VINCOR PROJECT TWIST

Product Management

Prof. Ramesh Venkateswaran

Case Submission By: Group B2

Job K Joseph 2008027
Shaileshkumar Goyal 2007053
Gaurav Barman 2008081
Amit Tyagi 2008074
Hitesh Garg 2008085
Karthik Swaminathan 2008088

Group B2
7/31/2010
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Contents
Contents......................................................................................................................2

Introduction..................................................................................................................3

Background..................................................................................................................3

Analysis........................................................................................................................4

Refreshment Beverage Market in Canada.................................................................4

Should Vincor launch a new refreshment beverage?................................................4

Is Vincor well equipped to launch a new refreshment beverage?.............................5

What kind of a beverage should Vincor launch?........................................................6

RECOMMENDATIONS....................................................................................................8

Marketing Objective..................................................................................................8

Entry Strategy...........................................................................................................8

Markets and Target Segment....................................................................................8

Positioning................................................................................................................8

Competition..............................................................................................................8

Marketing Mix...........................................................................................................9

Product Characteristics..........................................................................................9

Packaging and Distribution....................................................................................9

Pricing Strategy.....................................................................................................9

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VINCOR-PROJECT TWIST

INTRODUCTION
The case has a backdrop of Canadian alcoholic refreshment industry as
it was in the year 2005. Vincor was the world’s eighth largest producer
and distributor of wine and wine-related products, with its revenues
that year exceeding US$ 400 million. In Canada, Vincor was the market
leader with 21 percent market share. The refreshment category was an
important part of their business in Canada and their portfolio
comprised Vex, Growers cider brands, Canada Cooler and Tabu.
Project Twist was a plan to launch a new alcoholic beverage product
within the refreshment drinks segment. Armed with the data from six
months of surveys, focus groups and coast-to-coast research, Kelly
Kretz, Brand Manager at Vincor, had to decide on the final product
offering they would launch. This would include deciding on the product
characteristics, positioning, branding, packaging, and distribution
strategy for the new beverage. Each of these choices imposed unique
challenges and constraints on the choice of product and would impact
the success (or failure) of the product.

BACKGROUND
The refreshment beverage market in Canada is highly fragmented with
many new brands and brand extensions competing in the same space.
The industry as such was shrinking by 6% y-o-y. Among the major
players are Diageo’s vodka-based Smirnoff Ice with 26% market share,
Bacardi’s rum bases Bacardi Breezer with 17% market share, and Mark
Anthony’s Mike’s Hard Lemonade with 9% market share.
About 30% of the products available on retailer shelves are either new
products or line extensions of existing products. The reason for such
large number of product/line extension introduction each year is that
the primary customer base for refreshment beverages is young and
open to trying new brands and varieties of coolers. Moreover as
consumers grow, their taste preferences change and leading to
existing brands becoming less appealing. Since primary customer for
these beverages is university students, what is trendy today is often
not trendy two years down the line. This phenomenon has resulted in
new “successful” products having only about 3 year shelf life before
they become obsolete.

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ANALYSIS
Refreshment Beverage Market in Canada
Refreshment beverage market in Canada is very dynamic with many
new brands and brand extensions are getting launched every year.
About 30% of the products available on retailer shelves are either new
products or line extensions of existing products. The reason for such
large number of product/line extension introduction each year is that
the primary customer base for refreshment beverages is young and
open to trying new brands and varieties of coolers. Moreover as
consumers grow, their taste preferences change and leading to
existing brands becoming less appealing. Since primary customer base
for these beverages is university students, what is trendy today is
often not trendy two years down the line. This phenomenon has
resulted in new “successful” products having only about 3 year shelf
life before they become obsolete.

Even though the market for refreshment beverage market is over

developed1, only 4 brands (Smirnoff, Bacardi, Mike’s and Vincor)
control about 70% of the market share. Moreover, despite strong
brands, the refreshment category within the alcoholic beverage
industry is shrinking by 6% year on year.

Should Vincor launch a new refreshment beverage?

Revenue from refreshment beverages forms about 16%2 of Vincor’s
total revenue. Primarily this revenue comes from two brands – Vex and
Growers Cider. Each of these brands sold nearly one million cases in
2005. From the facts given in the case, it is not clear when these
brands were launched but by looking at the volume of cases, we can
safely assume that these brands are more than three years old.
Moreover since the refreshment beverage category is shrinking year
on year but market share of leading brands is increasing1, we can also
assume that industry is consolidating and this increase in market share
for leading brands comes at the expense of smaller brands.

1
Exhibit 6 in the case
2
6.8 million cases = Cdn$ 230 million implies each 9 liter case sells for Cdn$ 33.82.
Since Vincor sold about 2 million cases of Vex and Growers last year, refreshment
beverages form Cdn$ 67 (16%) of Vincor’s revenue.

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Because of three factors - shrinking market size, experimental nature

of consumer base and new product/line extension introduction by
competitors, Vincor runs a serious threat of losing share in refreshment
beverage market if no new product/line extension is added is soon
there by affecting it’s top line and bottom line. Its existing products are
old and some of the recently launched new products are not very
successful so to keep the consumers moving away to other brands, it is
imperative for Vincor to launch a new brand.

Is Vincor well equipped to launch a new refreshment

beverage?
Vincor is one of the largest producers of wine and related products in
the world and has significant sales force presence in all the provinces
of Canada except Quebec. In addition to this, it also runs 160 wine rack
stores in Ontario province. Even though sale of alcohol in Canada is
controlled by regional liquor boards, Vincor can use this existing sales
and distribution network to pull new products from liquor boards.

Vincor’s absence in Quebec province will hurt it but not much since
Quebec is primarily a French speaking region3 and the case indicates
that English speaking drinkers prefer refreshment drinks more (4X)
compared to French speaking drinkers. Moreover, the willingness of
Quebec residents to try a new cooler is lower4 compared to other
provinces.

3
http://en.wikipedia.org/wiki/Language_demographics_of_Quebec
4
Exhibit 5

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What kind of a beverage should Vincor launch?

Based upon the survey results given in the case, we can infer that the
average demand for any alcoholic refreshment drink can be expressed
as the below demand function:-

A= Average demand for any alcoholic refreshment drink =

function (age, household income, flavour, brand, familiarity,
uniqueness, social_type, language)

However, considering that Vincor is exploring the possibility of

introducing a new drink, it is very important that the incentive for trial
must be maximised. Again, from results in the case, we can infer a
response function as:-

B= Incentive for trying a new drink = function(flavour, bottle,

color, claims/positioning, base_fluid)

Assuming Vincor gets its target customers to try out its new drink, to
keep them loyal to Vincor’s product, the incentive for re-purchase must
be maximised. Similarly, from the case, we can infer that:-

C=Incentive to re-buy = function (taste, sugar_content,

aftertaste, hangover, food_pairing)

Now, we can safely say that the expected sales figure from the target
segment is:-

Expected_value(D(new product)) = A*B*C*D*E,

Where D is a measure of the frequency of consumption&
E is the number of units consumed at one sitting

Exhibit 5 helps us learn more about the function B. Assuming that the
split between male and female drinkers applies across all three age
groups, we can redefine the first table in exhibit 5 as:-

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Product Preferences (B)

Drink base M19- M23-26 M27- F19-22 F23-26 FZ27-29 Tota
22 29 l
Fruit juice 42.60 39.29 38.82 47.40 43.71 43.18 85
Spring water 34.84 35.73 32.61 43.16 44.27 40.39 77
Tequila 35.04 29.45 30.98 33.96 28.55 30.02 64
Energy drink 32.45 27.13 32.94 34.55 28.88 35.06 64
Gin 28.25 27.75 27.75 27.75 27.25 27.25 55

Similarly, we can redefine the second table in exhibit 5, to infer the

nature of the functions C and D:-

Incentive to re-buy occasionally (C)

Drink base M19- M23-26 M27- F19-22 F23-26 FZ27-29 Tota
22 29 l
Fruit juice 38.65 42.83 40.74 35.35 39.17 37.26 78
Spring water 32.50 34.50 32.50 32.50 34.50 32.50 66
Tequila 30.73 35.77 33.76 30.27 35.23 33.24 65
Energy drink 32.94 34.00 34.00 29.06 30.00 30.00 63
Gin 27.50 28.50 32.00 27.50 28.50 32.00 59

Incentive to re-buy regularly (D)

Drink base M19- M23-26 M27- F19-22 F23-26 FZ27-29 Tota
22 29 l
Fruit juice 7.64 4.73 5.45 13.36 8.27 9.55 17
Spring water 4.00 2.50 2.50 4.00 2.50 2.50 6
Tequila 10.29 6.86 6.48 16.71 11.14 10.52 21
Energy drink 9.88 6.59 6.22 17.12 11.41 10.78 21
Gin 9.55 6.36 6.36 11.45 7.64 7.64 17

Quantity consumed at one sitting (E)

The below table shows the qualitative comments given by respondents
during the survey based upon the 5 top choice of drinks offered by
Vincor. These indicate that to maximize the quantity consumed at one
seating, the drink must not be perceived as very sweet, and must be
less filling.
FRUIT JUICE GIN COOLERS SPRING WATER TEQUILA COOLER ENERGY COOLER
COOLERS COOLER
Good Bad Good Bad Good Bad Good Bad Good Bad
Natural It is Smoot Bitter Low Weak Fun Bad Energy Caffeine
like h calories flavour? night
my alcoho
cockta l
il
Health Classy Gin Less gas Better Bitter Natural Too sweet?
y brand than
? vodka
Light Like a Stronger worm Fruity Too strong ?
cola?
Better Convenien
than just t
tequila

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Product Choice
To simplify, let us compare B*C*D for each of the 5 drink choices. It
can be seen that the local maxima are:- (see highlighted)
Drink base M19- M23-26 M27- F19- F23- FZ27-29
22 29 22 26
Fruit juice 125.79 223.85 141.59
2 79.596 86.193 9 2 153.649
Spring water 45.292 30.817 26.496 56.108 38.183 32.817
Tequila 110.80 171.77 112.04
1 72.265 67.773 4 8 104.975
Energy drink 105.60 171.88
8 60.787 69.662 9 98.856 113.384
Gin 74.192 50.300 56.477 87.378 59.334 66.621

RECOMMENDATIONS
Marketing Objective
The objective for this new product launch is growth in overall market
share and revenues.

Entry Strategy
Use Market Penetration as a strategy

Markets and Target Segment

The product will be launched in the Canadian market and from the
analysis above, it is recommended that the target segment be
students and youth in the age group between 19 and 26 catering to
both males and females.

Positioning
1. Fun/Youthful
2. Adventurous
3. Gender-Neutral
4. Tasty and Less Filling

Competition
The main competitors in this kind of positioning would be
1. Smirnoff Ice
2. Bacardi Breezer

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Marketing Mix
Product Characteristics
In this market, the consumers have high propensity for trial. Based on
the analysis in above sections, the real fruit juice based coolers, tequila
and spring water based coolers have higher chances of trial across the
various provinces in Canada.

The fruit juice based coolers are filling and not more quantities can be
consumed in one sitting, hence there is less scope for sustained
market penetration. This, along with the case fact that another real
fruit juice based cooler had already been tried in the market by
another company and flopped, makes it an unattractive option. Since
watered down vodka would provide very less flavor space to play
around with and create unique variants, we recommend Vincor to go
for a Tequila based cooler. Further, we recommend some variants with
higher alcohol content & more masculine flavours, targeting male
drinkers.

Packaging and Distribution

Vincor already has the Vex brand in six-pack. In order to directly
compete with Smirnoff Ice, introduce a 4 pack and position this as a
premium category by using ceramic labeling or pressure sensitive
labeling and use glass bottles of 341ml, if found that it is below the just
noticeable difference threshold for the consumer.

Pricing Strategy
Using the Dupont Pricing over the product life cycle model, it looks like
the refreshment industry and in particular coolers are a fairly mature
market and are declining. Hence the focus of attention is competition
and costs. The pricing method should be based based on profitability
analysis. Our recommendation is to use the above concept and
competitive pricing to price the product at $9.45 for a 4 pack
container.