The Sydney-based online wine retailer Cracka Wines is eyeing major expansion plans in Asia by raising $5m this year.
Inside FMCG sat down with Dean Taylor, the CEO and founder of the Australian liquor company, to talk about his company’s latest developments.
“Our vision for Cracka was to build an information rich marketplace where wineries can sell directly to consumers. By cutting out both the middleman and the supermarkets, we release extra margin that can be shared between the buyer and seller. It’s a win-win solution,” Taylor told Inside FMCG.
“While our focus to date has been building a great business here in Australia, we’ve realised that our direct-to-consumer model has even greater potential in other markets, particularly in Asia where we’re seeing massive demand for premium Australian wines.”
Inside FMCG: Cracka Wines recently announced its plans to raise $5m to expand in Asia. Tell us more about this exciting news.
Dean Taylor: The biggest roadblocks for Aussie wineries wanting to expand into Asia, are the erosive costs of wholesaling, distribution agents and logistics. Our model removes those barriers and goes one step further by providing them access to a powerful high margin sales channel. While there’s plenty of other wholesalers importing and exporting Australian and New Zealand wines into Asia, we’re excited to be the first to create a platform that allows producers the opportunity to connect directly with consumers in the region.
How do you see yourself expanding in Asia in terms of competition and brand awareness? Do you have any particular countries in mind?
Right from day one, Cracka has been a big supporter of Australian and New Zealand wines. While we sell some imports, our strength is definitely in introducing consumers to wines from local wineries, that they normally wouldn’t find in their average bottle shop.
We intend to take the same approach in Asia, creating the go-to-place for Australian and New Zealand wines — providing consumers in the region the ability to access thousands of boutique wines that aren’t readily available in those markets. Our competitive advantage in those markets will be the same as it is here, leveraging our direct-to–consumer model cutting out middlemen and distribution costs.
In terms of expansion, Hong Kong and/or Singapore are the most likely starting points. While smaller than China, they are markets that are easy to service. I expect that we will need to take a city-by-city approach in China, starting with Shanghai and Bejing. Beyond that there’s also good demand for Australian and New Zealand wines in Japan and Malaysia.
How did you start Cracka Wines in 2010? How is it different from then to now?
When I started exploring the online wine category back in 2008, I was shocked to discover how fragmented the market was. At the time, there were almost 1,000 websites selling wine in Australia, however none of them were really generating significant sales. Looking at them all, I realised there had to be a better mousetrap. At that point in time the classified sites like Realestate.com, Carsales.com and Seek.com.au were all booming. Their models were disrupting the traditional media companies by using the internet to directly connect suppliers and consumers at scale.
The light bulb went off and I realised that I could do the same — by aggregating inventory and information to create a direct-to-consumer marketplace for wine. By cutting out both the middleman and the greedy supermarkets, up to 50 per cent additional margin was released. Consumers save money. Wineries bank more dollars. It’s a win-win situation. Our direct-to-consumer model has remained pretty much the same since then. The only real change is that we now hold inventory on behalf of suppliers to improve the delivery experience.
What liquor and online trends do you see happening in 2017?
The Australian online wine market is that it is growing at a 25 per cent per annum, significantly higher than the general online eCommerce market which is forecast to grow at 11.7 per cent per annum and the 4-5 per cent for the overall wine market.
While changes in purchasing behavior is certainly one of the key drivers, I expect the growth we’re seeing is also due to a premiumisation trend occurring across the broader liquor market. Along with boutique beer, artisan spirits and craft ciders, [Aussies] are drinking less, but better wine. Since we launched the business in 2010, our average bottle price has increased by a massive 189 per cent.
What particular Cracka Wine products are the most sought out by consumers?
Sacredtree would be one of our most popular. They’re produced by Mike Brown at Gemtree, an organic and biodynamic boutique wine producer based in McLaren Vale. Every single one of their wines over delivers for the money, so it’s no surprise customers keep coming back for them.
