Foster’s: the failure was marketing

Trevor O'HoyThe resignation of Foster’s CEO Trevor O’Hoy, previously their CFO, was accompanied by an admission that the company paid too much for Southcorp wines. The rise of the Australian dollar was also mentioned. But I believe the company’s woes have more to do with a lack of dynamism in wine marketing.

New world wine-makers like Australia re-defined the business 20 years ago when they introduced the economies of machine harvesting and scientific principles into wine making. Victims of their own success: they made cheap wines better. Yellow Tail and Jacobs Creek became big brands in the US and the UK, and the market went ‘great! I can get quality bottled wine for US$5 dollars’. But that’s not where the profit is for wine makers.

So explain to me now why I should pay $20 a bottle for a better wine. That’s a hard sell. Let’s explore a few scenarios:

Marketer: You should pay $20 because this is an older wine, with more fruit intensity.
Consumer: It looks the same as the $5 bottle, just has a different year on it. How do I know it’s better?

Marketer: You should pay $20 because this is a better brand than the $5 bottle.
Consumer 1: It’s the same brand I buy for $5 a bottle. It just has a different bin number on it.
Consumer 2: How do I know that’s a better brand? I’ve never heard of it.
Consumer 3: There are hundreds of brands here. How the hell do you expect me to know which ones are better?

Marketer: You should pay $20 because this wine won a Gold Medal
Consumer: I bought a $5 bottle the other day; that won a Gold Medal too. Get a life! Most of those bottles over $20 don’t have any stickers on them.

Marketer: You should pay $30 because this is a restaurant
Consumer: Thanks very much for charging me $30 – I spend $8 when I buy the same wine in my bottle shop. It certainly demonstrates that paying more money gets me a better product.

If Fosters were a marketing-orientated company they would have picked up these attitudes and altered their marketing. They haven’t.

They needed to address the confusion over quality. As the owner of a portfolio of brands they could have introduced an internal ranking system and promoted that. Yes, the Penfolds Bin 389 won a Gold Medal in 2003. But it is only the 9th best shiraz we made that year. And it’s only drinking at 23/100 compared to the 1964 Grange.

And when I go to a bottle shop, instead of the 20%-off per case, which seems to be the only marketing promotion these guys ever use, why can’t I buy a vertical pack of the same variety? 2001, 2003, 2005. Let me see for myself how good the 2001 is.

I can see no evidence that Foster’s have used any social software to increase involvement of wine drinkers. Why can’t their consumers use the web and mobile technology to communicate with each other and the company about wine? Is this not a social product? Why have they not developed an International Wine Wankers Game?

And where is the packaging innovation? Why can I not buy single serve wine? I’d love to be able to go on a picnic and take two sachets of sparkling, one chardonnay, one riesling and a dessert wine instead of being locked in to one big heavy bottle. You can treat wine like a commodity and you’ll get commodity prices or you can look for a deeper understanding of consumer’s attitudes and the nature of the product. They will lead to more profitable product differentiation.

From the Foster’s web site: “We believe in placing the consumer and the customer at the heart of everything we do”. *Rolls eyes*. *Reaches for a drink*.

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4 Comments

  1. Great points. Really, the options are endless for these guys, strange that they couldnt’ find the right ones – or at least do something innovative.

    I think the social dimension of wine drinking could surely be exploited. Somehow…

    Have you read Blue Ocean Strategy and their take on Cassella Wines; success?

  2. Thanks James! I haven’t seen the case study but Blue Ocean Strategy look like a happening thing. I’ll get hold of the book.

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