Yellowtail Wine Case Study

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Mrinalini Ranjan March 31st 2015 Yellow Tail Wine Case Write-Up The US wine market in the 90’s had relatively slow growth and was intensely competitive, fragmented and regulated. After the dotcom boom in the late 1990s, there was a 60% increase in the production of wine, leading to an oversupply of wine (by about 15-20%) and growing import competition, despite the fact that the majority of Americans continued to be beer drinkers. Over 6500 brands were competing in this saturated market, making it fairly hard for a new entrant to break in and create a brand for itself. This was compounded by the fact that distributers were mainly purchasing wine from large-scale, full-line vineyards to take advantage of economies of scale. Under these market conditions, all varieties of wine with a range of price points were available in the US. Wines ranged from as low as $2, to $2000 for a vintage premium wine. Most companies created products by focusing on prestige. They also created wine with quality defined by price points. US wines were divided into 4 main categories: Ultra-premium, Super-premium, Pop-premium and Budget/jug. Prior to Yellow Tail’s entrance, in order to compete effectively in the budget market, premium wines would be competing to distinguish themselves from one another on the basis of taste and vineyard. It would thus make sense for Casella Wines, an Australian company planning to entire the US market, to focus primarily on the budget segment when launching their wines. Despite the fact that the market is glutted, premium wines are competing on their brand and the complexity of flavors. Moreover, Australian vineyards are not as well known for their wines compared to more traditional wine-producers such as France and Chile. Casella Wines also found that the majority of American adults saw wine as a turnoff; they found wines to be intimidating and

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