Market Overview - The total U.S. wine market was estimated at $81.3 billion in 2023, with average wine consumption per resident at 2.68 gallons, down 15% from the 2021 peak[24]. - The number of U.S. active wineries in 2023 was 11,620, representing a 1% decrease compared to 2022, despite the addition of 400 new wineries in 2022[24]. - The Oregon wine industry is expected to grow at a faster rate than the overall domestic wine industry, favoring premium, super premium, and ultra-premium producers[34]. Company Production and Capacity - The Company owns and leases approximately 1,018 acres of land, with 801 acres currently planted or suitable for future vineyard planting, aiming to grow 73% of the grapes needed for its production capacity of 654,000 gallons[41]. - The Company produced approximately 253,974 cases of wine in 2024, an increase from 234,086 cases in 2023, representing a growth of 8.5%[59]. - The company's producing acres yielded approximately 913 tons of grapes in 2024, which is a 5.3% increase from 867 tons produced in 2023[51]. - The total acreage of vineyards owned and leased by the company is 1,356 acres, with 873 acres currently producing grapes[42]. - The company has a production capacity of up to 275,000 cases of wine per year across its facilities, with the Tualatin Winery adding approximately 28,000 cases of capacity[59][61]. - The Company believes its production capacity of 720,000 gallons (303,000 cases) per year provides a competitive advantage over most Oregon wineries[79]. Sales and Marketing Strategy - The Company’s marketing strategy includes direct sales at wineries and through independent distributors, targeting high-quality premium wines[39]. - Direct sales contributed approximately 53.4% of the Company's net sales in 2024, up from 52.4% in 2023[73]. - The Company’s marketing strategy includes direct sales, mailing lists, and distribution through brokers, with increased sales to out-of-state markets[65]. - The Company has one of the largest wine club memberships in Oregon, which supports direct sales and customer engagement[67]. - The Company opened a new sparkling winery, Domaine Willamette Winery, in September 2022, enhancing direct sales and wine tourism opportunities[68]. Financial Performance - The Company reported a net loss of $117,894 for the year ended December 31, 2024, a decrease of 90.2% compared to a net loss of $1,198,593 in 2023[148]. - Net sales revenues increased by $646,328, or 1.7%, to $39,782,442 in 2024, primarily due to a $736,057, or 3.6% increase in direct sales revenue[150]. - The Company sold approximately 186,419 cases of wine in 2024, a decrease of 2.7% from 191,619 cases sold in 2023[145]. - Total revenue for the Company was $40,187,834 in 2024, up from $39,567,828 in 2023, after deducting excise taxes[154]. - Gross profit increased by $1,638,328, or 7.3%, to $24,195,456 in 2024, driven by higher product prices and a greater percentage of direct sales[158]. - The gross margin percentage improved by 3.2 percentage points to 60.8% in 2024, compared to 57.6% in 2023[159]. - Income from operations increased by $1,779,060, or 147.4%, to $571,858 in 2024, attributed to higher gross profit and lower labor expenses[161]. - EBITDA rose by 71.1% to $3,995,135 in 2024, compared to $2,334,629 in 2023, primarily due to a lower net loss[167]. Challenges and Risks - The wine industry is highly competitive, with significant competition from both domestic and foreign producers, which may adversely affect the Company's profitability[98]. - Fluctuations in grape supply due to weather, diseases, or pests could reduce the quantity and quality of wine produced, negatively impacting sales[102]. - A reduction in consumer demand for premium wines could harm the Company's business, influenced by economic conditions and health concerns[104]. - Changes in consumer spending patterns could negatively impact the Company's financial condition and sales[105]. - Increased regulation and taxation in the wine industry could adversely affect the Company's financial results and operations[106]. Debt and Financial Health - As of December 31, 2024, the Company's outstanding long-term debt was approximately $14.0 million, with $2.4 million drawn under its short-term line of credit[96]. - The total long-term debt balance rose to $14,042,910 as of December 31, 2024, up from $7,590,659 in 2023, primarily due to financing for the Estate Hospitality Center and vineyard development[190]. - The Company has incurred a total mortgage principal balance of $14,042,910 on its winery facilities as of December 31, 2024[62]. - The Company has not paid dividends on its Common Stock and does not anticipate doing so in the foreseeable future[129]. - The ability to pay dividends on Preferred Stock is contingent on the Company's financial health and cash generation capabilities[110]. Future Plans and Developments - The Company plans to develop new vineyards on approximately 54 acres of land currently owned or leased, expected to begin producing grapes within the next one to three years[179]. - The Company has continued to invest in vineyard development, with additions costing $237,437 in 2024, down from $419,023 in 2023, indicating a potential shift in capital allocation strategy[212].
Willamette Valley Vineyards(WVVI) - 2024 Q4 - Annual Report