Casella chases margin with premium shift

Yellow Tail producer Casella Wines has confirmed plans to introduce a new, more upmarket wine range by the end of next year.

Expected to feature two red styles and a white, the as-yet-unnamed range will retail for around AU$10. The move sees Casella seeking to improve margins in the face of a consistently strong Australian dollar, which has risen by a quarter against the US dollar since 2009.

As the US market’s largest foreign wine brand, Yellow Tail accounts for nearly 65% of Australia’s total volume exports to the country. However 2011 saw Australian wine exports to the US fall by 10%, with shipments for the 12 months to the end of June 2012 showing an 11% decline.

Despite the continued importance of the US market for Casella, the company has limited representation at higher, more profitable price points. “There’s scope for some premium Australian wines that are badly under-represented,” Casella’s managing director John Casella told Bloomberg.

However, Casella also suggested that the company would not discard the lessons it learned from Yellow Tail, a brand that grew from nothing in 2000 to hit 8 million cases within six years.

”We’re product-focused, we wouldn’t go and release anything unless we thought it would offer exceptionally good value at that price end, and that’s what we’re working on,” he outlined.

The addition of this premium range is expected to help boost Casella’s still limited presence in China and other growing Asian markets.

The news comes just months after Casella entered the premium beer market with new brand Arvo, as well as forming a joint venture with Coca-Cola Amatil to create the Australian Beer Compay, which is targeting market share of the country’s premium beer sector.