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.

Video Transcript

BRAD SMITH: Let's play a little game of reopening or stay at home play with the wine industry. One might argue it's actually right in the sweet spot. It's both. Premium wine sales up 21% in 2021 after a strong year in 2020 when Americans were stuck home drinking virtually every day.

Now comes 2022 and a record amount of weddings and parties of all kinds. Let's talk about what's 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 have it right-- are you both? And what is driving sales in '21?

ALEX RYAN: Well, good afternoon. Thank you. Yeah, during the pandemic, you know, people were still wanting to connect with friends. So they were buying wines, drinking them at home, following their favorite brands. For 40 years, we've been creating great brands that people trust. And during trying times, there's not a better time to really be able to explore those wines with your friends and make things a little bit better.

What we're seeing is that's sticky, right? People love their wines. They love the experience. And it seems to be continuing as we gradually pull out of COVID, both from stores-- store shelf purchases people take home, and, as you well know, the new loosening of the world of people going to restaurants, people going to bars, people going to their favorite clubs, and, again, continuing to drink their favorite brands. So we're seeing we're seeing kind of some successes on both sides.

BRAD SMITH: When you think about the pandemic success that you've seen and the number of consumers either purchasing directly from you or purchasing from some of the many distributors that carry your product, at the end of the day, pre-pandemic and in the before times, there was this shift in tastes-- if anything from that time and also in the learnings during the pandemic, has that led you to discuss internally any types of new categories that you would be able to leverage the Duckhorn portfolio and brand and tap into in the future?

ALEX RYAN: Yes. It was an exciting time during the pandemic for us. We released a lot of new wines. It was a great time to give something new to these loyal fans-- again, many have been following us for over 40 years. So we released a new brand on our flagship brand Decoy called Decoy Limited. We released some sparkling wines.

We took advantage of a whole new area of California, releasing some wines from the Central Coast under the Postmark label. You know, people like new things. They like excitement and something to talk about. And our brands and our company give them that.

And so during the pandemic when people were home trying to make sense of it all, we were trying to give them some new brands. And it has been sticky. And it continues to do really well for us. So new and exciting is popular. And it will remain popular into the future.

BRAD SMITH: California has also been very cannabis-friendly. In the future, do you ever foresee a cannabis-infused wine as well?

ALEX RYAN: I'm not sure-- I'm not sure we're going to go that route. There are great cannabis producers out there. And we're great luxury wine producers. So we'll leave it at that.

DAVE BRIGGS: Fertile soil out there, nonetheless. One of the big trends you're seeing in the industry is the single serve-- every time I go into a gas station, I'm astonished at the cans, at the boxes, at the single serve wine industry. How much is it growing? Is it something you've considered getting into?

ALEX RYAN: On a small basis, we've gotten a single serve under a Decoy Premium wine seltzer. We've gotten there in a small, small way. It's been very interesting, and kind of rewarding, and inviting Decoy consumers to come back into the fold. But really what I see at the luxury-- remember, we only compete at the luxury level. We're the only luxury wine company on Wall Street that's a pure-play wine company.

We only compete in the really sweet spot of luxury. It's about $200 down to about $20 retail bottle price. That's where we want to focus on. We want people to share wine, share experiences. The connectivity there is so deep that we will continue-- I don't see people sharing single serves. I see people sharing with their family and their friends a bottle of wine-- the stories and the camaraderie that come with that.

So we will largely remain selling full bottles of wine to those people who like to enjoy it that way. I think single serve, if done correctly, really offer an entry level into a lot of younger consumers into the world of wine. So they have a place. And I think they are helping to raise all boats, if you will.

BRAD SMITH: I suppose a good problem to have at this point in time is when I go into any type of retailer and they say an item is on allocation or it's on back order, have some of those supply chain issues, that maybe Duckhorn has also experienced, have they been resolved to this point?

ALEX RYAN: Well, you know, again, like I said, I've got almost 100 years on my executive team's tenure, right? So we've seen supply chain challenges. We've seen these types of issues in the past. We've made very nimble changes. We've made very, very strategic partnerships with suppliers to make sure that that doesn't happen.

It's exciting for a second, then it becomes really boring to see your favorite product, whatever it is, not 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 loyal to a brand to a point, but out of stock for us is really out of question.

Our trade partners and our distribution partners I think respect that, because we're all in the business of making money. So we want to make sure if you want to find one of our wines in the many outlets that's available, it will be there at the price you expect and certainly the quality and style you want.

BRAD SMITH: Alex Ryan, who's the Duckhorn Portfolio Chairman, CEO, and President joining us here this afternoon. We appreciate the time-- perhaps over a glass of wine next time, right, Dave? Perhaps.

DAVE BRIGGS: Please, sir.