Wine Production and Sales - The Company produced and sold various types of wine under multiple labels, with Pinot Noir being the flagship varietal priced between $30 to $120 per bottle[19][21]. - In 2023, the company produced approximately 234,086 cases (556,700 gallons) of wine, primarily from its 2021 and 2022 harvests[61]. - The total grape harvest in 2023 was 4,192 tons, which includes 1,771 tons grown and 2,421 tons purchased from other growers[66]. - The company's producing acres yielded approximately 867 tons of grapes in 2023, which is roughly 14% below the 10-year average[53]. - The Company sold approximately 191,619 cases of wine in 2023, a 2.3% increase from 187,371 cases in 2022[148]. - Direct-to-consumer retail sales revenue increased by 31.0% in 2023, while in-state sales decreased by 5.0%[154]. - The Company has an estimated aggregate production capacity of 720,000 gallons (303,000 cases) per year, providing a competitive advantage in the market[83]. Financial Performance - The Company reported a net loss of $1,198,593 for the year ended December 31, 2023, an increase of 85.4% compared to a net loss of $646,492 in 2022[151]. - Net sales revenues increased by $5,202,033, or 15.3%, to $39,136,114 in 2023, driven by a 30.4% increase in direct sales revenue[153]. - Total revenue for the year ended December 31, 2023, was $39,567,828, an increase of $5,321,644, or 15.6%, compared to $34,246,184 in 2022[156]. - Gross profit rose to $22,557,128 in 2023, an increase of $3,743,032, or 19.9%, compared to $18,814,096 in 2022[161]. - The gross margin percentage improved to 57.6% in 2023, up 2.2 percentage points from 55.4% in 2022, driven by higher direct sales prices[162]. - Selling, general and administrative expenses increased by $4,403,816, or 22.7%, to $23,764,330 in 2023 from $19,360,514 in 2022[164]. - Loss from operations increased by $660,784, or 120.9%, to $1,207,202 in 2023 compared to $546,418 in 2022, influenced by higher depreciation costs[165]. - EBITDA for 2023 was $2,334,602, reflecting a 22.1% increase from $1,912,012 in 2022[171]. Market Trends and Industry Insights - The U.S. wine industry added 400 new wineries in 2022, marking a 3% increase from 2021, with a total retail value of wine sales rising from $26.3 billion in 2000 to $78.4 billion in 2021[25]. - The Oregon wine industry saw a 22% increase in the total value of wine grapes produced in 2022, reaching $330 million, with Pinot Noir accounting for 71% of planted acreage[29]. - The Company believes that the Oregon wine industry will grow at a faster rate than the overall domestic wine industry in the coming years, favoring premium wine producers[35]. - The number of active wineries in the U.S. decreased by 1% in 2023 compared to the peak in 2022, indicating a slowdown in industry growth[25][26]. - The wine industry is highly competitive, with significant pressure on selling and promotional expenses due to competition from both domestic and foreign wines[102]. Operational Developments - The Company has embarked on a brand expansion project in the Walla Walla AVA, aiming to produce small vintages of Cabernet Sauvignon and other Bordeaux varietals under the Pambrun brand[40]. - The Company opened a sparkling wine facility and tasting room called Domaine Willamette in 2022, featuring its sparkling wines and biodynamic farming practices[40]. - The Company opened a new sparkling winery, Domaine Willamette Winery, in September 2022, enhancing direct sales and wine tourism opportunities[71]. - The Company operates eight additional tasting rooms across various locations, expanding its market presence[75]. - The Company has developed a Winery Ambassador program to enhance customer engagement and facilitate wine ordering[74]. Grape Supply and Quality - The Company anticipates that its vineyards will enable it to grow approximately 73% of the grapes needed to meet its current production capacity of 654,000 gallons (275,000 cases)[42]. - The company’s contracted grape purchases are considered an important component of its long-term growth and risk-management plan[54]. - The company believes that high-quality grapes will be available for purchase in sufficient quantity to meet its requirements[54]. - Fluctuations in grape supply quality and quantity could adversely affect wine production, impacting sales and operational results[106]. Employee and Corporate Structure - The Company had approximately 223 full-time employees and 123 part-time employees as of December 31, 2023[89]. - The Company believes its unique structure as a publicly owned entity will provide significant advantages in gaining market share[83]. Risks and Challenges - Contamination risks could lead to product recalls, damaging the Company's reputation for quality[107]. - A reduction in consumer demand for premium wines could negatively impact the Company's business, influenced by economic conditions and health trends[108]. - Changes in consumer spending patterns could adversely affect the Company's financial condition and sales[109]. - Increased regulation and taxation in the wine industry could negatively impact the Company's financial results[110]. - The Company relies heavily on independent distributors for sales, which represent a substantial portion of net revenue, and any changes in distributor relationships could harm sales[104]. - The Company's common stock is thinly traded, resulting in lower liquidity compared to other investments[112]. - The issuance of additional shares of Preferred Stock could adversely affect the market price and rights of Common Stock holders[116].
Willamette Valley Vineyards(WVVI) - 2023 Q4 - Annual Report