I was really interested in Inniskillin’s strategy of selling
ice wine exclusively through DFS. DFS targets a consumer with high purchasing
power and has acquired a large customer base primarily in the Asia Pacific
region. In partnering with DFS, Inniskillin gained access to this growing
customer base and established a retail strategy with a company that was already
highly visible in multiple regions. The issue that I see with exclusively
selling through DFS initially was that Inniskillin potentially closed off the ability
to acquire customers in other regions such as the US or Canada. I wonder what
the business would have looked like if Inniskillin rolled out its product with
two distribution strategies – one through DFS which may have been a high-end
exclusive luxury product and another that was more easily accessible to North
American customers. Although this was something that was done later, I believe
that rolling out the two strategies earlier may have pulled in a supplemental
customer base at an earlier stage. The hesitation to do this could have been
related to either 1) cost constraints or 2) early interest primarily with a
Japanese customer base and a lack of interest from the NA region.
For further information, I found this article that detailed the freeze process and the history of the company very interesting!
"Provost targeted Asia. Japanese travellers to Canada had already become entranced with icewine—tens of thousands of them visited Inniskillin every year. More important, high taxes in Japan had entrenched a duty-free shopping culture. Thanks to his Courvoisier experience, Provost knew that only a luxury product could produce the margins necessary to succeed. So he pushed Inniskillin to produce a rarer brand of icewine purely for the duty-free market. This "Gold Label" brand, aged in oak and some years reaching 46 Brix, was made from grapes harvested at the lowest possible temperatures, between -12 and -14...The first order from DFS was disappointing: a grand total of 48 bottles. But soon, Inniskillin icewine was being rolled out in stores across the Asia-Pacific region. Within a few years, it was DFS's top-selling wine. And in 2004 came Provost's biggest coup, when Inniskillin's Gold Label won the Star Product of the Year distinction at the Frontier Awards, the duty-free industry's big event in Cannes. "I was just stunned," remembers Provost. He was shaking so much, "I couldn't even text."
The risk in the dual-pronged strategy that you outlined is that a) DFS wouldn't have agreed to take on Inniskillen without the channel exclusivity in the early days, and b) as a team, it was instrumental to the brand's launch and pull through to be focused on its earliest channel partners, and DFS was perfectly matched with DFS.
ReplyDeleteThat makes sense, however I remain curious about the larger plan that Iniskillin had in rolling out its business and how that evolved. Do you know if their original plan included a strategy that would eventually expand beyond DFS or if that evolved once the business took off? Also, at one point would a brand decide that it is time to push forward with expansion to multiple product lines and channels? Is there a specific turning point that you see in the wine industry that is different from other luxury products?
ReplyDeleteI have had trouble finding research that discusses this specifically, but will report back if I do!