Blue Ocean Strategy - Go Beyond Competition

Blue ocean strategy - Go beyond competition
US brewing industry was suffering from intense competition and continuously facings shakeouts and consolidation.
There are seven principal factors believed to be the driving factors for selection of wine by the consumers in the
industry:
1. Price per bottle of wine

2. An elite, refined image in packaging, including labels announcing the wine medals won and the use of esoteric
enological terminology to stress the art and science of wine making
3. Above-the-line marketing to raise consumer awareness in a crowded market and to encourage distributors
and retailers to give prominence to a particular wine house
4. Aging quality of wine
5. The prestige of a wine’s vineyard and its legacy (hence the appellations of estates and chateaux and
references to the historic age of the establishment)
6. The complexity and sophistication of a wine’s taste, including such things as tannins and oak
7. A diverse range of wines to cover all varieties of grapes and consumer preferences from Chardonnay to
Merlot, and so on
These factors are viewed as key to the promotion of wine as a unique beverage for the informed wine drinker,
worthy of special occasions. That is the underlying structure of the U.S. wine industry from the market perspective.
There are two strategic groups’ strategies march, but at different altitudes of offering level. Customers’ insights also
tend toward the familiar “offer me more for less.” And what customers typically want “more” of are those product and
service features that the industry currently offers.
In the case of the U.S. wine industry, conventional wisdom caused wineries to focus on over delivering on prestige
and the quality of wine at its price point. Over delivery meant adding complexity to the wine based on taste profiles
shared by wine makers and rein-forced by the wine show judging system. Wine makers, show judges, and
knowledgeable drinkers concur that complexity—layered personality and characteristics that reflect the uniqueness of
the soil, season, and wine maker’s skill in tannins, oak, and aging processes—equates with quality.
Factors Av. score Av. score

( Max score 10) Budget Premium
wines wines
1 Price 8 3
2 Packaging, 7.9 5.2
3 Enological terminology 8.1 4.1
4 Above-the-line marketing 8 4
5 Aging 8.3 4
6 Vineyard and its legacy 8.1 3.9
7 Complexity wine’s taste 7.9 3.9
8 Diverse range of wines 8.2 3.8
Note to table: A high score means that a company offers buyers more, and hence invests more, in that factor. In the case of price, a higher score
indicates a higher price.
A new entrant by name, Casella Wines, wanted to redefine the problem of the wine industry to a new one:
 How to make a fun and nontraditional wine that’s easy to drink for everyone.
 Survey revealed that the demand side of the alternatives of beer, spirits, and ready-to-drink cocktails, which
captured three times of sales of wine,
 Casella Wines found that the mass of American adults saw wine as a turnoff.
 It was intimidating and pretentious, and the complexity of wine’s taste created flavor challenges for the
average person even though it was the basis on which the industry fought to excel.
To understand and reconstruct buyer value elements the following questions to challenge an industry’s strategic
logic/belief and business model was placed before the management team.
• Which of the factors that the industry takes for granted?
• Which of the factors to be eliminated, reduced, raised and created to have a different landscape to compete?
The team came to conclusion that factors taken for granted and are not adding value to buyers are to be eliminated.
They searched for new sources of value to buyers and noncustomers for improving business and better earning in
the industry.
The team used the four actions framework to the strategy canvas of wine industry, got a revealing new look at old
perceived truths. In the case of the U.S. wine industry, by thinking in terms of these four actions vis-à-vis the current
industry logic and looking across alternatives and noncustomers, Casella Wines created a wine whose strategic
profile broke from the competition and created a new market. Instead of offering wine as wine, Casella created a
social drink accessible to everyone, beer drinkers, cocktail drinkers, and other drinkers of non-wine beverages. In the
space of two years, the fun, social drink emerged as the fastest growing brand in the histories of both the Australian
and the U.S. wine industries and the number one imported wine into the United States, surpassing the wines of France
and Italy.
What’s more, whereas large wine companies developed strong brands over decades of marketing investment, leap-
frogged tall competitors with no promotional campaign, mass media, or consumer advertising? It didn’t simply steal
sales from competitors; it grew the market, brought non-wine drinkers— beer and ready-to-drink cocktail consumers
—into the wine market. Moreover, novice table wine drinkers started to drink wine more frequently, jug wine drinkers
moved up, and drinkers of more ex-pensive wines moved down to become consumers of its brand.
Casella Wines acted on all four actions—eliminate, reduce, raise, and create—to unlock uncontested market space
that changed the face of the U.S. wine industry in a span of two years. Casella Wines found that the mass of
Americans rejected wine because its complicated taste was difficult to appreciate. Beer and ready-to-drink cocktails,
for example, were much sweeter and easier to drink. Accordingly, this brand was a completely new combination of
wine characteristics that produced an uncomplicated wine structure that was instantly appealing to the mass of alcohol
drinkers. The wine was soft in taste and approachable like ready-to-drink cocktails and beer, and had up-front, primary
flavors and pronounced fruit flavors. The sweet fruitiness of the wine also kept people’s palate fresher, allowing them
to enjoy another glass of wine without thinking about it. The result was an easy-drinking wine that did not require
years to develop an appreciation for.
In line with this simple fruity sweetness, dramatically reduced or eliminated all the factors the wine industry had
long competed on—tannins, oak, complexity, and aging—in crafting fine wine, whether it was for the premium or the
budget segment. With the need for aging eliminated, the needed working capital for aging wine at Casella Wines was
also reduced, creating a faster payback for the wine produced. The wine industry criticized the sweet fruitiness of this
wine, seeing it as significantly lowering the quality of wine and working against proper appreciation of fine grapes
and historic wine craftsmanship. These claims may have been true, but customers of all sorts loved the wine.
Wine retailers in the United States offered buyers aisles of wine varieties, but to the general consumer the choice
was overwhelming and intimidating. The bottles looked the same, labels were complicated with enological
terminology understandable only to the wine connoisseur or hobbyist, and the choice was so extensive that salesclerks
at retail shops were at an equal disadvantage in understanding or recommending wine to bewildered potential buyers.
Moreover, the rows of wine choice fatigued and demotivated customers, making selection a difficult process that left
the average wine purchaser insecure with the choice.
This brand changed all that by creating ease of selection. It dramatically reduced the range of wines offered,
creating only two: the most popular white (XX) and red (YYY). It removed all technical jargon from the bottles and
created instead a striking, simple, and nontraditional label featuring aa animal in bright, vibrant colors of orange and
yellow on a black background. The wine boxes came in were also of the same vibrant colors, with the name [brand
name] printed boldly on the sides; the boxes served the dual purpose of acting as eye-catching, unintimidating displays
for the wine. This hit a home run in ease of selection when it made retail shop employees. The retail employees were
inspired by the branded clothing and having a wine they themselves did not feel intimidated by, and recommendations
to buy [this brand] flew out of their mouths. In short, it was fun to recommend [this brand]. The simplicity of offering
only two wines, a red and a white, streamlined Casella Wines’ business model. Minimizing the stock keeping units
maximized its stock turnover and minimized investment in warehouse inventory. In fact, this reduction of variety was
carried over to the bottles inside the cases, broke industry conventions. Casella Wines was the first company to put
both red and white wine in the same-shaped bottle, a practice that created further simplicity in manufacturing and
purchasing and resulted in stunningly simple wine displays.

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1. Price per bottle of wine

Factors Av. score Av. score

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