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Posted: Saturday, 14 May 2022 22:18

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Casella to sell 35 NSW and SA wineries with a Long Term Focus

May 14: Stung by the Chinese debacle, Australia’s biggest family-owned wine grape grower and wine maker Casella Family Brands is reportedly selling two-thirds of its vineyard portfolio, with 7200 hectares from 35 vineyards in Australia up for sale, which includes 5650 hectares of vineyards and 1608 of supporting land, plant and equipment and water entitlements, writes Subhash Arora who feels that due to Indo-FTA kicking in soon, the premium wine producers would do well to participate in wine shows like Vinexpo India in Mumbai on 18-12 August and Delhi on 1-3 December 2022

Casella has announced that the decision to sell property has been made as they prepare to invest in growing their portfolio of wine brands. The sale is described by Casella’s managing director John Casella as part of the family-owned wine giant’s long-term development plan. He has confirmed that the sale won’t change the purchase of grapes from contracts with the farmers. It simply means that they will focus more on brand building and not own vineyards anymore, which seems to indicate a long term weakness and uncertainty for grape growing in the Australian wine market.

In January this year, Casella bought the balance half of the share in an Australian beer joint venture from Coca-Cola Europacific Partners which exited its total stake in the Australian Beer  business.

The sale includes farms in the Riverina region, Barossa Valley, Clare Valley, Langhorne and Currency Creek and Limestone Coast areas in South Australia, according to local Australian reports. Yellow Tail is one of Australia's most exported wine brands. Founded in 1969, Casella is considered as one of Australia’s biggest wine exporters and owns popular brands such as Yellow Tail and Peter Lehmann, both imported into India.

Yellow Tail was first launched and exported to the US in 2001 and has since become a huge success story. It expected to sell 25,000 cases but actual sales reached 500,000 cases. It sold 14 million cases in 2020. Today, the US market makes up over 50% of Yellow Tail’s global sales volume and accounted for half of Australian wine sales in value.

Unlike many Australian exporters, especially Treasury Wine Estates which heavily depended on the Chinese market before the punitive taxes of around 210% reduced the Chinese export by 97%, making a big shake up in the Australian market.

Founded by the Italian immigrants Maria and Filippo Casella in 1969, the winery made bulk wines till 2000 when the Yellow Tail was first introduced and has since produced more than one billion bottles of Yellow Trail alone with a host of premium wine brands.

Meanwhile, tons of grapes have been left to rot as Australia struggles to shift the wine market.  There is a talk of around 15,000 tonnes left on the vines in New South Wales alone, according to a Report.

There has been a lot of speculation about the producers looking towards the Indian wine market, with an assumed 300 million potential drinkers available and the Indo-Australian FTA signed a couple of weeks ago raising hopes. The FTA will no doubt be useful but only premium wines would benefit, with a limited market share. Wines like YellowTail would not have the benefit of lower duties. In order to get the maximum benefits, participation in wine shows like Vinexpo India and ProWine Mumbai on August 18-20 would be extremely helpful to the potential exporters.

Established labels like Jacobs Creek have redoubled their efforts to increase their market share and with the best distribution channel already established in India that covers the liquor market with a strong hold, are sure to benefit the most with hopefully more premium products entering the market. During the lockdown wine drinkers have upgraded their palates and would be willing to buy more of their premium offerings.

One has to wait till the FTA kicks in July-August to see the results.

Subhash Arora

Voluntary Disclosure: Though Arora has no personal interest in the Show Vinexpo India debuting in Mumbai, he is an Advisor to the Show in a professional capacity and feels it would be prudent to collectively participate in wine shows like Vinexpo India, especially as discerning drinkers are shifting their tastes to better and more expensive wines. Once the Indo- EU treaty is signed, this advantage with Australian wines would be diluted.

 

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