Yellow Tail Is Losing Money.....Oh No!

Yellow Tail Logo
Courtesy Casella Wines
It has been reported this week that Casella Wines (the makers of Yellow Tail) have posted a $30 Million (Aus) loss for fiscal 2012.  Decanter Magazine reported that the company is in emergency talks with their lenders to extend the companies borrowing and financing options.

This comes as a bit of a surprise given the overwhelming popularity of the brand across the globe.  The core issue for the company is the strength of the Australian Dollar these days.  The strong Aussie dollar relative to the US Greenback is making profitability for Yellow Tail which sells for less than $7 US on average.

It is amazing to see the power of currency and how it plays a roll in the wine industry.  You don't think about that when you have a bottle of French or Argentinean or South African wine in your hand.  It makes a lot of sense that the price advantage for certain wine regions around the World is supported by currency. It is amazing is that such a huge brand like Yellow Tail goes from profitability to loss in such a short period of time.

So what does this mean for Casella Wines?  Odds are there will be financial lifelines thrown to the company but if there is not a drop in the Aussie Dollar then the company will need to make a lot of cuts/changes.  In our case here in Canada we had a weak dollar relative to the US and that made our exports really attractive to the US and other countries.  We are now at par with the US dollar and it has certainly impacted our economy both positively and negatively.  The key for us was that we could not expect a return to a $0.75 Canadian Dollar so we collectively needed to change how we do business globally.  Casella will need to do the same.  Sure the Dollar might come back down for them, but if it doesn't then their wine making efforts will need to reflect a profitable export in order to maintain their markets around the globe.

While we are not regular Yellow Tail drinkers (anymore) we certain do recognize their place in the wine world.  They absolutely had their impact on our lives, both from a palate and price point perspective.  There were days in our wine drinking lives when $5.99 Cabernet Sauvignon was the top end of our budget.  We wish them well.

So Yellow Tail, best of luck surviving the currency conundrum.

Keep on tasting!

Chris & Shannon


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