What Softsoap has to tell us about Iowa's competitive advantage in wine

Terry post:

A competitive advantage is something which all businesses strive to attain. A competitive advantage is that certain something which gives a product or a brand an advantage over its competitors. Examples of competitive advantage would include engineering expertise at General Electric, logistic chain with FedEx and brand recognition for Coke.

A competitive advantage can be brief or enduring. A competitive advantage can be realized or unrealized. Having a competitive advantage also requires that you recognize that advantage and are able to comprehend it’s scope and magnitude. It takes skill or luck to create the advantage and expertise to recognize its existence.

It could be argued that the soil and climate of France created a competitive advantage for their wine makers. That competitive advantage for premium wines existed unchallenged for dozens of years and is being challenged by similar regions which, each in their own way, have advantages.

That brings me to the story of Softsoap. Those of you 30 or younger have always known of liquid soap products which are dispensed from pump containers. It was not always that way. Until very recently there was no such product.

Enter the entrepreneurs at Minnetonka Corporation. In 1980 they envisioned a liquid soap product which would be squirted from pump dispensers - Softsoap. The only problem was that they were a small company and their idea, once on the market, could be easily duplicated by huge companies such as Proctor & Gamble.

Minnetonka desperately needed to find a way to maximize their competitive advantage - liquid soap - establish market share, and keep the big guys at bay.

How did they do it?

It turned out that the patents and manufacturing capacity for the pump mechanisms were held by one company. Minnetonka invested heavily and locked-up 100% of the pump manufacturing capacity for a period of three years thus ensuring that no competitor could bring their product to market during those three years. This provided Minnetonka's Softsoap with an unfair competitive advantage: the only liquid soap product in the market segment for over three years.

Now it is time to put this analogy in terms of Iowa wine.

I am certain that there are people reading this who think that Iowa operates at a competitive disadvantage as compared to other wine producing states such as California, Oregon or Washington. And that the competitive disadvantage is the inability of Iowa to consistently produce the workhorse grapes of the West Coast such as Chardonnay, Merlot, Cabernet Sauvignon, etc.

Let’s recast the scenario in terms of Minnetonka's Softsoap and P&G. Softsoap was a new and unique product which Minnetonka wanted to bring to market and were able to do so in isolation for a period of three years because they controlled a key element required for production - the pump mechanism.

How then, is Iowa like Softsoap?

I would offer that Iowa’s unfair competitive advantage is that it does not grow the same grapes found in California, Oregon and Washington. I contend that Iowa holds an unfair competitive advantage in the growth of LaCrosse, Frontenac and Marechal-Foch grapes. And, that the advantage is an enduring advantage given the period of time it takes to make vines productive.

Now hold that thought for a moment. I am certain that most of you have never considered this to be an advantage. Iowa has a unfair competitive advantage in growing grapes which are not widely enjoyed outside of Iowa. Iowa is in the identical position of Minnetonka the day before Softsoap went to market.

What then to do?

If I were the Iowa Wine Association (if there is such a thing) I would:

1. Increase the name recognition of varietals (NOT BRANDS) which are grown primarily in Iowa.
2. Create “buzz” over the new hot varietal - which just happens to grow in Iowa.
3. Get Iowa varietals used as blending grapes in wines from other states.
4. Develop and distribute the taste characteristics of Iowa varietals - create the language of the top Iowa varietals.

Bottom Line: Iowa's wine issue is not so much copying California wines, as establishing which varietals will carry the state's banner. Job #1 should be identifying which grape is the Chardonnay of Iowa, and then advertising the hell out of it.

~ Terry

Fun Wine Marketing Data

Terry Post:

Some interesting quotes from a 2007 report on wine produced by Marketing Intelligence (MINTEL):

“Wine branding though fun labels has emerged as an important attribute to attract American consumers, especially the younger ones, and drive growth in the market. The brands with fun imagery, such as animals and critters, and tongue-in-cheek titles such as Fat Bastard seemed to connect better with consumers”

“On premise consumption...accounted for nearly 50% of the total sales...Liquor stores remained the biggest off-premise channel accounting for 22% of the total wine sales. Supermarkets...accounted for 18% of the total sales.”

“The imported wine segment exhibited 56% increase volume sales growth - four times the sales growth achieved by domestic wine segment...Although Italian brands accounted for the highest volume share (35.2%) of the imported segment, it is Australian brands that drove primary growth. Australian Yellow Tail, the best selling imported brand...accounted for 26% of the total volume growth.”

“37% of women are likely to drink wine, compared with 30% of men.”

“Around 40% of the respondents aged 55-64 are likely to drink wine - exhibiting the highest incidence...while respondents aged 21-34 exhibited the lowest incidence of drinking wine.”

“Wine consumption significantly increases with household income of respondents. Around 46% of respondents reported drinking wine in the highest household income of $100k+, compared to 23% of respondents with household income of $25k or less.”

~ Terry

Sesame Street and Wine?

Brad Posts:

Found an interesting article by Jo Diaz (Wine Blog) about Wining and Dining the Millennials and how to market to these new wine consumers.

She emphasizes concise statements without superfluous wordiness using text with primary colors - to direct these attention deficient younger consumers. Today's wine is sponsored by the letter "R" and by the color "Red".

She may have a good point. I think about the times I've gone to an ice cream counter only to be overwhelmed with the number of choices. Perhaps limiting the number of options and directing the new consumer toward specific wines would encourage more people (millennial or not) to give these specific wines a try.

Cheers!
~Brad