Blue Ocean Strategy Applied - An Australian Case Study
/ · The question: How do you create a blue ocean in a $20 billion US wine industry with over 1,600 wineries which faces intense competition, mounting pressure, increasing bargaining power on the part of the retail and distribution channels, and flat demand?· The US wine industry in the late 1990s competed on factors which were viewed as key to the promotion of wine as a unique beverage for the informed wine drinker, worthy of special occasions. Conventional strategic logic-benchmarking competitors, choosing either differentiation or low cost, offering more for less - over-delivering on prestige and the quality of wine at its price point - dominated the industry.
· The underlying structure of the US wine industry from the market perspective is best captured on the strategy canvas which is both a diagnostic and an action framework for building a compelling blue ocean strategy. Wines, whether budget or premium, imported (i.e. France, Italy, Chile, etc.) or domestic (i.e. California), all competed head-to-head with each other and shared the same strategic profiles - their value curves had the same shape.
· In looking at the demand side of the alternatives of beer, spirits, and ready-to-drink cocktails, which was three times the wine market, Casella Wines found that the mass of American adults saw wine as a turnoff. It was intimidating and pretentious and required cultivating a discerning taste.
· Armed with these insights, Casella Wines turned to the second basic analytic underlying blue oceans: the four actions framework. Combining its use with a supplementary analytic called the eliminate-reduce-raise-create grid, Casella Wines was able to craft a unique and exceptional value curve to unlock a blue ocean based on introducing three new competitive factors of "easy drinking", "ease of selection" and "fun and adventure".
· The result is "yellow tail" which appealed to a broad cross section of alcohol beverage consumers.
· From the moment the wine hit the retails shelves in July 2001, sales took off.
· Casella Wines expected to sell 25,000 cases in the first year. Sales at the end of 2001 were nine times that amount.
· Yellow Tail rapidly became the number one imported wine and the fastest growing brand in the history of the U.S. and Australian wine industries. It is the overall best selling 750ml red wine, outstripping California, French, and Italian brands.
· And by the end of 2005, Yellow Tail's cumulative sales were tracking at 25 million cases.