Casella receives serious sales offers

Casella Family Brands, the producers of Yellow Tale, have been approached to sell. It's another example of the turmoil happening at the commercial end of the wine market.

Yellow Tail, the blockbuster wine from Casella
Yellow Tail, the blockbuster wine from Casella

Casella Family Brands, the producer of the blockbuster Yellow Tail brand, has been approached by private equity groups seeking to buy it.

According to Australia’s Financial Review newspaper, Casella has engaged the UBS investment bank to help it consider its options.

Yellow Tail, Casella’s flagship wine, was created for the lower end of the US market in 2000. At the time, the bottom shelf was dominated by wines of very poor quality, while Yellow Tail offered good quality for the money. It flew off the shelf, becoming the number one imported wine in the US by 2003 and spawning a whole category of “critter wine” imitators.

But it’s now selling in a very difficult sector of the wine market, as consumers trade up. Indeed, number of the big companies are offloading their most commercial wines; in April this year, Gallo agreed to buy $1.7bn worth of wine and spirit brands from Constellation. Most of the wine brands included in the deal were at the very commercial end.

In April 2018, private equity group Carlyle paid $1 bn for Australia’s Accolade, whose brands include Hardys and Kumala. Carlyle has since embarked on a rationalisation and cost-cutting drive. Meanwhile, French company Pernod Ricard has put Australian wine brand Jacob’s Creek up for sale.

Many of the blockbuster Australian brands such as Yellow Tail entered the international market when the Australian dollar was low against the US dollar, making them good value for money. Today, production costs are high and Australia’s commercial end struggles to compete against other New World competitors. Margins are low and competition fierce.

When Meininger’s asked about the likelihood of a sale, a spokesperson for Casella wrote that “Casella Family Brands has not commenced a sale process for the business.

“There has been strong interest in the sector, driven by the recent sale of Accolade Wines and the rumoured sale of the Pernod Ricard Wine assets, and Casella Family Brands has received a number of approaches over an extended period of time from a range of investors in relation to the Casella Family Brands business.

The spokesperson went on to say that, “The company will continue to invest in the growth of its portfolio of brands including [yellow tail], Peter Lehmann Wines, Brand’s Laira, Morris Wines of Rutherglen and Baileys of Glenrowan.”

According to the Financial Review, any sale would be worth about A$500m ($346m).

John Casella, managing director of Casella Family Brands, spoke to Meininger’s at length for our June cover issue. You can find that interview here.

Felicity Carter

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