Government support needed to lift Australian spirits sector

Casella Family Brands managing director John Casella

Australian wine’s evolution into a $2.5bn export industry surely ranks as one of our nation’s greatest trade achievements in recent memory.

The export boom completely transformed our company, Casella Family Brands, and the NSW Riverina region where we are based.

Casella now employs more than 800 people year-round, with a further 200 jobs created during vintage time, not to mention the many additional jobs supported throughout our network of grape growers.

Our flagship label Yellow Tail is one of the largest wine brands in the world, selling almost 12 million cases a year in 70 countries.

Yet as recently as the 1980s, Australian wine was a complete unknown on the world stage.

Similar could be said today of our spirits industry. Australian distillers are consistently winning prestigious global awards, raising awareness among a select group of aficionados overseas.

But the reality is that Australian spirits are still unknown to most global consumers, which is not surprising given the minimal quantities exported.

Worldwide, spirits are the second most consumed alcohol category after beer, yet Australia is largely under-represented in this space.

Australian spirits exports rank 23rd globally, with trade value of $112m, as compared with sixth place for Australian wine.

The wine industry’s international success did not come by accident. It took a co-ordinated effort and significant investment from the federal government and individual businesses.

The statutory body, Wine Australia, has played a crucial role in facilitating export market growth by providing valuable market insights, assisting with trade introductions in key markets, and co-ordinating the industry’s presence at major trade shows.

Additionally, Wine Australia simplifies the regulatory process by managing export approvals, certifications and compliance requirements, ensuring that producers can focus on expanding their reach without getting bogged down in red tape.

Casella Family Brands managing director John Casella. Picture: Rohan Thompson

Unfortunately, the same supports do not currently exist for spirits. Distillers are largely left to fend for themselves without government backing or a unified strategy.

When you compare this to countries such as Japan and Ireland, the gap is clear. Both have well co-ordinated export programs because their governments have recognised the long-term value of investing in their spirits industries.

The policy shortcomings have become abundantly clear to me since Casella diversified into spirits, with our 2016 purchase of the 165-year-old Morris family winery in Rutherglen, Victoria.

We have invested a total of $30m re-purposing the site to produce distinctly Australian single malt whisky, which is aged in former wine barrels and finished in Morris’s prize-winning fortified wine barrels. Morris of Rutherglen is one of the only distilleries in the world to do this, giving us a unique proposition to take to whisky aficionados around the world.

Morris Whisky is already one of the top selling Australian single malt whiskies in the domestic market, and we have begun exports to the US, Canada, France, Germany, Singapore, the UK, New Zealand and Taiwan.

But we need the federal government to share in our export ambitions, because of the clear opportunities for economic growth and job creation in regional areas, where 50 per cent of Australian distilleries are.

At home, the Australian spirits market is heavily dominated by international brands. The gap is even more striking when it comes to whisky, Australia’s largest spirits category. Most of the whisky consumed is either Scottish or American, with local brands accounting for less than 2 per cent of the whisky consumed.

Australians take pride in buying locally made products, and spirits are no exception.

But the industry is being crippled by the world’s third highest spirits tax, which has increased by 20 per cent in the past four years.

Unlike global brands that can achieve economies of scale across larger volumes, small local producers risk pricing themselves out of the market if they pass these costs onto consumers.

The excise burden drains resources that could otherwise be used to fuel export growth.

Most of the profits distillers make, after covering excise, are reinvested into supporting local operations, leaving little left to push into international markets.

Having reduced funds to invest in marketing and advertising also makes it tough to compete with well-funded, established foreign whisky brands, especially scotch, which often has the backing of large companies and government-supported export programs.

Now that Americans are looking after America first, it surely compels our government to look after the Australian spirits manufacturing industry, and hedge against the increasingly volatile trade environment by diversifying our beverage exports.

The wine sector’s success in export proves the government can work quickly and effectively with industry for mutual benefit.

As global consumers shift towards premium craft spirits, Australia is well positioned to meet that demand with high-quality products, steeped in quality ingredients and innovative craftsmanship.

But our experience building the Yellow Tail wine brand tells us government investment and support is vital to help the industry fulfil its potential.

John Casella is managing director of Casella Family Brands.