Casella reveals premium wine strategy
By James Atkinson
Casella is in a better position than many other Australian wineries to succeed at making premium wine, according to managing director John Casella (pictured), who has detailed the company's strategy for overcoming its first loss in 20 years.
Casella told TheShout that the company's new premium wine venture, along with its move into beer with joint venture partner Coca-Cola Amatil, aims to insulate the company from currency movements after the company reported a $30 million loss in 2011-12.
Using fruit sourced from its new Barossa Valley vineyard, recently acquired for $5 million, Casella said the company is preparing to launch a new premium wine brand destined largely for the Asian and domestic markets.
"It's close to 200 acres, it's all red varieties, about a third Cabernet and two thirds Shiraz," he said of the new vineyard.
"It's an expensive exercise in terms of cash outlay but I think it's a prudent one. You build your reputation on being able to do it year in year out, and there's no better way of doing that than actually owning the vineyard that the fruit comes from."
With its fixed costs covered by mainstay brand Yellowtail, Casella said the company's profit margins on the premium venture will be significant.
"If you were to produce half a million cases of premium wine, our margin would be much, much better than a producer who only produces half a million cases of premium wine, because we've got all the overheads and costs covered," he said.
"That's the sort of thing we need to be doing."
Casella reiterated that while the company was suffering as a result of the strong Australian dollar, it was nowhere near the extent of the $30 million loss reported in its accounts.
"That loss wasn't an actual loss, there were some write-downs in that," he said.
"The majority of those are internal loans, it really doesn't change our cash position, it's purely an accounting thing."
While senior executives Andy Bower, Russell Hole and Bob Powell all departed Casella last year – reportedly as part of a company restructure – Casella said there had been no job losses at the company as a result of its recent financial difficulties.
"One thing you need to keep in mind, we've had the biggest six months ever at Casella Wines, in packaged products," he said.
"We don't have a volume problem, not by any measure. It's just a margin problem because of the dollar."
"The crucial thing is that volume is safe, employee jobs are safe, growers are safe, suppliers are safe, there's no issue. We're just doing what we should be doing as a good business – looking at costs, looking at where we can save and looking at ways of staying competitive in a very difficult environment."