Yellow Tail winemaker Casella Wines profit slumps on currency volatility

Casella Wines has seen its profit slump by more than half on currency volatility and costly hedging contracts, but its wines still remain popular from New York to Tokyo.

John Casella, managing director of of family owned Casella Wines, has resisted raising prices in the US to protect market share. Picture: Jonathan Ng

Casella Wines, the family owned winemaker whose juggernaut ‘cheap and cheerful’ Yellow Tail label became the most popular imported wine in the US, has suffered a more than 50 per cent drop in profits due to volatile exchange rates and costly hedging contracts.

The Griffith-based winery also saw its sales for 2022 dip as its exports to the US slightly retreated and there was a larger slide in sales to Britain, however it did manage to stabilise sales in Australia helped by its widening portfolio of brands that now include Peter Lehman, Baileys, Brands Laira, Baileys of Glenrowan and Morris of Rutherglen.

The earnings fall was also likely driven by a decision by the privately owned winemaker to resist lifting its shelf prices in the face of rampant inflation across its key markets in the US, Europe and Australia to maintain market share.

Accounts for Casella Wines lodged with the corporate regulator show total sales for fiscal 2022 fell to $461.16m, down from $500.53m in 2021. However, net profit slumped 56 per cent to $25.375m as cost of production rose and the company - which is a huge wine exporter, especially to the US, was hit by volatile currency movements.

The accounts show that Casella Wines booked a loss on foreign exchange movements of $34.49m for 2022, against a profit of $31.1m in 2021.

Casella Wines, founded by Maria Casella and her husband Filippo, who migrated from Italy in 1957, is the nation’s largest family-run winemaker and shot to fame and fortune soon after the Sydney Olympics in 2000 when an idea on a drawing board for Yellow Tail wine became a huge international success. At one point Yellow Tail was the most imported wine into the US and also found popularity through Europe, Asia and Australia.

Casella Wine’s Yellow Tail leapt from the drawing board in 2000 to become the most imported wine into the US. Picture: Dylan Robinson

Almost half its sales are still drawn from the US, with the latest accounts showing sales into that country slightly lower at $219.4m for 2022. Sales within Australia were stable at $110.387m although there was a larger sales fall in Britain where exports fell to $72.4m from $90.67m in 2022. Sales into Japan and Asia weakened to $28.33m from $36.911m.

Meanwhile, it was also a good year for the three brothers and their families who own Casella, as the winemaker paid a fully franked dividend of $246.75 per share to deliver total dividends to the family of $14m in 2022, up from dividends of $9.52m in 2021.

Late last year a leading Canadian pension fund bought 35 vineyards from Casella - around two-thirds of its total land - as part of a sale and leaseback deal that was at the time the largest single sale of vineyards in Australia.

The vineyard sale included first-class vineyards dotted across some of Australia’s most respected wine regions, such as the Barossa Valley, Clare Valley, Langhorne and Currency Creek, Limestone Coast, and the ­Riverina.

In July last year Casella bought the remaining 50 per cent stake in a joint venture it held with soft drinks giant Coca-Cola Europacific Partners that operated a beer business, Australian Beer Co based at Yenda, NSW.

It bought the half stake for $21m, the Casella accounts report.