’ rights and upholding the entrepreneurial spirit started by Dan Duckhorn. “The social justice aspect of sustainability has always been very important to me,” says Ryan. “Of course, our wineries and production facilities have received a number of certifications, including Goldeneye as certified California Sustainable Vineyards, and our Calera Estate is organic — but we’re focused on the employees, paying them enough to live well, and trying to stay it motivates.”

Maybe it’s because Ryan has spent so much time working in the vineyards that he’s very worried about the vineyard workers. “Do you know that for every mechanical harvester that only requires 4 people to operate, 25 vineyard workers become unemployed? Although we use mechanical harvesters on some of our vineyards, it is important to pay attention to the employees and their needs. I believe the staff are the soul of the wine.”

Another positive aspect of the IPO, according to Ryan, is the ability to allow employees to purchase company stock at a 15% discount as part of their new ESOP program.

The strong value of entrepreneurship within the company is evident in the development of new brands and the acquisitions the company has made over the past decade. Having spearheaded two successful acquisitions of luxury wine brands, Kosta-Browne and Calera, Ryan has a strong belief in bringing new wineries into the portfolio.

“When it comes to luxury wine purchases, we have to be patient,” says Ryan. “The magic of a luxury wine brand cannot be drawn on paper – the soul of a company is its people. When we buy a company, we try to involve the founders and engage with the brand. That’s important because when we’re in the market and talking to our distributors, they want to know that the original owner is still involved to some degree. When buying a new brand, we rely on respect and patience.”

Ryan concludes, “My primary responsibility is to protect our employees, their brands and our shareholders.”

Sunset over the Duckhorn Vineyards in Napa Valley, CA

The Duckhorn Portfolio, Robert McClenahan