November 21, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

M&A in the U.S. luxury wine market is having a moment – activity that is reflective of expectations for the global sector. From a value of $229.4 billion in 2021, global luxury wines and spirits are forecasted to grow at a CAGR of 6.2 percent from 2022 – 2031 to land at a value of $414.8 billion, according to data from Allied Market Research. On a more granular level, Statista reported that 2023 revenue in the U.S. wine market alone amounted to $37.2 billion – the most out of all global markets. 

News of the latest deal in the segment comes from The Duckhorn Portfolio, which has announced its agreement to acquire Sonoma-Cutrer Vineyards – one of the largest luxury Chardonnay wineries in the U.S. – from Brown Forman in a $400 million deal consisting of a combination of company stock and cash. 

Founded in 1973, Sonoma-Cutrer has grown to be one of California’s best-known luxury Chardonnay brands, owning six estate vineyards spanning 1,121 acres in both the Russian River Valley and Sonoma Coast appellations. It sells its luxury wines at a price point of between $20-$50 per bottle through wholesale channels via distributors and direct-to-consumer channels. 

Brown-Forman acquired Sonoma-Cutrer in 1999, and for nearly 25 years has been a supporter of the growth and development of the brand, which today is among the fastest growing major brand by retail sales in the category. 

“We are delighted to welcome Sonoma-Cutrer Vineyards into The Duckhorn Portfolio,” said Deirdre Mahlan, interim president, CEO, and chairperson, The Duckhorn Portfolio. “Sonoma-Cutrer is an iconic, highly acclaimed winery brand with a long history of crafting exceptional wines in a timeless style and is a perfect addition to our thoughtfully curated portfolio of luxury wines.”

“Sonoma-Cutrer is among the fastest-growing major brands in the luxury Chardonnay category. We see opportunity to further accelerate that growth and enhance operating margins of the combined business. This transaction expands our presence and visibility, diversifies our portfolio of luxury American winery brands, and dramatically increases our position in the luxury Chardonnay category.”

Under the terms of the deal, Brown-Forman will receive 31.5 million shares of The Duckhorn  Portfolio’s common stock valued at approximately $350 million, based on a 60-day, volume-weighted average price as of November 1, 2023 that equates to an ownership percentage of approximately 21.5 percent. Brown-Forman also will receive approximately $50 million in cash. 

Additionally, Brown-Forman will be entitled to nominate two directors to The Duckhorn Portfolio’s Board of Directors. 

For Duckhorn, the deal will enhance its standing as a leading luxury ($15+ per bottle) wine company in the U.S., while also elevating its position with the Chardonnay segment – the number one domestic white varietal, and one where, until now, The Duckhorn Portfolio has lacked a meaningful presence. 

For the 12 months ending July 31, 2023, Sonoma-Cutrer had approximately $84 million in net sales, and management estimates annual run-rate synergies of approximately $5 million, which are expected to be realized in full starting fiscal year 2025. 

“We believe The Duckhorn Portfolio provides the capabilities, expertise, and focus to take the Sonoma-Cutrer wines to the next level,” said Lawson Whiting, president and CEO, Brown-Forman. “The Duckhorn Portfolio has some of the world’s most-respected luxury wine brands and Brown-Forman looks forward to participating in their future growth through a minority equity stake and board membership.”

This deal follows closely after Melbourne-based Treasury Wine Estates (TWE) accelerated its own premium and luxury portfolio earlier this month when it announced its acquisition of U.S.-based DAOU Vineyards – the fastest growing luxury wine brand in U.S. trade over the past year – for a total consideration of $1 billion. 

Much like The Duckhorn Portfolio, TWE is angling to gain a stronger foothold in one of the most promising markets. Tim Ford CEO of TWE, stated, “The U.S. is the world’s largest wine market and we’re beyond thrilled to add DAOU to our portfolio, cementing our position as a global luxury wine leader. This is a transformative acquisition that will accelerate the growth of our luxury portfolio globally and paves the way for new luxury consumer experiences.”

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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