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The Framework That Transformed the U.S. Wine Industry Ever tried a Yellow Tail wine? The brand's makers actually created an uncontested market space.

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Nicole Leach | Entrepreneur

For the last ten years, Blue Ocean Strategy has challenged business leaders to explore uncontested marketplaces -- or what we call "blue oceans." But this strategy goes beyond theory: It provides a set of methodologies and tools that can help managers pursue value innovation systematically and make blue oceans attainable for all aspiring organizations and individuals. Take, for instance, the wine industry.

Related: The Cloud-Based Startup Making Waves in Wine Country

Historically, the industry has proudly promoted wine as a refined beverage with a long history and tradition. This has alienated a large portion of consumers who have viewed wine as intimidating and pretentious. Alternatives -- beer, spirits and ready-to-drink cocktails -- have captured three times as many U.S. consumer-alcohol sales.

The Australian winery Casella Wines addressed these problems with a new strategy that transformed the market, but not by competing on traditional factors.

Instead, Casella looked to beer and ready-to-drink cocktails and created Yellow Tail, a fun and easy-to-drink nontraditional wine brand. Yellow Tail was designed to embody the characteristics of Australia's culture: bold, laid back, fun and adventurous. Yellow Tail aimed to represent a leap in value that appealed to a broad cross-section of alcohol beverage consumers.

Casella Wines' success with Yellow Tail was not by luck. Finding that many Americans, too, saw wine as a turnoff, the winery created a new value curve by applying what we call the four actions framework:

  1. Eliminate: Which of the factors that the industry takes for granted should be eliminated?
  2. Reduce: Which factors should be reduced well below the industry's standard?
  3. Raise: Which factors should be raised well above the industry's standard?
  4. Create: Which factors should be created that the industry has never offered?

Applying the Four Actions Framework, Casella Wines created three new factors in the U.S. wine industry -- easy drinking, ease of selection and fun and adventure; it also eliminated or reduced the traditional factors of complexity and aging. Accordingly, Yellow Tail was marketed as a new combination of wine characteristics: an uncomplicated, fruity wine structure that was instantly appealing to the mass of alcohol drinkers.

By dramatically reducing the range of wine characteristics, Yellow Tail simplified a wine choice many consumers had traditionally seen as overwhelming and intimidating: Bottles looked the same, labels were complicated with enological terminology and the range of choices was so extensive that salesclerks had a hard time making recommendations.

Related: This Device Lets Wine Lovers Try a Sample Without Popping the Cork

In contrast, Yellow Tail produced only two wines at the start: Chardonnay and Shiraz. It removed all technical jargon from the bottles and created instead a striking, simple and nontraditional label. The simplicity of just two wines -- a red and a white -- helped streamline Casella Wines' business model; it reduced stock-keeping units' maximized stock turnover and lowered investment in the company's warehouse inventory.

Whereas large wine companies had developed strong brands over decades of marketing investment, Yellow Tail leapfrogged its taller competitors by employing no promotional campaign, mass media or consumer advertising in its initial years. It didn't simply steal sales from competitors; it grew its market by bringing in nonwine drinkers.

En route, Casella Wines was able to reconstruct buyer-value elements to offer an entirely new experience, while simultaneously keeping cost structures low, making the existing rules of competition irrelevant.

Casella's success was evident: In the space of only two years, Yellow Tail emerged as the fastest-growing brand in the histories of both the Australian and the U.S. wine industries, and the number-one imported wine into the United States, surpassing the wines of France and Italy.

Yellow Tail also acted on the four actions framework to break away from its competition. Today, ten years since Yellow Tail was introduced, the brand is available in more than 50 countries, with more than two-and-a-half million glasses enjoyed around the world each day. In the space of a decade, it has emerged as one of the top five most powerful wine brands in the world.

The takeaway: three characteristics of a good strategy

When expressed through a value curve, an effective blue ocean strategy like Yellow Tail's has three complementary qualities: focus, divergence and a compelling tagline:

  1. Focus: Every great strategy has focus, and your company's strategic profile, or value curve, should clearly show it.
  2. Divergence: When a company's strategy is formed reactively as it tries to keep up with the competition, it loses its uniqueness. In contrast, the value curves of blue oean strategists always stand apart. By applying the four actions -- eliminating, reducing, raising and creating -- you'll differentiate your company's profile from the industry's average profile.
  3. Compelling tagline: A good strategy has a clear-cut and compelling tagline. A good tagline must not only deliver a clear message but also advertise an offering truthfully, or else customers will lose trust and interest.

Without these qualities, your company's strategy will likely be muddled, undifferentiated and hard to communicate, with a high-cost structure. The four actions of creating a new value curve should be guided toward building your company's strategic profile with these characteristics. These three characteristics serve as an initial litmus test of the commercial viability of blue ocean ideas.

This post was adapted with permission from the authors' book, Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant. Boston: Harvard Business School Publishing, 2015.

Related: What It Means to Be JetBlue's Wine Expert

W. Chan Kim and Renée Mauborgne

Faculty, INSEAD Blue Ocean Strategy Institute

W. Chan Kim and Renée Mauborgne are the authors of the international bestseller Blue Ocean Strategy and the soon-to-be released followup, Blue Ocean Shift – Beyond Competing: Proven Steps to Inspire Confidence and Seize New Growth (Hachette, September 2017).

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