Founders of Yellow Tail wine branch out into beer
The Casella family, famous for producing Australia's best known wine brand Yellow Tail, finally confirmed in April 2012 that they plan to become a player in the Australian beer market. Tara Tara! But why has it taken them so long to declare their intention? For almost a year, the Casellas have had their newly-built 300,000 hl brewery sitting idle. From what we have heard, the family spent AUD 130 million (USD 128 million) on this brewery, which is located right next to their 3 million hl winery in Griffith, a town 600 km to the west of Sydney. They had even recruited staff: brewers Andy Mitchell, formerly with South African Breweries and Anthony Clem, a veteran of Lion Nathan plus Fiona Seath, a marketer, who used to work for Heineken in the UK.
They were all ready ... but not rearing to go. In recent months, whenever the Casella brewery project was broached, industry observers in Australia would tap their noses saying that apparently the Casellas did not know what kind of beer to brew.
Now if there are two things one should know about the Casellas, it's these: they are shrewd marketers themselves as the success of Yellow Tail has shown (one in five wine bottles leaving Australia is a Yellow Tail) and are very comfortably off. So they don't have to rush headlong into unknown territory, like the beer industry, just to recoup expenses on a brewery quickly. According to the journalist Leon Gettler, Casella had revenues of AUD 344 million in the 2011 financial year, down 13 percent on the previous year, while net profit was AUD 45.3 million, from AUD 12.3 million a year earlier.
With a 42.3 percent share in value of the Australian category of the U.S. wine market, Managing Director John Casella is a great believer in spotting trends before they happen. His business model has transformed the wine industry. He hopes to do the same for beer. And he might just pull it off.
In wine, Casella has done everything differently from its competitors. While other Australian wine companies built their brands locally before venturing overseas, Casella went the other way and made its brand big in the United States.
As Mr Gettler tells the story, when Casella entered the U.S. market in 2000, they were not interested in wine drinkers. Instead, they embarked on a strategy to convert beer and cocktail drinkers to drinking wine. It was too big a market to ignore. Casella saw that punters wanted a social drink, not something with a taste and tradition which they often found difficult to appreciate.
To make matters simple for them, Casella devised a label with a kangaroo on it and set the price at USD 5.99 a bottle - which made the Yellow Tail wines very affordable.
Whatever plans Mr Casella has for his beers, he has not let on yet. But his preparations for the beer launch in mid-June show that he knows how to make a splash. As if to confirm his critics' suspicions, In April 2012 he launched The Perfect Lager Project - a quest to find what makes a perfect beer for Australians.
Through the Perfect Lager Project, Casella also released an iPhone app in April asking people to tell them their beer drinking experience and which characteristics make the ultimate beer-drinking experience. It was reported that around 2,000 people have downloaded the app and provided information about what they like in beer. Casella said the information will shape the new beer's recipe. Given that the launch of the new beer is scheduled for mid-June, that did not leave them with a lot of time to brew from scratch. Moreover, 2,000 responses is not a lot considering that Australia has 23 million people.
But the Perfect Lager project created quite a media response and thus free PR for Casella. The name of the beer will be released at the launch and Mr Casella has hinted as much that it will be a “nice Aussie name”. It won’t be Yellow Tail beer, though, that much he admitted.
The launch will be accompanied by a no-expense-spared two-day extravaganza in Griffith: one for those in the trade and one for media. Invitations to the exclusive event included a personalised website and a chartered jet will be available to ferry guests to and from the brewery from Sydney and Melbourne airports, it was reported.
Why is Casella getting into the beer market when consumers are drinking fewer beers? Mr Casella knows as well as everybody else that Australians are drinking less but if you look at the figures, they are spending more which means they are buying more high-margin beers for a night out and fun events. He told the press that he hopes to become an Aussie competitor to proper imports like Corona.
The other part of the strategy is to target liquor stores and restaurants. And, he says, there is an advantage coming from the wine industry and having what he calls a “wine-maker’s eye”. That's his euphemism for low-cost production. Having a brewery sit along-side his winery, Casella can take out a lot of the fixed costs such as waste water, heating, security and HR. All these things Casella can incorporate into a single operation and be an effective competitor.
Mr Casella said that there are two big lessons other businesses can draw from his experience: focus on costs and create a better product than your rivals. “You can’t do it on price,’’ he says. “You have to sell the product and the attributes of the product.”
