Casella family ‘s $46 million joint venture deal with Coke

Casella Wines, which launched Arvo Beers in June this year, has secured a joint venture deal with Coca-Cola Amatil as part of the beverage giant’s return to the Australian beer market.

Coca-Cola is currently restrained from selling, distributing or manufacturing beer in Australia until December 16, 2013 as the result of a non-compete clause with brewer SABMiller, so the joint venture will be limited to a $46 million loan from Coca-Cola until that date.

Casella Wines is the family-owned winery behind one of Australia’s most successful export wines, Yellow Tail. Managing director John Casella told SmartCompany the winemaker’s newly launched Arvo beer would now be produced by a company known as the Australian Beer Company.

“[The joint venture] will happen in the future, so this agreement is an agreement that we will form that partnership at that point, before that point [Coca-Cola] has advanced money and then that will become the joint venture,” he says.

“They wanted to get back into beer, we were in beer and we had an informal discussion and it looked like there was a good fit between us being the producers and them being the sellers.”

Under the terms of the deal the joint venture between Coca-Cola and the Australian Beer Company will be responsible for manufacturing premium beer and developing brands, while Coca-Cola will be solely responsible for the sales, distribution and development and management of customer relationships.

Casella says the Coca-Cola deal gives “tremendous scope” to grow Casella’s brewing operations.

“There are fantastic synergies, they have a fantastic sales force and incredible distribution; with our sales force we have limited reach and they have unlimited reach,” he says.

Casella says the main limitation for Casella Wines in selling beer was the need for beer to be on premises where Casella Wines has “limited reach” despite having great off premises networks.

“A small brewer will always have those limitations just because of the number of feet you need on the ground for the on-premise area,” he says.

The $46 million loan will be used by the Australian Beer Company to assist with the acquisition and expansion of its brewery in Griffith, New South Wales into a 500,000 hectolitre annual capacity brewery.

The expansion will enable the brewery to supply 15% of the Australian beer market, an increase on the newly completed brewery’s current capacity to supply 7% of the Australian beer market.

Casella says it will be “business as usual” for the Australian Beer Company until the loan converts into the joint venture in 2013 and in the meantime it will continue to produce and sell Arvo Beer.

“We have been really happy with the response we have had through social media and happy with the sales and the response to the brews themselves,” he says.

Coca-Cola is describing the loan as a “preparatory step” towards its re-entry into the Australian premium beer market.

Coca-Cola’s group managing director, Terry Davis, said the deal would give Coca-Cola the opportunity to access a “world class, low cost brewery” and to re-enter the premium beer market in Australia.

The plan is to use the brewery to brew international beers in Australia as well.

“Coca-Cola’s large-scale sales and distribution expertise and experience, combined with the draught and packaged brewing capability of the Australian Beer Company, will provide international beer companies after December 16, 2013 with a uniquely independent route to market in Australia and the ability to partner with the leading non-alcoholic beverages and spirits partner for the licenced trade,” Davis said.

LeadingCompany recently interviewed John Casella about how his company broke into the American market.

This article first appeared on SmartCompany.