Vincor Canada

Company Background(As per the case study) Vincor was worlds eighth largest producer and distributor of wine and wine related products with its revenues exceeding US $400 million in 2004. Based in Mississauga, Ontario, Vincors operations and distribution extended across Canada, the United States, New Zealand, Australia, South America and the United Kingdom. In Canada, Vincor was the market leader with 21 percent of market share in 2004. Vincors business activities included production and distribution of wine and winerelated products, 160 Wine Rack retail stores in Ontario, a winemaking-kit business and an alcoholic refreshment beverage business. The refreshment category was an important part of Vincors business in Canada, and was driven primarily by its Vex and Growers Cider brands, each of which sold nearly one million cases in 2005. Canada Cooler, a wine-based beverage, and Tabu, a carbonated low-alcohol beverage were also in Vincors refreshment portfolio, but neither was a significant source of revenue nor represented a growth opportunity. Situation Vincor is entering in to premium refreshment industry with an alcoholic cooler. Its products have been well received by the Canadian market and its the worlds eighth largest producer and distributor of wine and wine related products. Vincor offers several refreshment beverages in the growing refreshment beverage industry including Vex and

Growers Cider brands. Vincor want to enter the cooler market which was worth Cdn$230-million in 2004 with the total consumption of over 6.8 million nine-litre cases of coolers. The options on shelf are fruit juice based cooler, tequila based cooler, energy based cooler, spring water based cooler and the gin based cooler. Market Summary The cooler market consists of three major players namely Diageos vodka-based Smirnoff Ice, launched in 1999, was the market leader, with 26 per cent market share. Bacardis rum-based Bacardi Breezer had 17 per cent market share, and Mark Anthonys Mikes Hard Lemonade, launched in 1996 and considered to be the first cooler, owned nine per cent. Vincor was the second largest supplier of refreshment products in Canada, primarily due to sales of Vex and Growers Cider. The cooler market is so dynamic in Canada that we can see new products coming up every year to capitalize on innovation and the demanding market. Many new products are launched each year to compete with the present popular brands and to cope up with the everchanging consumer taste. The shelf life of a new product in coolers category can range from a year to a maximum of 3 years as per the previous trend. Many products in the coolers market fail to recoup the costs of research and development in their launch. Among the newest generation of products, launched in 2005 were Yuha, a fresh fruit juicebased vodka beverage, Mikes Berry, a variation of Mikes Hard Lemonade, and Vodka Mudshakes, a milk-based beverage. The cooler sales occurred between May and September, during the Canadian spring and summer. The cycle for new product introduction is well defined to get the products

in stores for consumption on time. Companies typically began preparing 10 to 12 months ahead of a new product launch, conducting research during the spring and summer, pitching the retail trade in the fall and finalizing production and distribution in the winter in order to have the new product on the shelves for the first of April. Porters Five forces Michael Porter has identified five forces that determine the attractiveness of a market or market segment. 1. Threat of Intense Segment rivalry The cooler refreshment sector has many competitors like Smirnoff ice (26%), Bacardi breezer (17%) Mark Anthony Mike Lemon (9%) and Growers Cider (8.6%).This high competitors has led Vincor to make new product introductions. 1. Threat of New Entrants Taking in to consideration the liberalized economy and attractive market, a new global player could emerge. But a climatic situation in Canada remains a entry barrier to most of the refreshment segment players. 2. Threat of Substitute products Since tequila based cooler is a new concept, there would not be any substitutes for the product during the initial stages. If a substitute comes up, prices and profits would likely fall. 3. Threat of buyers growing bargaining power Vincors tequila based cooler is in premium product category and it concentrates on developing superior offers that strong buyers cannot refuse.

4. Threat of suppliers growing bargaining power LCBO remains Vincors sole supplier in Ontario. This can be constraint in raising prices or quantity supplied in the province. Defense mechanisms like Win-Win relations can be created to overcome this type of barrier. Motivations of launching a new product Refreshments industry is a Canadian $230 million industry in Canada. The industry is very dynamic and many new brands and brand extensions are launched each year. Kertz points that trends in the industry change every year and all companies try to bring out new flavors and formats to their existing product line.30 % of the coolers on the shelf each year were either new products or their line extensions. Customers are very exploratory in nature and their taste changes with the age. Thus innovation is a necessity to prevent any dwindles in sales and profits. Cultural implications for Vincor Vincors organizational structure is such that each of its departments works in harmony with other departments by caring out their responsibilities and functions. Highly developed supply chains are the determinants of a better cash flow in a company. The supply chain of Vincor is highly penetrated and all the departments such as sales, marketing, Sales, Marketing, customer service and the demand planning work in harmony with each other and has proved out to be very effective.

The departments in Vincor are subdivided into different departments working in harmony with each other serving as one functional unit. Vincor only sells to particular retailers or distributers and it does not distribute the products in public.

Vincors sales organization is arranged geographically with the reps responsible for a number of stores in a defined area through the province owned states. The Vincor reps also distribute the products through various bars and restaurants. Less than 10% of the cooler sales are generated from the bars and restaurant sites.

The sales reps also provide the company with mandates or Limited Time Offerings (LTOs) and also provide a good marketing program to support the sales in order to secure the best placements in the stores. The reps also rely on the long standing relationships with individual store managers in order to pull the products from the central buyer.

Kertz also insists in gathering people from various departments to have their expert views on the subject and organized a marketing offsite to initiate the distilling process in market research so as to create the product concepts into a refined form. Kertz also invited representatives from the R&D, production and sales department to join the marketing department at the offsite.

Marketing, Sales, Human Resources, Finance & Administration and IT are also departments fundamental to Vincors Organization structure.

Vincor had to face oppositions from its sales team across the country in launching the new refreshment cooler. They believed that the company should focus on its stronger products like the wines instead of launching in to a new

product. The part of this reason is that it was hard to push a new product than a product you know. Despite the negative reactions from colleagues, Kertz decided to continue with the launch as she believed that the innovation was key to Vincors long term strategy. Identification of the target market The target markets or buyers of the new product would be the Canadian Provinces liquor boards like the B.C Liquor Distribution Branch, Liquor Control Board of Ontario, and Qubec's Societ d'Alcools du Qubec which constitute for the worlds top three biggest alcohol buying groups, Saskatchewan Liquor Board, Manitoba Liquor Board and private stores in Alberta and B.C. Bars and restaurants of all provinces will act as a trial and awareness platform for the new product as the total sales of coolers from the bars and restaurants constitute for 10%. In the report survey, 56 % of the Canadians with the ages of 19 years and above claim to drink more of different types of the refreshment categories. This implies that in order to cater to their wants and needs, the target market should be so selected which targets at non teen age group with different types of refreshment in view so as to increase the consumption. Since the most popular type of refreshment is Vodka or Spirit coolers as depicted in the report, and since 42 % claim to drink this cooler regularly or occasionally or regularly which is followed by wine coolers (35 per cent), and 32 % drinking lemonades and 17 % the ciders, this implies that the target market should be s selected so as to introduce more drinks in Vodka and cooler segment.

Demography: Most of the consumers fall under 44 years which constitute 58% of the total consumers and 35% falling under 34 years, and the rest of the consumers constituting 41% fall from the age group of 34% - 45 years. So the target market should be so selected so as to meet the expectations of mature consumers by not sidelining the teenagers.

The refreshment segment should be targeted primarily at females and approximately 60 % consumers are females which consume refreshment.

Income Profile:Under $25,000: 21 per cent of each group; $25,000$49,900: 27 per cent; $50,000$74,900: 22 per cent; and $75,000 and up: 31 per cent of each group).

93 % in refreshment category preferred flavoured drinks 66% are value conscious => target best value not premium 46 % are health conscious in refreshment category so do not increase the carbs in drinks, instead use artificial sweetened flavours by indicating that the drinks are specifically targeted towards the calorie conscious.

44 % trendsetting and 39 % outdoorsy 79% consumption of English- Speaking cooler drinks than French Speaking cooler drinks

Product Chosen The options available with the company is tequila based cooler, gin based cooler, energy based cooler, fruit-juice based cooler and spring water based cooler. The decision can only be rendered by looking at the pros and cons of each option.

Tequila based coolers Pros Many consumers appeared to find the concept unique as per the qualitative research. The addition of the gummy worm will entice the customers to try it once as no one has ever tried it before. Tequila drinkers seemed most interested in purchasing the cooler as it can be a party drink. Tequila is generally perceived as party liquor and it is perceived to act fast in terms of intoxication. So its another factor for consumers to try it more than once. The quality of tequila is that it can go well with other mixers quite well without hampering the taste of the liquor. The sugar content in tequila based cooler will be less, thus making it a cooler which goes well with food. Cons The bitter taste of tequila is a concern for few respondents in the research.

Fruit-juice based coolers Pros The concept is well received in the research by making it less sugary and unconventional like carbonated coolers.

Many consumers also seemed interested in trying a non-carbonated cooler claiming that it might be less filling.

The taste of juice based coolers is favored among cooler drinkers. It is considered as a good replacement to a the popular cocktails like tequila sunrise and bloody mary.

Cons Some respondents feel that the drink can be easily made at home. Some respondents doubt about the claim of being less sugary and sweet.

Gin based coolers Pros The concept is liked by consumers as it claims to be less sweet and goes well with tonic. A few consumers commented that gin would blend well with many flavours making huge variety in their flavors. Cons Some consumers dont like the concept of Gin based coolers. A couple of consumers criticized the description triple distilled gin claiming that they would prefer information on the brand of gin used so that they could better determine the quality of the cooler. Its a unique concept among coolers. Gin is perceived as classy spirit displaying ostentation among drinkers.

Spring water based coolers Pros Many consumers perceived the overall benefit as being able to stay better hydrated while drinking alcohol and considered water based coolers to be a healthier option allowing them to have more energy and less of a hangover. Some female respondents seemed interested in the promise of low calorie and less sweetness associated with this concept. Some consumers praised the lighter carbonation level. Consumers perceived this concept to be a unique and new product offering in the cooler category. Cons Many consumers were concerned about the flavor of the cooler. Some consumers did not relate to the insight, claiming that they were not concerned about coolers being heavy and high in calories A few consumers seemed skeptical that a water cooler could provide more hydration than any other cooler. Energy drinks based coolers Pros Many consumers, particularly those who go to clubs, expressed interest in the concept primarily due to the increased energy the cooler would provide.

Several consumers praised the use of the guarana berry as a natural source of energy.

Cons

Some consumers perceived the taste of fruit flavours to be appealing.

Many consumers, including those who found the concept appealing, expressed concern regarding the consumption of caffeine in a cooler.

Several consumers claimed that the cooler might be too sweet given the description of guarana berry and fruit based flavours.

Decision on the product After the discussion about the pros and cons of the available options, we would like to go ahead with a unique blend of fruit juice and tequila based cooler as the respondents find both concepts unique and flavorful. With the blend of fruit juice, the cooler will be less sugary, flavorful which is a top concern among cooler drinkers to drink the cooler again. And the fruit juice based cooler have the highest incidence rates for occasional drinkers and consumers reported they are most likely to try this. Tequila based cooler have the highest incidence rate among regular drinkers making it a combined hit formula for the market. We would launch the product in three flavors namely orange & grenadine juice with tequila based cooler, grapefruit and lime juice with tequila based cooler, apple juice with tequila based cooler.

Characteristics of packaging, and pricing strategies Packaging Packaging creative development was allocated 10% of the overall marketing budget for the launch of new cooler. There were options for a four pack as well as six pack. A sixpack was favored for the following reasons. a. It is efficient in production ie: a higher yield of up to 275 bottles per minute. b. Inexpensive due to higher yield levels. c. Also a six pack premium brand cooler was not there in the market. The carrier will be an open box made up of cardboard with a handle containing the brand logo, brand colors and the product uniqueness quotes. An open carrier would let consumers see the actual bottles as well as the product inside which will be colorful and aesthetic to view from a viewers perspective. d. Easy to carry as compared to a closed box carrier and mainly due to the fact the liquor stores are self serviced which doesnt allow the customers to gain an insight about the product. An open carrier will display the product easily and catch the eyes of the passing customers. These decisions were made after considering following factors as well: a. Consumer affluence b. Company and brand image c. Innovation opportunity

Pricing Marketing department is responsible for pricing strategy of the new product. The industry is regulated by liquor boards, Vincor refreshment cooler is priced at $11.45 per six bottles. It gives Vincor a price advantage of 20% over premium brand like Smirnoff and impression of a premium product. 0.75 $ discount for LTO reducing the price from 11.45$ to 10.70$ for the first three months. Label Selecting the right label is a key in making bottle attractive to new consumers. Vincor decided to go with ceramic labeling which involved etching the graphics and text directly onto the bottle using a laser. The key reason this label was selected because the new premium cooler can be easily differentiated and no other competitors currently use this technology. The drawback was that Vincor had to invest in developing them or need to outsource them making it an expensive option. Bottle A square glass bottle with a capacity of 341 milliliters will be used. The shape of bottle helps in differentiating the product and glass was preferred because it has one year of carbonation. After analyzing the case condition, we came upon the following recommendations a. The fruit juice and tequila based cooler b. Six pack with ceramic labeling c. Positioning for medium to premium market. d. Priced at $ 11.45.

e. Square shape bottle with a capacity of 341 ml. Test marketing Since the final decisions related to the product have been made, we would like to test market the product in the London, Ontario. We chose the region based on the following factors: London, which is less than two hours drive from Windsor, Detroit, Toronto and Buffalo has a population of over 450,000. It is located in the centre of southwestern Ontario. For years, London has been a favourite "test market" for marketers because it is a relatively contained media market and has a fairly representative population composition. There is less media presence in the city, and the city provides the perfect demographic profile of the customers as it will do in the bigger markets like Toronto, and Vancouver. The product testing can be done in a discreet manner giving less time to the competitors to think on their recourse actions against the product launch. Vincor should do the test marketing to get an estimate of market share and volume. The following factors led the decision for the test marketing. This will be a crucial step in determining the effects of tequila cooler in the existing market. This is also going to help the company to know the

characteristics of consumers who will buy the product. This technique will help the company to improve the marketing approach for the product. Knowing the demographic characteristics will help in developing the

media plan that will effectively reach target consumers. Knowing the psychographic and lifestyle characteristics of target customers will provide valuable insights into how to position the product and the types of promotional messages that will appeal to them. The behavior of the competitors during the test will also be tested by this way. This will provide Vincor an idea that what will be reactions of the competitors after the product is launched nationally. Vincor should opt for the simulated test market. This approach can be conducted more quickly than the other types of test market options that are available like traditional, scanner or controlled. This test can normally be conducted more quickly than the other three approaches, at a lower cost, and produce results that are, in most cases highly predictive of what will actually happen. A more limited amount of information is used in conjunction with mathematical models that include estimates of the effects of different marketing variables that can be adjusted to fit the situation. In this approach a sample of consumers can be selected based on the expected or known characteristics if the target market consumer for the test product. They are then given the opportunity to purchase the product in the actual marketplace. Strategy for product launch The characteristics of the product have been finalized, now the next step is to pitch this idea to the main buyers which are the liquor control boards.

As per the timelines discussed in the case, we need to set the appointments with the representatives of the liquor boards by September 6th 2005 for a presentation of the new product so as to get the product on the shelves by 1 st April, 2006. The following framework will be required to present the concept of the product to the liquor boards:Product Description- The product is a unique blend of fruit juice and tequila based cooler. The product is available in three flavors namely orange & grenadine juice with tequila based cooler, grapefruit and lime juice with tequila based cooler, apple juice with tequila based cooler.

Marketing Budget Kretz created a new break even proposition to launch the new product. The marketing budget was dependent on the sales forecast and the profits that could be generated. Kretz estimated the sales would be in the range of 50,000 to 75,000. Sales reaching a 1, 00,000 cases will be a remarkable achievement in the first year and anything below 40,000 would be considered as the failure of the product. Direct costs were estimated to be between 30 to 50%. Total sales and marketing budget was prepared with inputs from the sales organizations.

Media Creative Limited time offers Packaging development Image/display/sales promo Marketing promotion/out of store trial In-store tastings Total

37% 9% 4% 9% 6% 31% 4% 100%

With the product launching, sales forecasts could be revised which can potentially create more money for promotion.

Promotion Strategies The product uniqueness will be the top priority in the marketing strategies. As the research states that the market is anticipating the launch of a product which includes the fruit juice and the tequila both. This product is set to go to attain a substantial amount of market share in the coolers category. Vincor will have to invest a considerable amount of capital in the advertising of tequila cooler. As Vincor will have to adopt a pull strategy to stir a demand in the market and to

attract customers to come and purchase the product from the retailers. For this approach heavy investment will be required. Vincor can use public relations as it involves developing positive relationships with the media organizations to help promote its tequila cooler. The promotion strategies are sub-divided in the following stages: Stage 1(Initial marketing) We are trying to promote the cooler at the target age range of 19-45 in the corporate offices, club parties, sponsored fashion shows after parties. The product will be advertised in such a way to create a buzz in the town. An evening get-together can be suggested to the employees of big corporate groups where the coolers and free DJ will be provided by the event management company hired by Vincor to generate awareness in the target profile. Sponsored fashion shows after parties will associate the brand with the entertainment industry to boost the sales of the product by capitalizing on the brand recognition and media presence in those parties. The nightclubs will promote the cooler to the youth and thus making it a perfect party drink. The tasting sessions at the liquor board stores will generate awareness and will prove the fact of its sync with the food. By seeking contracts for official sponsorship of high profile sporting events like World cups, Olympics- as these are opportunities for promotion and advertising of alcoholic products. For example, Rogers Cup in Montreal and the Tennis

Masters Series in Toronto are sponsored by breweries. Such a practice helps the manufacturers to establish global brand recognition. In this era of science and technology, we can use digital marketing- Internet as a medium for the promotion of alcoholic products. Vincor websites can have events appealing for the youth like games, music, cartoons, variety of high tech downloads that can attract the budding generation. Stage 2(Post sales marketing) As the awareness of the product will be generated through the above stated methods, now the product will be exposed for the sales with a Limited time offer discount for the first three months in the liquor stores. The product can be marketed to the Food and Beverage controllers of the hotels and the convention centers to generate the demand of the product within high profile clients using the restaurants and the convention services for the social and corporate needs. The presence of the brand in the youth magazines and print media will boost the awareness of the product. The product can be associated with cool television advertisements linking to the coolness and uniqueness of the product. The participation of the brand in the citys beverage shows will further extend the awareness of the product in the masses.