Duckhorn files for an estimated $300 million IPO

Our business successes are reflected in our attractive financial profile:

For an explanation of how we calculate adjusted EBITDA and for a reconciliation to net income (loss), the most directly comparable financial measure stated in accordance with U.S. GAAP, see “Selected consolidated financial and other data—Non-GAAP financial measures.”

Luxury wine: our large and attractive target market

Our target market

We operate in the large and stable global wine industry that, according to Statista, is projected to exceed $340 billion in sales value in 2020.

A majority of our wine is sold in the growing U.S. market which boasts over 500,000 licensed retail accounts according to Nielsen. According to Statista, the United States consumes more wine than any other nation and is expected to increase its global wine market share by volume from 13.6% in 2012 to 15.8% in 2020. According to data from Statista capturing on-premise and off-premise sales, the total sales value of wine in the United States was more than $53 billion in 2019, having grown steadily since 2012. While the COVID-19 pandemic has adversely impacted on-premise sales, including in bars and restaurants, it has benefited grocery and other off-premise sales. As a result, the total sales value of wine in the United States is expected to remain relatively resilient to the impacts of the COVID-19 pandemic. According to Statista, 2021 is expected to mark a return to long-term category growth, and total sales value of wine in the United States is expected to exceed $55 billion, nearly $2 billion greater than the pre-pandemic 2019 value.

Consumers in the United States have steadily increased their per capita spending on wine over time to $163 per year in 2019, up from $141 in 2017, equating to a 7% CAGR, according to Statista. Compared to peer countries, the United States experienced one of the highest annual growth rates per capita in wine consumption in 2019, and we believe the United States still holds ample opportunity for growth. For example, 2019 per capita consumption in France, the United Kingdom and Australia were $439, $347 and $425, respectively, according to Statista. We believe these favorable trends will continue and that wine will take further alcohol beverage market share in the United States, led by established brands with diversified portfolio offerings.

Luxury wine and premiumization

American Millennials and Generation X adults have come of age in a culture where cooking shows, celebrity chefs, farmers’ markets and food blogs are the norm. U.S. consumers have had an increasing hunger and thirst for high-quality food and drinks and are willing to pay more for items perceived to be superior. Wine has and continues to benefit from this premiumization trend. We believe that Millennial wine buyers are often spending more per bottle than any other generation and that as their careers progress and incomes grow, both

Millennials and Generation X wine enthusiasts are poised to spend more on wines, particularly those from experiential brands with authentic heritages.

The luxury wine segment, which we believe comprised between 10% and 15% of the total U.S. wine market in 2019, expanded at nearly double the pace of the broader wine industry from 2012 to 2019, according to sales value data from IRI. With suggested retail prices of $20 to $200 per bottle, our portfolio is strategically positioned to benefit from premiumization.

We have consistently increased our market share in the growing luxury wine segment, both before and during the COVID-19 pandemic, and we believe premiumization will continue to benefit our business as consumers seek trusted brands. According to data from IWSR, wine sold for $20 per 750ml bottle or higher outpaced the overall wine category from 2010 to 2019. During this period, the sales value of wine sold for $20 per bottle or higher grew at an 8.6% CAGR, compared to a 3.1% CAGR for the total U.S. wine industry. According to IRI data, the U.S. luxury wine segment grew at 20% in sales value in the twelve month period ending on October 31, 2020 and encompassing the period of economic uncertainty caused by the COVID-19 pandemic, compared to the same period in the prior year, while the overall wine industry grew 11% over the same period.

We expect premiumization to continue to shape the wine industry in the United States. According to IWSR, the U.S. luxury wine segment aggregate sales value from 2020 to 2024 is expected to generate a CAGR more than four times greater than that of the CAGR of the overall wine industry in the same period.

Luxury producer fragmentation and distributor consolidation

As the luxury wine segment is highly fragmented, we have the advantage of being one of only a few luxury wine producers of scale. Our brands compete for consumers with a wide range of competitors, from the vast number of small volume local wineries, to divisions of large conglomerates. According to IWSR data, $20 or higher per bottle U.S. wine suppliers with less than $100 million of sales in 2019 comprised 93% of all $20 or higher per bottle U.S. wine suppliers.

In recent years, extensive growth in the number of wineries in the United States has been accompanied by a decrease in wine distributors, with approximately 1,800 wineries and 3,000 wine distributors in 1995, compared to over 10,400 wineries and 950 wine distributors in 2020, according to Wines Vines Analytics. The substantial consolidation of distributors has been driven primarily by mergers and acquisitions, and we expect this trend to continue.

In this environment of distributor consolidation and a fragmented universe of many subscale luxury producers, we believe our position as a scaled luxury producer is highly appealing to large distributors and retailers and that our comprehensive portfolio offering provides a “one-stop shop” solution for all of their luxury wine needs.

Key drivers of our continued success

We attribute our success to the following strengths:

Curated and comprehensive portfolio of luxury wines.     Our portfolio encompasses ten luxury brands that champion 18 varietals in 25 AVA designations. Duckhorn Vineyards, Decoy and Kosta Browne are the cornerstones of this curated and comprehensive portfolio and reinforce the credibility and brand strength of our entire portfolio. We believe the breadth and depth of our luxury brands, coupled with our scale, position us as a premier supplier of luxury wines. Our singular focus on sustainable luxury winemaking energizes our employees, fosters trust and credibility in our customer and grower relationships, and ultimately results in high-quality, award-winning wines that we believe deeply resonate with consumers.

Our portfolio breadth and depth also allow us to offer tiered pricing within the luxury wine segment, enabling us to attract new consumers with affordable wines and deepen our relationship with them as they seek more premium offerings. The Decoy brand provides high-quality wines at accessible prices, often serving as the customer gateway into our luxury wine offerings across our broader portfolio. Duckhorn Vineyards, Kosta Browne and our other winery brands provide the consumer an opportunity to both elevate and broaden their experience with the wines in our diverse luxury portfolio. As distributors continue to grow in size, our curated and comprehensive portfolio is well-positioned to meet their needs, and the needs of our accounts and consumers.

Focused portfolio of powerful brands

Focused Portfolio Of Powerful Brands Brand Decoy Duckhorn vineyards kosta browne calera paraduxx. goldeneye migration> canvasback greenwing postmark First vintage Primary focus Description SRP Range Tasting Room 1985 California A luxury consumer brand of choice, Decoy is dedicated to crafting serious wines of superior quality at a remarkable price across multiple varieties. Acclaim Wine Brand of the Year, Market Watch (2020); Hot Brand Award - 5X Winner, Impact; Top Growth Brand - 7X Winner, Beverage Information Group; Top Restaurant Wine,- 4X winner Wine & Spirits $20-$35 -- 1978 California Napa Valley A benchmark for American Merlot, Duckhorn has been crafting Napa Valley wines of distinction for over 40 years. Acclaim #1 Wine of the Year (Global), Wine Spectator (2017); Winery of the Year - 9X Winner , Wine & Spirits; Top Restaurant Wine - 13X winner, Wine & Spirits; Top 100 Wines of the Year - 4X winner, Wine Spectator $30 - $155 1997 California Sonoma Coast Kosta Browne is a pinnacle of ultra-luxury California Pinot Noir and Chardonnay. (Acquisition) Acclaim #1 Wine of the Year (Global), Wine Spectator (2017); Top 100 Wines of the Year - 7X winner, Wine Spectator $85 - $200 1976 California Central Coast Calera is a pioneer of luxury American Pinot Noir and is revered throughout the industry for its Mt. Harlan AVA wines. (Acquisition) Acclaim Winery of the Year - 8X Winner , Wine & Spirits; Top Pinot Noir Issue Cover Photo, Wine Spectator (2013); Top 100 Wines of the Year - 3X winner, Wine Spectator $30 - $100 1994 California Napa Valley Paraduxx specializes in producing the world's great red blends in a distinctively Napa Valley style. Acclaim Top 50 Winery in Restaurants, Wine & Spirits (2017) $30 - $100 1997 California Anderson Valley The first dedicated Pinot Noir producer in Anderson Valley, Goldeneye produces ultra-luxury wines from Mendocino County. Acclaim Top Pinot Noir Issue Cover Photo, Wine Spectator (2019); Wine & Spirits Top Restaurant Pinot Noir, Wine & Spirits (2011) $30 - $130 2001 California Sonoma Coast Refined, cool-climate Burgundian wines, Migration wines are sourced from premiere California vineyards in the Sonoma Coast AVA. Acclaim Top 100 Wines of the Year, Wine Spectator (2005) $30 - $70 Mid-2021 2012 Washington Red Mountain Canvasback is dedicated to producing luxury Cabernet Sauvignon from the highly-acclaimed Red Mountain in Washington State. Acclaim Winery to Watch, Wine & Spirits (2017) $30 - $84 2019 Washington Columbia Valley Rooted in Columbia Valley Bordeaux varieties, Greenwing is making some of North America's most exciting next generation wines. Acclaim (New release) 91 points, Wine Enthusiast (2020) $35 -- 2020 California Napa, Paso Postmark Cabernet & Merlot reflect their iconic Napa Valley roots while the brand name enables sourcing of quality grapes wherever they might be grown. Acclaim (New release) 90 points, Wine Enthusiast (2020) $35 -

Exceptional brand strength and critical acclaim.    The Duckhorn Portfolio has consistently received stellar reviews across varietals, geographies and price points from the industry’s top critics and publications. Two of our wines, the Kosta Browne Sonoma Coast Pinot Noir and the Duckhorn Vineyards Napa Valley Three Palms Vineyard Merlot, have received one of the industry’s most prestigious awards, Wine Spectator magazine’s Wine of the Year. We are the only wine company to have more than one winery brand in our portfolio to have received this award in the 21st century. Critics within our industry widely use a 100 point scale to score individual wines, and we take pride in our consistent track record of 90+ point wines, scores that indicate superior quality. The strength of our winery brands is also demonstrated by our market-leading sales in some of the most popular varietals in the U.S. luxury market. During the twelve months ended October 4, 2020, we had the top selling luxury wine for Cabernet Sauvignon (the largest luxury varietal during the period), Sauvignon Blanc (the fastest growing luxury varietal during the period) and Merlot, according to U.S. sales value data from IRI. These three varietals combined represented approximately 31% of the total U.S. luxury wine market during the same period.

Scaled luxury platform.    We are the largest pure-play luxury wine company in the United States. We believe our approach and dedicated focus on luxury wines continues to be highly appealing to the modern wine consumer seeking authenticity and enables category excellence versus our more broadly-focused, scaled competitors. We also have an advantage over our fragmented, smaller-scale competitors because our individual brands each benefit from their place in our larger portfolio, leveraging more efficient operational, branding, marketing and distribution capabilities. For example, our depth of operational capabilities enables us to simultaneously present a curated offering of the most popular wine varietals and prudently develop new offerings in new, high-growth categories, all with the credentials of a pure-play luxury producer of scale.

Our large, highly knowledgeable sales force is a key advantage of our scale relative to small luxury producers. We deploy our sales force in the wholesale channel to evangelize our portfolio to our vast network of distributors and retail accounts. Understanding how consumers will connect with winery brands is critical to gaining shelf and menu space, and while smaller luxury wine brands rely on distributors to introduce and promote brands, our sales force takes direct action to strengthen our account relationships. As a credentialed luxury supplier of choice, we expect to benefit from further enhanced distributor prioritization due to sell-through confidence and operational efficiency.

Differentiated omni-channel sales and distribution platform.    Our innovative, scalable platform enables us to fulfill consumer needs through an integrated experience across channels at attractive margins. Our ideal consumers interact with us seamlessly across channels, through our wine clubs and tasting rooms and when grocery shopping or ordering at a restaurant.

We leverage our long-standing wholesale channel nationwide (with over 47,000 accounts), including our direct to retail accounts business in California (with over 2,800 accounts), to build deep, impactful relationships with our trade accounts. These channels provide a critical path for our winery brands to succeed both on-premise and off-premise, across a wide range of outlets and geographies.

Since our founding more than 40 years ago, we have been selling directly to retail accounts in California, a point of distinction among large California wine producers, many of which sell through a distributor in the state. We believe our direct to retail accounts business in California gives us a competitive advantage for several reasons. First, our direct connection with the retail accounts allows us more control over sales, branding and other marketing support. Second, our approach gives us more visibility into sell-through rates. Finally, we enjoy significantly stronger margins selling directly to retail accounts, rather than selling through a distributor.

Our DTC channel is a powerful marketing engine. This part of our business encompasses our multi-winery e-commerce website, featuring award-winning subscription wine clubs, and is reinforced by our seven stylistically unique and high-touch tasting rooms located throughout Northern California and Washington. Our wine club boasted over 55,000 members as of Fiscal 2020, and we hosted nearly 100,000 consumers at our tasting rooms in 2019. Our ultra-luxury wines, which we consider to be wines with suggested retail prices of $25 or higher per 750ml bottle, are prominently featured in this channel, yielding high average bottle prices. Early access to new releases, a compelling slate of member benefits and active cross-marketing throughout the portfolio drive wine club member loyalty and sales. These strategies maximize each winery brand and property while driving awareness for the Company’s other world-class wines and properties, resulting in more and lasting connections with consumers and wholesale customers.

We believe the strategic combination of our complementary paths to consumers has been an important driver of our sustained growth and will continue to enable long-term scalability. We balance the market accessibility of a broad wholesale reach with direct and authentic customer and consumer touchpoints that drive connectivity, insights and trust. Combined, our California direct to retail accounts business and DTC channel make up 39% of our combined net sales.

We believe our comprehensive omni-channel route-to-market is a key differentiator of our leading U.S. luxury wine platform and allows us to engage with distributors, customers and consumers on multiple fronts and meet their needs across price points, varietals and appellations, driving long-term sustainable growth.

Diversified and scalable production model.    The success of The Duckhorn Portfolio is underpinned by our strategic, diversified and scalable supply and production platform. We strive for capital efficiency and secure the majority of our grape supply by leveraging long-standing relationships within a vast, geographically diversified network of more than 225 trusted growers and bulk wine suppliers, designed to help us mitigate agricultural risk, optimize costs and quality and flexibly scale. At our eight state-of-the-art wineries, we are able to directly control the quality of the wine we produce.

To complement this scaled platform, we own 22 distinct Estate vineyards spanning 843 acres. Some of our most prestigious wines are created from Estate grapes grown in these vineyards under our own viticultural heritage utilizing sustainable winegrowing techniques.

This diversified sourcing model provides many benefits:

Our diversified and scalable production model enables us to efficiently adapt to changing consumer demand, drive toward our environmental sustainability goals and rapidly bring to market diversified case lot sizes.

Exceptional leadership team.    We have an exceptional, culture-driven leadership team at the helm of The Duckhorn Portfolio. The highly tenured executive team has over 100 years of cumulative experience with Duckhorn and is led by Alex Ryan, who began his work with luxury wine at Duckhorn nearly 33 years ago. The executive leadership team is made up of six strategic and functionally focused professionals dedicated to the success and growth of The Duckhorn Portfolio. Since 2010, this leadership team has grown net sales by approximately 500%, successfully managing the business through multiple economic cycles, challenging environmental externalities and the integration of two acquisitions. Supporting this leadership team is a deep bench of highly talented managers, many of whom have a long history at the Company and with our winery brands. Throughout our history, we believe we have been able to attract the highest caliber employees in the winemaking industry because of our reputation, prioritization of sustainability and corporate responsibility, holistic focus on our team members and commitment to developing, empowering, supporting and promoting our employees, which is a core element of our leadership.

Our strategy for continuous growth

Our entire organization is growth-oriented. From product innovation and category expansion to expanding points of distribution, every department plays a role in the growth of The Duckhorn Portfolio. We have a long, successful track record of enhancing our growth initiatives and delivering on our commitment to excellence in luxury winemaking.

Our growth plan relies on core competencies demonstrated by our organization throughout our history. We expect to deliver meaningful increases in stockholder value by continuing to execute the following strategies:

Leverage our sales and marketing strength to gain market share in a consolidating marketplace.

The continued strength and resonance of our brands with consumers is paramount to our success. We have a comprehensive plan that we believe will continue to drive increased brand awareness for some of our more Estate-based winery brands as we grow sales to our existing consumer base and attract a new generation of consumers without compromising the authenticity and heritage of our wines. This plan is made possible by our omni-channel platform, which enables us to grow, both through increased volume with existing and new customers and accounts as well as through periodic price increases, particularly on our higher end, smaller lot DTC wines. Strategic pricing by label, variety and channel (where permitted) is a core competency and will help ensure that we maximize demand and profit as we grow.

We plan to continue to invest in our wholesale channel sales force, leveraging it to expand our network of distributor and account advocates and growing our retail presence. We expect this differentiated platform advantage to continue to drive increased brand awareness and presence in the fragmented luxury wine segment.

Finally, our commitment to excellence has resulted in a track record of industry awards and recognitions that we believe provide our entire portfolio with a halo of prestige. We expect to continue to be honored with critical acclaim and 90+ point wine scores as we grow, which we believe drives consumer engagement around our brands and further solidifies our reputation with customers. We believe continuing to establish and maintain awareness of The Duckhorn Portfolio as a premier luxury winemaker is paramount to our growth and success.

Insightful and targeted portfolio evolution.

We maintain close connectivity to luxury wine consumers through our omni-channel sales model, which coupled with our high-quality, flexible production assets, allows us to thoughtfully tailor our portfolio to meet consumers’ needs. One of our most successful growth initiatives has been the long-term development and evolution of Decoy, which began with a single offering and now includes 12 different labels across our Decoy and Decoy Limited offerings. We expect to further enhance Decoy as a luxury winery brand and we see great potential for further extensions, as evidenced by some of the following recent innovations. During 2020, we successfully launched four new Decoy labels, each of which received strong consumer reception. Three of these labels are in our new upmarket tier, Decoy Limited, which consists of Napa Valley Cabernet Sauvignon, Napa Valley Red Blend and Sonoma Coast Pinot Noir. In addition, we inaugurated a new category offering, Decoy Brut Cuvée Sparkling. We expect to launch other Decoy extensions in the future and intend to continue evolving and strategically broadening The Duckhorn Portfolio to drive future growth.

Our curated and comprehensive portfolio and historical growth result from long-term dedication to continuous evolution and alignment with the luxury wine consumer. As we continue to scale, we believe our growth mindset, coupled with our differentiated production and distribution platform, will enable us to continue to adapt and remain at the forefront of our industry.

Expand and accelerate wholesale channel distribution.

We see an opportunity to continue to expand our retail accounts and increase cases sold per retail account, most prominently by leveraging the strength of our powerhouse Decoy brand. In Fiscal 2020, we increased the number of our accounts by 10% to greater than 47,000. Over the same period, our domestic case sales per account increased by 10% and our number of distribution points increased by approximately 13%. With over 500,000 total licensed retail accounts in the United States, according to Nielsen, there remains ample opportunity to continue broadening distribution of the wines in our portfolio as well as to increase the volume of wine sold to existing accounts. We believe our long-standing existing commercial relationships coupled with exceptional portfolio strength, built over the last four decades, position us to capture this distribution growth opportunity and accelerate sales to existing distributors and retail accounts in California.

Continue to invest in DTC capabilities.

We plan to continue to invest in our DTC channel, which currently comprises approximately 20% of sales and features seven tasting rooms, and had over 55,000 active wine club members who purchased wine in Fiscal 2020. This robust channel provides an important means for us to engage with consumers, create brand evangelists and drive adoption across our portfolio. This channel also favorably impacts margins, as wines sold through our DTC programs are often more exclusive, higher-priced wines. Over 3,000 new members have signed up for our DTC offerings in Fiscal 2020, which we believe is a meaningful testament to our wines and their appeal to American luxury wine consumers. Our DTC channel will continue to play a critical role in authenticating our luxury credentials with consumers, and we believe our scaled presence and expertise in the channel separates us from our competitors.

Evaluate strategic acquisitions opportunistically.

As part of our ongoing growth strategy, we strategically evaluate acquisition opportunities. While our growth and success are not contingent upon future acquisitions, we believe our leadership and operational teams have the capabilities and experience to execute and integrate acquisitions to create stockholder value. We continually track and evaluate acquisition opportunities that could create strategic advantages for our business.

This approach has led to the successful acquisition of two winery brands over the past three years: Kosta Browne and Calera. Both brands offer highly acclaimed wines with deeply connected consumer followings. In addition to complementing our portfolio, both acquisitions had unique strategic rationale: Kosta Browne expanded our DTC capabilities and Calera further diversified our supply chain and production resilience by broadening our grape-sourcing relationships within the Central Coast of California. These renowned wineries have continued to thrive and grow in prominence under our stewardship.

Summary risk factors

An investment in our common stock involves a high degree of risk. Any of the factors set forth under “Risk factors” may limit our ability to successfully execute our business strategy. You should carefully consider all of the information set forth in this prospectus, and, in particular, you should evaluate the specific factors set forth under “Risk factors” in deciding whether to invest in our common stock. Among these important risks are the following:

Implications of being an emerging growth company

We qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies that are not emerging growth companies. These provisions include, among others:

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenues as of the end of our fiscal year, we have more than $700.0 million in market value of our common stock held by non-affiliates as of the end of our second fiscal quarter or we issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some or all of these reduced disclosure obligations.

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. Our consolidated financial statements may, therefore, not be comparable to those of other public companies that comply with such new or revised accounting standards.

Our sponsor

TSG is a leading private equity firm focused exclusively on the branded consumer sector. Since its founding in 1987, TSG has been an active investor in the food, beverage, restaurant, fitness, beauty, personal care, household, apparel & accessories and e-commerce sectors. Representative past and present partner companies include Planet Fitness, IT Cosmetics, REVOLVE, BrewDog, Canyon Bicycles, Dutch Bros, Pabst, Backcountry, Power Stop, vitaminwater, thinkThin, popchips, Stumptown, Smashbox Cosmetics and e.l.f. Cosmetics.

Following the completion of this offering, investment funds affiliated with TSG will own approximately        % of our common stock, or        % if the underwriters exercise in full their option to purchase additional shares of our common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of      , and TSG will continue to have significant influence over us and decisions made by stockholders and may have interests that differ from yours. See “Risk factors—Risks related to our common stock and this offering—TSG will continue to have significant influence over us after this offering, including control over decisions that require the approval of stockholders, which could limit your ability to influence the outcome of matters submitted to stockholders for a vote.”

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