Slide 1: Blue Ocean Strategy: Reaching Beyond Existing Demand part B Andrew Shipilov
Slide 2: FWG Strengthens its Segmentation Brands Low Involvement Easy Going Glass with friends Least care choosing a wine Not wine preferrers Price is a strong influencer Enjoyers Everyday enjoyment To relax/unwind Stick with limited list of known brands Choose in-store Not interested in wine language Influenced by major brand advertising Lindemans M/F: 50/50 Age: 35-49 Aspirationals Image important Wine preferrers (sic) Varietal knowledge Interested in some wine language Enjoy trying new wines Appreciators Want to discover wine Knowledge of wine regions Frequently buy >$10 wines Join wine clubs Don’t stick to known brands High Involvement Connoisseurs Sophisticated drinker Discerning wine tastes Don’t decide in store Have a cellar Less influenced by specials/ promotions Actively pursue wine knowledge Penfolds Age: 40+ Ideal wine is Visit wineries / complex & read wine articles interesting Rosemount Estate M/F: 30/70; Age: 30-40 Wolf Blass M/F: 70/30; Age: 35-50 Brand: Demographic:
Slide 3: Video Case Part B  We looked at the industry from a structuralist (supply) point of view  What if we looked at the industry from a reconstructionist (demand) point of view? • Market boundaries are not viewed as given, but could be reconstructed to unlock new demand
Slide 4: What are you looking for in a wine?
Slide 5: Industry Profile/ Strategic Groups High Low
Slide 6: Low High [yellow tail] Pr ic e Di Wi Te stinc ne rm tio ino ns log / Ab y ov Ma e th rke e l tin ine g Ag ing Qu ali ty Vin Pr eya es rd tig e Non-Customers Co Win mp e lex it y W ine Ra ng e
Slide 7: ERRC Grid  Eliminate  Reduce  Raise  Create
Slide 8: Three Tiers of Non-Customers  First tier: buyers who purchase your industry offerings out of necessity and will jump ship as soon as the opportunity presents itself  Second tier: buyers who purchase alternative offerings that serve the same function  Third tier: people who don’t consume even the alternatives to your offerings sample volume Core wine Drinkers Marginal Wine drinkers Beer/spirits drinkers Non drinkers Total 10% 86% 15% 33% 42% 100% 14% 0% 0% 100%
Slide 9: 3 Core Principles Reconstruct Market Boundaries … overcome believes. Reach beyond existing Demand … go for Non-Customers. COST Get the strategic sequence right … value [innovation] first. VI VALUE
Slide 10: Unlocking non-customer demand: Value Innovation Utility Create new buyer utilities Price Set a price that attracts a mass of buyers Cost Set the structure based on a target
Slide 11: Value Innovation of [yellow tail] Utility proposition (customers, distributors and retailers) Creating of a social drink that is accessible to anyone Easy drinking, ease of selection, sense of fun and adventure Limit number of SKUs Price to move at volume Price proposition Targeted at the mass of customers Priced against the alternative (6-pack) Cost structure Elimination of working capital tied up in aging wines Fast product turnover
Slide 12: Generic Strategies vs. Value Innovation Red Ocean Strategy High Blue Ocean (VI) Strategy High V1 Quality • D V1 Quality • Low High Cost LC Low C1 Low High Cost C1 Low Structuralist Reconstructionist
Slide 13: Key Takeaways (1)  Three tiers of non-customers: • 1: buyers who purchase your industry offerings out of necessity; will jump ship if given an opportunity. • 2: buyers who purchase alternative offerings that serve the same function • 3: people who don’t consume even the alternatives to your offerings  Non-customer demand is unlocked by providing new buyer utilities, at a price that attracts a mass of buyers, given target costs.  Buyers could be not only end-users, but also other participants in a value chain (e.g. distributors)
Slide 14: Key Takeaways (2): Comparison of approaches Red Ocean Strategy Blue Ocean Strategy