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  Vincent Grimaldi French Accent - Yellow Tail leaps off the shelf
by Vincent Grimaldi de Puget
September 8, 2003

One of the fastest growing brands in the entire history of branding could very much be a wine label called Yellow Tail. The wine industry -- under the spur of cutthroat competition and an excess of supply -- is indeed ripe to embrace brand management, and some contenders are already doing it superbly. However, with thousands of obscure brands, it is a highly fragmented market that can appear terribly intimidating to consumers, even to many Frenchmen.

True, every bottle of wine is a flowery poem; but unfortunately for the artist who made it, the label will most likely remain foreign to most, and the content is sealed until purchase (sometimes, years after purchase). The lack of consumer-oriented focus is heartbreaking for most brand strategists, who would love the challenge of reconciling globalization with terroir and expansion with tradition to turn many of those splendid wines into business successes.


Yellow Tail, a mom-and-pop wine brand that did not even exist three years ago, raised that challenge and against all odds, blasted off to become the number one imported wine in the US market, according to AC Nielsen.

Figures put the situation in perspective: About 6,500 wine brands compete in the US alone, the largest wine market in the world, where all the most aggressive wine-producing countries are well represented: France, Italy, Australia, Chile, and Spain, besides the American wines and the all powerful Californians in particular. Ninety-six percent of those wine brands sold less than 100,000 cases in 2002, according to Impact Databank. Only 23 wine brands sold at least 2 million cases each, accounting for 40 percent of a growing market of 245 million cases.

Far from that competitive gargantuan market, down under, in a country known for its enthusiastic beer drinkers, rugged rugby players, and leaping kangaroos, a small iconoclastic winery has turned many traditions on their head.

Based in New South Wales, Casella Wines is a family-owned dwarf -- was a dwarf -- among Australian giants. Since the 1960s, the Casella family was working a 16-hectare (39.5-acre) vineyard and selling its wine in bulk. John Casella, the son of founders Filippo and Maria Casella, took over the winery in 1994 after studying oenology at Charles Sturt University and gaining winemaking experience at Riverina Estate.

Casella wanted to expand his parents' business and hired an experienced manager away from an export-oriented competitor, Cranswick Estate, to lead the effort. The new general manager, John Soutter, quickly launched new wines under the Carramar Estate label. Undifferentiated, similar to any other Australian wine, the new products did not pass some of the most basic marketing tests. Consumers gave the new wines a cold shoulder and it flopped painfully.

To Soutter's credit, he was a lucid entrepreneurial manager who could seize an opportunity and understand his limits. The window of opportunity appeared in the American market in the late 1990s. Americans have shown a marked preference for wines that express the toasty vanilla flavor that oak barrels release. Unfortunately, oak barrels lose their potency similarly to tea bags, and replacing them for new ones can greatly add to the cost of producing the wine. As barrel-aging is an expensive process, the consumer preference for oak flavor -- and perhaps over-investments from some winemakers –- contributed to pulling the price of decent low-price wines up to about US$ 9 to $10. Thus, a price gap yawned open in the $6 to $7 range, right above the cheap jug wine.

Soutter spotted this emerging opportunity, and entirely focused his company on taking full advantage of it. Yellow Tail would not be sold in Australia, and Casella came up with a new blend, lighter on the expensive oak and aging time, totally targeted at that unsatisfied segment of the US market. Its new Chardonnay, for instance, is terrific, and certainly value for the money, as it displays explosive peach and floral aromas and hints of honey, vanilla and oak that nicely balanced the smooth citrus-like acidity. A poem in a bottle, as it should be.

Was Soutter going to release his new wines under the same old indistinctive label? No! Soutter would follow a textbook approach and revisit each of the familiar "4 Ps."

The bold brand, label design, and merchandising program -- which capture all the positive imagery of Australia under a superb trademark -- were professionally developed by a brand design firm of Adelaide, Australia. Consumers like the distinctive kangaroo and are attracted by the catchy colors, deep yellow and black contrasting with each other and enhancing the wine color. Unlike so many of its competitors, this new brand identity passes the toughest batteries of name tests, and its typography -- including brackets and lower cases -- contributes to enhance its differentiation and make it a breeze to protect the trademark.

After the debacle of Carramar Estate, the winemaker's credibility with American distributors was at a low point. Instead of being greedy or simply hardnosed, Soutter stuck to his bold business strategy to motivate his distribution channels. He offered W.J. Deutsch & Sons, one of the largest US wine importers, no less than a 50/50 association in the North-American distribution joint-venture. W.J. Deutsch imports the popular French label Georges Duboeuf, known for its Beaujolais Nouveau, and the partnership immediately gives Yellow Tail access to distribution networks in 44 states.

From a project management perspective, it is worth mentioning that the launch was nicely planned and helped build enthusiasm in the take-off phase. Indeed, retailers received the brightly colored branded displays on time to promote the new label and support a successful introduction at the point of sale.

John Soutter expected to sell 25,000 cases in 2001, the first year Yellow Tail would hit the market. Cautious but lucky, he got all his projections wrong as the wine sold 9 times as much! With its bold branding, a good product and a very affordable price, the bottles with the fancy kangaroo leapt off the shelf. The first batches sold out so quickly that extra cases had to be shipped by plane, at considerable expense. Production could not follow either. Not only was the equipment insufficient but additional quantities of wine had to be bought on the bulk market, further cutting into Casella's thin margins, estimated at 75 cents per bottle. Nonetheless, Casella Wines sold 200,000 cases of Yellow Tail wines in 2001, and 2.2 million the following year. They have now invested in a $2.5 million bottling line to reach their goal of 4 million cases for 2003.

There is little doubt that luck helped make Yellow Tail so incredibly successful, but the Australian brand is nonetheless a benchmark. The characteristics of this resounding business development success calls for some strategic reflections throughout the industry, from the garage wineries to the boardroom of groups nurturing a portfolio of wine brands; some of which have already dropped their prices in the below-$10 segment.

This accessible case convincingly demonstrates that developing the business requires more than displaying bottles of quality wines in a booth at Vinexpo, a leading wine trade show, and expecting importers to come up with the marketing (read "advertising"). As such, Yellow Tail's story is an encouraging example to follow for the countless small wineries that have sought to expand without battle plans and the resources to back them up.

Yellow Tail illustrates that an entrepreneurial winemaker, free from the burden of excessive regulations, can successfully integrate time-tested investment and marketing strategies that have proved powerful to penetrate the tough US market successfully. In addition to the publicity it receives, Yellow Tail will now benefit from a focused positioning that is clearly differentiated from its rivals. From the distinctive name and label, to the accessible wine, to the affordable price point, to the uncluttered website, the message is consistently delivered at every contact point with the consumer. To build a durable brand, it remains for Casella Wines to keep delivering the same brand promise over time, without drifting. In an industry that largely lives according to the clemency of the weather and of a few star critics, consistency over time might not be easy to maintain. Regardless, Yellow Tail has already beaten a clear path for many winemakers to follow.

   Vincent Grimaldi de Puget is a leading brand strategist. He is a partner at GRIFIN PARTNERS, focusing on capital investing and business restructuring, and a visiting professor at US and European business schools.

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