A Tail of '100m Americans'

Can Yellow Tail, the US's biggest-selling imported wine, get any bigger - or has it peaked? Graham Holter asks managing director John Casella
27 August, 2008
Page 20 
Is it possible for the Yellow Tail wine brand, the biggest-selling imported wine in the US, to grow any more? To put that question into perspective, last year, Casella Wines accounted for 9 per cent of the Australian vintage. This year, it's 10 per cent.

Managing director John Casella does not regard his task as a complicated one. He makes wine that people like drinking and sells it at prices they can afford. The rest is detail. The critics have never warmed to Yellow Tail, most bewailing its residual sugar levels, but the softly-spoken Casella points out that "100 million Americans can't be wrong".

The stellar growth Yellow Tail has achieved in the US has inevitably slowed, to around 3 per cent annually, and Casella has been busy conquering other markets. Canada is the number two export territory, and the UK is now in third place after years of relative under-achievement ("we've sold five times the wine this year that we did last year"). Asia looks promising, particularly Japan, while China remains an unknown quantity.

Casella takes a conservative approach, preferring to stick to a winning formula than tinker with the portfolio, but there has been a small flurry of NPD, including the launch of a sparkling rosé. "We're looking at producing lower-alcohol wines," he says. "We need to work out how we brand and market those, but the important thing is that the low alcohol needs to be a bonus rather than the roots of the wine.

"There's no point doing it without delivering the right product. I've tasted a few of the low-alcohol products and I can't see them getting anywhere because you can't enjoy drinking them."

He is generally cautious about brand extensions. "There's a lot of potential for different regions and different-priced products. But we've got to be very careful that we stay focused on Yellow Tail and, more importantly, think about the impact of marketing and developing completely new labels on the business overall. We could work very hard to sell 200,000 cartons. Is that going to change our business as much as putting the same effort into Yellow Tail?

"With Yellow Tail, you can increase the volume without any issues. When it comes to these premiums, if you get it wrong and it doesn't sell the way you expected, you find yourself with expensive surplus wine. That can impact on your business fairly heavily."

Brand integrity

Casella rules out the idea of following the Lindemans example of creating a global brand, using fruit from outside of Australia. "It did occur to us earlier on when we thought there wasn't going to be any water," he admits. "If we don't have the volume, do we let it fall off the shelf and bring it back in three years' time when it rains again? Or do we substitute it with products from other regions and countries?

"I had a good think about it and really, Yellow Tail is a certain standard of wine responding to a certain expectation from the consumer, and I know we'd have huge issues in delivering that with products from other countries. So if it didn't rain, we'd let it roll off the shelf and relaunch it when the rains came back. We wouldn't release wines from other countries under the Yellow Tail banner."

Casella is wary of talk of premiumisation and marketing Australia on its regions. "For us to move price points doesn't mean everyone is going to follow us," he insists. "At the end of the day, if consumers have £5 to spend, they'll spend £5. If you put it at £6, they'll avoid you. There are plenty of wines that deliver at lower-price points.

"The Australian industry wants to build on regionality and get people to spend more, but you've got to deliver more. You can't just expect people to pay more because it comes from Australia. How are we going to deliver more? More of what? More flavour? We've been successful because we've delivered style-wise and quality-wise. The ideal thing is to get people to spend more, but I don't know how you do it."

Yellow Tail has avoided the extreme sales tactics of some of its rivals, which many (including Casella) believe has led to a deterioration in quality.

"You've got a lot of £6 wines that are really £4 wines," he says. "You can't really blame the producer for putting less and less in there because he's not getting the return. We won't ever do that - we'd rather lose sales at some point than keep the volume up by reducing the cost."

Yellow Tail may have taken the US by storm, but 42 per cent of wine drinkers there haven't even heard of it, Casella reports. But given his drive and focus, losing sales seems a long way off for this most successful and dynamic of wine brands.

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