Kevin Tame and Denis Peralta

Vincor Case
What strategy is appropriate for the launch of the new product? Address the following
issues in your answer:
a. Motivation for launching a new product
There are a few motivating factors that are driving Kertz in the direction of releasing a
new product. One of these factors is that the industry is extremely dynamic and as a result many
new brands and brand extensions are launched each year. The current trends of today may not be
the same two years from now. In this industry at any point in time 30 percent of coolers on the
shelf are either new products or line extensions. Companies believe that continuously adding
new flavors and formats to their existing product lines and launching new products is a way to
create a competitive advantage. The belief supports the notion that if innovation does not happen
market share will begin to dwindle. Another key motivating factor to launching a new product is
that coolers, industry wide are a seasonal business. Most sales occurred between May and
September, during the Canadian spring and summer. Bolliger noted that since the seasonal
timeline was so finite that being a week or two late would directly impact the bottom line and
result in a loss of real dollars. To prepare for a proper product launch, companies typically began
preparing 10 to 12 months ahead of a new product launch. The proceed by 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.
b. Cultural implications for Vincor around the launch of a new refreshments product.
Kertz is facing some resistance from the sales teams in launching a new product. The first
major cultural implication for the sales team is that the new product will cannibalize the current
products. Sales reps feel that the company should be focusing on wines and the current products
that Vincor has already developed. Pushing a new product is more difficult than selling
something that the sales reps already know. Much of the sales reps success is done by creating
long lasting relationships with their buyers. The concern is that by constantly switching up
products that could fail suppliers’ trust may begin to waiver. This resistance causes problems for
Kertz because sales reps are responsible for forecasting and she needs them for promotion and
budgeting. Reps are also responsible for price setting and currently want a deeper discount than
marketing wants to offer. Kertz’s concern is that sales reps are not thinking long-term and that
they lack the needed “buy in” to the idea in order for the product launch to be successful. On top
of problems within the sales teams, Kertz was concerned about the monopolistic nature of the
distribution channel. Getting approval from the liquor board is essential to the success of a new
product launch. She knows that she is going to have to pitch the product effectively to the board
and also to her sales team.
c. Target market
As for the target market, the customer is very exploratory and is open to trying new
things. This is partially the result of targeting the university age demographic where a person’s
tastes change from their first year of university, when they are 19, to when they graduate at 22.
For example, 56% of Canadians, 19 and older, claimed to drink one or more of the different
types of refreshment categories. So, this tells us that refreshment category drinkers tended to be
young. Also, refreshment category drinkers were more likely to be female (57%) than male
(43%). The most important driver for purchasing a refreshment brand among refreshment
category drinkers was flavor, with 93% of respondents claiming it played a significant role in
their purchase decision. The next strongest drivers were “looking for something familiar” (59%),
“looking for something new and different” (44%) and the brand (37%). Another, majority of
refreshment category drinkers seemed to be value conscious (66%) and 65% of people
considered themselves extremely social people. In addition, some saw themselves as health
conscious (46%), trendsetting (44%) or outdoorsy (39%).
In terms of language, results reflected regional findings, with a much higher proportion of
English-speaking cooler drinkers (79%) than French-speaking drinkers (21%). Alongside, many
consumers said that the primary drivers to trying new coolers included exciting flavors,
interesting packaging (bottle and color of the liquid), compelling and unique product claims and
perceived value offering. Many cooler drinkers stated that the new brand would have to deliver a
taste profile equal to or better than their current brand for them to switch brands or include them
in their consideration set. Other product features that consumers considered when trying a new
cooler included the liquor base (vodka, rum or wine), carbonation versus non-carbonation and
fruity- versus clear-colored (most males said they preferred clear or opaque coloring over fruity
coloring).
2.What should the positioning, packaging, and pricing strategies be? a. Describe product
positioning, pricing, and packaging options, and how they are related (a table might be
helpful here)
Implications of Pricing Decisions

Positioning Pricing Packaging

The grey goose approach
The price assumes premium $14.95 Six pack

$11.95 Four pack

The slightly below market leader Approach

Price implies a similar quality to market leader $9.65 four pack

Quantity/Price differentiator Could also be offered at $9.45 Six pack

Below the Nine dollar Approach

Price leader -- Sales volume focused $8.95

LTO’s

Good placement in provincial liquor stores & offered Sales was pushing for deeb discounts of $1.50
consumer discounts driving sales volumes up. and $2.00

This was intended to protect premium launch Marketing wanted smaller discount of $0.50
positioning. and $1.00 to protect margins

Packaging Decision Implications

Positioning Pricing Packaging
Provides more room for creative design (differentiation) Close box
Allows for consumer to see product inside. Open Box

Represents premium 200 bottles/min Slower = Higher Four pack

production cost
Represented value 250 - 270 bottles/min = cheaper Six pack

No a differentiator 1 cent per label Paper label

Differentiated - no one uses this. 3 to 4 cents per label (no recyclable Ceramic label
- cost more)
Allows for flexibility to execute creative designs. 6 cents per label (no recyclable - Pressure sensitive
Considered premium cost more)
Creative - edginess - could be a differentiator option free of charge No label

Shape of the bottle could be use as a differentiator factor Bottle

b. What are the pros and cons of the different positioning, packaging, and pricing options?
Positioning
Grey Goose Approach
Pro: Higher Margins Cons: Exceeding the $10 threshold could be risky without a
brand-named sprite, Risk of having to drop the price
if the product didn't generate adequate sales, We
don't have the brand name to back up the ultra
premium price point (Grey Goose is associated with
ultra premium).
The Slightly Below Market Leader Approach
Pro: Consumers might think the product is similar in Cons: Product could be perceived as a "me too."
quality to the market leader.
Below the nine dollar approach
Pro: Generate higher sales volume by Cons: Might confuse customers as the the products
differentiating through premium pricing in this position, might put the product too close to Vex.
direction.
LTOʼs
Pro: Good placement in provincial liquor stores. Cons: Deep discounts could hurt margins and the desired
Products that were on sale typically got an premium launch positioning.
end-of-aisle display or were stockpiled in eye-
catching displays.

Packaging
Close Box
Pro: Larger surface for creative packaging design Cons: Consumers cannot see product.
and copy.
Open Box
Pro: Allows you to see product inside, better for Cons: Surface space is less.
carrying because of handle.

Pro: Associated with premium products. Higher
margins due to less products while
maintaining a premium price point. A four-
pack was appealing because it would
differentiate the product from Vex (in its six-
pack).
Pro: Faster - 250 to 270 bottles a minute.
Production is set up to do this already.
Cheaper. There was no premium six pack in
the market.
Carrier
4 - Pack
Cons: Production not set up to do this. Can only produce
200 per min. More expensive.
6 - Pack
Cons: People may perceive it as lesser in quality. premium
six-pack would need to be priced above the $10
psychological threshold in order to generate the
desired margins.
 Labeling
Paper
Pro: Cheap (1cent). Good communication medium. Cons: Doesn't allow for as much creativity as other
Already have production capability mediums. Not perceived as upscale.
Ceramic
Pro: Still cheap 3 to 4 cents per label Cons: Non recyclable which increases cost. No in house
production capability. Outsourcing required.
Pressure Sensitive
Pro: Allows for more creativity. Can do more things Cons: Most expensive (6 cents). Not recyclable. Do not
with it.( Multi-page, etc). have in house production capability. Will need
outsourcing for this.
No Label
Pro: Cheapest and most edgy. Cons: May be hard for consumers to recognize. May need
to spend more to make a distinctive bottle design.
Nobody has done this before.

Bottle
Glass
Pro: A squared shape bottle could be used as a Cons: Less durable. The square shape would require a new
differentiator. Conventional choice for the mold.
cooler.
Plastic
Pro: Less expensive & more durable. Given the Cons: Non recyclable as a result will increase cost. No in
innovator title gain with the one litter plastic house production capability. Outsourcing required.
Vex Bottle, there might be opportunity for
innovation here.
Metal
Pro: Cheap Cons: Not associated with quality

c. What do you recommend and why?

The Spring Water Vodka is the optimal product mix for positioning Vincor in the market.
Based on the survey 42% of people claimed to drink a vodka cooler occasionally or regularly and
72% of the people said they were likely to try a spring water cooler. Whereas 65% said they
would likely drink occasionally. 46% saw themselves as health conscious and 39% of the people
were considered outdoorsy. With these numbers the spring water options seems to fit the
preferences of consumers the best. The spring water cooler tested well, primarily with females,
despite some concern with it being a water based cooler. Currently, Vincor does not have any
type of products along these lines so there is little fear that launching this product will affect
other Vincor lines. Even though real fruit juice coolers tested well, previous launches have been
unsuccessful and current facilities and capacity are inadequate to launch one.
4 pack vs 6 pack
4 pack 6 pack
Minutes in a day 1,440 1,440
Bottles Per Minutes 200 250
Bottles Per day 288,000 360,000
Bottles Per Case 24 24
Cases Per Day 12,000 15,000

Using a 4 pack vs a 6 pack in regards to cost of production is virtually negligible. Since

Vincor expects only around 50,000 case to be sold the ability to be able to produce 12,000 cases
versus 15,000 cases a day does not have that great of an impact on production cost. The
perceived benefit of having a 4 pack is worth the extra cost. We plan on pricing the 4 pack at
$9.45 which is just below the market leader, which as mentioned earlier implies a similar quality.
Also a 4 pack will be different from Vex and not compete directly with it. As for bottle design
we have selected a simple look that expresses the idea of health and cleanliness. In order to save
on production cost and labeling, we have decided to go with a simple paper label that takes a
minimalistic approach to its design and evokes a sense of cool, clean and health. We have also
decided to go with the closed box so that we can utilize the space for a sleek design.

3. Propose a marketing budget for advertising and promotion. Justify your

recommendation. What types of advertising and promotional activities should Kretz
consider?
First of all, to be somewhat conservative we assume sales volume will be roughly 65,000 cases,
which would yield a yearly revenue of $3,685,500. The breakdown for this revenue is as follow:

Budget

Marketing budget. National average is 11%. When working with the consumer market the
15%
number should be raised up
50% direct cost
35% Margin
Cases 4 pack 4 packs in a Yearly Marketing Direct Cost Margin
price case revenues Budget
65,000 $ 9.45 6 $ 3,685,500 $ 552,825 $ 1,842,750 $ 1,289,925
75,000 $ 9.45 6 $ 4,252,500 $ 637,875 $ 2,126,250 $ 1,488,375

Proposed marketing budget:

Media 37% $ 204,545
Creative 9% $ 49,754
Limited time offers (LTOs) 4% $ 22,113
Packaging development 9% $ 49,754
Image/display/sales promo 6% $ 33,170
Marketing promotion/out
31% $ 171,376
of store trial
In store tastings 4% $ 22,113
Total 100% $ 552,825

We did not find any strong reasons to changes the percentage allocation of the marketing
budget. We agree on having media and “marketing promotion/out of store trial” as the highest
expenditures. Given the fact that we are dealing with a young target market, we assume that
media (i.e. TV ads, newspaper ads, magazines, radio ads, etc) is a crucial way to present our
product to them. Also, as it was found out in the market research, people for the most part get
aware and try new products at “out of store trials” such as in restaurants and bars.
As for specific recommendations for advertising and promotional activities, we find that
airing TV ads and radio ads would be a good idea given the demographics of our target market.
Nonetheless, these ads should be made for a unisex audience given the predominant percentage
of women that drink coolers over men. The company depending on each university regulations
could run promotional campaigns in university campuses and college sports teams and games.
They could also tie those promotional activities with restaurants issuing coupons with free trial
coolers included with a given meal. A similar approach could be used with bars in which an
offers of a free cooler can be obtained with the purchased of a given drink, etc.