2020 has had many of us buying, and drinking, wine. A lot. Mostly consuming at home, sometimes in parks, and, now that things are opening up here in Canada, wineries when we’re feeling fancy.
We’re blessed here in Toronto to have a few wine regions just outside the city. I visited a few last weekend for a friend’s birthday. Whilst chatting with a sommelier, he spoke of recent renovations to their two-hundred year old winery to position it as more accessible and less pretentious than their stuffy neighbours.
Blue oceans and red oceans
This reminded me of a presentation I watched a couple of years back, delivered by a colleague, about product positioning using the ‘Blue Ocean Strategy framework. One of the illustrative case studies used was about [yellow tail] wines — a brand I was familiar with, perhaps even purchased before, but their backstory was new to me.
Back in the 90s, wine was seen as cryptic and intimidating. Traditional brands leant on this, promoting heritage and exclusivity to charge higher prices and claim fatter margins. There were thousands of brands offering relatively similar products, without standardisation around namings and classifications of each wine, which confused customers. When the customer doesn’t understand the product, they assume price correlates with quality.
Many saw the opportunity in the lower-end of the market, but were never able to crack it. They followed the same playbook as high-end wines by spending big on advertising, creating bolder wines, and winning in expensive distribution channels. They consistently failed to make their mark. These expensive plays combined with intense competition meant unsustainable margins for everyone.
Enter Australian winemaker Casella. After decades as a traditional winemaker supplying wineries in bulk, they successfully defied the industry and cut through to the common consumer by creating a product that was easy to recognise, easy to buy, and easy to drink.
With their new brand [yellow tail], launched in 2000, they created a new category that didn’t exist previously — wine for people that didn’t drink wine — whilst others were battling for share in a well-defined market.
Funnily enough, a couple of years before launching [yellow tail], Casella had attempted to create a product for the value market by copying everybody else, and failed. Let’s take a look at how they did it successfully the second time around.
Finding new customers and discovering hard truths
Like those that went before them, Casella knew there was an opportunity in the lower-end of the market. As did the established American wine importer Deutsch Family. They saw that even lower-end wines were being produced in traditional, and expensive, wine-producing countries like Spain, France, and Italy. Australia was a cheaper place to produce wine, and they found the perfect winemaking partner in Casella.
As part of their customer research, the Casella family visited the USA. However, they eschewed wine country. Californians already drank wine. They drove across middle America and went to some unusual places for wine connoisseurs. To honky tonks. To dive bars. To liquor stores. To Costco. (Sidebar: this sounds like one heck of a business trip).
In these places, wine was a turn-off. People bought and drank beer, or spirits, or pre-mixed cocktails. Therein lay the opportunity. They defined their market as all casual drinkers rather than wine drinkers alone. If they could convert a small fraction of those people to drinking wine regularly, they’d be phenomenally successful.
At that time, 85% of Americans didn’t drink wine. Becoming a wine drinker had a steep learning curve. It wasn’t approachable with its fancy terms, stuffy community, and harsh taste to the undeveloped palette. These obstacles could take years to overcome.
The available offerings from established brands ignored and excluded the majority of potential customers. It’s no wonder that 10% of adults in the US accounted for 86% of wine sales.
The Casellas found a hard truth that the rest of the industry had ignored. Those people that didn’t drink wine wanted to, but couldn’t because it was inaccessible.
Creating the product to service the untapped market
Upon returning to Australia, they set about creating a wine to suit this unserviced market. Their research showed that Americans preferred a sweet, fruity taste with fewer tannins and acidity. They put it down to growing up with sugary drinks like juice and Coke.
After engineering the product through many iterations, alongside potential customers, they’d perfected an easy to drink wine with subtle flavours which held broad appeal for those 85% of American adults that didn’t drink wine. They produced a wine that none wine drinkers would like, rather than creating a wine that pretentiously told customers what they ‘should’ like.
They also kept scalability in mind. At a low price point, volume would be key for profitability so the wines were developed from a single grape and were not aged for long nor aged in expensive oak barrels. They were the first winemaker to use the same bottle designs for red and white wines. All of these factors made the wine cheaper and easier to produce, protecting margins whilst offering an attractive price point for the value market.
Creating awareness to sell the innovative product
So now they knew there was a market out there they wanted to sell to, and had a product that they were confident those customers would like. It was now just a case of reaching them and convincing them to give it a try. This is where they really won.
They positioned the product as easy drinking, easy to select, and fun. The tagline became ‘a wine for any occasion’.
Let’s start with the name. Comparable wines from Australia at the time were often given aboriginal names based on local landmarks. Wine drinkers have trouble recalling what wine they had previously drank at the best of times, and these names didn’t foster recall with American customers. So, the Casellas went with something in plain English that Americans would easily be able to recall . [yellow tail]. They even made it lower-case to reduce pretension at first glance.
Look at the bottle design. They used a wallaby as Americans identified the animal as Australian to evoke a fun, laidback, and adventurous vibe. However, this wasn’t without risk. In research, the use of an animal on the bottle was divisive. Nobody was using animals on wine bottles back then.
They took the risk and used the wallaby, and they were easy to pick out on crowded shelves. The yellow wallaby contrasted with black bottles and were even positioned on the bottle so that you can recognise it from an angle as you walked down the aisle.
These principles apply to the labels too. There are very few words on the label, so as not to confuse customers. They don’t use jargon. They made it easy to understand what you’re buying. Traditional labels were full of obscure words that only someone with wine knowledge could understand, creating an obstacle to purchase. Customer don’t want to embarrass themselves by buying the ‘wrong’ wine, so only those confident in their knowledge — say, 10% of American adults — purchased wine regularly.
They also used bold colors that reinforced their fun image and simplified the buying process again. If you wanted a Cab Sav, you bought the red accented label. If you wanted Shiraz, it was the yellow one. If you wanted Merlot, you chose the orange one. This extended to the brightly colored case packaging that could be stacked to make a quick and easy in-store display. They made the retailer’s job as easy as possible.
Simple branding on the face of it, but incredibly effective moves that removed as many obstacles as possible for both those buying the product and those selling the product. A stroke of genius.
Getting the brand in front of eyeballs
Partnering with the experienced Deutsch Family to distribute their wine in the US enabled rapid distribution of the product. However, rather than following the playbook and getting the wine in the hands of sommeliers they put them in the hands of retail sales assistants of places like Costco and Sam’s Club.
These new ambassadors were enthusiastic about a wine that was approachable, one that they could sell to people like them. They arranged in-store tastings to help facilitate this ambassadorship. They gave away fun Aussie-themed swag to customers. These were far cheaper than traditional advertising methods that established brands used.
Their bosses loved the concept too — wine generally sticks on the shelves a lot longer than beer, which is a problem when shelf space is money. The slower the turnover, the lower the profits. A wine with the potential to turnover at the rate of beer was an attractive proposition. [yellow tail] even placed wines in the beer aisle to signal to customers that their easy-drinking wine was a real alternative. They made it easy for customers to try something new.
All the pieces were in place, were they a success?
A strategy that aged like the finest of wines
For its first year, Casella projected 25,000 cases of [yellow tail] to be sold. They sold 10x as many cases in their first 6 months. In its second year, it grew 10x.
There was even a backlash from established winemakers in Australia, who claimed [yellow tail] were devaluing the Aussie wine industry in the eyes of global consumers. For a new generation of wine drinkers, [yellow tail] was likely one of the first they consumed. That sort of response from incumbents in the early days showed they were onto something big.
And they continued to drink it. [yellow tail] quickly became the single biggest imported wine brand into the US, and is now the third best selling wine in the world.
They won by zigging when others zagged. They created a new category with an acute understanding of their potential customers and everything they did serviced their market with masterful execution.
Cheers to that.
Liked this piece? Feel free to share on Twitter: