Surry Hills, New South Wales-based Cracka Wines was founded by Taylor, a former architect and start-up veteran who sold his first business (Wine Ark) in 2007 for A$8.5 million. Keen to help struggling Australian wine producers find an alternative route to market, in 2010 he put his money where his mouth was and launched Cracka Wines, a marketplace that now represents more than 1,000 wineries and supports their growth with its direct-to-consumer marketplace model.
Cracka has consistently been ranked within the Top 50 and 100 Australian online retailers up against the country’s biggest brands. The fifth-largest exporter of wine, Australian wines are highly popular in China and the US. In lieu of the growing Asian market, the Australian enterprise announced plans to raise AS$5 million from its 250,000 customers to expand its direct-to-consumer marketplace into Asia.
Taylor spills the beans on his Asian expansion, crowdfunding moves and more.
What inspired the business expansion into Asia?
Dean Taylor: While there’s been tremendous growth in online wine sales in Australia, at about A$500 million, this still only represents about 8% of the overall retail wine market. Beyond Australia, there’re some much larger markets for wine that are growing far quicker than ours. The direct-to-consumer model that we have developed is powerful here but offers even greater potential for our suppliers in international markets. I’m currently in the process of raising capital to expand our platform and allow Australian and New Zealand producers to sell their wines directly to consumers all over the world.
What motivated your crowdfunding decision?
Taylor: While Amazon’s arrival in Australia is likely to affect many local retailers who sell products sourced from outside of Australia, it’s going to be a boon for those like us who specialise in locally made products.
I firmly believe the arrival of Amazon in Australia will create a conduit for small and medium-sized producers to start selling wine directly to consumers all over Asia. As we prepare to embark on the next phase of our journey, the decision to provide our most loyal supporters the opportunity to invest seemed a logical step. Not only can they point to their investment in Cracka, but also become a part of Equitise’s first Australian raise. Equitise is an online equity crowdfunding platform.
And the federal government’s approval of crowd-sourced funding was the icing on the cake. Up until now, directly investing in a start-up like ours was an option only available to venture capital funds, family offices and sophisticated investors.
We partnered with Equitise to become the first Australian publicly unlisted company to raise capital through a crowd-sourced equity funding campaign and believe our direct-to-consumer model is a perfect fit. The fundraising will commence when the bill comes into effect in a couple of months.
How will you leverage your reputation to earn investors? Are there any special campaigning efforts to urge people to support?
Taylor: Since launching in 2010, we’ve managed to build a large, passionate and loyal customer base who enjoys and appreciates what we offer. On average, they shop with us every six to eight weeks, spending close to A$1,000 each per year. For the past three years, we have hardly spent a cent on advertising or marketing, relying entirely on their referrals to drive growth.
We’re in the fortunate position now, where when we get behind a wine, we can move an entire vintage. For example, we recently sold more 10,000 bottles of an A$80 shiraz to our customers without even telling them what the actual wine was. With a loyal customer base exceeding 250,000, we’re hoping to harness this trust and support by inviting our customers to join us on the next phase of our journey.
What’s in store for Asia with the expansion?
Taylor: We’ve developed a robust and highly scalable technology platform which produces significant sales volumes for our winery partners in Australia. It’s time to expand our horizons to allow the small and medium-sized wineries that we work with to sell to consumers all around the world.
We intend to create the go-to place for Australian and New Zealand wines in 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, thus cutting out middlemen and distribution costs.
Which markets, in particular, are you looking at?
Taylor: In terms of expansion, Hong Kong and 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 Beijing. Beyond that, there’s also a good demand for Australian and New Zealand wines in Japan and Malaysia.