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What changed in WILLAMETTE VALLEY VINEYARDS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WILLAMETTE VALLEY VINEYARDS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+161 added−181 removedSource: 10-K (2024-03-26) vs 10-K (2023-03-28)

Top changes in WILLAMETTE VALLEY VINEYARDS INC's 2023 10-K

161 paragraphs added · 181 removed · 149 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

59 edited+6 added−21 removed55 unchanged
Biggest changeThe following table summarizes the Company’s acreage: ACRES TONS Vineyard Name Total Producing Pre-Production Plantable Non-Plantable Harvest 2022 Harvest 2021 Owned Vineyards WVV Estate 107 69 - - 38 206 242 Tualatin Estate Vineyard 107 61 - - 46 279 184 Ingram Vineyard 86 63 - - 23 364 172 Pambrun Vineyard 87 20 - 30 37 49 28 Loeza Vineyard 62 20 15 23 4 104 43 Louisa Vineyard 53 - - 25 28 - - Maison Bleue Vineyard 37 15 - 19 3 45 30 Bernau Estate 20 13 - - 7 33 35 Dayton Vineyard 40 - - 34 6 - - Lafayette Vineyard 36 - - 36 - - - Jory Claim Vineyard 69 - 20 45 4 - - Sub-Total 704 261 35 212 196 1,080 734 Leased Vineyards Peter Michael Vineyard 79 69 - - 10 461 270 Meadowview Vineyard 49 49 - - - 307 189 Elton Vineyard 59 54 - 2 3 198 163 Ingram Vineyard 110 93 - 17 - 463 194 Bernau Estate 17 7 2 - 8 - - Sub-Total 314 272 2 19 21 1,429 816 Contracted Vineyards* Various 327 327 - - - 1,307 1,522 Total 1,345 860 37 231 217 3,816 3,072 * Contracted acreage is estimated WVV Estate – Established in 1983, the Company’s Estate Vineyard (the “Estate Vineyard”) is located at the Winery location south of Salem, near Turner, Oregon.
Biggest changeThe following table summarizes the Company’s acreage: ACRES TONS Vineyard Name Total Producing Pre-Production Plantable Non-Plantable 2023 2022 Owned Vineyards WVV Estate 107 69 — — 38 216 206 Tualatin Estate Vineyard 107 61 — — 46 190 279 Ingram Vineyard 86 63 — — 23 178 364 Pambrun Vineyard 87 20 — 30 37 45 49 Loeza Vineyard 62 20 15 23 4 133 104 Louisa Vineyard 53 — — 25 28 — — Maison Bleue Vineyard 37 15 — 19 3 37 45 Bernau Estate 20 13 — — 7 68 33 Dayton Vineyard 40 — 15 19 6 — — Lafayette Vineyard 36 — — 36 — — — Jory Claim Vineyard 69 — 23 42 4 — — Sub-Total 704 261 53 194 196 867 1,080 Leased Vineyards Peter Michael Vineyard 79 69 — — 10 264 461 Meadowview Vineyard 49 49 — — — 167 307 Elton Vineyard 59 54 — 2 3 187 198 Ingram Vineyard 110 93 — 17 — 286 463 Bernau Estate 17 9 — — 8 — — Sub-Total 314 274 — 19 21 904 1,429 Contracted Vineyards* Various 605 605 — — — 2,421 1,307 Total 1,623 1,140 53 213 217 4,192 3,816 * Contracted acreage is estimated WVV Estate – Established in 1983, the Company’s Estate Vineyard (the “Estate Vineyard”) is located at the Winery location south of Salem, near Turner, Oregon.
In September 2022, the Company opened a new sparkling winery, Domaine Willamette, located adjacent to Highway 99 in Dundee, Oregon (the “Domaine Willamette Winery, approximately 30 miles southwest of the state’s largest metropolitan area (Portland) and 25 miles northwest of the state’s second-largest metropolitan area (Salem).
In September 2022, the Company opened a new sparkling winery, the Domaine Willamette Winery, located adjacent to Highway 99 in Dundee, Oregon, approximately 30 miles southwest of Portland, the state’s largest metropolitan area, and 25 miles northwest of Salem, the state’s second-largest metropolitan area.
Grape Vines – Beginning in 1997, the Company embarked on a major effort to improve the quality of its flagship varietal by planting new Pinot Noir clones that originated directly from the cool climate growing region of Burgundy rather than the previous source, Napa, California, where winemakers believe the variety adapted to the warmer climate over the many years it was grown there.
Grape Vines Beginning in 1997, the Company embarked on a major effort to improve the quality of its flagship varietal by planting Pinot Noir clones that originated directly from the cool climate growing region of Burgundy rather than the previous source of Napa, California, where winemakers believe the variety adapted to the warmer climate over the many years it was grown there.
We believe the location of the Domaine Willamette Winery along Highway 99 in Dundee provides an ideal location for direct wine sales and wine tourism. Domaine Willamette Winery’s Tasting Room is open daily for wine tasting, restaurant service and education by trained personnel. It features méthode traditionelle sparkling wines and a wine club.
We believe the location of the Domaine Willamette Winery along Highway 99 in Dundee provides an ideal location for direct wine sales and wine tourism. Domaine Willamette Winery’s Tasting Room is open for wine tasting, restaurant service and education by trained personnel. It features méthode traditionelle sparkling wines and a wine club.
Under its Pambrun label, the Company produces and sells the following types of wine in 750 ml bottles: Chrysologue, $65 per bottle; Merlot, $65 per bottle; and Cabernet Sauvignon, $70 per bottle.
Under its Pambrun label, the Company produces and sells the following types of wine in 750 ml bottles: Chrysologue, $70 per bottle; Merlot, $65 per bottle; and Cabernet Sauvignon, $75 per bottle.
The vineyards the Company owns and leases are all certified sustainable by LIVE (Low Input Viticulture and Enology) and Salmon Safe. At full production, the Company anticipates these vineyards would enable the Company to grow approximately 72% of the grapes needed to meet the winery’s current production capacity, of 654,000 gallons (275,000 cases), at its Estate Winery.
The vineyards the Company owns and leases are all certified sustainable by LIVE (Low Input Viticulture and Enology) and Salmon Safe. At full production, the Company anticipates these vineyards would enable the Company to grow approximately 73% of the grapes needed to meet the winery’s current production capacity of 654,000 gallons (275,000 cases) at its Estate Winery.
The culinary offering has now expanded to include “Pairings Wine Dinners,” community-style wine dinners hosted regularly throughout each month. In 2019, the Company added a new experience offered throughout the week called Pairings Exploration that features four wines paired with four small bites to educate guests on food and wine pairing.
The culinary offering has now expanded to include “Pairings Wine Dinners,” which are community-style wine dinners hosted regularly throughout each month. In 2019, the Company added a new experience offered throughout the week called Pairings Exploration that features four wines paired with four small bites to educate guests on food and wine pairing.
The Company’s mission for this brand is to become the premier producer of Pinot Noir in the Pacific Northwest. 4 Under its Domaine Willamette label, the Company produces and sells the following types of wine in 750 ml bottles: Brut, $75 per bottle; Brut Rose, $75; Blanc de Blancs, $85.
The Company’s mission for this brand is to become the premier producer of Pinot Noir in the Pacific Northwest. 4 Under its Domaine Willamette label, the Company produces and sells the following types of wine in 750 ml bottles: Brut, $75 per bottle; Brut Rose, $75 per bottle; and Blanc de Blancs, $115 per bottle.
This brand’s mission is to be the highest quality producer of Bordeaux and Rhone varietals in Southern Oregon. Under its Elton label, the Company produces and sells the following types of wine in 750 ml bottles: Pinot Noir, $75 per bottle and Chardonnay, $75 per bottle.
This brand’s mission is to be the highest quality producer of Bordeaux and Rhone varietals in Southern Oregon. Under its Elton label, the Company produces and sells the following types of wine in 750 ml bottles: Pinot Noir, $79 per bottle; and Chardonnay, $79 per bottle.
Currently, no Oregon winery dominates the Oregon wine market. Several Oregon wineries, however, are older and better established and have greater label recognition than that of the Company. The Company believes that the principal competitive factors in the premium, super premium, and ultra-premium segment of the wine industry are product quality, price, label recognition, and product supply.
Currently, no Oregon winery dominates the Oregon wine market. There are several Oregon wineries that are older, better established and have greater label recognition than that of the Company. The Company believes that the principal competitive factors in the premium, super premium, and ultra-premium segment of the wine industry are product quality, price, label recognition, and product supply.
Numerous private events, charitable and political events are also held at Company locations. Direct sales produce a higher profit margin because the Company can sell its wine directly to consumers at retail prices rather than to distributors at free-on-board or “FOB” prices.
Numerous private events, charitable and political events are also held at Company locations. Direct sales produce a higher profit margin because the Company can sell its wine directly to consumers at retail prices, rather than to distributors at free-on-board prices.
In 2022, the Company has opened a sparkling wine facility and tasting room called Domaine Willamette, at Bernau Estate that features the Company’s sparkling wines, as well as its other reserve wines, and its biodynamic farming practices. 7 Vineyards The Company owns and leases approximately 1,018 acres of land, of which 801 acres are currently planted as vineyards or is suitable for future vineyard planting.
In 2022, the Company opened a sparkling wine facility and tasting room called Domaine Willamette, at Bernau Estate that features the Company’s sparkling wines, as well as its other reserve wines, and its biodynamic farming practices. 7 Vineyards The Company owns and leases approximately 1,018 acres of land, of which 801 acres are either currently planted as vineyards or are suitable for future vineyard planting.
Western Oregon’s latitude (42 o –46 o North) and relationship to the eastern edge of a major ocean is very similar to certain centuries-old wine grape growing regions of France. In the Willamette Valley, permanent vineyard irrigation generally is not required. The average annual rainfall provides sufficient moisture to avoid the need to irrigate.
Western Oregon’s latitude (42 o –46 o North) and relationship to the eastern edge of a major ocean is very similar to certain centuries-old wine grape growing regions of France, such as Burgundy. In the Willamette Valley, permanent vineyard irrigation is generally not required. The average annual rainfall provides sufficient moisture to avoid the need to irrigate.
The two outstanding loans require monthly principal and interest payments of $62,067 for the life of the loans, at annual fixed interest rates of 4.75% and 5.21%, and with maturity dates of 2028 and 2032.
The two outstanding loans require aggregate monthly principal and interest payments of $62,067 for the life of the loans, at annual fixed interest rates of 4.75% and 5.21%, and with maturity dates of 2028 and 2032, respectively.
The Company also operates seven additional tasting rooms at the following locations: (i) historic downtown McMinnville, Oregon; (ii) at its Tualatin Vineyard, Oregon; (iii) Lake Oswego, Oregon; (iv) Happy Valley, Oregon; (v) downtown Walla Walla, Washington; (vi) Vancouver, Washington and (vii) Folsom, California. The Company holds various festivals and events at its locations throughout the year.
The Company also operates eight additional tasting rooms at the following locations: (i) historic downtown McMinnville, Oregon; (ii) at its Tualatin Vineyard, Oregon; (iii) Lake Oswego, Oregon; (iv) Happy Valley, Oregon; (v) downtown Walla Walla, Washington; (vi) Vancouver, Washington; (vii) Folsom, California, and (viii) Bend, Oregon. The Company holds various festivals and events at its locations throughout the year.
To remain competitive in the premium, super premium and ultra-premium market, the Company has embarked on a brand expansion project including developing a brand and winery in the Walla Walla AVA under the names Pambrun, Maison Bleue and Metis.
To remain competitive in the premium, super premium and ultra-premium market, the Company has embarked on a brand expansion project including developing a brand and winery in the Walla Walla American Viticultural Area (“AVA”) under the names Pambrun, Maison Bleue and Metis.
Business Introduction – The Company was formed in May 1988 to produce and sell premium, super premium and ultra-premium varietals. The Company was originally established as a sole proprietorship by Oregon winegrower Jim Bernau in 1983. The Company is headquartered in Turner, Oregon, which is just south of the state capitol of Salem, Oregon.
ITEM 1. BUSINESS Business Introduction – The Company was incorporated in May 1988 to produce and sell premium, super premium and ultra-premium varietals. The Company was originally established as a sole proprietorship by Oregon winegrower Jim Bernau in 1983. The Company is headquartered in Turner, Oregon, which is just south of the state capitol of Salem, Oregon.
The Company believes the location of the Estate Winery next to Interstate 5, and Domaine Willamette Winery next to Highway 99W, significantly increases direct sales opportunities to consumers. The Company believes these locations provide high visibility for the Company to passing motorists, thus enhancing recognition of the Company’s products in retail outlets and restaurants.
The Company believes the locations of the Estate Winery next to Interstate 5, and the Domaine Willamette Winery next to Highway 99W, significantly increase direct sales opportunities to consumers. The Company believes these locations provide high visibility for the Company to passing motorists, enhancing recognition of the Company’s products in retail outlets and restaurants.
Governmental Regulation of the Wine Industry The production and sale of wine is subject to extensive regulation by the U.S. Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau and the Oregon Liquor Control Commission. The Company is licensed by and meets the bonding requirements of each of these governmental agencies.
Governmental Regulation of the Wine Industry The production and sale of wine is subject to extensive regulation by the U.S. Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau (the “TTB”) and the Oregon Liquor and Cannabis Commission (the “OLCC”). The Company is licensed by and meets the bonding requirements of each of these governmental agencies.
However, these regulatory costs and processes are effectively integrated into the Company’s regular operations and consequently do not generally cause significant alternative processes or costs. 13 Employees As of December 31, 2022, the Company had approximately 169 full-time employees and 193 part-time, or on call employees. In addition, the Company hires additional employees for seasonal work as required.
However, these regulatory costs and processes are effectively integrated into the Company’s regular operations and consequently, do not generally cause significant alternative processes or costs. 13 Employees As of December 31, 2023, the Company had approximately 223 full-time employees and 123 part-time, or “on call” employees. In addition, the Company hires additional employees for seasonal work as required.
According to the Oregon Vineyard and Winery Report produced by University of Oregon’s Institute for Policy Research and Engagement (UOIPRE) in 2021, the most recent year such data is available, the overall number of wineries increased from 995 to 1,058 with the biggest increases coming from the Willamette Valley, which added 45.
According to the Oregon Vineyard and Winery Report produced by University of Oregon’s Institute for Policy Research and Engagement (“UOIPRE”) in 2022, the most recent year such data is available, the overall number of wineries increased from 1,058 to 1,116 with the biggest increases coming from the Willamette Valley, which added 38.
The Company takes commercially reasonable precautions in an effort to prevent the spread of phylloxera to other vineyards. 6 As a result of these factors, subject to the risks and uncertainties identified in this Annual Report, the Company believes that long-term prospects for growth in the Oregon wine industry are excellent.
The Company takes commercially reasonable precautions in an effort to prevent the spread of phylloxera to other vineyards. 6 As a result of these factors, subject to the risks and uncertainties identified in this Annual Report on Form 10-K, the Company believes that long-term prospects for growth in the Oregon wine industry are good.
This brand’s mission is to be the highest quality producer of Sparkling Wines in Oregon. Under its Tualatin Estate Vineyards label, the Company currently produces and sells the following type of wine in 750 ml bottles: Semi-Sparkling Muscat, $22 per bottle.
This brand’s mission is to be the highest quality producer of Sparkling Wines in Oregon. Under its Tualatin Estate Vineyards label, the Company currently produces and sells 750 ml bottles of Semi-Sparkling Muscat, $28 per bottle.
Sales made directly to consumers at retail prices result in an increased profit margin equal to the difference between retail prices and distributor prices. For 2022 and 2021, direct sales contributed approximately 46.4% and 41.8% of the Company’s net sales, respectively.
Sales made directly to consumers at retail prices result in an increased profit margin equal to the difference between retail prices and distributor prices. For 2023 and 2022, direct sales contributed approximately 52.4% and 46.4% of the Company’s net sales, respectively.
Under its Griffin Creek label, the Company produces and sells the following types of wine in 750 ml bottles: Syrah, the brand’s flagship, $55 per bottle; Merlot, $48 per bottle; Cabernet Sauvignon, $55 per bottle; Grenache, $55 per bottle; Cabernet Franc, $55 per bottle; Tempranillo, $55 per bottle; Malbec, $55 per bottle; The Griffin (a Bordeaux style blend), $65 per bottle; and Viognier, $35 per bottle.
Under its Griffin Creek label, the Company produces and sells the following types of wine in 750 ml bottles: Syrah, the brand’s flagship, $59 per bottle; Merlot, $55 per bottle; Cabernet Sauvignon, $59 per bottle; Grenache, $59 per bottle; Cabernet Franc, $59 per bottle; Tempranillo, $59 per bottle; Malbec, $59 per bottle; The Griffin (a Bordeaux style blend), $69 per bottle; and Viognier, $39 per bottle.
In 2021, sales to one distributor represented approximately 18.1% of total Company revenue. 12 Competition The wine industry is highly competitive. In a broad sense, wines may be considered to compete with all alcoholic and nonalcoholic beverages.
In 2022, sales to one distributor represented approximately 17.5% of total Company revenue. 12 Competition The wine industry is highly competitive. In a broad sense, wines may be considered to compete with all alcoholic and nonalcoholic beverages.
Management believes that the grapes grown on the Company’s vineyards establish a foundation of quality through the Company’s farming practices, upon which the quality of the Company’s wines is built. Wine produced from grapes grown in the Company’s own vineyards may be labeled as “Estate Bottled” wines.
Management believes that the grapes grown on the Company’s vineyards establish a foundation of quality through the Company’s farming practices, upon which the quality of the Company’s wines is built. Wine produced from grapes grown in the Company’s own vineyards may be labeled as “Estate Bottled” wines. These wines traditionally sell at a premium over non-estate bottled wines.
The Company’s products are distributed in 49 states and the District of Columbia, and there are 3 non-domestic (export) customers. For 2022 and 2021, sales to distributors and wine brokers contributed approximately 53.6% and 58.2% of the Company’s revenue from operations, respectively.
The Company’s products are distributed in 49 states and the District of Columbia, and there are three non-domestic (export) customers. For 2023 and 2022, sales to distributors and wine brokers contributed approximately 47.6% and 53.6% of the Company’s revenue from operations, respectively.
Under its Maison Bleue label, the Company produces and sells the following types of wine in 750 ml bottles: Frontiere Syrah, $75 per bottle; Graviére Syrah, $65 per bottle; Voyageur Syrah, $50 per bottle; Bourgeois Grenache, $50 per bottle; and Voltigeur Viognier, $40 per bottle and Lisette Rose, $30 per bottle.
Under its Maison Bleue label, the Company produces and sells the following types of wine in 750 ml bottles: Frontiere Syrah, $75 per bottle; Graviére Syrah, $70 per bottle; Voyageur Syrah, $58 per bottle; Bourgeois Grenache, $55 per bottle; Voltigeur Viognier, $45 per bottle; and Lisette Rose, $34 per bottle.
The Company’s Winery is equipped with current technical innovations and uses modern laboratory equipment and computers to monitor the progress of each wine through all stages of the winemaking process. 10 The Company’s recent annual grape harvest and wine production is as follows: Tons of Tons of Total Tons Gallons of Harvest Grapes Grapes of Grapes Bulk Production Cases Year Grown Purchased Harvested Purchases Year Produced 2005 1,107 25 1,132 - 2005 72,297 2006 1,454 34 1,488 - 2006 81,081 2007 850 896 1,746 - 2007 115,466 2008 551 874 1,425 57,736 2008 121,027 2009 1,033 1,100 2,133 74,954 2009 132,072 2010 674 371 1,045 4,276 2010 110,224 2011 718 609 1,327 9,620 2011 81,357 2012 658 670 1,328 7,910 2012 91,181 2013 755 1,020 1,775 6,257 2013 95,638 2014 1,211 970 2,181 520 2014 108,958 2015 1,266 1,012 2,278 - 2015 120,794 2016 921 1,052 1,973 47,780 2016 141,416 2017 1,631 1,622 3,253 15,900 2017 151,332 2018 1,501 1,063 2,564 800 2018 164,590 2019 1,572 1,046 2,618 - 2019 172,869 2020 1,031 1,470 2,501 13,173 2020 175,357 2021 1,550 1,522 3,072 6,643 2021 206,954 2022 2,509 1,307 3,816 22,000 2022 186,792 Cases produced per ton harvested often vary between years mainly due to the timing of when the cases are produced.
The Company’s historical annual grape harvest and wine production from 2005 to 2023 is as follows: Tons of Tons of Total Tons Gallons of Harvest Grapes Grapes of Grapes Bulk Production Cases Year Grown Purchased Harvested Purchases Year Produced 2005 1,107 25 1,132 - 2005 72,297 2006 1,454 34 1,488 - 2006 81,081 2007 850 896 1,746 - 2007 115,466 2008 551 874 1,425 57,736 2008 121,027 2009 1,033 1,100 2,133 74,954 2009 132,072 2010 674 371 1,045 4,276 2010 110,224 2011 718 609 1,327 9,620 2011 81,357 2012 658 670 1,328 7,910 2012 91,181 2013 755 1,020 1,775 6,257 2013 95,638 2014 1,211 970 2,181 520 2014 108,958 2015 1,266 1,012 2,278 - 2015 120,794 2016 921 1,052 1,973 47,780 2016 141,416 2017 1,631 1,622 3,253 15,900 2017 151,332 2018 1,501 1,063 2,564 800 2018 164,590 2019 1,572 1,046 2,618 - 2019 172,869 2020 1,031 1,470 2,501 13,173 2020 175,357 2021 1,550 1,522 3,072 6,643 2021 206,954 2022 2,509 1,307 3,816 22,000 2022 186,792 2023 1,771 2,421 4,192 11,236 2023 234,086 Cases produced per ton harvested vary between years mainly due to the timing of when the cases are produced. 10 Sales and Distribution Marketing strategy – The Company markets and sells its wines through a combination of direct sales at the retail locations, directly through mailing lists, and through distributors and wine brokers.
Products – Under its Willamette Valley Vineyards label, the Company produces and sells the following types of wine in 750 ml bottles: Pinot Noir, the brand’s flagship and its largest selling varietal in 2022, $24 to $100 per bottle; Chardonnay, $25 to $50 per bottle; Pinot Gris, $18 per bottle; Pinot Blanc, $25 per bottle; Sauvignon Blanc, $28 per bottle; Gruner Veltliner, $28 per bottle; Rose, $18 to $25 per bottle; Brut, $50 to $65 per bottle; Brut Rose, $65, and Riesling, $14 per bottle (all bottle prices included herein are the suggested retail prices).
Products – Under its Willamette Valley Vineyards label, the Company produces and sells the following types of wine in 750 ml bottles: Pinot Noir, the brand’s flagship and its largest selling varietal, $30 to $120 per bottle; Chardonnay, $28 to $60 per bottle; Pinot Gris, $24 per bottle; Pinot Blanc, $30 per bottle; Sauvignon Blanc, $35 per bottle; Gruner Veltliner, $39 per bottle; Rose, $27 to $32 per bottle ; Brut, $75 per bottle; Brut Rose, $75 per bottle; and Riesling, $19 per bottle (all bottle prices included herein are the suggested retail prices).
Additionally, the Company added 3 acres through a lot line adjustment to add to the parcel. The Company leases 17 adjoining acres. Dayton Vineyard – The Company purchased 40 acres in Dayton, Oregon in December 2016. The Company intends to plant vineyards and construct a new winery at this location.
Additionally, the Company added three acres through a lot line adjustment to add to the parcel. The Company leases 17 adjoining acres. Dayton Vineyard – The Company purchased 40 acres in Dayton, Oregon in December 2016. The Company intends to plant vineyards at this location. Lafayette Vineyard – The Company purchased 36 acres in Lafayette, Oregon in January 2018.
At the Tualatin Vineyard, the Company has water rights to a year-round spring that feeds an irrigation pond. The Company also has water rights at the Pambrun Vineyard and Maison Bleue Vineyards.
At the Tualatin Vineyard, the Company has water rights to a year-round spring that feeds an irrigation pond.
These wineries are also each approximately a 45-minute drive from Portland. Dependence on Major Customers Historically, the Company’s revenue has been derived from thousands of customers annually. In 2022, sales to one distributor represented approximately 17.5% of total Company revenue.
These wineries are each an approximately 45-minute drive from Portland, the state’s largest metropolitan area . Dependence on Major Customers Historically, the Company’s revenue has been derived from thousands of customers annually. In 2023, sales to one distributor represented approximately 14.5% of total Company revenue.
These wines traditionally sell at a premium over non-estate bottled wines. 9 Viticultural conditions – Oregon’s Willamette Valley is recognized as a premier location for growing certain varieties of high-quality wine grapes, particularly Pinot Noir, Pinot Gris, Chardonnay and Riesling.
Viticultural Conditions Oregon’s Willamette Valley is recognized as a premier location for growing certain varieties of high-quality wine grapes, particularly Pinot Noir, Pinot Gris, Chardonnay and Riesling.
Tourists – Oregon wineries are a popular tourist destination with many bed & breakfasts, motels and fine dining restaurants available. The Willamette Valley, Oregon’s leading wine region has approximately 74% of the state’s wineries and vineyards, is home to approximately 781 wineries and was selected by Wine Enthusiast Magazine as its 2016 Wine Region of the Year.
Tourists – Oregon wineries are a popular tourist destination with many bed & breakfasts, motels and fine dining restaurants available. The Willamette Valley, Oregon’s leading wine region has approximately 69% of the state’s wineries and vineyards, is home to approximately 1,016 wineries.
In 1997, the Company purchased Tualatin Vineyards at the Tualatin Winery, which has phylloxera at its site. All current plantings are with, and all future planting will be with, phylloxera-resistant rootstock at that location.
Prior to the discovery of phylloxera in Oregon, all vine plantings in the Company’s Estate Vineyard, in Turner, Oregon, were with non-resistant rootstock. In 1997, the Company purchased Tualatin Vineyards at the Tualatin Winery, which has phylloxera at its site. All current plantings are with, and all future planting will be with, phylloxera-resistant rootstock at that location.
From 2009 to 2021, U.S. wineries grew from 6,357 to 11,053, according to Statista, and consequently can be considered one of the fastest-growing segments in agriculture. The total retail value of wine sales has increased from $26.3 billion in 2000 to $78.4 billion in 2021, according to Statista.
From 2009 to 2021, the number of U.S. wineries grew from 6,357 to 11,053, according to Statista, and consequently the wine industry can be considered one of the fastest-growing segments in agriculture.
These Pinot Noir clones were planted at the Tualatin Vineyards with phylloxera-resistant rootstock and the 667 and 777 clones have been grafted onto seven acres of self-rooted, non-phylloxera-resistant vines at the Company’s Estate Vineyard.
These Pinot Noir clones were planted at the Tualatin Vineyards with phylloxera-resistant rootstock and the 667 and 777 clones have been grafted onto seven acres of self-rooted, non-phylloxera-resistant vines at the Company’s Estate Vineyard. In 2023, crop yields were roughly 14% below the 10-year average and the Company’s producing acres yielded approximately 867 tons of grapes.
The Company believes high quality grapes will be available for purchase in sufficient quantity to meet the Company’s requirements. Additionally, the Company will continue to evaluate opportunities to plant more acres and purchase properties for future vineyards.
Contracted grape purchases are considered an important component of the Company’s long-term growth and risk-management plan. The Company believes high quality grapes will be available for purchase in sufficient quantity to meet the Company’s requirements. Additionally, the Company will continue to evaluate opportunities to plant more acres and purchase properties for future vineyards.
There is a 12,500 square foot outside production area for harvesting, pressing and fermenting wine grapes The Company also has a 23,000 square foot storage building to store its inventory of bottled product with a capacity of approximately 135,000 cases of wine.
The Company also has a 23,000 square foot storage building to store its inventory of bottled product with a capacity of approximately 135,000 cases of wine. The production area is equipped with a settling tank and sprinkler system for disposing of wastewater from the production process in compliance with environmental regulations.
The Company holds U.S. federal and/or Oregon state trademark registrations for the trademarks material to the business, including but not limited to, WILLAMETTE VALLEY VINEYARDS, DOMAINE WILLAMETTE, OREGON’S LANDMARK WINERY, GRIFFIN CREEK, GRIFFIN, ELTON, WILLAMETTE, WVV, SIP.
T he Company holds U.S. federal and/or Oregon state trademark registrations for the trademarks material to the business, including but not limited to: Willamette, Willamette Valley Vineyards, WVV, Domaine Willamette, Willamette Whiskey, Willamette+, Whole Cluster, Give Your Whole Heart with Willamette Whole Cluster, Daedalus Cellars, Elton, Griffin, Griffin Creek, Ingram Estate, It’s Willamette, Dammit!, Jory Claim, Pambrun, Pambrun Cross Logo, SIP.
Wine production – The Company operates on the principle that winemaking is a natural but highly technical process requiring the attention and dedication of the winemaking staff.
Wine production – The Company operates on the principle that winemaking is a natural, but highly technical, process requiring the attention and dedication of the winemaking staff. The Company’s Winery is equipped with current technical innovations and uses modern equipment and software to monitor the progress of each wine through all stages of the winemaking process.
Lafayette Vineyard – The Company purchased 36 acres in January 2018. Jory Claim Vineyard – The Company purchased 69 acres south of Salem, Oregon in 2019.
The Company intends to plant vineyards at this location. Jory Claim Vineyard – The Company purchased 69 acres south of Salem, Oregon in 2019. The Company intends to plant vineyards at this location.
The Company is in the process of gradually replacing infested areas with new, phylloxera-resistant vines. Winery Wine production facility – The Company’s Estate Winery and production facilities are capable of efficiently producing up to 275,000 cases (654,000 gallons) of wine per year, depending on the type of wine produced.
Winery Wine production facility – The Company’s Estate Winery and production facilities are capable of efficiently producing up to 275,000 cases (654,000 gallons) of wine per year, depending on the type of wine produced. In 2023, the Winery produced approximately 234,086 cases (556,700 gallons) of wine, primarily from its 2021 and 2022 harvest.
Furthermore, Oregon’s Willamette Valley has an unpredictable rainfall pattern in early autumn. If significantly above-average rains occur just prior to the autumn grape harvest, the quality of harvested grapes is often materially diminished, thereby affecting that year’s wine quality. Finally, phylloxera, an aphid-like insect that feeds on the roots of grapevines, has been found in several commercial vineyards in Oregon.
Greater worldwide label recognition and larger production levels give Oregon’s competitors certain financial, marketing, distribution, and unit cost advantages. Furthermore, Oregon’s Willamette Valley has an unpredictable rainfall pattern in early autumn. If significantly above-average rains occur just prior to the autumn grape harvest, the quality of harvested grapes is often materially diminished, thereby affecting that year’s wine quality.
The phylloxera at Tualatin Vineyard is believed to have been introduced on the roots of the vines first planted on the property in the southern most section Gewurztraminer in 1971 that the Company partially removed in 2004. The remaining vines, and all others infested, remain productive at low crop levels.
It is not possible to estimate any range of loss that may be incurred due to the phylloxera infestation of the Company’s vineyards. The phylloxera at Tualatin Vineyard is believed to have been introduced on the roots of the vines first planted on the property in the southern-most section Gewurztraminer in 1971 that the Company partially removed in 2004.
Mortgages on properties – The Company’s winery facilities at the Estate Winery are subject to two mortgages with an aggregate principal balance of $5,062,654 at December 31, 2022.
The Company also stores and ages product at the Domaine Willamette Winery location in Dundee, Oregon. Mortgages on properties – The Company’s winery facilities at the Estate Winery are subject to two mortgages with an aggregate principal balance of $4,565,710 at December 31, 2023.
Susceptibility of vineyards to disease – The Tualatin Estate Vineyard and the adjacent leased vineyards are known to be infested with phylloxera, an aphid-like insect, which can destroy vines. It is not possible to estimate any range of loss that may be incurred due to the phylloxera infestation of the Company’s vineyards.
The Company also has water rights at each of the Pambrun and Maison Bleue Vineyards. 9 Susceptibility of vineyards to disease – The Tualatin Estate Vineyard and the adjacent leased vineyards are known to be infested with phylloxera, an aphid-like insect, which can destroy vines.
Because of climate, soil and other growing conditions, we believe the Willamette Valley in western Oregon is ideally suited to growing superior quality Pinot Noir, Chardonnay, Pinot Gris and Riesling wine grapes. Some of Oregon’s Pinot Noir, Pinot Gris and Chardonnay wines have developed outstanding reputations, winning numerous national and international awards.
According to UOIPRE, Oregon case sales in 2022 were 5.7 million, an 8% increase from 2021. Because of climate, soil and other growing conditions, we believe the Willamette Valley in western Oregon is ideally suited to growing superior quality Pinot Noir, Chardonnay, Pinot Gris and Riesling wine grapes.
The production area is equipped with a settling tank and sprinkler system for disposing of wastewater from the production process in compliance with environmental regulations. In addition to the production capacity discussed above, the Tualatin Winery has 20,000 square feet of production capacity. This adds approximately 28,000 cases (66,000 gallons) of wine production capacity to the Company.
In addition to the production capacity discussed above, the Tualatin Winery has 20,000 square feet of production capacity. This adds approximately 28,000 cases (66,000 gallons) of wine production capacity to the Company. The capacity at the Tualatin Winery is available to the Company to meet any anticipated future production needs.
Oregon does have certain disadvantages as a wine-producing region. Oregon’s wines are lesser known to consumers worldwide and the total wine production of Oregon wineries is small relative to California and French competitors. Greater worldwide label recognition and larger production levels give Oregon’s competitors certain financial, marketing, distribution, and unit cost advantages.
Some of Oregon’s Pinot Noir, Pinot Gris and Chardonnay wines have developed outstanding reputations, winning numerous national and international awards. However, Oregon has certain disadvantages as a wine-producing region. Oregon’s wines are lesser known to consumers worldwide, and the total wine production of Oregon wineries is small relative to California and French competitors.
In 2022, the Company purchased an additional 1,307 tons of grapes from other growers. The Company cannot grow enough grapes to meet anticipated production needs, and therefore contracts grape purchases to make up the difference. Contracted grape purchases are considered an important component of the Company’s long-term growth and risk-management plan.
The Company fulfills its remaining grape needs by purchasing grapes from other nearby vineyards at competitive prices. In 2023, the Company purchased an additional 2,421 tons of grapes from other growers. The Company cannot grow enough grapes to meet anticipated production needs, and therefore contracts grape purchases to make up the difference.
In 2022, the Winery produced approximately 186,792 cases (444,107 gallons) primarily from its 2020 and 2021 harvest. The Winery is 12,784 square feet in size and contains areas for processing, fermenting, aging and bottling wine, as well as an underground wine cellar, and administrative offices.
The Winery is 12,784 square feet in size and contains areas for processing, fermenting, aging and bottling wine, as well as an underground wine cellar and administrative offices. There is a 12,500 square foot outside production area for harvesting, pressing and fermenting wine grapes.
Contrary to the California experience, most Oregon phylloxera infestations have expanded very slowly and done only minimal damage. Nevertheless, phylloxera does constitute a significant risk to Oregon vineyards. Prior to the discovery of phylloxera in Oregon, all vine plantings in the Company’s Estate Vineyard, in Turner, Oregon, were with non-resistant rootstock.
Finally, phylloxera, an aphid-like insect that feeds on the roots of grapevines, has been found in several commercial vineyards in Oregon. Contrary to the California experience, most Oregon phylloxera infestations have expanded very slowly and have done only minimal damage. Nevertheless, phylloxera does constitute a significant risk to Oregon vineyards.
However, of concern, consumption growth is mainly amongst those over 60 years old, with the most significant growth area among 70-80-year-olds. Consequently, we believe future positive sales and growth will depend on the industry targeting younger consumers.
Consequently, we believe future positive sales and growth will depend on the industry targeting younger consumers.
Oregon wine grapes produced a 2021 crop with a total value of $271 million, an increase of 72% from 2020 primarily due to a more normal fruit set compared to the preceding 2020 harvest according to UOIPRE. Pinot Noir leads all varieties accounting for 60% of planted acreage and 61% of production.
Planted acres of wine grape vineyards increased by 2,588 acres from 41,899 to 44,487, an increase of 6%, 40,774 acres of which were harvested. Oregon wine grapes produced a 2022 crop with a total value of $330 million, an increase of 22% from 2021. Pinot Noir leads all varieties accounting for 71% of planted acreage and 67% of production.
SAVE, WHOLE CLUSTER, GIVE YOUR WHOLE HEART WITH WILLAMETTE WHOLE CLUSTER, OREGON BLOSSOM, NOG, OREGON NOG, INGRAM ESTATE, IT’S WILLAMETTE, DAMMIT, FULLER, TUALATIN, TUALATIN ESTATE, MAISON BLEUE WINERY, MÉTIS, O’BRIEN, EAGLE’S CLUTCH, WILLAMETTE WINEWORKS, JORY CLAIM, COTE DU BLEUE, PÈRE AMI, KAYAK, DAEDALUS and NATOMA marks. Additionally, the Company has allowed use on PAMBRUN and PIERRE PAMBRUN and PINOT BLACK.
SAVE., Made in Oregon Cellars, Heart Vine, Camp Willamette, Natoma, Salem Hills, Oregon Blossom, Oregon’s Landmark Winery, Oregon’s Nog, Club Willamette, Eagle’s Clutch, Kayak, W and Circle Design and W Willamette Valley Vineyards and Circle Design, Fuller, Maison Bleue Winery, Métis, Willamette Wineworks, Tualatin Estate, Tualatin, Natoma, Côte du Bleue and Père Ami.
According to the report, the U.S. value of direct-to-consumer wine shipments grew by 13.4 percent during 2021. Total wine consumption in the United States has also grown 46 percent since 2005. Additionally, 1.1 Billion gallons of wine were consumed in 2021, an increase of 413 million from 2005 (Statista).
Additionally, 1.1 billion gallons of wine were consumed in 2021, an increase of 413 million from 2005 (Statista). This growth rate has recently slowed and according to Silicon Valley Bank’s 2024 annual report premium wineries faced a challenging landscape in 2023.
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ITEM 1. BUSINESS Forward Looking Statements This Annual Report on Form 10-K, including any information incorporated by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, referred to as the “Securities Act”, and Section 21E of the Securities Exchange Act of 1934, as amended, referred to as the “Exchange Act”.
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According to Wine Business Monthly’s February 2024 report, the number of US active wineries in 2023 stood at 11,620, showing a 1% decrease compared to the peak in 2022. The total retail value of wine sales has increased from $26.3 billion in 2000 to $78.4 billion in 2021, according to Statista.
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These forward-looking statements involve risks and uncertainties that are based on current expectations, estimates and projections about the Company’s business, and beliefs and assumptions made by management.
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According to this report, while the value of premium wine continued to grow, volume sales were anticipated to finish lower for the year.
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Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates”, “predicts,” “potential,” “should,” or “will” or the negative thereof and variations of such words and similar expressions are intended to identify such forward-looking statements.
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Additionally, direct-to-consumer volume and value sales declined and tasting room visitation dropped for the second consecutive year and consumer demand for the overall wine category continued its decline, with fewer U.S. consumers opting for wine and choosing alternatives such as ready-to-drink beverages, spirits, cannabis, or abstaining altogether.
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Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to: availability of financing for growth, availability of adequate supply of high quality grapes, successful performance of internal operations, impact of competition, changes in wine broker or distributor relations or performance, impact of possible adverse weather conditions, impact of reduction in grape quality or supply due to disease or smoke from forest fires, changes in consumer spending.
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A 2023 study conducted by the Wine Market Council of 1,500 U.S. consumers identified a significant downward trend in wine consumption attributed to a general reduction in alcohol consumption, primarily for health reasons.
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In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic economic conditions. Many of these risks as well as other risks that may have a material adverse impact on our operations and business, are identified in Item 1A “Risk Factors” in this Annual Report on Form 10-K.
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Previously considered a “healthy” option on the Healthy Eating Pyramid, alcohol consumption is now cautioned against by organizations like the World Health Organization. 5 Overall, we believe the industry is expected to stabilize in 2024 around the current levels. However, of concern, consumption growth is mainly amongst those over 60 years old, with the most significant growth area among 70-80-year-olds.
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We urge you to carefully review the disclosures we make concerning risks and other factors that may affect our business and operations.
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The remaining vines, and all others infested, remain productive at low crop levels. The Company is in the process of gradually replacing infested areas with new, phylloxera-resistant vines.
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The forward-looking statements in this report are made as of the date hereof, and, except as otherwise required by law, the Company disclaims any intention or obligation to update or revise any forward-looking statements or to update the reasons why the actual results could differ materially from those projected in the forward-looking statements, whether as a result of new information, future events or otherwise.
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Wine consumption has been increasing in the United States, as since 2005, the average annual consumption per U.S. resident has increased by 33 percent to a high of 3.18 gallons in 2021.
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According to Statista revenue in the U.S. wine market is worth $56.65 billion as of 2023, up 7.5% from the prior year, and is expected to grow annually by 5.85% through 2027. Wine Grand View Research in their report believes millennials and younger generations drive this increase as wine consumption has become a sign of social status.
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In addition, Wine Grand View Research believe innovations in flavors, color, and packaging have also contributed to the growth. According to Wine Intelligence Ltd., the total wine-drinking population in the U.S. increased to a record high of 118 million in 2019, an increase of 8 million people drinking wine at least once a year compared with 2015.
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However, according to this same report the number of consumers drinking wine at least once a month declined by 11 million over that same time. Wine Intelligence reports in that this trend is driven by 21-34 year old’s who are moderating consumption and switching to other beverages.
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Yet, Wine Intelligence found that Millennials who remain regular wine drinkers, say they are “more highly involved, adventurous and higher spending wine drinkers than more mature consumers.” According to the Wine Market Council of U.S. wine consumers in 2022, 54% were female and 42% male, with 34% drinking wine more than once a week.
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Further, domestic wine accounted for 66.9% of U.S. sales in 2019, according to a Wines & Vines Analytics.
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Within the total wine market, the five most popular wines in 2022 were cabernet sauvignon, chardonnay, red blends, pinot gris, and pinot noir, according to Nielsen. 5 In 2021, off-premise sales accounted for roughly 80% of the U.S. market, with an average bottle price of $12.05, according to Grand View Research and Statista.
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In addition, a Sovos ShipCompliant and Wines Vines Analytics report from 2022 shows direct-to-consumer wine shipments remained consistent with 2021 at 12% of the total off-premise wine market in the U.S. However, according to this report the average price per bottle within these shipments increased by 9.7% in 2022 versus the prior year, up to $45.16.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn particular, wine production in the United States is dominated by large California wineries that have significantly greater resources than the Company. Additionally, greater worldwide label recognition and larger production levels give many of the Company’s competitors certain unit cost advantages.
Biggest changeIn addition, the wine industry has experienced significant consolidation. Many of the Company’s competitors have greater financial, technical, marketing, and public relations resources than the Company does. In particular, wine production in the United States is dominated by large California wineries that have significantly greater resources than the Company.
Additionally, as the Company focuses its issuance of Preferred Stock to wine enthusiasts likely to purchase the Company’s wines, any failure by the Management to successfully target its stock sales could diminish the opportunity to maximize earnings and offset the administrative, regulatory, and legal costs of this form of capital formation through Preferred Stockholder wine purchases.
Additionally, as the Company focuses its issuance of Preferred Stock to wine enthusiasts likely to purchase the Company’s wines, any failure by management to successfully target its stock sales could diminish the opportunity to maximize earnings and offset the administrative, regulatory, and legal costs of this form of capital formation through preferred stockholder wine purchases.
We use information technologies to manage our operations and various business functions. We rely on various technologies to process, store and report on our business and to communicate electronically between our facilities, personnel, customers, and suppliers as well as for administrative functions and many of such technology systems are independent on one another for their functionality.
We use information technologies to manage our operations and various business functions. We rely on various technologies to process, store and report on our business and to communicate electronically between our facilities, personnel, customers, and suppliers as well as for administrative functions and many of such technology systems are independent of one another for their functionality.
These impediments include, but are not limited to; the classification of our Board of Directors (the “Board”) into three classes serving staggered three-year terms, which makes it more difficult to quickly replace Board members; the ability of our Board, subject to certain limitations under the rules of the NASDAQ Stock Market, to issue shares of preferred stock with rights as it deems appropriate without stockholder approval; a provision that special meetings of our Board may be called only by our chief executive officer or at the request of holders of not less than half of all outstanding shares of our common stock; a provision that any member of the Board, or the entire Board, may be removed from office only for cause; and a provision that our stockholders comply with advance-notice provisions to bring director nominations or other matters before meetings of our stockholders.
These impediments include, but are not limited to; the classification of our Board of Directors (the “Board”) into three classes serving staggered three-year terms, which makes it more difficult to quickly replace Board members; the ability of our Board, subject to certain limitations under the NASDAQ rules, to issue shares of Preferred Stock with rights as it deems appropriate without stockholder approval; a provision that special meetings of our Board may be called only by our chief executive officer or at the request of holders of not less than half of all outstanding shares of our common stock; a provision that any member of the Board, or the entire Board, may be removed from office only for cause; and a provision that our stockholders comply with advance-notice provisions to bring director nominations or other matters before meetings of our stockholders.
Any such extreme weather condition could negatively impact the harvest of grapes at our vineyards and/or the other vineyards that supply us with grapes for our wine. In particular, Oregon’s Willamette Valley has an unpredictable rainfall pattern particularly in early autumn.
Any such extreme weather condition could negatively impact the harvest of grapes at our vineyards and/or the other vineyards that supply us with grapes for our wine. Oregon’s Willamette Valley has an unpredictable rainfall pattern, particularly in early autumn.
As a result, these wines are often sold at a higher price point than wines not produced in Oregon. Because of this recognition, out of state competitors have used Oregon AVAs on bottles and packaging claiming its use as fanciful marketing.
As a result, these Oregon wines are often sold at a higher price point than wines not produced in Oregon. Because of this recognition, out of state competitors have inappropriately used Oregon AVAs on bottles and packaging, claiming its use as fanciful marketing.
Loss of the “Willamette Valley Vineyards” and “Willamette” trademarks could adversely affect the Company’s distinction within the AVA The Company has long held the federal trademarks “Willamette Valley Vineyards” and “Willamette” as used in its wine brands.
Loss of the “Willamette Valley Vineyards” or “Willamette” trademarks could adversely affect the Company’s distinction within the AVA The Company has long held the federal trademarks “Willamette Valley Vineyards” and “Willamette”, as used in its wine brands.
Any one or more of these events or circumstances would have a material adverse impact upon our business, financial condition or results of operations, and may make it more difficult or more expensive to undertake capital-raising efforts in the future. The Company may be unable to pay accumulated dividends on its Series A Redeemable Preferred Stock.
Any one or more of these events or circumstances would have a material adverse impact upon our business, financial condition or results of operations, and may make it more difficult or more expensive to undertake capital-raising efforts in the future. The Company may be unable to pay accumulated dividends on its Preferred Stock.
Because the average active trading volume is thin, there is less opportunity for shareholders to sell their shares of the Company’s common stock on the open market, resulting in the common stock being less liquid than common stock in other publicly traded companies. 17 The Company may face liabilities associated with the offer and sale of our preferred stock.
Because the average active trading volume is thin, there is less opportunity for shareholders to sell their shares of the Company’s common stock on the open market, resulting in the common stock being less liquid than common stock in other publicly traded companies. 17 The Company may face liabilities associated with the offer and sale of its Preferred Stock.
The Oregon wine industry has historically embraced higher standards for wine production than those established by the federal government and other states. As a result, wines from Oregon AVA’s, and specifically the Willamette Valley AVA, have achieved recognition for their quality against other wines in their class.
The Oregon wine industry has historically embraced higher standards for wine production than those established by the federal government and other states. As a result, wines from Oregon AVA’s, and specifically the Willamette Valley AVA, have achieved recognition for their quality when compared against other wines in their class.
Our operations are susceptible to changing weather patterns and other environmental factors Over the past several years, changing weather patterns and climatic conditions have added to the unpredictability and frequency of natural disasters, such as hail storms, wildfires and wind, snow and ice storms.
Our operations are susceptible to changing weather patterns and other environmental factors Over the past several years, changing weather patterns and climatic conditions have added to the unpredictability and frequency of natural disasters, such as hailstorms, wildfires and wind, snow and ice storms.
As a result, although the Series A Redeemable Preferred Stock will continue to earn a right to receive dividends, the Company’s ability to pay dividends will depend, among other things, upon our ability to generate excess cash.
As a result, although the Preferred Stock will continue to earn a right to receive dividends, the Company’s ability to pay dividends will depend, among other things, upon our ability to generate excess cash.
However, although shares of our Series A Redeemable Preferred Stock will earn cumulative dividends, unpaid dividends will not, themselves, accumulate (as might compounding interest on a debt security, for example).
However, although shares of our Preferred Stock will earn cumulative dividends, unpaid dividends will not, themselves, accumulate (as might compounding interest on a debt security, for example).
Additionally, the Company had notes payable to private parties of approximately $1.2 million as of December 31, 2022. Costs of being a publicly-held company may put the Company at a competitive disadvantage As a public company, the Company incurs substantial costs that are not incurred by its competitors that are privately-held.
Additionally, the Company had notes payable to private parties of approximately $1.1 million as of December 31, 2023. Costs of being a publicly-held company may put the Company at a competitive disadvantage As a public company, the Company incurs substantial costs that are not incurred by its competitors that are privately-held.
Bernau, our President and Chief Executive Officer, John Ferry, our Chief Financial Officer and Joe Padilla, our Chief Operating Officer could harm the Company and its reputation and negatively impact its profitability, particularly if one or more of the Company’s key employees resigns to join a competitor or to form a competing company.
Bernau, our President and Chief Executive Officer and John Ferry, our Chief Financial Officer could harm the Company and its reputation and negatively impact its profitability, particularly if one or more of the Company’s key employees resigns to join a competitor or to form a competing company.
The trading volume of the Company’s common stock on NASDAQ is consistently “thin,” in that there is not a great deal of trading activity on a daily basis.
The trading volume of the Company’s common stock (the “Common Stock”) on the NASDAQ Capital Market (“NASDAQ”) is consistently “thin,” in that there is not a great deal of trading activity on a daily basis.
The Company’s Series A Redeemable Preferred Stock bears a cumulative 5.3% dividend based upon the original issue price, or $0.22 per share per annum.
The Company’s Preferred Stock bears a cumulative 5.3% dividend based upon the original issue price, or $0.22 per share per annum.
In extreme events, smoke can produce effects on grapes that make them unusable in the production of wine. The Company cannot predict smoke events, or their potential impact were they to occur. We may not be able to economically insure certain risks The Company maintains insurance policies to cover certain risks.
In extreme events, smoke can produce effects on grapes that make them unusable in the production of wine. The Company cannot predict smoke events, or the potential impact if such events were to occur. We may not be able to economically insure certain risks The Company maintains insurance policies to cover certain risks.
While it is lawful for wine producers meeting the federal and state requirements to list the American Viticultural Area “Willamette Valley” source of their wine grapes and wine on their labels, packaging and advertising materials, the Company has enforced its trademarks on any unauthorized use as a wine brand.
While it is lawful for wine producers meeting the federal and state requirements to list the “Willamette Valley” AVA source of their wine grapes and wine on their labels, packaging and advertising materials, the Company has enforced its trademarks on any unauthorized use as a wine brand.
There can be no assurance that in the future the Company will be able to successfully compete with its current competitors or that it will not face greater competition from other wineries and beverage manufacturers. 15 The Willamette Valley American Viticultural Area (“AVA”) value may be eroded by out of state competition who use it inappropriately or as fanciful marketing Wine grape growing regions in the United States are divided into American Viticultural Areas (AVAs) by the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), of the United States Department of the Treasury, based on distinguishable geographic features.
There can be no assurance that in the future the Company will be able to successfully compete with its current competitors or that it will not face greater competition from other wineries and beverage manufacturers. 15 The Willamette Valley AVA value may be eroded by out of state competition who use it inappropriately or as fanciful marketing Wine grape growing regions in the United States are divided into AVA) by the United States Department of the Treasury’s TTB, based on distinguishable geographic features.
Failure to comply with all conditions of the credit facilities, or to have sufficient funds for operations could adversely affect the Company’s results of operations and shareholder value. As of December 31, 2022, the Company’s outstanding long-term debt was approximately $7.1 million and $0.2 million under its short term line of credit.
Failure to comply with all conditions of the credit facilities, or to have sufficient funds for operations could adversely affect the Company’s results of operations and stockholder value. As of December 31, 2023, the Company’s outstanding long-term debt was approximately $7.6 million, with $2.7 million drawn under its short-term line of credit.
The terms of our Series A Redeemable Preferred Stock are unusual for a company of our size, and we believe the structure of these securities and of the offering are not commonplace among issuers of any type.
The terms of our Preferred Stock are unusual for a company of our size, and we believe the structure of these securities and of the offering is not commonplace among issuers.
Increased regulation and/or taxation could adversely affect the Company The wine industry is subject to extensive regulation by the Federal Alcohol and Tobacco Tax and Trade Bureau (“TTB”) and various foreign agencies, state liquor authorities, such as the Oregon Liquor Control Commission (“OLCC”), and local authorities.
Increased regulation and/or taxation could adversely affect the Company The wine industry is subject to extensive regulation by the TTB and various foreign agencies, state liquor authorities (such as the OLCC) and local authorities.
The Company’s wines also compete with popular priced generic wines and with other alcoholic and, to a lesser degree, non-alcoholic beverages, for shelf space in retail stores and for marketing focus by the Company’s independent distributors, many of which carry extensive brand portfolios.
The Company’s wines also compete with popular generic wines and with other alcoholic and, to a lesser degree, non-alcoholic beverages, for shelf space in retail stores and for marketing focus by the Company’s independent distributors, many of which carry extensive brand portfolios. One result of this intense competition has been upward pressure on the Company’s selling and promotional expenses.
In August 2015, the Company commenced a public offering of our Series A Redeemable Preferred Stock pursuant to a registration statement filed with the SEC. The Company registered this transaction with the securities authorities of the States of Oregon and Washington and, in November 2015, achieved listing status on NASDAQ under the trading symbol WVVIP.
The Company registered this transaction with the securities authorities of the States of Oregon and Washington and, in November 2015, achieved listing status for the Preferred Stock on NASDAQ under the trading symbol “WVVIP”.
Company sales may be harmed to the extent it is not able to compete successfully against such wine or alternative beverage producers’ costs.
Additionally, greater worldwide label recognition and larger production levels give many of the Company’s competitors certain unit cost advantages. Company sales may be harmed to the extent it is not able to compete successfully against such wine or alternative beverage producers’ costs.
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A result of this intense competition has been and may continue to be upward pressure on the Company’s selling and promotional expenses. In addition, the wine industry has experienced significant consolidation. Many of the Company’s competitors have greater financial, technical, marketing, and public relations resources than the Company does.
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In August 2015, the Company commenced a public offering of our Series A Redeemable Preferred Stock (the “Preferred Stock”) pursuant to a registration statement filed with the SEC.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company owned sparkling winery, Domaine Willamette, is located adjacent to Highway 99 in Dundee, Oregon, at Bernau Estate. At Bernau Estate there is also a tasting room and restaurant, retail bottle shop and residence in addition to the winery. The Company carries Property and Liability insurance coverage in amounts deemed adequate by Management.
Biggest changeThe Company-owned sparkling winery, Domaine Willamette, is located adjacent to Highway 99 in Dundee, Oregon, at Bernau Estate. Bernau Estate also features a tasting room and restaurant, retail bottle shop and residence, in addition to the winery. The Company carries Property and Liability insurance coverage in amounts deemed adequate by management.
The Company’s hospitality Center located as the Company’s Estate Winery (the “Hospitality Center”) is a large 35,642 square foot tasting and hospitality facility. The Hospitality Center sits above the underground barrel cellar and tunnel that connects with the Winery.
The Company’s main hospitality Center is located at the Company’s Estate Winery (the “Hospitality Center”) and is a large 35,642 square foot tasting and hospitality facility. The Hospitality Center sits above the underground barrel cellar and tunnel that connects with the Winery.
Of the 1,018 acres of land owned or leased, 533 acres are productive vineyards, 268 acres are pre-productive vineyards or are suitable for future vineyard plantings, and 217 acres are not suitable for vineyard planting or are used or reserved for winery or hospitality purposes.
Of the 1,018 acres of land owned or leased, 535 acres are productive vineyards, 266 acres are pre-productive vineyards or are suitable for future vineyard plantings, and 217 acres are not suitable for vineyard planting or are used or reserved for winery or hospitality purposes.
In 2022, the Winery produced approximately 186,792 cases (444,107 gallons) from its 2020 and 2021 harvest. The Winery is 12,784 square feet in size and contains areas for processing, fermenting, aging, and bottling wine, as well as an underground wine cellar, meeting rooms, and administrative offices.
In 2023, the Winery produced approximately 234,086 cases (556,551 gallons) of wine, mostly from its 2022 and 2021 harvest. The Winery is 12,784 square feet in size and contains areas for processing, fermenting, aging, and bottling wine, as well as an underground wine cellar, meeting rooms, and administrative offices.
See additional discussion of vineyard and wine production facility under Item 1. Business.
For additional discussion of vineyard and wine production facilities, see Item 1. Business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company’s common stock is traded on the NASDAQ Capital Market under the symbol “WVVI.” Holders As of March 28, 2023, the Company had approximately 2,115 common stock shareholders of record.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company’s Common Stock is traded on the NASDAQ Capital Market under the symbol “WVVI.” Holders As of March 26, 2024, the Company had approximately 3,177 Common Stock stockholders of record.
The Company intends to use its earnings to expand its vineyards, winemaking, and customer service facilities. 20 Equity Compensation Plans The Company had no equity compensation plan pursuant to which equity awards could be granted and no outstanding options or other equity awards as of December 31, 2022. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.
The Company intends to use its earnings to expand its vineyards, winemaking, and customer service facilities. 20 Equity Compensation Plans The Company had no equity compensation plan pursuant to which equity awards could be granted and no outstanding options or other equity awards as of December 31, 2023. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.
As some of our shares of common stock are held in “street name” by brokers on behalf of shareholders, we are unable to estimate the total number of beneficial holders of our common stock represented by these record holders. Dividends The Company has paid dividends on the Preferred Stock.
As some of our shares of Common Stock are held in “street name” by brokers on behalf of stockholders, we are unable to estimate the total number of beneficial holders of our Common Stock represented by these record holders. Dividends The Company has paid dividends on the Preferred Stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSee the Statement of Cash Flows set out in our financial statements included herein. 25 The following table provides a reconciliation of net income (loss) (the most comparable GAAP measure) to EBITDA for the periods indicated: Year Ended December 31, 2022 2021 Net Income (loss) $ (646,492 ) $ 2,445,463 Depreciation and amortization expense 2,315,901 1,952,093 Interest expense 367,745 391,272 Interest income (5,496 ) (12,412 ) Income tax expense (benefit) (119,646 ) 1,020,879 EBITDA $ 1,912,012 $ 5,797,295 Sales Wine case sales for the years ended December 31, 2022 and 2021 and ending inventory amounts for the year ended December 31, 2022, are shown in the following table: Cases Sold Cases Sold Cases On-Hand Varietal/Product 2022 2021 December 31, 2022 Pinot Noir/Estate 16,079 17,414 13,147 Pinot Noir/Barrel Select 19,789 13,928 91 Pinot Noir/Founders Reserve 4,519 3,895 3,686 Pinot Noir/Special Designates 14,083 10,384 11,754 Pinot Noir/Whole Cluster 50,674 59,683 17,903 Pinot Gris 33,568 32,991 2,362 Riesling 19,298 22,843 9,833 Chardonnay 5,010 5,831 6,077 Other 24,351 36,848 27,926 Total 187,371 203,817 92,779 Approximately 56% of the Company’s case sales during 2022 were of the Company’s flagship varietal, Pinot Noir.
Biggest changeSee the Statement of Cash Flows set out in our financial statements included herein. 25 The following table provides a reconciliation of net loss (the most comparable GAAP measure) to EBITDA for the periods indicated: Year Ended December 31, 2023 2022 Net loss $ (1,198,593 ) $ (646,492 ) Depreciation and amortization expense 3,426,977 2,315,901 Interest expense 594,106 367,745 Interest income (27 ) (5,496 ) Income tax benefit (487,861 ) (119,646 ) EBITDA $ 2,334,602 $ 1,912,012 Sales Wine case sales for the years ended December 31, 2023 and 2022 and ending inventory amounts for the year ended December 31, 2023, are shown in the following table: Cases Sold Cases Sold Cases On-Hand Varietal/Product 2023 2022 December 31, 2023 Pinot Noir/Estate 17,334 16,079 21,554 Pinot Noir/Barrel Select 10,093 19,789 1,185 Pinot Noir/Founders Reserve 3,988 4,519 5,091 Pinot Noir/Special Designates 12,706 14,083 16,028 Pinot Noir/Whole Cluster 60,070 50,674 32,697 Pinot Gris 33,279 33,568 9,109 Riesling 19,982 19,298 7,879 Chardonnay 5,191 5,010 5,246 Other 28,976 24,351 32,858 Total 191,619 187,371 131,647 Approximately 54% of the Company’s case sales during 2023 were of the Company’s flagship varietal, Pinot Noir.
In December of 2005, the Company entered into a revolving line of credit agreement with Umpqua Bank that allows borrowing up to $2,000,000 against eligible accounts receivable and inventories, as defined in the agreement. The revolving line bears interest at prime less 0.5%, with a floor of 3.25%, is payable monthly, and is subject to renewal.
In December of 2005, the Company entered into a revolving line of credit agreement with Umpqua Bank (the “Credit Agreement”) that allows borrowing up to $2,000,000 against eligible accounts receivable and inventories, as defined in the agreement. The revolving line bears interest at prime less 0.5%, with a floor of 3.25%, is payable monthly, and is subject to renewal.
The Company plans to address long-term grape supply needs by developing new vineyards on properties currently owned or secured by lease. The Company has approximately 37 acres of vineyards that have been planted but are in the pre-productive stage. We anticipate that these vineyards will begin producing grapes within the next one to three years.
The Company plans to address long-term grape supply needs by developing new vineyards on properties currently owned or secured by lease. The Company has approximately 53 acres of vineyards that have been planted but are in the pre-productive stage. We anticipate that these vineyards will begin producing grapes within the next one to three years.
We have the capacity to store and process about 275,000 cases of wine per year at the Estate Winery but can expand that capacity by utilizing storage at the Tualatin Winery, as well as temporary storage. Management continues to invest in new production technologies intended to increase the efficiency and quality of wine production.
We have the capacity to store and process about 275,000 cases of wine per year at the Estate Winery but can expand that capacity by utilizing storage at the Tualatin Winery and temporary storage. Management continues to invest in new production technologies intended to increase the efficiency and quality of wine production.
During 2022, the Company did not choose to utilize the wine production facilities at the Tualatin Winery but did utilize it for wine storage. The Tualatin Winery has capacity to produce approximately 28,000 cases of wine. Management intends to fully utilize the production capacity at the Estate Winery before expanding into the Tualatin Winery.
During 2023, the Company did not utilize the wine production facilities at the Tualatin Winery but did utilize it for wine storage. The Tualatin Winery has capacity to produce approximately 28,000 cases of wine. Management intends to fully utilize the production capacity at the Estate Winery before expanding into the Tualatin Winery.
Additionally, the Company has made a significant investment in developing alternative wine brands, products, direct sales methods, and venues. 22 Periodically, the Company will sell grapes or bulk wine, which primarily consists of inventory that does not meet Company standards or is in excess to production targets. However, this activity is not a significant part of the Company’s activities.
Additionally, the Company has made a significant investment in developing alternative wine brands, products, direct sales methods, and locations. 22 Periodically, the Company will sell grapes or bulk wine, which primarily consist of inventory that does not meet Company standards or is in excess of production targets. However, this activity is not a significant part of the Company’s activities.
For a discussion of these forward-looking statements, and of important factors that could cause results to differ materially from the forward-looking statements contained in this report, see Item 1 of Part I, “Business – Forward-Looking Statements.” While our significant accounting policies are described in more detail in Note 1 to our financial statements, we believe the following accounting policies are those most critical to the judgements and estimates used in the preparation of our financial statements.
For a discussion of these forward-looking statements, and of important factors that could cause results to differ materially from the forward-looking statements contained in this report, see “Cautionary Note on Forward-Looking Statements.” While our significant accounting policies are described in more detail in Note 1 to our financial statements, we believe the following accounting policies are those most critical to the judgements and estimates used in the preparation of our financial statements.
The grapes are processed into wine, which is typically bottled and available for sale between five months and two years from date of harvest. The Company received $1,868,742 and $1,166,116 worth of grapes from long-term contracts during the years ended December 31, 2022 and 2021, respectively.
The grapes are processed into wine, which is typically bottled and available for sale between five months and two years from the date of harvest. The Company received $3,313,483 and $1,868,742 worth of grapes from long-term contracts during the years ended December 31, 2023 and 2022, respectively.
Direct-to-consumer sales generate a higher gross profit margin than national sales to distributors due to differentiated pricing between these segments. 26 Wine Inventory The Company had 92,779 cases of bottled wine on-hand at the end of 2022.
Direct-to-consumer sales generate a higher gross profit margin than national sales to distributors due to differentiated pricing between these segments. 26 Wine Inventory The Company had 131,647 cases of bottled wine on-hand at the end of 2023.
The Company had 10,001 wine club memberships for the year ended December 31, 2022, a net increase of 1,376 when compared to 2021. Additionally, the Company’s preferred stock sales since August 2015 have resulted in approximately 11,778 preferred stockholders many of which the Company believes are wine enthusiasts.
The Company had 11,541 wine club memberships for the year ended December 31, 2023, a net increase of 1,540 when compared to 2022. Additionally, the Company’s Preferred Stock sales since August 2015 have resulted in approximately 14,385 preferred stockholders, many of which the Company believes are wine enthusiasts.
Production Capacity Current production volumes are within the current production capacity constraints of the Winery when including storage capacity at the Tualatin Winery and utilization of temporary storage when appropriate. In 2022, 186,792 cases were produced.
Production Capacity Current production volumes are within the current production capacity constraints of the Winery, when including storage capacity at the Tualatin Winery and utilization of temporary storage when appropriate. In 2023, 234,086 cases were produced.
These three sales channels represent 46.4%, 17.5% and 36.1%, of total revenue for the year ended December 31, 2022, respectively. This compares to 41.7%, 18.1% and 40.2% of total revenue for the year ended December 31, 2021, respectively. Miscellaneous and grape sales are included in direct-to-consumer sales.
These three sales channels represent 52.4%, 14.4% and 33.2%, of total revenue for the year ended December 31, 2023, respectively. This compares to 46.4%, 17.5% and 36.1% of total revenue for the year ended December 31, 2022, respectively. Miscellaneous and grape sales are included in direct-to-consumer sales.
Grape Supply For the 2022 and 2021 vintages, the Company grew approximately 66% and 50% of all grapes harvested, respectively. The remaining grapes harvested were purchased from other growers. In 2022 and 2021, 8% and 30% of grapes harvested were purchased under short-term contracts, and 26% and 19% of grapes harvested were purchased under long-term contracts, respectively.
Grape Supply For the 2023 and 2022 vintages, the Company grew approximately 42% and 66% of all grapes harvested, respectively. The remaining grapes harvested were purchased from other growers. In 2023 and 2022, 18% and 8% of grapes harvested were purchased under short-term contracts, and 40% and 26% of grapes harvested were purchased under long-term contracts, respectively.
Management believes sufficient bulk wine inventory is on-hand to bottle 289,438 cases of wine in 2022 and that sufficient stock is on hand to meet current demand levels until the 2022 vintage becomes available.
Management believes sufficient bulk wine inventory is on-hand to bottle approximately 330,000 cases of wine in 2023, and that sufficient stock is on hand to meet current demand levels until the 2023 vintage becomes available.
Management believes this decrease is related to reduced availability of product at the beginning of 2022. The Company pays alcohol excise taxes to both the OLCC and to the TTB. These taxes are based on product sales volumes. The Company is liable for the taxes upon the removal of product from the Company’s warehouse on a per gallon basis.
The Company pays alcohol excise taxes to both the OLCC and to the TTB. These taxes are based on product sales volumes. The Company is liable for the taxes upon the removal of product from the Company’s warehouse on a per gallon basis.
Total cash provided from financing activities for the year ended December 31, 2022 was $4,737,293, which primarily consisted of proceeds from the issuance of Preferred Stock and an increase in long term debt with Farm Credit Services, being partially offset by the payment of a preferred stock dividend.
Total cash provided from financing activities for the year ended December 31, 2023 was $6,615,626, which primarily consisted of proceeds from the issuance of Preferred Stock and an increase in the line of credit and long term debt, being partially offset by the payment of a preferred stock dividend.
At December 31, 2022, wine inventory included 92,779 cases of bottled wine and 688,154 gallons of bulk wine in various stages of the aging process. Case wine is expected to be sold over the next 12 to 24 months and generally before the release date of the next vintage.
At December 31, 2023, wine inventory included 131,647 cases of bottled wine and 785,363 gallons of bulk wine in various stages of the aging process. Cased wine is expected to be sold over the next 12 to 24 months (and generally before the release date of the next vintage).
The Company also pays taxes on the grape harvest on a per ton basis to the OLCC for the Oregon Wine Board. The Company’s excise related taxes for the years ended December 31, 2022 and 2021 were $312,103 and $384,498, a decrease of $72,395, for the year ended December 31, 2022 over the prior year period.
The Company also pays taxes on the grape harvest on a per ton basis to the OLCC for the Oregon Wine Board. The Company’s excise related taxes for the years ended December 31, 2023 and 2022 were $431,714 and $312,103, respectively, an increase of $119,611, for the year ended December 31, 2023 over the prior year period.
The increase in retail sales revenues in 2022 compared to 2021 was mostly a result of increased revenues from the opening of four new retail locations during 2022.
The increase in retail sales revenues in 2023 compared to 2022 was mostly a result of increased revenues from new retail locations being open for longer during 2023.
The Company has three primary sales channels: direct-to-consumer retail sales, in-state sales to distributors, and out-of-state sales to distributors. During 2022, revenues from retail sales increased 18.6%, revenues from in-state sales increased 2.8%, and revenues from out-of-state sales decreased 4.3%, compared to 2021.
The Company has three primary sales channels: direct-to-consumer retail sales, in-state sales to distributors, and out-of-state sales to distributors. During 2023, revenues from retail sales increased 31.0%, revenues from in-state sales decreased 5.0%, and revenues from out-of-state sales increased 6.1%, compared to 2022.
The Company received $639,677 and $1,762,282 worth of grapes from short-term contracts during the years ended December 31, 2022 and 2021, respectively. Total grapes payable was $1,208,673 and $1,388,601 as of December 31, 2022 and 2021, respectively. Grapes payable includes $934,371 and $538,677 of grapes payable from long-term contracts as of December 31, 2022 and 2021, respectively.
The Company received $1,941,572 and $639,677 worth of grapes from short-term contracts during the years ended December 31, 2023 and 2022, respectively. Total grapes payable was $2,446,233 and $1,208,673 as of December 31, 2023 and 2022, respectively. Total grapes payable includes $1,357,649 and $934,371 of grapes payable from long-term contracts as of December 31, 2023 and 2022, respectively.
This increase was generally driven by an increase in sales revenues partially offset by a higher cost of sales. The gross margin percentage was 55.4% and 58.7% for the years ended December 31, 2022 and 2021, respectively, a decrease of 3.3 percentage points, for the year ended December 31, 2022 over the prior year period.
This increase was generally driven by an increase in sales revenues in 2023. The gross margin percentage was 57.6% and 55.4% for the years ended December 31, 2023 and 2022, respectively, an increase of 2.2 percentage points, for the year ended December 31, 2023 over the prior year period.
When considering joint ownership, we believe these new shareholders represent approximately 17,667 potential customers of the Company. The Company also has approximately 2,115 common shareholders which we believe represent an estimated 3,171 potential customers when considering joint ownership.
When considering joint ownership, we believe these new shareholders represent approximately 21,577 potential customers of the Company. The Company also has approximately 3,177 shareholders of Common Stock which we believe represent an estimated 4,765 potential customers when considering joint ownership.
Direct sales included $97,652 and $103,471 of bulk wine and grape sales in the years ended December 31, 2022 and 2021, respectively, and represented approximately 46.4% and 41.8% of the Company’s total revenue for 2022 and 2021, respectively, while the Company’s remaining revenues came from sales through distributors. 23 The following table sets forth certain information regarding the Company’s revenue, excluding excise taxes, from the Winery’s operations for the twelve months ended December 31, 2022 and 2021: Year ended December 31, 2022 2021 Retail sales $ 15,786,241 $ 13,306,156 In-state sales 5,987,410 5,824,130 Out-of-state sales 12,374,881 12,937,605 Bulk wine/miscellaneous sales 97,652 103,471 Total revenue 34,246,184 32,171,362 Less excise taxes (312,103 ) (384,498 ) Sales, net $ 33,934,081 $ 31,786,864 Retail sales revenues for the years ended December 31, 2022 and 2021 were $15,786,241 and $13,306,156 respectively, an increase of $2,480,085, or 18.6%, for the year ended December 31, 2022 over the prior year period.
Direct sales included $69,924 and $97,652 of bulk wine and grape sales in the years ended December 31, 2023 and 2022, respectively, and represented approximately 52.4% and 46.4% of the Company’s total revenue for 2023 and 2022, respectively, while the Company’s remaining revenues came from sales through distributors. 23 The following table sets forth certain information regarding the Company’s revenue, excluding excise taxes, from the Winery’s operations for the twelve months ended December 31, 2023 and 2022: Year ended December 31, 2023 2022 Retail sales $ 20,680,024 $ 15,786,241 In-state sales 5,686,517 5,987,410 Out-of-state sales 13,131,363 12,374,881 Bulk wine/miscellaneous sales 69,924 97,652 Total revenue 39,567,828 34,246,184 Less excise taxes (431,714 ) (312,103 ) Sales, net $ 39,136,114 $ 33,934,081 Retail sales revenues for the years ended December 31, 2023 and 2022 were $20,680,024 and $15,786,241 respectively, an increase of $4,893,783, or 31.0%, for the year ended December 31, 2023 over the prior year period.
Bulk Wine/miscellaneous sales revenues for the years ended December 31, 2022 and 2021 were $97,652 and $103,471, respectively, a decrease of $5,819, or 5.6%, for the year ended December 31, 2022, over the prior year period.
Bulk Wine/miscellaneous sales revenues for the years ended December 31, 2023 and 2022 were $69,924 and $97,652, respectively, a decrease of $27,728, or 28.4%, for the year ended December 31, 2023, over the prior year period.
Interest expense was $367,745 and $391,272 for the years ended December 31, 2022 and 2021, respectively, a decrease of $23,527, or 6.0%, for the year ended December 31, 2022 over the prior year period. The decrease in interest expense was mainly due to the decrease in average loan balances in 2022 compared to the previous year.
Interest expense was $594,106 and $367,745 for the years ended December 31, 2023 and 2022, respectively, an increase of $226,361, or 61.6%, for the year ended December 31, 2023 over the prior year period. The increase in interest expense was mainly due to the increase in average loan balances in 2023 compared to the previous year.
Net income (loss) applicable to common shareholders was $(2,512,943) and $1,001,180, for the years ended December 31, 2022 and 2021, respectively, a decrease of $3,514,123, or 351.0%, for the year ended December 31, 2022 over the prior year period. This decrease was primarily driven by lower net income and higher preferred stock dividends.
Net loss applicable to common shareholders was $3,245,690 and $2,512,943, for the years ended December 31, 2023 and 2022, respectively, an increase of $732,747, or 29.2%, for the year ended December 31, 2023 over the prior year period. This increase was primarily driven by a higher net loss and higher preferred stock dividends.
The Company believes that cash flow from operations and funds available under its existing credit facilities and preferred stock program will be sufficient to meet the Company’s foreseeable short and long-term operating needs.
The Company believes that cash flow from operations and funds available under its existing credit facilities and preferred stock program will be sufficient to meet the Company’s foreseeable short and long-term operating needs. Inflation The Company’s management does not believe inflation has had a material impact on the Company’s revenues or loss during 2023 or 2022.
Other income, net, was $142,529 and $155,183 for the years ended December 31, 2022 and 2021, respectively, a decrease of $12,654, or 8.2%, for the year ended December 31, 2022 over the prior year period.
Other income, net, was $114,827 and $142,529 for the years ended December 31, 2023 and 2022, respectively, a decrease of $27,702, or 19.4%, for the year ended December 31, 2023 over the prior year period.
The decrease in case sales in 2022 compared to 2021 was primarily the result of a decrease in shipments through distributors, partially offset by an increase in direct to consumer cases. The Company has three primary sales channels: direct-to-consumer sales, in-state sales to distributors, and out-of-state sales to distributors.
The increase in case sales in 2023 compared to 2022 was the result of an increase in direct-to-consumer case sales. The Company has three primary sales channels: 1) direct-to-consumer sales; 2) in-state sales to distributors; and 3) out-of-state sales to distributors.
This decrease was due primarily to the timing of removals in 2022. Cost of Sales was $15,119,985 and $13,121,191 for the years ended December 31, 2022 and 2021, respectively, an increase of $1,998,794, or 15.2%, for the year ended December 31, 2022, over the prior year period.
This increase was due primarily to a larger crop processed and the timing of removals in 2023. Cost of Sales was $16,578,986 and $15,119,985 for the years ended December 31, 2023 and 2022, respectively, an increase of $1,459,001, or 9.6%, for the year ended December 31, 2023, over the prior year period.
Case sales of Pinot Gris and Riesling follow with approximately 18% and 10% of case sales each, respectively. The Company sold approximately 187,371 and 203,817 cases of Company-produced wine during the years ended December 31, 2022 and 2021, respectively. This represents a decrease of approximately 16,447 cases, or 8.1% in 2022 compared to 2021.
Case sales of Pinot Gris and Riesling follow with approximately 17% and 10% of case sales, respectively. The Company sold approximately 191,619 and 187,371 cases of Company-produced wine during the years ended December 31, 2023 and 2022, respectively. This represents an increase of approximately 4,248 cases, or 2.3%, 2023 compared to 2022.
This increase was primarily as a result of more sales coming from tasting rooms which have higher selling costs and from costs related to the opening and development of four new tasting room and restaurant locations.
This increase was primarily as a result of more sales coming from tasting rooms which have higher selling costs and from newer locations being open for longer in 2023.
In July 2021, the Company renewed the credit agreement until July 31, 2023. In November 2022, the Company increased the borrowing line up to $5,000,000. The Company had an outstanding line of credit balance of $166,617 at December 31, 2022, at an interest rate of 6.5%, and zero outstanding balance at December 31, 2021.
In July 2021, the Company renewed the Credit Agreement until July 31, 2023. In November 2022, the Company increased the borrowing line up to $5,000,000. In July 2023 the line of credit was renewed for an additional two years.
As of December 31, 2022, the Company had a total long-term debt balance of $7,062,654, including the portion due in the next year, owed to Farm Credit Services, exclusive of debt issuance costs of $119,237. As of December 31, 2021, the Company had a total long-term debt balance of $5,535,096, exclusive of debt issuance costs of $132,483.
As of December 31, 2022, the Company had a total long-term debt balance of $7,062,654, exclusive of debt issuance costs of $119,237.
The Company had net sales revenues of $33,934,081 and $31,786,864 for the years December 31, 2022 and 2021, respectively, an increase of $2,147,217, or 6.8%, for the year ended December 31, 2022 over the prior year period primarily as a result of an increase in revenue from direct sales of $2,459,483, or 18.5% in 2022 compared to 2021, which more than offset a decrease in revenue from sales to distributors of $312,266 or 1.7% in 2022 compared to 2021.
The Company had net sales revenues of $39,136,114 and $33,934,081 for the years December 31, 2023 and 2022, respectively, an increase of $5,202,033, or 15.3%, for the year ended December 31, 2023 over the prior year period primarily as a result of an increase in revenue from direct sales of $4,786,730, or 30.4% in 2023 compared to 2022, and an increase in revenue from sales to distributors of $415,303 or 2.3% in 2023 compared to 2022.
The Company sold approximately 187,371 and 203,817 cases of produced wine during the years ended December 31, 2022 and 2021, respectively, a decrease of 16,447 cases, or 8.1% in the current year over the prior year. The decrease in case sales was primarily the result of reduced shipments to distributors in 2022 when compared to 2021.
The Company sold approximately 191,619 and 187,371 cases of produced wine during the years ended December 31, 2023 and 2022, respectively, an increase of 4,248 cases, or 2.3% in the current year over the prior year. The increase in case sales was the result of more direct to consumer sales in 2023 when compared to 2022.
The Winery bottled 186,792 cases during the year ended December 31, 2022. Results of Operations 2022 compared to 2021 Net income (loss) was $(646,492) and $2,445,463, for the years ended December 31, 2022 and 2021, respectively, a decrease of $3,091,955, or 126.4%, for the year ended December 31, 2022 over the prior year period.
The Winery bottled 234,086 cases during the year ended December 31, 2023. Results of Operations 2023 compared to 2022 Net loss was $1,198,593 and $646,492, for the years ended December 31, 2023 and 2022, respectively, an increase of $552,101, or 85.4%, for the year ended December 31, 2023 over the prior year period.
In-state sales revenues for the years ended December 31, 2022 and 2021 were $5,987,410 and $5,824,130, respectively, an increase of $163,280, or 2.8%, for the year ended December 31, 2022 over the prior year period. Out-of-state sales revenues for the years ended December 31, 2022 and 2021 were $12,374,881 and $12,937,605, respectively, a decrease of $562,724, or 4.3%.
In-state sales revenues for the years ended December 31, 2023 and 2022 were $5,686,517 and $5,987,410, respectively, a decrease of $300,893, or 5.0%, for the year ended December 31, 2023 over the prior year period. Out-of-state sales revenues for the years ended December 31, 2023 and 2022 were $13,131,363 and $12,374,881, respectively, an increase of $756,482, or 6.1%.
This change was primarily the result of an increase in fruit and packaging costs in 2022 and the mix of vintages sold between the two periods. Gross profit was $18,814,096 and $18,665,673 for the years ended December 31, 2022 and 2021, respectively, an increase of $148,423, or 0.8%, for the year ended December 31, 2022 over the prior year period.
This change was primarily the result of increased sales and the mix of sales between direct and distributors between the two periods. Gross profit was $22,557,128 and $18,814,096 for the years ended December 31, 2023 and 2022, respectively, an increase of $3,743,032 or 19.9%, for the year ended December 31, 2023 over the prior year period.
Income (loss) per common share after preferred dividends was $(0.51) and $0.20 for the years ended December 31, 2022 and 2021, respectively, a decrease of $0.71, or 351.0%, for the year ended December 31, 2022 over the prior year period. The primary reason for this decrease was a decrease in net income in 2022 compared to 2021.
Loss per common share after preferred dividends was $0.65 and $0.51 for the years ended December 31, 2023 and 2022, respectively, an increase of $0.14, or 29.2%, for the year ended December 31, 2023 over the prior year period.
The debt in 2022 with Farm Credit Services was used to finance completion of new restaurant and tasting room locations and provide operating capital. 28 As of December 31, 2022, the Company had an installment note payable of $1,201,038, due in quarterly payments of $42,534 through February 2032, associated with the purchase of property in the Dundee Hills AVA.
The debt with AgWest was used to finance the Estate Hospitality Center and subsequent remodels, invest in winery equipment to increase the Company’s winemaking capacity, acquire new vineyard land for future development and provide operating capital. 28 As of December 31, 2023, the Company had an installment note payable of $1,100,735, due in quarterly payments of $42,534 through February 2032, associated with the purchase of property in the Dundee Hills AVA.
The Company has approximately 231 acres of land that is suitable for future vineyard development. The Company intends to seek out opportunities to acquire land for future grape plantings in order to continue to increase available quantities, maintain control over farming practices, more effectively manage grape costs and mitigate uncertainty associated with long-term contracts.
The Company intends to seek out opportunities to acquire land for future grape plantings in order to continue to increase available quantities, maintain control over farming practices, more effectively manage grape costs and mitigate uncertainty associated with long-term contracts. 27 Wine Quality Continued awareness of the Willamette Valley Vineyards brand and the quality of its wines was enhanced by national and regional media coverage throughout 2023 including the accolades below.
Provision for income tax expense (benefit) was $(119,646) and $1,020,879 for the years ended December 31, 2022 and 2021, respectively, a decrease of $1,140,525, or 111.7%, for the year ended December 31, 2022 over the prior year period.
Provision for income tax benefit was $487,861 and $119,646 for the years ended December 31, 2023 and 2022, respectively, an increase of $368,215, for the year ended December 31, 2023 over the prior year period.
Total cash used in investing activities for the year ended December 31, 2022 was $15,479,674, which primarily consisted of cash used on construction activity and vineyard development costs.
This was partially offset by increased depreciation, a reduction in accounts receivable and an increase in grapes payable. Total cash used in investing activities for the year ended December 31, 2023 was $4,726,970, which primarily consisted of cash used on construction activity and vineyard development costs.
Total cash used in operating activities for the year ended December 31, 2022 was $2,666,228, which resulted primarily from a net loss in 2022 as well as increased inventory, income tax receivable and accounts receivable, being partially offset by increased depreciation and non-cash lease expense.
The Company had cash balances of $238,482, at December 31, 2023. Total cash used in operating activities for the year ended December 31, 2023 was $1,998,850, which resulted primarily from a net loss in 2023 as well as increased inventory and lease liabilities.
The primary reason for this decrease was higher net sales revenues being more than offset by higher cost of sales and operating expenses for the year ended December 31, 2022, compared to the previous year.
The primary reason for this increase was a higher gross profit from additional sales revenue, being more than offset by higher operating expenses. This was primarily related to higher tasting room expenses as a result of some locations being open for longer for the year ended December 31, 2023, compared to the previous year.
This decrease in income tax expense in 2022 compared to 2021 was primarily the result of lower income from operations in 2022, and higher tax depreciation deductions related to the higher capital spend.
This increase in income tax benefit in 2023 compared to 2022 was primarily the result of a higher loss from operations in 2023 and an increase in the effective tax rate in 2023.
This decrease in the gross profit percentage was primarily the result of an overall decrease in per case margins mostly due to the release of wines in 2022 from vintages produced with higher product costs for item such as packaging and vineyard labor. 24 Selling, general and administrative expenses were $19,360,514 and $14,975,654 for the years ended December 31, 2022 and 2021, respectively, an increase of $4,384,860, or 29.3%, for the year ended December 31, 2022 over the prior year period.
This increase in the gross profit percentage was primarily the result of higher direct sales prices and more sales coming from direct to consumer sales in 2023. 24 Selling, general and administrative expenses were $23,764,330 and $19,360,514 for the years ended December 31, 2023 and 2022, respectively, an increase of $4,403,816, or 22.7%, for the year ended December 31, 2023 over the prior year period.
As of December 31, 2022, the Company was out of compliance with a debt covenant. The Company has received a waiver from Umqua Bank waiving this violation until the next measurement date of December 31, 2023.
The Company has received a waiver from Umqua Bank waiving this violation until the next measurement date of December 31, 2024. As of December 31, 2023, the Company had a total long-term debt balance of $7,590,659 owed to AgWest, including the portion due in the next year, exclusive of debt issuance costs of $105,989.
The Company had cash balances of $338,676 at December 31, 2022, and $13,747,285 at December 31, 2021. The Company had an outstanding line of credit balance of $166,617 at December 31, 2022, and zero outstanding balance at December 31, 2021.
The primary reason for this increase was an increase in net loss and higher preferred stock dividends in 2023 compared to 2022. The Company had cash balances of $238,482 at December 31, 2023, and $338,676 at December 31, 2022. The Company had an outstanding line of credit balance of $2,684,982 at December 31, 2023, and $166,617 at December 31, 2022.
EBITDA In 2022, the Company’s earnings before interest, taxes, depreciation, and amortization (“EBITDA”) decreased 67.0% to $1,912,012 from $5,797,295 in 2021, primarily as a result of a decrease in net income. EBITDA does not reflect the impact of a number of items that affect our net income (loss), including financing costs.
EBITDA does not reflect the impact of a number of items that affect our net income (loss), including financing costs.
Seasonality The Company has historically experienced and expects to continue to experience seasonal fluctuations in its revenue and net income. Typically, first quarter sales are the lowest of any given year, and sales volumes increase progressively through the fourth quarter mostly because of consumer buying habits.
Typically, first quarter sales are the lowest of any given year, and sales volumes increase progressively through the fourth quarter mostly because of consumer buying habits. Liquidity and Capital Resources At December 31, 2023, the Company had a working capital balance of $18.4 million and a current ratio of 2.33:1.
Income (loss) from operations was $(546,418) and $3,690,019 for the years ended December 31, 2022 and 2021, respectively, a decrease of $4,236,437, or 114.8%, for the year ended December 31, 2022 compared to the prior year period.
Interest income was $27 and $5,496 for the years ended December 31, 2023 and 2022, respectively, a decrease of $5,469 for the year ended December 31, 2023 over the prior year.
Wine Enthusiast rated the Company’s 2019 Tualatin Estate Chardonnay with 91 points, 2019 Tualatin Estate Pinot Noir with 90 points, 2017 Bernau Estate Brut with 92 points & Editors’ Choice and 2017 Bernau Estate Blanc de Blancs with 91 points.
James Suckling rated the Company’s 2021 Estate Pinot Noir 91 points, Dijon Clone Chardonnay 91 points and the 2022 Pinot Gris 90 points. Wine Enthusiast Magazine rated the Company’s 2021 Estate Pinot Noir 91 points, 2021 Dijon Clone Pinot Noir 90 points and 2021 Founders’ Reserve Pinot Noir 90 points.
The Sunset International Wine Competition rated our 2021 Whole Cluster Rosé of Pinot Noir with 91 points & Gold and our 2021 Pinot Gris with 90 points and Gold. The Sommeliers Choice Awards rated our 2021 Whole Cluster Rosé of Pinot Noir with Gold and 91 points and our 2021 Pinot Gris with 90 points and Gold.
The Company’s 2022 Whole Cluster Pinot Noir 90 points, 2022 White Pinot Noir 91 points, 2022 Maison Bleue Voltigeur Viognier 90 points, 2020 Métis Red Blend 92 points and Cellar Selection. Sunset International Wine Competition awarded the Company’s 2022 Whole Cluster Rosé of Pinot Noir 94 points with a Gold Medal.
Removed
The decrease was primary the result of the $1,821,106 contribution loss related to the opening of four new locations and the higher cost of sales in 2022. Interest income was $5,496 and $12,412 for the years ended December 31, 2022 and 2021, respectively, a decrease of $6,916.
Added
Loss from operations was $1,207,202 and $546,418 for the years ended December 31, 2023 and 2022, respectively, an increase of $660,784, or 120.9%, for the year ended December 31, 2023 compared to the prior year period. This increase included higher depreciation costs of $1,232,459 in 2023 mostly relating to the investment in new locations.
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Wine Quality Continued awareness of the Willamette Valley Vineyards brand and the quality of its wines was enhanced by national and regional media coverage throughout 2022 including the accolades below.
Added
The Company had a bank overdraft of $393,416 at December 31, 2023, and no overdraft at December 31, 2022. EBITDA In 2023, the Company’s earnings before interest, taxes, depreciation, and amortization (“EBITDA”) increased 22.1% to $2,334,602 from $1,912,012 in 2022, primarily as a result of increased depreciation costs in 2023.
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Vinous rated the Company’s 2019 Estate Pinot Noir with 90 points, 2019 Tualatin Estate Pinot Noir with 90 points, 2018 Elton Pinot Noir with 91 points, 2018 Bernau Block Pinot Noir with 93 points, 2018 Tualatin Estate Pinot Noir with 92 points and 2018 Hannah Pinot Noir with 92 points.
Added
The Company has approximately 213 acres of land that is suitable for future vineyard development.
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Vinous also reviewed the Company’s Pambrun wines and scored the 2018 Pambrun Cabernet Sauvignon with 92 points, 2018 Pambrun Merlot with 92 points and 2018 Pambrun Chrysologue with 92 points.
Added
Sip Magazine’s Best of the Northwest rated the Company’s 2022 Pinot Blanc a Double Gold. Global Fine Wine Challenge awarded the Company’s 2019 Griffin Creek Cabernet Franc and 2019 Domaine Willamette Brut both Gold. Seasonality The Company has historically experienced and expects to continue to experience seasonal fluctuations in its revenue and net income.
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The Company’s Maison Bleue wines received scores of 92 points for the 2019 Voyageur Syrah, 92 points from the 2019 Graveiere Syrah and 92 points for the 2019 Frontiere Syrah. 27 James Suckling rated the Company’s 2019 Vintage 46 Chardonnay with 94 points, 2019 Vintage 46 Pinot Noir with 93 points and the 2019 Tualatin Estate Chardonnay with 91 points.
Added
The Company had an outstanding line of credit balance of $2,684,982 at December 31, 2023, at an interest rate of 8.0%, and an outstanding line of credit balance of $166,617 at December 31, 2022, at an interest rate of 6.5%. As of December 31, 2023, the Company was out of compliance with a debt covenant contained in the Credit Agreement.
Removed
The 2019 Bernau Block Pinot Noir received 90 points and the 2019 Elton Pinot Noir received 92 points. The inaugural vintage of the 2017 Bernau Estate Méthode Traditionnelle Brut received 91 points and the 2017 Bernau Estate Blanc de Blancs received 90 points. Wine Enthusiast Magazine rated the 2019 Founders’ Reserve Pinot Noir with 90 points.
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Wine Enthusiast rated the Company’s 2020 Riesling with 90 points & Best Buy, and in the Top 100 Best Buy Wines for 2022. Global Fine Wine Challenge 2022 rated the company’s 2018 Domaine Willamette Méthode Traditionnelle Brut 96 points & Double Gold Medal.
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Liquidity and Capital Resources At December 31, 2022, the Company had a working capital balance of $17.9 million and a current ratio of 2.80:1. The Company had cash balances of $338,676, at December 31, 2022.
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The debt with Farm Credit Services was used to finance the Hospitality Center and subsequent remodels, invest in winery equipment to increase the Company’s winemaking capacity, complete the storage facility, acquire new vineyard land for future development and provide operating capital.
Removed
The Company’s contractual obligations as of December 31, 2022 including long-term debt, note payable, grape payables and commitments for future payments under non-cancelable lease arrangements are summarized below: Payments Due by Period Less than 1 2 – 3 4 – 5 After 5 Total Year Years Years Years Long-term debt $ 7,062,654 $ 496,970 $ 3,072,769 $ 1,187,195 $ 2,305,720 Notes payable 1,201,038 1,201,038 - - - Line of credit 166,617 166,617 - - - Grape payables 1,208,673 1,208,673 - - - Operating leases 12,443,191 1,215,935 2,363,881 2,241,958 6,621,417 Total contractual obligations $ 22,082,173 $ 4,289,233 $ 5,436,650 $ 3,429,153 $ 8,927,137 Inflation The Company’s management does not believe inflation has had a material impact on the Company’s revenues or income (loss) during 2022 or 2021.

Other WVVI 10-K year-over-year comparisons