Yellow Tail makers in crisis talks with lender

Casella Wines, makers of Yellow Tail – the best selling Australian wine in America – is in crisis talks with its lender after recording its first loss in 20 years.

According to the Wall Street Journal, Casella is looking to secure a deal with lender National Australia Bank ahead of an extended 30 January deadline.

A failure to secure a new loan could force the company to sell off vineyards and other assets, the company’s chief executive John Casella told the WSJ.

Casella reported a loss of AU$30 million in the last financial year, down from a $43.5m profit the year before, according to The Australian Financial Review.

“It is very, very tough. Provided we have the support of our financiers, we can make little or no money for a year or two,” Casella told the AFR.

Yellow Tail is in trouble over the soaring Australian dollar, which has strengthened by 13% against the US dollar in the past three years, according to Bloomberg.

Three quarters of Yellow Tail sales come from the US, but the strength of the Australian dollar against the US dollar has made its wines less competitive against those from the Napa Valley, Chile, Argentina and Europe.

Sales are not a problem for the brand, it just isn’t profitable anymore in the US.

“There is no volume issue, it’s all about the exchange rate. The currency is having serious implications for a lot of Australian manufacturers,” Casella told the WSJ.

Rather than raising prices to combat the problem, Casella is looking to introduce a range of premium wines from a new vineyard in the Barossa Valley and through a beer partnership with Coca-Cola Amatil Ltd.

Known for its distinctive kangaroo logo, competitive pricing and fruit forward style, Yellow Tail is the flagship brand produced by Casella, Australia’s largest family-owned winery, which also owns the Yendah and Mallee Point brands.

The world’s fourth-largest wine exporter, Australian volume exports rose in 2012, with exports of bulk wine overtaking bottled wine exports for the first time.

The growth of entry-level bulk wine meant the value of Australian wine exports fell 2% last year to AU$1.85 billion in a sixth consecutive year of value losses.