John Casella’s lucrative wine experiment is ageing well
The Casella family hoped to sell 25,000 Yellow Tail cases in its first year. More than one million sold and it’s now one of our most successful exports helping secure them billionaire status on The List.
John Casella has a wide variety of wine and whisky to choose from, but while enjoying a traditional Sicilian dish he’s cooked up for the family, he’s partial to a glass of Yellow Tail.
The Casella Family Brands label has likely sailed under the upturned noses of self-styled connoisseurs, but Yellow Tail has racked up several hundred wine awards over the years and sold literally billions of bottles.
It’s also carved a beachhead in the hard-to-crack US wine market, and in recent years reached the lofty heights of producing its own Super Bowl advertisements – undeniably the Everest of marketing in the US.
This article is from The List — Australia’s Richest 250, published March 15, where Casella is ranked 73 with $1.82bn.
It was Casella himself who conceived of Yellow Tail.
He returned to the family business in the mid-1990s after working as a winemaker elsewhere. At that time, the Casella winery was a small operation trading in bulk wine, but through some savvy dealing, he grew it to the point that it was making enough money to crush its own vintage and install its own bottling facility.
That was the genesis of Yellow Tail, with the first export shipments rolling off the line in 2001 at the family farm outside Griffith, which Casella’s parents Filippo and Maria bought after migrating from Italy in 1957.
The family hoped to sell 25,000 cases that first year. It sold more than one million.
Suddenly, a small operation in regional NSW was outselling French and Italian labels, and Yellow Tail went on to become the most popular wine imported into the US.
Yellow Tail’s success is derived from some basic strategies. It was affordable and didn’t compete with wines that were expensive and required intimate knowledge, it was easy to drink, and its bright labelling made it stand out among a sea of other bottles in liquor shops.
It has become one of the country’s most successful export stories this century.
The ranks of Australia’s wealthy individuals and families are dotted with wine lovers, which often leads to them taking that passion and turning into a business pursuit.
The Oatley family is renowned for its Hamilton Island tourism asset, but the basis of its fortune was from the $1.4 billion sale of Rosemount Winery in 2001 to what is now Treasury Wine Estates. It is now back in business with Robert Oatley Wines in Mudgee, NSW.
Others parlay their fortune into wine with some critical success. Brisbane’s Terry Peabody made his money in waste management, but the Craggy Range winery he and wife Mary began in Hawke’s Bay in 1993 was rated last year’s New Zealand Winery of the Year by The Real Review.
Some on The List produce wine as part of their tourism pursuits. Caravan magnate Gerry Ryan has a hotel at his Mitchelton Estate in Victoria, while retail billionaire John Gandel has a restaurant and sculpture park at his $50 million Pt Leo Estate on the Mornington Peninsula.
Meanwhile, the Paspaley pearl fortune also includes Bunnamagoo Estate Wines in NSW, and Alexandra Burt is running the Voyager Estate winery in Western Australia that was started by her late father, Michael Wright. Last year, mining magnate turned property developer Tony Poli bought Margaret River’s Altair Estate.
Yet the Casella business is the biggest privately owned wine company still in local hands, and with John Casella as managing director (he owns the business with his brothers, Marcello and Giuseppe) the business has expanded its portfolio, thanks to the Yellow Tail success story.
Annual revenue is usually around the $500 million mark, and profits are often a healthy $50 million or so, give or take currency fluctuations. In a fragmented industry that can do it tough, Casella’s strategy stands out.
Casella has, over the past decade or so, acquired a number of super-premium brands to round out its offerings, including Peter Lehmann and Brand’s Laira in South Australia, Morris of Rutherglen, and Baileys of Glenrowan.
Casella’s Australian Beer Co late last year took full ownership of ready-to-drink spirits company Ampersand Projects, and Casella’s spirits arm Copper & Grain is producing high-end products such as Morris Whisky.
While the company has been acquisitive in the past, Casella says now is the time to reinforce the base, dismissing rumours the company might have taken a look at buying Jacob’s Creek from Pernod Ricard, for example.
On the question of additional acquisitions generally, his answer is “definitely not’’. “Those acquisitions were about building, and becoming more meaningful to our customers around the world,’’ he says. “We’ve got premium, we’ve got super-premium, we’ve got everyday, value wines. There’s no value in just complicating our portfolio. It’s a matter of keeping it as clean and as relevant as possible.’’
That relevance does not extend, at this stage, to no-alcohol wines, Casella says. “At the end of the day, we’ve got to keep our consumers and customers happy. It’s a matter of producing lower alcohol but maintaining consistency in style and delivering on taste expectations. We’re doing a fair bit of research and development with lower alcohol, the main brand being the Yellow Tail Pure Bright.”
The wine industry has undoubtedly been doing it tough for the past couple of years, with the closure of the Chinese market only exacerbating structural oversupply problems, particularly in the warmer wine regions.
Casella was conservative going into China even before trade restrictions effectively cut off exports more than three years ago, and he says they’ll be conservative going back.
“I think if there’s an expectation that it will come back quickly, that’s just plain wrong,” he says. “It’ll be long-term. We need to rebuild relationships. We need to rebuild the consumer base, and obviously the retailers have got to make space for Australians. A lot of people don’t understand that if an Australian bottle goes into a store, somebody else’s bottle goes out. So there’s got to be a reason for the storekeeper to do that. That’s going to be value, that’s going to be demand, it’s going to be that the sale rate is much higher than the one they’re taking out.’’
Casella also says the industry in Australia needs to maturely deal with its oversupply problems, not just demand handouts from governments.
“The industry’s been in oversupply for quite some years. If it were to ask for federal help, there’s got to be a plan in place that makes sure that in five years’ time we’re not back in the same situation.
“This is one of the consequences of a free industry – that people plant and speculate. [If they] then expect somebody to bail them out, to me that’s not right. We’ve all had a chance to build brands, we’ve all had a chance to take advantage of the export market, and the ones that haven’t are obviously paying the price now – or the ones that took the easy way out, which was China.”
In terms of the focus for this year, Casella says that while some businesses looked to acquisitions for growth, the first step should always be to “optimise the resources you have’’. And although the company is naturally keen to grow its RTD, whisky and beer businesses, he’s making sure it never takes its eye off what the business was built on: wine.
“Within those regions, we’re certainly working hard in the Barossa to re-enter China in a meaningful way,” he says. “With Baileys, that’s fully organic, with Morris, it’s the whisky. We’ve built a diverse portfolio of products, but complementary at the same time, and it gives us more meaningful relationships with our partners by having a diverse range of products.’’
Casella says his motivation to continue to grow the business stems from it being – and remaining – a family operation. On the operational front, while the winemaker’s role these days is mainly high-level strategy, you can still find him tasting the product before it goes out. “I still get to taste most of the wines we release. It’s just a way of making sure that there’s consistency in what we produce.’’
On the relaxation front, you’ll find Casella in the garden, or in the kitchen, rustling up the aforementioned Sicilian dishes, with eggplant, capsicum and “lots of tomatoes”. Paired with a glass of Yellow Tail, it has proven to be a successful combination.
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