Volumetric wine tax will harm winemakers, says Casella

John Casella from Casella Winery in Yenda near his home in Griffith, NSW. (Source: News Limited)

John Casella, whose Griffith-based winery makes the Yellow Tail wine that last year struck nearly $400 million in sales and is the most imported wine in the US, has warned attempts to swap a system based on value to a tax charged per litre would only exacerbate oversupply plaguing the sector, trigger an exodus of growers and see many lose their life savings.

“We are part of an industry that is in distress, and what we need to do is work at building sales, building margins, maintaining a strong grower base and not by changing taxation,” Mr Casella told The Australian.

“A volumetric tax would be throwing the industry back into oversupply, regardless of what regions we are talking about.

“I think it’s immoral, and I don’t think it’s a correct thing for the industry.”

The latest financial results for Casella reveal a $50 million turnaround, with the family winery climbing out of a loss in 2013 to a $37.8m profit last year.

The brawl over tax within the wine sector has flared up as the government calls for submissions to its tax review.

Treasury Wine Estates, the maker of the nation’s most expensive wine, Penfolds Grange, as well as other premium brands such as Wolf Blass and Saltram, has joined with global drinks giant Pernod Ricard to urge a volumetric tax, which they believe will restore growth and secure a more sustainable future for the industry.

Backers of the proposal say such a tax would give growers and winemakers an incentive to produce higher-quality wines. This is where the better profits can be made and what consumers are shifting to, and it is a more sustainable part of the market.

However, opponents in the local wine sector argue a volumetric tax would increase the cost of cheaper wine, especially cask wine, while the price of more expensive wine, such as Penfolds, would come down.

They see the push as an attempt to gain an advantage for premium wines to the detriment of other players in the industry.

Treasury Wine believes there would only be a neutral to negligible increase in the cost of cheap wine under a volumetric tax, and that cask wine would not increase in price by much — although it does concede wine such as Penfolds would be cheaper.

Mr Casella told The Australian the volumetric tax proposal would only help some winemakers.

“It’s being pushed by interested parties to alter the commercial landscape in their favour.”

He said a volumetric tax could ruin some winemakers. “Oversupply will just lengthen the times that these growers are in distress and cause an exodus of these growers, who obviously have got their lifetime invested in their farms and their savings, which would be then worth very little.”

Casella’s bounce back into profit was driven by the lower Australian dollar while sales rose from $344.48m to $367.2m.

Mr Casella said a decision to maintain US pricing had caused it to drop into the red.

Source: The Australian, Eli Greenblat, June 26^th 2015