I’ll hazard a guess and say if they throw enough marketing at the brands, they’ll 2-3x sales in a very short timeframe. They are already in Costco, so if they go the way of Meiomi, still lots of upside. However, the sale price still seems like a significant premium, regardless.
Daou’s numbers are far greater than anything being published. daou has been the hottest brand (based on sales growth) for the past 6-10 yrs. They have assembled an all-star team (many former opus sales executives), launched in Europe, Asia Etc and have been incredibly successful at being a global brand. Daniel and his brother George are nothing short of brilliant.
They are actually in the process of building a winery in Italy and plan to duplicate their US-based successes there.
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Someone in my tasting tonight said this out loud, “wow Treasury bought Daou for $1billion!”
Two of us across the table heard “wow The Treasury bought Dow for $1billion!”
Took us both a second to hear it correctly. And to realize what we heard wasn’t a likely scenario lol.
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I feel like I understand the reasons other mega brands are successful (even if they don’t appeal to me personally), but I don’t understand it about Daou.
I guess the tasting room is really snazzy, but that can’t account for most of it.
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I drank a fair amount of their wines when I was starting to get serious about wine 5-6 years ago. At the time I felt that their entry level cab and BDX blend showed pretty good value, and their higher level wines were well made, if pricy, in the modern style.
In the past few years, as they expanded, the quality of the base wines seemed to drop a lot, or perhaps my palate changed. Regardless, I have some fond memories of the wines, and congrats to them on getting the bag.
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Sounds like a winner, then?
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Let’s hope that this doesn’t have adverse impacts on Ruth’s Chris’ annual Daou wine dinner . . .
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That purchase price seems very high. It’s a good fit for Treasury, but still. I wonder if it will actually pay for itself in a reasonable amount of time. Throwing marketing dollars at it only goes so far, and may not lead to a sustained increase in sales. My guess is there’s only so much higher the brand can go.
It actually could be one billion. The price is $900MM now and up to another $100MM in additional earn-outs achieved over the next 3 years based on certain growth projections.
I like this quote . . . .
“DAOU is an award-winning luxury wine business with an outstanding track record for growth and we have grand plans for DAOU to become the next brand with the international scale and luxury credentials of Penfolds. With DAOU, we will be well positioned to connect with a new generation of wine lovers, combining tradition with innovation, culture-led experiences, and global distribution.”
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Needless to say the news traveled via light speed throughout Napa. I struggle to make sense of this number using the “free cash flow discount model” of Warren Buffett or any other valuation model. The only way I see this working out for Treasury is if they plan to 3x this brand. Or more! Daou’s owners and investors have to be elated. Not bad for a brand just 14 years old. Personally, I think Rombauer is a more scalable brand and far better known name, imo.
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That sure is ambitious! Some other descriptors come to mind, but I’ll stick with ambitious.
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I was thinking as well about the value of the assets. They owned 400 acres of so-called premium vineyard land in Paso Robles, which looks like it can range hundred thousand per acre or so. So maybe all in their vineyards and facilities are in the $50-$60 million range. At the 1 billion mark, I was expecting more and assets.
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Is Patrimony included in the sale?
Ford revealed in a statement that Daou currently generates 98% of its sales within the US, but that the producer had the potential “to go global.”
He added that the implied multiple of 12.8 times projected calendar 2023 earnings was a fair price
FWIW
I have some experience with firms selling in Oz and 10-13 times earnings is a common level to base a sell on.
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What is the track record of large base wine brands internationally? You would have to think folks could get similarly styled wines at lower prices given the proximity of Spain, Italy, France. China doesn’t seem like an option given that relationship and the easing of tariffs against Australia. Just curious what the customer base is.
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Yeah, I have a hard time picturing Daou (or any American brand) becoming an international powerhouse. I guess theoretically in markets like China, England, Scandanavia (epic Daou tasting at @Otto_Forsberg’s house!) and India which produce little or no wine?
But maybe they think they’re going to crack the code.
It’s an industrial produced grape beverage
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The appeal is sub $20 Paso cab that is widely available at least around here. It’s a "premium " supermarket wine like Justin
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“Maybe they think”? I’d change that to “they’re almost certain.” A public alcohol bev company, it’s managerial team, and it’s board, don’t make this kind of bet unless they have a high degree of certainty, the resources, the distribution, etc. (Sure, other industries like tech make lower-probability bets).
Yellow Tail was giant here for years despite being an import into a market that produced an ocean of inexpensive wine. Why wouldn’t the reverse be possible/likely?