Business Strategy Lessons From Yellow Tail, Case Study & Blue Ocean Strategy
In 2000, the US wine market was very competitive -A few larger brands dominated it, particularly, the premium segment. They controlled distributors, retailers, and shelf space. They supplied 75 percent of the wine sold in the market.
As a new brand, it would be nearly impossible to penetrate the premium wine segment, as the market had several entry barriers. On the other hand, the value segment had only a few entry barriers. Unfortunately, there’s a flip side -a new label had to face competition from thousands of domestic/imported brands in the value segment.
As the bigger brands supplied 75% of the wine sold, more than 1600 value brands competed for the remaining 25 percent of the wine market. The brands fought for customer’s attention, loyalty, retail space, distribution network, and market positioning. They spent huge money on marketing and promotional activities. Yet, they couldn’t establish brand awareness or brand recall. The brands struggled to register their name in a consumer’s mind.
From 1990 to 2000, hundreds of brands had vanished from the value segment, without a trace. The surviving brands made only minimal profits as they battled for lower prices to attract customers.
The value segment of the wine industry was a difficult market to enter for any new brand. It would be a battle of a blood bath -A red ocean.
In that scenario, in 2001, a small, little known, Australian winemaker Casella Wines, in partnership with US-based distributor W J Deutsche & Sons, launched a value brand called Yellow Tail in the United States. The team estimated sales of approximately 25,000 cases in the first year. However, the sales exceeded 225,000 cases in the initial six months. It sent shock waves across the wine industry.
Yellow Tail continued to ascend. It reached the number one spot in the imported wine category by 2003. And by 2006, sales touched 8.1 million cases. It was an unbelievable success story.
How did Yellow Tail succeed in such a highly competitive market? What did they do differently from other brands?
What lessons could we learn?
Let’s understand Casella Wine’s Yellowtail journey.
Note: In 1999, Casella Wines launched a value brand called Carramar Estate in the US wine market. It had no differentiation from other brands in that category. Customers saw Carramar Estate as another me-too product.
The product failed miserably. Casella Wines lost money and an opportunity. However, they didn’t back out of business.
The Casella Wines and their US distributor W J Deutsche & Sons learned valuable lessons that helped in developing Yellow Tail products. The failure also increased their determination to succeed.
HIRE RIGHT PEOPLE
Before beginning any journey, a business needs the right people in the team. That’s a fundamental requirement.
Jim Collins writes, “Those who build great brands make sure they have the right people on the bus and the right people in the key seats before they figure out where to drive the bus. They always think first about who and then about what. When facing chaos and uncertainty, and you cannot possibly predict what’s coming around the corner, your best “strategy” is to have a busload of people who can adapt to and perform brilliantly no matter what comes next. Great vision without great people is irrelevant.”
Ed Catmull, the CEO, Pixar, says that the fundamental problem in business is not finding good ideas but finding the good people. Most people believe the opposite was true.
The Casella Team -So, Casella Wine’s CEO John Casella’s first move was to hire the right persons for the team. The first person he hired for the US expansion team was John Soutter.
John Soutter had earlier developed, launched, and marketed premium wine brands in the US and UK markets. He was eagerly looking for a way to generate a new value brand on his own & John Casella offered him the opportunity at the right time.
John Casella also hired an experienced winemaker who was also looking for new challenges -Alan Kennett. John named Alan as the chief winemaker for the latest brand.
John might have hired a few more people to make the team. Unfortunately, I couldn’t find the needed information.
Hiring A Distributor Team -A distributor is a critical cog in a wheel of the wine business. John Casella established a partnership with US distributor W J Deutsche & Sons.
Deutsches was passionate about their industry. They loved marketing -They had developed an incredible distribution network -They had a sound knowledge of the wine industry. The distribution team worked closely with John Casella in developing the new brand.
Partnership with Deutsche was one of the critical reasons behind the Yellow Tail brand’s success.
Now, the team was in place -Let’s begin the journey.
1.0 BRAND POSITIONING -Category, Focus, Differentiation
When we start a business or a new brand, it is essential to aim for a long-term payoff for all our efforts and investments -A sustainable ROI. One of the ways to achieve that is to strive for getting maximum value from each customer(higher Customer Lifetime Value(CLTV)) -It means the brand should look for developing loyal customers.
The first step in building loyalty is to find a way to enter a customer’s mind, which is called Brand Positioning. It is a consumer’s perception of a brand with respect to competing brands. And, the research shows that the easiest way to enter their mind is being first under a new category.
Coke is the first cooldrink to enter the consumer’s mind under the Cola category. Seven-up is the first cooldrink under the Un-cola category. Redbull is the first cooldrink under the ‘energy drink’ category. Xerox is the first brand under the ‘photocopying’ category.
What is the need for categories? Our human brains are wired for categorization to help us remember things. Without that, we would be quickly overwhelmed by the vast amount of information.
Whenever we come across new things, subconsciously, we would file them under different known categories in our memories. If a consumer sees your brand, he would automatically file it under a known existing category. The problem with this filing under the existing category is — your brand would be filed several layers below the other brands and the consumer would fail to recollect your brand name at the top of the mind.
Example -Coke is the first product under the cola category. Pepsi is the second brand. Do you remember the third brand? Fourth brand? If you ask people, they may not recollect beyond two-three names in any category. How many energy drinks can you name other than Redbull?
To summarise, the first step in business is to position your brand inside a consumer’s mind. It could be done only after creating a new category in their minds.
Now, the next challenge -How to create a new category?
1.1 CREATING A NEW CATEGORY
Before creating a new category, we need to understand what classifications are already existing in a consumer’s mind. We don’t want to repeat the category -Otherwise, your brand would be filed several layers below other brands and would lose the race of brand awareness & recall.
How to find the current categories in a consumer’s mind? By studying the existing market, current customers, and the competitors’ value offerings.
Here, it means studying the existing value segment of the wine market.
STUDY OF VALUE SEGMENT-WINE MARKET
Casella Wine’s earlier launch of Carramar Estate had taught them valuable lessons about the wine industry. Additionally, this time, the team also did more extensive research on the existing market.
RESEARCHING US WINE MARKET -While studying the US wine market, Casella Wines observed some unexpected truth. Let’s see that in detail.
Before going for an in-depth understanding of the existing market or customers, we need to understand the profitability of the potential market? Can it sustain more competitors? Is the customer base stagnant or growing?
Why should we ask the above questions?
Because, a Value/Mass Brand’s growth depends on the following three important criteria(Other than meeting customer’s needs, desires, and attitudes)-
- The number of customers that purchase the product
- Frequency of purchase
- Quantity of purchase.
All the above three points are related to the market. A product would fail if the potential market didn’t meet any of the above three conditions. We have to check whether the US Wine market in the 1990s did meet the above criteria.
Purchase Frequencies -While estimating market potential, it was critical to understand how frequently a customer would purchase a product/service. The higher the frequency, the better the market opportunities for a new brand to exploit.
In the 1990s, Americans drank relatively little wine — on average, about one bottle per adult per month — It was roughly one-tenth of the per capita consumption of France or Italy. The customers drank wine only on special occasions & most of them preferred expensive fine wine for those events.
So, the research showed that the frequency of product use was so low to sustain one more new mass-market brand. Remember, a value brand relies on volume to become profitable.
The Available Customer Base -For a business to succeed, the target market should have enough customers to buy the product or service.
For niche brands, sales gain is predominantly dependent on the repeat purchase behavior of customers. On the other hand, a value brand’s sales gain comes mostly from getting more buyers. Therefore, it is essential to check whether the customer base is large enough to build a sustainable business.
In the 1990s, U.S. wine consumption was driven primarily by a small segment of committed wine connoisseurs. And, these customers represented only 10% of the adults in the country but accounted for 86% of the total wine sales. It’s a shocking data.
The eight prominent brands, hundreds of import labels, and thousands of value brands were fighting for a pie of this ten percent population. And the irony is that hundreds of the value brands were fighting for 25% of 10% adults in the country. It was a pretty small customer base.
Casella Wine’s CEO John Casella and John Soutter, GM(Exports), strongly felt that the current customer base was too small and insufficient to leverage sustainable ROI for investments/efforts.
To conclude, the value segment of the wine market didn’t meet any of those three conditions -frequency of use was low, Quantity of purchase was flat, and importantly, the customer base was a stagnant one.
Creating a niche or category within this existing mass segment(Which is a stagnant one) of the wine market would not be a feasible business due to its limited size.
So, what’s the solution?
2.0 GROW THE MARKET
In early 2000, Cadbury Schweppes was in a similar situation -The company’s Chief Strategy Officer Todd Stitzer told his teammates, “I’m not going to ask you to increase our company’s market share. In that case, you would look at the existing market and the current competitors. I’m asking you to look for a strategy to grow the available market”.
Yes, the solution is to increase the available customer base. It is time to look for noncustomers and entice them to use our product/service.
Find a way to attract non-wine consumers.
W. Chan Kim and Renée Mauborgne say that focusing on ‘Non-customers’ would help in generating ‘Radical Value Innovations’ -It would open up new uncontested markets.
Focusing on existing customers will break the existing market into finer segments, forcing us to tailor the offerings further, and reducing the market further. To break away from this, the first step is to shift your focus from “Customers” to “Non-Customers” -Blue Ocean Strategy.
So, where should we start? What nonconsumers should Casella Wines target?
ADJACENT MARKET -Begin with customers who are related to the industry you are planning to enter -It means a market closest to the wine industry -The customers who have some commonalities with the existing wine customer -For the proposed new wine, the noncustomers are The beer and cocktail drinkers.
Largest Catchment -W. Chan Kim writes that while choosing a group of customers, the rule is to opt for the largest catchment, matching the capabilities of an organization. The beer sales were ten times more than the wine sales in the year 2000. The potential market was huge.
Therefore, the customers of Beer, alcoholic drinks, and cocktails could be the right target segment for the proposed new ‘value brand’ wine.
3.0 UNDERSTANDING YOUR CUSTOMERS
Once you have chosen your target segment of customers, the next step is to understand them -Their likes, dislikes, interests, and desires related and relevant to your market. It is also essential to study the commonalities between both existing customers & potential noncustomers and leverage them.
ESTABLISHING PRIORITIES -It’s a massive customer base. It would be overwhelming to study them. And, time, resources, and money are all critical constraints. So, the smart way is to identify and focus on a section of customers that could deliver a disproportionate revenue to the company. Break the noncustomer segments into groups and rank them. Establish priorities.
The research showed that a considerable percentage of noncustomers had earlier tried the wine but never continued it. They were a massive customer base. They could be the primary target. And, as expected, Casella Team had initially targeted this group of noncustomers and tried to understand the reasons behind their disliking for wine and the reasons behind their infrequent purchase of wine.
Studying and understanding the needs of this noncustomer group could also help in attracting the remaining alcoholic beverage drinkers who were yet to try the wine, as both the groups had several commonalities.
3.1 USER RESEARCH
You have chosen your target segment -Prioritized the customer groups -Next, study the customers in-depth.
To understand the customers’ behavior, attitudes, needs, desires, and wants, we need to spend time with them, listen to them, observe them, and ask open-ended questions. You need to become your customer.
Casella Wine’s team took on a grand journey to understand the customers. John Casella, John Soutter, and Philip Casella rented a car and drove across America. They visited beer halls, drive-through liquor stores, mom & pop liquor shops, larger retail outlets, nightclubs, and drugstores. They observed beer drinkers, other alcoholic beverage consumers, and tried to learn their consuming/purchasing behavior.
Co-Creation Workshops -The team at Casella Wines conducted co-creation workshops with existing and potential customers. In the class, managers, marketers, leadership team, designers of the company took part and worked along with the customers. They also observed customers from close quarters. It helped Casella’s team to understand the attitudes and behaviors of the customers. They could understand the reasons behind the consumption of other beverages.
The team also worked with the customers to understand the consumer journey from product awareness stage to decision-making to consumption to disposal stage. They collected deep insights.
4.0 RESEARCH OBSERVATIONS AND INSIGHTS
The research showed the following reasons behind a section of noncustomer’s dislike for wines -
4.1 THE RITUALS
A person could enjoy a wine only when he gains more knowledge, learns the ritual, and frequently practices it. For a new nonconsumer, it means that he/she had to invest a considerable amount of time and effort into learning those rituals before beginning to enjoy wine. It is like learning a new behavior.
A person would naturally resist any new behavior when it demands a lot of effort/time upfront. On the other hand, he/she would quickly adopt the practice if he/she gets an instant reward with minimal effort. Unfortunately, that was not the case with the wines. The rituals and the necessity of prior information acted as a barrier for alcoholic beverage drinkers to adopt wine drinking behavior.
John Casella, CEO of Casella Wines, was once a noncustomer for the wine product. He initially disliked the taste of the wine. He had to put effort and time into learning to enjoy the wine.
Research has shown that customer behavior change would happen if the brand asks a customer to put the effort by incremental steps, which would require only a small motivation. Baby steps are the way to begin.
INSIGHTS -The best way to encourage a person to adopt a new behavior is to make a product that has many familiar elements to him/her.
It means that Casella Wines need to change the conventional wine to suit the noncustomer’s requirements — No need for any rituals — It should be easy to pour — Smoother and approachable as beer and cocktails.
A new customer need not learn about the ways of holding the glass or pouring the wine. He or she had to invest only a little time and effort.
Let’s remove the barriers and allow noncustomers to enjoy the wine as quickly as possible.
4.2 TASTE OF THE PRODUCT
The research showed that one factor played a highly critical role in a noncustomer’s dislike for wine -It was Taste of the product. The noncustomers hated the wine taste.
As we saw earlier, John Casella, himself was once a noncustomer. In the beginning, he despised the taste. It was so tannic and acidic. It took effort and time for him to get used to that taste.
INSIGHTS -Again, the same thing -The best way to encourage a person to adopt a new behavior is to make a product that has many familiar elements to him/her.
When Maggi noodles came to India in the early 1980s, Nestle launched the product with a masala flavor -a taste Indian consumers are familiar with and widely experienced. Noodles was a new, unusual product for Indians at that time but came with a well-known flavor. It was one of the critical reasons why Maggi became successful in India.
The wine’s taste was a critical barrier in preventing new customers from adopting the intended behavior. So, it was essential to change the wine taste to a known one. The noncustomers were familiar and comfortable with a sweeter taste. Minimize tannins, acid, and green tastes.
John Casella pondered the idea of making the wine based on fruits so that the beverage could taste sweeter.
A wine for people who grew up mostly on soft drinks -The sweeter but not too sugary like coca-cola — That’s the main value proposition.
4.3 THE CHOICE PARADOX
The research shows that as the choices increase, a customer’s limited working memory gets overloaded, resulting in indecision.
In the market, the brands differentiate the wine options by the following characteristics -grape varietals, origin, flavor & balance, vintage, boutique, aging, image, smoothness, concentration, presentation, and acuteness. Imagine, how confusing it would be for a noncustomer?
When a noncustomer goes to purchase a bottle of wine, his lack of knowledge/information about the product characteristics would have already created a certain level of anxiety in his/her mind. The research showed that the abundance of choices in the retail store would only add to his/her stress levels. Many noncustomers reported that they found the options confusing and intimidating. In addition to that, a brand launches multiple varieties, generating further uncertainty among the customers. The customer was worried about choosing the wrong item, wastage of time in deliberation, and not meeting unknown expectations.
The choices overwhelmed a noncustomer and blocked his/her decision-making.
INSIGHTS -A brand has to help people in quicker decision-making. The more time we allow a person to deliberate, it builds up stress inside him and would force him to make poor decisions or indecisions. However, people also want options as they want to feel that they are in control of their life. So, a brand has to strike a balance.
The solution should be to launch a product in not more than 2–3 choices. It would be easy to recognize and choose. Make a customer’s life simpler.
4.4 NAMING OF THE BRAND
The research also showed that noncustomers found the existing names of value brands confusing. They struggled to remember them when they went for repurchase after a month. Most of the names were foreign to them -Consumers couldn’t understand the meaning or connect to that.
Sometimes, the noncustomers could not guess the grape variety itself as various brands used different names for the same grape.
Casella Wines also learned lessons from their experience -Take the case of The Carramar Estate line, which they introduced in 1999 -While launching this brand, Casella followed the competitor trends by naming its wine after a local Australian landmark (an aboriginal vineyard site) -Carramar means “by shady tree” & Estate indicates a place of stature. Unfortunately, people did not know the landmark and failed to associate with Australian origin.
INSIGHTS -Give a simple English name that could also communicate some known association or meaning. Mention the grape name clearly in English.
4.5 CONTRAST PRINCIPLE
Stores often organized and displayed wines by the country of origin. It made it difficult for a consumer to compare the wine with another brand’s similar product. We have to understand that humans cannot choose in absolute terms. We need to compare one thing with another. As Dan Ariely says, “We don’t understand the value of the 6-cylinder engine without comparing it with a 4-cylinder engine.” People want to be in charge of their life. So, they need to feel that they are in control of their own decisions. They need options to compare.
INSIGHTS -Place your product varieties in a retail store in such a way that people could compare them to other brand’s similar products. Make sure that the differentiation stands out clearly from the competitor. Color, label, clarity, value proposition should stand out.
4.6 FREQUENCY OF USE
To sustain a business, a brand needs to convert a noncustomer into a loyal customer. It would happen when he/she uses the product frequently. And, the frequency of use is essential for both niche and value brands. So, Casella Wines needed to check the instances a noncustomer could use the proposed wine. If the frequency of use would be high, then the company has to customize the product to meet those contexts.
The Casella wines team found that several noncustomers would be willing to use wine every day as an after-food beverage and also for weekend social gatherings with his/her friends.
INSIGHTS -Develop a wine that has a great taste and would go well with most of the popular food consumed by nonconsumers. And, at the right price, it would entice the new customer to repurchase the product often.
4.7 BRAND PERSONALITY
We all know that to build a sustainable business, a brand has to develop loyal customers. One of the ways to build loyalty is to establish a relationship with customers, particularly an emotional connection.
Let’s think about relationships between people -What do you think would affect the relationship most? (Other than communication, understanding) -The personality. A person would like to understand the other person’s personality to build a relationship. Similarly, a customer has to see the brand’s personality to establish an emotional connection.
So, brand personality means the personification of the brand -assigning human characteristics to the brand that would also play a pivotal role in differentiating the brand from competitors. It would also define the brand communication -Content for marketing material, prospect language, packaging design, naming, tagline, color palette, and other related things.
An important note -The brand personality should be built based on the kind of character a customer would like to see. The customer should define the brand’s personality and not the company. So, work with customers, understand their interests, take insights, incorporate them into your brand, and communicate.
Co-Creation Workshops -We already saw that Casella Wines conducted a co-creation workshop along with customers. It helped them to understand the required brand characteristics.
One of the workshop exercises were -The Casella wines team asked the consumers to write a love story about the proposed new wine.
A couple of examples from the book ‘Brand Together’ by Nicholas Ind, Clare Fuller, and Charles Trevail.
- Yellowtail is a classy lady. She is young, but worldly and from a distant land. She hangs with the common folk. She is fun, energetic, young at heart, and would not allow me to spend too much money on her. But, Miss Yellowtail and I are only friends. She’s a free spirit -A Houston Fan.
- How do I feel about Yellowtail? Just the thought of it takes me back to picnics for two in the long grass, getting away from it, a feeling of loyalty and trust… no other wine really compares -A London Fan.
The research showed that customers wanted a wine that could be enjoyed with others in an atmosphere of fun and also for weekend social gatherings.
A brand that is down-to-earth and has a fun-loving attitude. That’s the required personality.
4.8 THE PRICE
Most of the value brand wines were sold in the price range of $9 to $10 at retail for a 750ml bottle. For luring a nonconsumer to try a product, the cost had to be as low as possible. The research showed that $9–10 prices would discourage noncustomers from trying the new wine brand. Casella’s earlier US launch ‘Carramar Estate line’ was priced around $10 & it was also one of the reasons why the product failed.
Think Like A Customer -When we are trying to attract nonconsumers, we have to remember that they would compare the new product with the options from the other industry.
Example -Casella’s noncustomers would compare the new value wine brand with the price of the products from the alcoholic beverages category. They would not compare the new product with other wine brands. Thinking from the customer’s perspective should be the guiding factor for price fixation. Previously, for the Carramar Estate brand, Casella priced the product by comparing it with the existing value brands in the wine industry.
The proposed price could be a little higher than the optional products that the customer buys usually.
So, John Casella and his team priced the new wine based on the pricing structure of beers and other alcoholic drinks in that market.
Pursue pricing against substitutes and alternatives across industries -Blue Ocean Strategy.
Their research showed that the new product should be priced between $6 to $7 to lure a noncustomer to try the product.
Deutsche, director W J Deutsche & Sons, “When a wine is priced around $7, most of the consumers would not hesitate to buy.”
5.0 UNDERSTANDING CHANGE IN BUSINESS ENVIRONMENT -SOCIAL FACTORS
We all would agree that businesses do not operate in a vacuum but rather in a dynamic environment that could influence their success. A company that observes the external environmental changes, understand the opportunities, then, tweaks its path, and adopts its business model has a better chance to build a sustainable business.
Before entering into a new market, it is advisable to observe the environment and recognize the factors that could be leveraged by the brand for success.
Below are some of the changes in the business environment that played a pivotal role in Yellow Tail’s success.
5.1 2000 SUMMER OLYMPICS, SYDNEY
Casella Wines was at the right place at the right time. Was it so? Or the 2000 Sydney Olympics gave the company an opportunity?
BRAND AUSTRALIA -Just two years before the Olympic event, the Australian government launched a grand ‘Brand Australia’ program worldwide. They aggressively marketed every significant thing about Australia. It created brand awareness in the United States. It was a massive marketing program. Till that time, a host country had advertised only Olympic-related content. That was the first time a country had leveraged the Olympics to sell everything about Australia -to generate benefits for the entire country.
Michael Payne, Director-Marketing, International Olympic Committee commented that Australia was the first host country to take advantage of the games to promote itself for the benefit of the whole country. No one else had promoted like them till that time. He further added that he would like to see the Australian model to be carried forward by future Olympic nations.
The Australian government also promoted its Industry capabilities and ran joint programs with Industry members in other countries. They arranged networking programs. Through one such program only, John Casella and W J Deutsche met and began to collaborate.
The Implications -The research has shown that the Olympic games had enhanced the position of Australia in International Markets. The country remained for some more time in people’s minds even after the event was over.
Studies showed that it was the right time for Australian companies to enter international markets as people were more receptive to Australian brands. The challenge was to exploit and build on it.
In the United States, Americans became receptive to Australian products. They actively searched and bought Australian or Australian themed products. Research showed that Australia topped the wish list for tourist destinations among Americans in the year 2001.
Post 9/11 Scenario -Moreover, after 9/11, Australia gave its support to America’s intervention in Afghanistan while some European countries opposed the same. That prompted Americans to patronize Australian products and boycott some of the European wines. Casella Wines had an opportunity to fill a vacuum.
Casella Wines was lucky to be at the right place at the right time. They utilized the opportunity.
INSIGHTS -The new brand has to show its Australian association explicitly to exploit the opportunity.
5.2 OTHER NOTABLE ENVIRONMENTAL FACTORS -The research also revealed that in value segments, the Americans began to show a higher preference for imported wines in the 1990s.
The market for imported wines was good and growing.
Single Grape Wines -Another study also revealed that value segment customers were pleased with wines that had only one grape. And, it would appeal to non-customers too, as they also needed a simple product.
6.0 PRODUCT DEVELOPMENT
From the research, it became clear that young & price-sensitive non-consumers wanted fruit-forward everyday wines that would be softer & sweeter with a pleasant finish and as approachable as beer & cocktails. It meant that the proposed new wine should have minimum tannins, acid, and green tastes to maintain palatableness. There should be no ritual -Soft, smooth, and easy to pour. The pricing should be within the range of $6–7. The new wine should also appeal to current wine drinkers.
So, the primary value propositions -
- The Differentiation — A fruit-flavored sweety wine
- Low Cost
6.1 BRAND NAME
From the research, it was clear that the brand name should be uncomplicated and easy to understand -It should show the connection to Australian origin. If it is in English, it would be better.
HARKNESS DESIGN STUDIO -Casella’s team sought the help of Barbara from the Harkness design studio. Barbara had been designing wine labels for nearly a decade. She had an in-depth understanding of the wine industry and its customers.
THE PIVOT -Recent studies had found that many customers often perceived the origin of wine as an indicator of quality & they applied it as the basis of decision making while purchasing wine. It prompted Casella’s team to focus on highlighting the Australian origin -It could be a good idea. It would also help the new brand to exploit the recent ‘Brand Australia’ awareness. So, Casella’s team decided to focus on sharing a story of Australian origin.
The Australianness -What elements/symbols would show Australianness as quickly as possible? Who would answer that question? Yes. The Customers. Think like a customer. What’s the first thing that would come to his/her mind when he/she hears the word Australia?
Americans had been watching the Australian Tourist Commission’s(ATC) advertisements for the last few months. Do you know what was the ATC’s logo?- It was ring-tailed-wallaby.
The research revealed that the Wallaby image instantaneously brought the Australian association in the mind of an American consumer. The symbol had deep penetration among the people.
Australian Wallaby is also called yellow-footed rock wallaby -Its tail is ringed brown and yellow -its paws are yellow.
Barbara, John Casella, and John Souttter took that as inspiration and derived the brand name Yellow Tail.
To the name, Barbara also added double brackets -[yellow tail].
In an NYtimes article, John Casella says, “We were looking up for a technical description of a wallaby in a textbook. In the margin, alongside the Latin derivation of the name, was the Australian version, in brackets. So, we added those square brackets -[yellow tail]. We decided to keep the brackets “to set the wine apart” from competing brands. We also used the lower-case lettering to underscore the wine’s lack of pretension.”
And, square brackets also symbolized programming code and IT Industry -It was the trend of that time. The wine’s target market was youngsters & most of them worked in the newly growing IT sector. The brackets would help to grab their attention.
A nonconsumer, who lacks wine knowledge, would rely on intrinsic and extrinsic factors to purchase the wine. He/she would find it challenging to evaluate intrinsic attributes such as aroma/taste of wine as they would be rarely available at the point of purchase. Therefore, he/she has to rely on extrinsic factors such as packaging, retail environment, salespeople recommendations, POP displays, and other related content to judge the wine.
Out of those extrinsic factors, wine packaging plays a critical role in helping a customer to choose a wine.
Design Specifications -We have already seen that the priority should be to focus on showing the story of Australian origin. The Australian connection should be overtly on the label. It should be visible even from a distance.
Symbol and Color -Barbara and her team chose the yellow-foot wallaby that Americans were already familiar with watching advertisements. They positioned the wallaby on the label in such a way that customers could see it even from a distance. Since the animal symbol was in yellow, the team chose a contrast color(black) for the background so that the wallaby could be seen clearly by people. Barbara also adds that she picked up contrasting black and yellow colors based on Australian traffic warning-sign colors as they were designed mainly to capture the attention. At the same time, Barbara’s team also cross-checked whether the color palette would stand out from other brands in the retail environment.
‘Less Is More’ Content Strategy -We have already seen that in a retail environment, many nonconsumers found wine options confusing and downright intimidating. One of the reasons was the content on the front label of the bottle. As the customers lacked knowledge about the product, detailed information in the form of too much text about the wine increased their anxiety levels. The fewer the writing, the easier to understand the wine, and customers would have lesser tension.
The research had also shown that noncustomers found it challenging to figure out the grape type from the wine label. The customer wanted a simple and clear packaging.
Casella Wines decided to address those things -The front label had no additional content other than necessary things -Brand name, Wallaby, Grape type with matching band in neon color were made prominent.
The backside of the Label -We have already seen that noncustomers found it confusing to choose the wine as they were unfamiliar with wine’s complexity. In a retail environment, when they pick a wine bottle to try to understand, they were often put off by the details of the wine in the label. The research revealed that the enological terminology used in the packaging repelled them.
I came across one of the examples in a website(Missed the weblink -Would try to add the reference soon)
A competitor’s wine label’s backside might contain content similar to what’s written below -
- Chateau D’Arcins Haut Medoc has a dark garnet color, toasted nose with hints of black fruits, prunes, raspberries, and licorice. Well balanced. Fine and ripe tannins leaving a lingering finish.
Imagine how a person who did not know about wine would react to the above content.
In contrast, the description on the back of a bottle of Yellow Tail Merlot read:
- For 3 generations, the Casella family has been making wine at their winery in the small town of Yenda in South Eastern Australia. It is here that [yellow tail] is created with a simple purpose in mind: to make a great wine that everyone can enjoy. [yellow tail] is everything a great wine should be. It’s approachable, fresh, flavorsome, and has a personality all of its own.
Casella Wines made it simpler for a noncustomer to understand the product. They didn’t add any unnecessary text or wine terminology that could build anxiety in a person.
John Casella explains, “We said from the beginning that we are unpretentious. Heck, we had a Kangaroo on the label. We used bright colors. When you turn the bottle around and read the back, the label in no way talks about where the wine comes from, or what the oak barrel maturation was.” — from the book, ‘If You’re in a Dogfight, Become a Cat!: Strategies for Long-Term Growth’ by Leonard Sherman.
7.0 ACTIVITIES AND THE STRATEGIC FIT
Now, the next crucial part -A business has to perform several direct/indirect activities to deliver value to a customer through its product/service. Example -For Starbucks, the activities are Sourcing of quality coffee beans, Roasting, Customer Education, Baristas training, Consumer Research, R&D, Hiring, Procurement, Testing, Real Estate, Packaging, and Branding.
Similarly, for the new proposed wine, Casella has to perform specific actions. The company has to review its existing activities & it should only adopt activities that would add or enhance value to the new value proposition.
For reviewing the activities, Blue Ocean Strategy suggests a Four-Action Framework tool -Raise, Create, Eliminate, and Reduce. I feel that there’s a better tool available for this -It’s called the SCAMPER creativity tool.
- S -SUBSTITUTE -See if you can Substitute any or part of the activities with an efficient one that saves time, effort, and money.
- C -COMBINE or CREATE -Can you combine some of the activities so that resources could be shared? Or Do we need to create a new activity?
- A -ADOPT or ADAPT -Can you adapt any of the activities to meet the new value proposition or business environment? Can you adopt some of the good things from an activity from the adjacent industry?
- M -MODIFY -Can you modify part of an activity to meet the new value proposition?
- P -PUT TO A DIFFERENT USE -Can we put some of the activities to a different use?
- E -ELIMINATE OR ENHANCE -Can we eliminate the activities that don’t add much value to the noncustomer in the long run? Can we eliminate redundant activities? Can we eliminate activities that don’t fit well with other activities or core activities? Can we eliminate activity that cannot be modified to meet the new requirements?
- R -REUSE or REFUSE -Can we repeat or reuse some of the activities in other areas of the value chain?
THE STRATEGIC FIT-For a business to establish a sustainable competitive advantage, the chosen activities should interact, complement, enhance, and reinforce one another. It is called ‘Strategic Fit’ among activities. The ‘fit’ determines the brand’s success. The fit creates a chain-like structure & it is as strong as its weakest link.
So, for Casella’s team, It was time to review the core and support activities and their fit. It would also help in the optimization of each activity and improvisation of the relationship between the activities.
Where to start? As usual, focus on activities that would have a disproportionate influence on customers.
Start with core activities that dealt with the customers. For this, the Casella team used the research data of a customer’s journey from product awareness stage to decision-making to consumption to disposal stage. A brand has to provide a better experience at all customer touchpoints -Observe activities that are responsible for providing a great experience at that particular touchpoint.
Remember, every activity should also meet the unique value propositions of the brand -namely, sweeter taste and low cost. Eliminate the activity that would fail to meet those propositions.
Let’s see some of the Casella Wine’s activities and understand how the company modified an existing activity or created a new activity to deliver the new value propositions.
Note: This article covers only a few activities.
7.1 ACTIVITIES & CONSUMER AWARENESS
The consumer interaction with a brand starts from the place/point where he/she comes to know about the product.
The research showed that younger consumers (under 35 years old) would rely upon in-house displays(Extrinsic Cues) and advice from salespersons, bar waiters, samples as they lacked wine-related knowledge.
The Activities That Support Awareness Through Extrinsic Cues-From the research, it was clear that extrinsic cues in the retail environment would play a critical role in convincing a noncustomer to choose a wine option. So, instead of focusing on mass advertisements, Casella Wines decided to concentrate on product promotion in the retail environment.
The Casella team undertook the following activities to build external cues-
- Design — Based on user research, Casella Wines specially designed customized colored POP displays, floor displays, shelf-talkers, backer cards, and neck hangers.
- Renting —They also rented dedicated space inside the stores. Also, they had engaged the area at the end of aisles. Casella wine’s displays dominated wine sections.
In big-box retailers like Sam’s Club and Costco, the company had massive shelf-talkers with images of the yellow wallaby that were hard to miss. John Soutter and John Casella made sure that the bottle’s bright colors and bold marketing campaign would stand out against competing brands
In a store, it was easy to spot, pick up a Yellow Tail wine.
Activities That Support AUSTRALIANNESS ASSOCIATION -Casella Wines has to create new activities that would help in exploiting ‘Brand Australia’ awareness.
- John Soutter and his distribution team developed a marketing program in which they gave Australian themes jackets, hats, key rings, and other incentives to marketing personnel.
- The company also provided Aussie Outback clothing with bright yellow leather outback caps and oilskin jackets(branded with Casella logo)to retailer staff.
- The Casella’s team designed neck hangers, backer cards, shelf-talks, and end-displays to display the Australian theme. Neck hangers of bottles had Australian recipes inside.
7.2 ACTIVITIES & RETAILERS
We have already seen that customers would rely on external triggers/cues in the retail environment and also retail salesperson’s recommendations.
So, a retailer plays a critical role in the new wine’s success. It is essential to think why would they give more space to your brand or why would they allow their salespersons to promote your brand.
Retailer Works, Partner Owns -John Casella believed that everyone who comes in contact with the product in the value delivery chain should make a profit from it -He wanted to consider them as partners. Partners indicate that they are also owners of the business. It means they would have a selfish interest in becoming an advocate for the brand. The retailer could get long-term value from his/her investments.
Think Like A Retailer -The key objective of a retailer is to look for long-term benefits/ROI for their effort and time investments. They need quick asset turnover and high economies of scale. For them, the cost of space meant for premium/mass wine was the same.
Think About Retailer’s Problems -One of the biggest problems a retailer faced was the inventory turnover -The research showed that wine’s inventory was particularly very slow — an average of 2.4 times per year compared to 70 times for beer. As YellowTail wine was a hybrid between the wine and beer industry, it attracted retailers as they felt that the inventory turnover would be better than any value segment wines. So, they could benefit more largely as products that replenish quickly bring in huge profits.
Simplify a Retailer’s Life -Moreover, a retailer would be interested in a product that simplifies his/her employee’s job of helping a customer to make a decision as easy as possible. In the case of existing wines, the employees had to spend hours learning the wine’s complexity. Yet, they failed to convince clients very often.
On the other hand, the YellowTail product was simpler to understand. Retailer’s employees could explain the product’s benefits/story effortlessly to a customer. The product simplified his/her job of making a customer buy the product -Another benefit for the retailer.
Reduce Retailer’s Workload -Casella Wines also had planned for a $24 million marketing campaign covering retail space. It was a significant investment in creating brand awareness. It simplified the retailer’s job.
Long-Term Partnership -John Casella looked for long-term earnings rather than quick gains. So, he and his team always focused on long-term strategies. As a part of that, he preferred to engage in long-term partnerships with retailers. It built trust -An essential ingredient in a brand’s success. John appeared as a person of integrity.
The retailers loved John’s thought process. They also wanted to generate long-term ROI from their efforts/investments. And, stable contracts motivate the retailers as they also would have an opportunity to gain long-term value from their effort, money, and time.
Healthy Profit Margins -Casella’s team never encouraged discounting. They built healthy margins into every level of the pricing structure so that retailers could gain considerable value from their product.
7.3 ACTIVITIES & DISTRIBUTOR PARTNERSHIP
In the case of imported wines, a local distributor played the most critical role in the success of a new brand. John Casella’s partnership with W J Deutsch turned out to be a massive competitive advantage for the latest brand.
The Right Team -Deutsches were passionate people, extremely skilled marketers, highly influential, well experienced, and networked in the wine industry. When new international wineries found it challenging to get their products onto US retailers’ shelves, Deutsches ensured that Yellow Tail could get a dedicated display space in most of the retail stores. They had an incredible, well-drenched distribution network in the United States. Their experience in the wine industry and alcoholic beverages helped Casella Wines in developing the YellowTail product.
Supply-Chain System -Deutsch had an effective and efficient supply chain management system that helped in quicker and safer delivery of products to retail stores at a lower cost compared to competitors. It was a critical activity that played a pivotal role in helping the product to meet the low-cost value proposition.
Co-workers and Collaborators -At that time, not many distributors were interested in investing time and effort in building a product from scratch. New product development would take time and effort.
Deutsche’s team loved to work closely with Casella’s team in developing the Yellow Tail product. They always looked for a long-term strategy than short term benefits. John Casella was lucky to come across a distributor who was eagerly looking to co-develop a new product from scratch.
A Partner is A Owner -John Casella considered his distributor as a business partner and not as a service provider. He signed long-term contracts with the profit-sharing model. It allowed Deutsche to see YellowTail as its brand. The distributor team knew that they could gain long-term benefits for their efforts if the brand becomes popular. Over a period, the Casella-Deutsche relationships became more powerful.
7.4 ACTIVITIES & INTRINSIC REWARD
How will you make a customer repurchase the new wine? How will you entice a customer to adopt a new behavior? -By giving him/her rewards. The reward would entice them to come back to try the product again. The reward here is -The taste of the wine and its ease of use. A satisfying taste of the wine is what would bring a customer back to the stores to buy the product. It’s the intrinsic reward.
Generally, there are primary and secondary rewards. The primary reward in the case of the wine brand was its taste & the secondary reward was the identity(People would be happy to show off their knowledge, abilities, or status through your product or service).
Craving -Let’s focus on the primary reward -Taste of the product. As a consumer keeps using the product, he/she would soon develop a craving for the reward. Cravings are the motivational force behind every new behavior change. Without craving, a consumer would have no reason to act.
You do not crave smoking a cigarette, you crave the feeling of relief it provides. You are not motivated by brushing your teeth but rather by the feeling of a clean mouth -From jamesclear.com.
Consistent Taste -To develop a craving, the consistency of wine taste is very critical — Particularly for noncustomers who grew up on alcoholic beverages, that are known for consistent taste.
Casella Wines built a sophisticated factory, with blending facilities to produce wines of uniform quality. The company also had invested in high-end testing equipment that ensured the consistency across all bottles.
While other wineries focused their product promotion on year to year improvements in their wine taste, quality, and aging, YellowTail concentrated on providing an identical tasting wine from the first bottle to the fiftieth millionth bottle.
7.5 ACTIVITIES & VALUE PROPOSITIONS -Low-Cost and Sweetness
As we discussed earlier, we need to check every activity and consider how it would impact the proposed value propositions — Low-cost and Taste of the wine.
The company has to eliminate activities that would add cost to the product & that would affect the intended taste of the product.
- Traditional methods of aging added complexity to the wine. It affected the sweetness of the product. And, also the old aging methods like aging in barrels were expensive and added additional cost to the final product. So, Casella Wines eliminated the traditional aging methods and adopted faster fermentation processes.
- As the need for aging eliminated, Casella Wines’ capital investment and working capital requirements came down. It further helped in lowering the product cost and allowed the company to earn profits quicker than anticipated.
- One of the factors, traditional wines competed with each other was aging in the Oak Barrels. It gave an excellent taste and flavor to the wine. Unfortunately, it also resulted in increased tannins, which acted as a taste dampener for noncustomers. Moreover, Oak Barrel aging also added a cost of $2–4 to the bottle. As taste and cost is a critical value proposition, Casella wines investigated the ways to use less Oak in winemaking. The company also explored barrel alternatives, aging time, and sourcing alternatives. Consistent quality, sweeter taste at a lower cost was the guiding principle.
- Casella’s idea of providing bottles of identical taste from the first bottle to billionth of bottle meant standardization of processes, components, machines, and ingredients. It resulted in time and cost savings.
7.6 ACTIVITIES & SWEETER TASTE
We already saw that the critical differentiation and an essential value proposition of the new brand was the fruit-forward, sweeter tasting wines. Unlike other wine brands, Casella’s new brand requires fruits in large quantities. The company needs to ensure a continuous supply of good quality fruits to its plants.
Note: The fruits should also be of consistent quality as it would affect the final wine taste.
Supplier Network -To ensure the supply, Casella had to enter into long-term agreements with large-scale fruit farmers in several regions. The company built a network of 300–400 small and large grape growers.
Standardization -The company also standardized several practices at those supplier farms to ensure consistent quality of fruits. The Casella team still keeps working on optimizing and standardizing the quality of the raw material.
Material Selection -As the aging of fruits adds a cost of $1–2 per bottle and also affects sweeter taste, Casella Wines adopted faster fermentation -This allowed John Casella to choose grapes that would not be good for laying down and aging. It became a competitive advantage as those grapes were reliably consistent, had great taste, and were cheaper. Riverina grapes were one of them. The fruit offered unbeatable value because of the abundant harvests.
The company could save costs in processing and storage.
AVAILABLE ON AMAZON -
The first reason why Yellow Tail succeeded was -They observed and listened to customers. They understood their likes, dislikes, and needs very well. That helped them to design the right product at the right price. The research also taught the company how to promote the brand.
Deutsch, the director of W J Deutsch & Sons, told, “So many wines from established regions told the consumer what they should like, but we just wanted to give them what they wanted.”
That was the primary difference between Yellow Tail and the other value brands of that time.
The second reason -They delivered better value at a lower price. For customers, it was value for money.
Michael Porter writes, “A company can outperform rivals only if it can establish a difference that it can preserve. It must offer greater value to customers or create comparable value at a lower cost, or do both”
Yellow Tail built a sustainable business by offering both -greater value and at a lower cost.
References: Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne, Positioning: The Battle Of Mind by Al Ries and Jack Trout, What is Strategy-HBR Article by Michael E. Porter, Good To Great by James C. Collins, Hooked by Nir Eyal, Brand Together by Nicholas Ind, Clare Fuller, and Charles Trevail, The Paradox Of Choice by Barry Schwartz, The Power Of Habit by Charles Duhigg, Predictably Irrational by Dan Ariely, Introduction to Business by Rice University-licensed under Creative Commons, Australian Tourist Commission-Olympic Games Tourism Strategy-Case Study, Article-Millennial wine consumers: Risk perception and information search -Thomas Atkin and Liz Thach, Article in New York Times by Frank J. Prial, A Toast to Bargain Wines: How Innovators, Iconoclasts, and Winemaking Revolutionaries Are Changing the Way the World Drinks By George M. Taber, Article: Casella at the crossroads in Felicitycarter.com, Casella-The Yellowtail Phenomenon by Jeremy Oliver in Winegenius.com, Operations Management-An Integrated Approach by Danny Samson and Prakash J. Singh, Wine Brands: Success Strategies for New Markets, New Consumers and New Trends By E. Resnick.