Case Study Reference No. MES0051C
This case was written by Chandrasekhar, IBSCDC. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. This case was compiled from published sources. © 2005, IBSCDC No part of this publication may be copied,reproduced or distributed, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or medium – electronic, mechanical, photocopying, recording, or otherwise – without the permission of IBSCDC.
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[Yellow Tail]: The Aussie champion in the US Wine Market
“[yellow tail] is a ‘value innovation’ product which continues to lead the way in opening new consumers to a taste profile of wine which is extremely good value. The brand has displayed a unique loyalty with its consumers and our research shows they are prepared torecommend it as ‘their discovery’ and take pride in that ownership. We researched the market intensively to determine the right price points, the right packaging, the right wine style and we certainly had the right marketing approach to enter the lucrative US market….” - John Casella1 “Results like this just don’t happen; it takes a team of professionals and the backing of distributors to cometogether to achieve these wonderful results.” - John Casella2 The New South Wales3 based Casella Wines captured the US wine market with its “Yellow Tail” brand of wines. In October 2005, Yellow Tail sold over l million cases in the US and created an industry history as the first varietal4 brand to have achieved that mark. In the wine industry, while the competition was for long on making sophisticatedwines for special occasions, Casella wines redefined the challenge on making a fun and easy-to-enjoy wine for daily consumption at an affordable price. Yellow Tail entered the US market in 200l and sold about 225,000 cases. The number climbed to 1.2 million in 2002. In 2005, the number reached 7.5 million cases5.[Annexure-1] In a short span of time, Yellow Tail’s Shiraz6, became the top selling redwine in the US market. Its merlot7 and chardonnay8 became No. 2 in their respective categories. As of June 30, 2005, Casella Wines reported an after-tax profit of $77 million on revenue of $255 million as against $61 million on $230 million in revenue in 2004. The profit was mostly due to the sales of Yellow Tail in the US. Yellow Tail ranked as the ninth most popular wine brand in the US, and thesingle biggest seller in the country’s grocery stores. It was also the No.1 Australian wine in Italy, Canada and Japan9. It also emerged as the most successful launch of any Australian wine brand in the history of the Australian wine industry10. In the US, the largest wine market in the world, about 6,500 wine brands from various wineproducing countries such as France, Italy, Chile, Spain andAustralia competed with one another, besides the locally produced wines. In the nation, known for its enthusiastic beer drinkers and rugged rugby players, the success of Yellow Tail surprised many. However, Yellow Tail’s sustained dominance was questioned, as industry analysts felt that many previous wine brands have faltered after a successful entry in the market.
1 “Casella Wines: LeadingAustralia's agribusiness exports”, www.austrade.gov.au 2 “US: [yellow tail] breaks the million-case barrier”, www.just-drinks.com, 15 November 2005 3 New South Wales is Australia’s most populous state. 4 A wine made principally from one variety of grape and carrying the name of that grape. 5 Frank J. Prial, “The Wallaby That Roared Across the Wine Industry”, www.nytimes.com, April 23,2006. 6 A...