Vincor: Project Twist Table of Contents Problem statement3 Situation analysis3 Objectives and goals:3 Background and forecast:3 S. W. O. T. analysis:3 Strengths:3 Weaknesses:4 Opportunities:4 Threats:4 Market analysis:4 Segmentation analysis:5 Competition analysis:5 Case Keys6 Key success factors:6 Key uncertainties:6 Analysis of alternative solutions7 Recommendation(s)9 Action plan10 Exhibits12 Exhibit 1: Perceptual Map12 Exhibit 2: Packaging13
Exhibit 3: Pricing and discounting15 Exhibit 4: Market segmentation chart16 Problem statement Kelly Kretz, Vincor’s Marketing Manager, must decide what type of cooler to launch for the upcoming spring and summer season. Kelly must also consider positioning and other marketing mix strategies to achieve a successful product introduction into the fast-paced and fickle refreshment category. Situation analysis Objectives and goals:
Kelly‘s goal is to develop a new brand of alcoholic beverage for Vincor that will be innovative and “truly Canadian” with the objectives of: * Introducing a cooler product that will help to maintain and grow Vincor’s position in the refreshment category and * Achieve a successful launch, 50,000 to 75,000 cases, in market where 80% of new products don’t make it past their first year. Background and forecast: Vincor’s refreshment portfolio has been driven mostly by sales of its Vex and Growers Cider brands, which make Vincor the 2nd largest supplier of refreshment products in Canada.
Canada Cooler and Tabu brands have not provided significant sources of revenue or growth for the company. Despite the existence of strong brands, the refreshment category itself has been shrinking by six per cent year over year. An innovative new product is needed in this category to help curtail this decline. S. W. O. T. analysis: Strengths: * Conducted extensive market research. * Success of Vex and Growers Cider and company as a whole. * Established national sales force that has strong relationships with retailers to leverage “pulling” product from the central buyer. Valuable human capital within firm: Steve Bollinger, Executive VP of Marketing was instrumental in launching Mike’s Hard Lemonade and Mardi Bielak, head of the R&D lab had over twenty years of experience designing successful brand/flavor combinations. Weaknesses: * Vincor is primarily recognized as the market leader in the wine industry. * Lack of success with other brands in category: Canada Cooler and Tabu. * New product introductions not supported by sales team as expertise and effort will be consumed meeting current sales targets. Opportunities: * Vincor has wineries and large presence in BC and ON.
The West and Ontario had the highest percentages of regularly drinking for all categories except Gin products. * 30% of coolers on the shelf each year were either new products or line extensions. Competitors launched new products last spring/summer. They will likely only add new flavours not new products. * Consumers are very exploratory and open to trying new things. * Potential for high volume sales with successful innovations make the industry attractive. Threats: * New products have a short lifespan and unsuccessful products don’t even make it a year in this industry. Time sensitive market in which definite timelines need to be met for having new product on the shelves. * Monopsonistic nature of distribution can limit ability to launch product across all provinces therefore impacting sales. Liquor board approval is essential. * The liquor boards set quotas that product has to achieve in order to stay on the shelves. For a new product to be listed, an existing one has to be dropped. Market analysis: The refreshment industry generated $230 million in sales in Canada in 2004 with over 6. 8 million nine-litre cases of coolers sold.
There are several successful brands in the market but the refreshment category is still declining overall from year to year. This industry is ever-changing and brands are constantly seeking “tremendous innovation” by adding new flavours and formats to current product offerings in addition to introducing new products. It is extremely difficult for new products to find success within the first year and even successful products might only be on the shelves for three years. Positioning (Exhibit 1) * Need cooler product that is differentiated from others in market.
Packaging (Exhibit 2) * Design of carrier, label and bottle are critical to differentiating product. Pricing (Exhibit 3) * Industry is regulated and the liquor boards have control over mark-ups. * Three levels exist in the market: premium, line priced and low priced. Distribution * Regulated by provincial government. * Distributed through province owned stores in all provinces except Alberta, Quebec, and BC where private distributors also exist. * Channel is monopsonistic – customer (liquor board) has tremendous influence over products reaching the shelves. Promotion Need to create a consumer brand badge. * Uniqueness and flavor are key communication elements. * Sales reps secure the best product placement in stores, conducting taste tests in stores and convincing “individual store managers to pull the product from the central buyer. ” (Singer, 2008) Segmentation analysis: Vincor and other leading brands have been targeting the university age (19-25) demographic. This target market is very “exploratory” and likes to try new things. Other possible segments have been considered and are summarized in Exhibit 4. Competition analysis:
Entrenched brands exist and already own a large percentage of market share and valuable shelf space. The market leader at 26% market share is Smirnoff Ice, a vodka-based product from Diageo. Bacardi’s rum-based Bacardi Breezer holds 17% of the market and Mark Anthony’s Mike’s Hard Lemonade owns 9% of the market. The new generation of products that have been introduced in 2005 prior to the launch of Project Twist include: * Yuha – a fresh fruit juice-based vodka beverage that hasn’t been very successful to date * Mike’s Berry – a variation on Mike’s Hard Lemonade * Vodka Mudshakes – a milk based beverage
Case Keys What type of cooler will be innovative in this dynamic market and how is Kelly going to brand, promote, package and price this new product? Key success factors: * Product acceptance by distributors: * Vincor’s reputation with distribution channels and liquor stores. * Successful launch: * Approximately 30% of the coolers each year are either new products or line extensions. This combined with the fact that the target market is exploratory and likes to try new things, means Vincor’s new product will draw attention. Sales compensation model: * Anne Givens, VP of Sales in Ontario, has mandated a push of the new product and sales rep compensation as incentive to ensure sales department support. Key uncertainties: * Missing the April deadline for having new product on the shelves, even by a week or two, would have a drastic impact on Vincor’s bottom line. * Competition’s reaction to the new product. * Any changes of liquor board regulations Analysis of alternative solutions 1. Real fruit-juice coolers Pros: * Most popular concept from market research Highest percentage (85%) of respondents likely or very likely to try this product * All provinces and age demographics over 80% with target customers 19-22 90% likely to try * Highest incidence of anticipated occasional drinking * More appealing to both sexes (each over 80% likely to try) and occasional drinkers Cons: * Only 17% incidence of regular drinking * No in-house capabilities to handle the fermentation and pasteurization; equipment investment is required. * Not a unique offering, similar product “Yuha” performed poorly in this category. Only 50% real fruit juice, higher percentage of fruit juice needed to appeal to health conscious consumer * Not carbonated. Too far off the beaten path on the perceptual map (Exhibit 1) 2. Gin coolers Pros: * No product currently exists in the market , unique product offering * Very appealing to gin drinkers Cons: * Vodka-based cooler consumers outnumbered gin drinkers by a factor of 10 so the market is small. * Extremely low incidence of regular drinking at 6% * Lowest percentage of all concepts for likely or very likely to try this product . Spring water coolers Pros: * 2nd most popular concept from market research * 77% of total survey respondents likely or very likely to try this product * Tied with tequila cooler for highest incidence of regular drinking at 21% * Highest incidence (27%) for regular drinking in university target market * Perceived as a unique new product offering * Appeals to health conscious consumers * Counters the dehydration of alcohol – strong appeal for university age demographic * Uses most popular vodka base Not sickly sweet, a characteristic that that many cite as desirable * Spring water cooler could be associated with spring water from BC. Vincor has high brand recognition in this 2nd largest geographic region for regular drinkers * Doesn’t require any additional equipment investment Cons: * Some concerns with the flavour profile of a water-based cooler * Lower percentages than real fruit juice for geographic and age demographics across the country * Not as appealing to males 4. Tequila coolers
Pros: * No product currently exists in the market, unique and fun offering * Tied with spring water cooler for highest incidence of regular drinking at 21% * Perceived to be stronger than other coolers, “liquored faster” may have strong appeal to university age target market Cons: * Vodka-based cooler consumers outnumbered tequila drinkers by a factor of 10 so the market is small. * Gummy worm not appealing and not going to happen according to the head of Vincor’s R&D lab 5. Energy coolers Pros: Increased energy appealing to university age target market * Red Bull and vodka was popular in the existing market and seems to be a new trend * Uses most popular vodka-base Cons: * Only 17% incidence of regular drinking * Concerns about caffeine content and sweetness * Not unique product, has negative impressions from other energy based drinks on market * Energy drinks and practice of mixing with alcohol currently under strong government scrutiny Recommendation(s) We recommend Alternative 3 to Kelly – take the more risky but also more innovative and unique spring water cooler approach.
Reasons include: * Highest incidence of regular drinking. Regular drinking statistics are more important for long term success of the product and market share growth. * Highest rating for regular drinking from the university age target group over any other cooler. * Can be targeted to both the “finally legal” and “ID me if you want to” markets. * Meets the rising trend for healthier beverage options. Our recommendations to achieve differentiation through packaging and pricing are: * 6 pack – first premium product in 6 pack, emphasize more “hydration”, more appealing to male drinkers, better value for student’s dollar. Closed carrier to maximize creative options. * Glass bottle for premium image and to highlight “clear spring vodka water, ice cold, frostiness and refreshing” concepts. * No label. Have striking brand logo on pry off crown cap. Keeps with clear and cool concept and is “edgy”. * Premium pricing is recommended but with a deep discount of $2 to be carried out in the stores through LTOs to appeal to value conscious and gain brand recognition. Action plan Immediate: Oct 2005 – 1 week * Kelly will pitch her final brief to executive council. Short-term:
Fall 2005 – Pitching to Retail Trade * Kelly will work with Anne Givens to gain full support from sales team with respect to pushing the new product * Sales team starts to pitch the new cooler and LTOs to liquor stores. * Sales team will approach university and college pubs to build good relationships with them. Free sample coolers and a “Bottle Cap Collection” campaign will be used to encourage sale volumes. Winter 2005 – Finalizing Production and Distribution * Kelly will request that her brand manager implement the packaging recommendations. Promotional campaign should focus on social media, television, print and radio mediums targeted at the 19 – 44 year old age groups. Examples include: YouTube videos, Facebook campaigns, reality TV shows and university and college websites and bulletin boards. Campaign suggestions include: * “Slam Dunk with AQUA” – ad could show a dunk tank or a basketball game. Dunk tank is more water related. * “Drown your sorrows with AQUA” – ad could show guy getting dumped or “dunked” by his girlfriend. * “Get AQUA blitzed! ” “AQUA – Water with Zip” – ad could show guy or gal flying down a zipline and landing in water (a lake, ocean) * “Dive right in… with AQUA” – ad could show swimming pool party Spring 2005 – Launch of new product * New product must be on the shelves by the first of April. Long-term: * Conduct follow up market survey to monitor consumer response and changing trends. * Innovate and add new taste, flavors, packaging and promotions to remain competitive. * Introduce new brands to keep pace with the dynamic market and expand product line to include new alcohol based products (e. . Tequila). Kelly should consider testing a 100% real fruit juice vodka cooler. This improvement would be more appealing to those looking for a healthier alternative than Yuha’s 50% version. Contingency plan: If initial launch is not on target for case sales, Kelly should refocus certain areas of the mix to drive consumer interest and trials. * Extend LTO’s to further capture market share by appealing to value conscious target market but emphasize “premium” quality at special introductory price to go head to head with Smirnoff. * Expanded brand advertisements/endorsements.
Exhibits Exhibit 1: Perceptual Map | | Not Sweet (Healthier)| | | | | | | | | | | | | | | | | | | | | | | | | | | | ? Spring water coolers| | | | | | | | | | | | ? Real fruit juice coolers| | | ? Gin coolers| | | Non carbonated| ? Vodka Mudshakes| | | | | Carbonated| | | | | ? Tequila coolers| | | | | | | | | | | | | | ? Vex| ? Smirnoff Ice| | | | | | ? Mike’s Hard| ? Bacardi Breezer| | | | | | ? Energy coolers| | | | | | | | | | | | Sweet (Less Healthier)| | | | Exhibit 2: Packaging | ADVANTAGES| DISADVANTAGES| Carrier| pk| Generally connoted premiumDifferentiates the product from Vex (6-pk)| Higher production costs compared to 6-pk| 6 pk| Lower production costs compared to four-packNo premium six-pack in the market| Generally associated with valueNot differentiated from Vex Take up more premium shelf space, customers may not be willing to provide| Closed box| Provides a larger surface for creative packaging design and copy| Not easy to pull outConsumers cannot see bottle or product| Open carrier| Easy to pull out Consumers can see the bottle and product color| | Label|
Paper| easiest and most straightforward optionused on the existing Vex and Growers Cider six-pack productsprovides a good communication mediumCheap to implementExisting production capacity| Not perceived as upscaleHard to create edgy, eye-catching differentiated packaging| Ceramic| Easier to etch eye-catching graphics and text directly onto the bottle using a laser| More expensive than paper label.
Bottles cannot be reused through the provincial recycling programs| Pressure-sensitive| Allow marketing team to maximize flexibility to execute their creative designs. Considered “Premium”| Most expensive optionNo in-house production capabilities & investment is costly. Bottles cannot be reused through the provincial recycling programs| No label| EdginessCheap to execute| A clear bottle may not be enticing enough to get new customers to try the beverage inside| Bottle|
Glass| Conventional choice for cooler categoryLonger shelf life than plasticFresh fruit juices and ice teas tended to be bottled in glass| | Plastic| Less expensive More durableBottled water, soft drinks and sports drinks tended to be bottled in plastic| Shorter shelf life than glass| Square shaped| Different| Require purchasing a new mold| Size| 341 ml| Easiest to use| Smaller than market leader| 355 ml| Same as market leader| | Other – Lids|
Screw cap | Resealable – consumers able to close if unable to finish drinkHave a seal so they cannot be tampered with| | Twist off crown cap | Convenient and easy to open – no bottle opener required| Twist off equipment slightly more expensiveHave a cheaper image? Possibility of tampering then putting cap back on? | Pry off crown cap| Prevents tamperingPry off equipment slightly less expensive| | Exhibit 3: Pricing and discounting | ADVANTAGES| DISADVANTAGES| Grey Goose Approach (Premium) $11. 95 per 4 pk $14. 5 per 6 pk| * Denotes premium product * Rich returns due to higher margins| * Exceeds $10 threshold * No brand name spirit as base * Risk having to drop price if inadequate sales| Line price| * Non differentiation in price against market leader might denote similar quality to consumers| * Product could be perceived as “me too”| Below the $9 level| * Generate higher sales volume by differentiating against premium price of market leader| * Positioning may be questioned – value vs premium product * too similar to Vex (value brand)| Limited time offers:| * Discount for consumers which drives higher sales volumes * Good placement in provincial liquor stores – end-of-aisle displays| | Deep discount ($1. 50 to $2. 00)| * Deep discount (as supported by sales) gets promotion off to a strong start. * Deep discount erodes margins * May undermines premium positioning| Smaller discount ($0. 50 to $1. 00)| * Competitive with market leader’s current LTO of $1. 00| * Protects margins * Maintains premium positioning| Exhibit 4: Market segmentation chart Segment #:| 1| 2| 3| Segment Name:| Finally Legal | ID me if you want to| Old enough to know better | Qualifying Dimensions| Must be of legal drinking age 19 in most provinces, 18 in Alberta| Must be of legal drinking age 19 in most provinces, 18 in Alberta| Must be of legal drinking age 19 in most provinces, 18 in Alberta| Who? | 19-25, university and college students, male and female| 26-44, more females than males| 45-65, mostly female| What? Beer, coolers, hard stuff| Beer, coolers, some hard stuff| Beer, coolers, more hard stuff than ID me group| Why? | Partying, Entertainment| Relaxation, Pleasure| Pleasure| Where? | University and college bars and concert events, bars, concerts, sporting events, bush and house parties| Home, with family and friends, neighborhood pubs, sporting events, concerts, camping, family gatherings, fundraising events for kids activities| Home, with family and friends, neighborhood pubs, local taverns, local dances, camping, family gatherings, curling clubs| When? | every weekend, weeknights| Occasional weekends, occasional weeknights with meals| Occasional weekends, infrequently with meals| How do they buy? Price sensitive| Less price sensitive| Most price sensitive| Trends/potential in segment| Not particularly brand loyal, very willing to try new things, strong peer influence | Willing to try new things but some brand loyalty if they find something they really like, some peer influence| Brand recognition more important, not as willing to try new things, not really influenced by peers| Media habits| Social media, Facebook promotions, Youtube, texting, radio, liquor store promotions| Becoming more social media oriented, radio, liquor store promotions| Traditional media, liquor store promotions| Determining Dimensions| | | | Benefits sought| Drink to get drunk, relieve thirst, feeling good day after, becoming more health conscious| Drink as social activity, to relax, with meals, relieve thirst in heat, becoming more health conscious| Drink as social activity, with meals|