Yellow Tail set to bottle its billionth Exports Sangria next in winery's sights

It's the family-owned winery from a New South Wales country town that has put the big companies of the Australian wine industry to shame, and today Casella Wines will flex its muscle even further when it pumps out the billionth bottle of its export-wine phenomenon, Yellow Tail.

It's the family-owned winery from a New South Wales country town that has put the big companies of the Australian wine industry to shame, and today Casella Wines will flex its muscle even further when it pumps out the billionth bottle of its export-wine phenomenon, Yellow Tail.

And the family behind the label is now turning its entrepreneurial gaze to the fruity Spanish wine sangria, hoping Australians will guzzle it at parties, restaurants and barbecues with as much verve as their American cousins, who get through about $US700 million ($739 million) worth of the beverage every year.

Just in time for the Aussie summer, Yellow Tail will this month launch its sangria for the domestic market after a recent launch in the US.

"I think the reason that sangria hasn't taken off in Australia is because there hasn't been a product to lead the category and lead consumers to that category," chief executive John Casella said on Tuesday. "And I believe once they trial it, anybody who wants sangria will drink Yellow Tail Sangria."

But the backbone of the Casella business, founded in 1969 by Filippo and Maria Casella, continues to be its portfolio of red and white wines under the Yellow Tail livery. Derided by some critics as the epitome of all that is wrong with Australia's wine industry, as the wine that earned the industry the "cheap and cheerful" tag, and as the first to inflict "critter wines" upon the world, Yellow Tail rocketed from an idea after the Sydney Olympics to a product that has filled more than 10 billion glasses.

While bigger players such as Treasury Wine Estates, owner of prestigious brands Penfolds, Wolf Blass and Lindeman's, have failed to capture the crucial US market, Yellow Tail has become its biggest imported wine.

Mr Casella said Yellow Tail had notched up its best year in fiscal 2013, with volumes increasing by 8 per cent. The one-billionth bottle will come off the production line on Wednesday, with supplier Amcor Glass presenting a commemorative bottle.

Pumping out about 12 million cases a year, almost 96 per cent of Casella's Yellow Tail is exported to Americans, who just can't get enough of the leaping yellow kangaroo.

Mr Casella said the business, now 45 years old, would transition to cope with a strong Australian dollar but that he believed fears of a dollar as high as $1.20 to the greenback - which would all but destroy export competitiveness - looked unlikely.

"There was talk of $US1.10 or $US1.20 and all that talk is gone so the Aussie dollar is oscillating between US90¢ and $US1.10, and at least we know we are in a region we are safe in, that it's not going to rocket away and undermine the business," he said.

"In an ideal world, I'd like it to be in the mid-US80¢, but I'm not sure if that's going to happen. The low-90s area is something we are probably going to have to live with, and with a lot of hard work, it's probably sustainable."

But there have been some disappointments. Last year Casella slumped to its first loss in 20 years when the strong Australian dollar tarnished its accounts, forcing it to push through heavy write-downs and trigger a breach of its banking covenants.

"The issue with that loss was that it was never a trading loss," Mr Casella said on Tuesday. "We have always travelled OK, we haven't really operationally lost money and it was just a matter of clearing up our books as far as our loans went."

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