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 are 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.