A Work Project, presented as part of the requirements for the Award of a
Master’s Degree in Management from the NOVA – School of Business and Economics
Marketing Plan for the Development of Port Wine Consumption in Germany –
The Case of Niepoort
Katharina Natalie Staab | Nr. 2062
A Project carried out on the Management course, under the supervision of: Professor Jorge Velosa
Index Executive Summary ... 1 Methodology ... 2 Situation Analysis ... 3 Scope ... 3 Customer Analysis ... 3 Company Analysis ... 4 Collaborator Analysis ... 5 Competitive Analysis ... 6 Context Analysis ... 7 SWOT Analysis ... 8
Key Success Factors ... 8
Marketing Strategy ... 9
Objectives ... 9
Segmentation and Targeting ... 10
Positioning ... 11 Marketing Mix ... 13 Product ... 13 Place ... 17 Price ... 19 Promotion ... 20 Financials ... 24
Implementation and Control ... 25
1 Executive Summary
“I barely ever tried port wine and can’t tell much about it. I think it’s more of a drink for old people. If ever, I had it at special occasions – like Christmas for example.” (Annex 3.2, p. 13-14). This opinion very much represents the view on port wine of a large proportion of German consumers of alcoholic drinks.
A survey among mainly young consumers showed that nearly 50% of them have never tried port wine. Accordingly, they do neither feel knowledgeable about this product nor do they hold a strong opinion on port (Annex 7.3.1, p. 37-38 and 7.3.2, p. 40-42).
Considering those facts, it is not surprising that port wine sales are very low in Germany. In 2014 2.1 Million (M) litres of port wine were sold – a vanishingly low share of the 8,046 M litres of alcoholic beverages sold in the country (Euromonitor International, 2015a and c).
Bartenders and sommeliers describe port wine as a product with a unique taste as well as distinctive and vibrant aromas (Annex 8, p. 51). Besides high-end ports which are mostly characterized by long maturation and complex, challenging nuances, there exist also port wines at affordable price points. The family wine business Niepoort produces such ports. Their broad portfolio comprises Ruby, Tawny and Dry White port wines for consumer prices around 10 – 15 Euros.
Even if Germany’s consumers of alcoholic drinks do not have a strong view on port, they still associate it with high quality, value and a pleasant taste (Annex 7.3.2, p. 40-42). Putting these facts in a nutshell, there is an opportunity for Niepoort to position their port wines as a suitable drink for numerous situations. This marketing plan reveals what it takes for Niepoort to turn their port wines from an old-fashioned grandeur enjoyed by a grandfather smoking pipe by the fireplace into a vibrant lifestyle drink.
The conducted analysis for this project shows that offering port as part of a mixed drink is the game-changer that promotes the senior of alcoholic drinks to the league of sophisticated cocktails
2 consumed by young and fashionable connoisseurs. The creation of various port wine mixed drinks by professional bartenders and subsequent product tests with young consumers lead to the emergence of Port Fresco by Niepoort, the subject of this marketing plan. Port Fresco consists of dry white port or red port and tonic water and it unifies what many consumers seem to seek when choosing alcoholic drinks: A fashionable, refreshing and not too sweet experience. The following five-year plan shows how introducing the new drink in the right way to selected on-trade outlets in Germany and promoting it effectively towards end-consumers will blot out the dusty image of port, make Port Fresco a frequently consumed drink and eventually meet the objective of increasing sales of a major part of Niepoort’s port wine portfolio by nine-fold, selling ca. 369,500 bottles of the appropriate port wines instead of 41,500 in the fifth year of this plan and achieving revenues of 1.3 M Euros instead of 138,000.
Methodology
This marketing plan is based on various research methods which were applied by the author. Besides the use of data gained through secondary research (e.g. from industry reports), primary research was conducted. An initial interview with the German importer of Niepoort’s wines provided an understanding of the company’s position in the market as well as of the market environment (Annex 1, p. 1-9). Insights into young consumers’ behaviour towards port wine and alcoholic drinks in general were gained by the means of a focus group (Annex 3, p. 12-15). Important information about the needs and expectations of channel members was also revealed through interviews (Annex 4, p. 16-18). With the help of professionals, several test products for this marketing plan were developed (Annex 5, p. 19-20). In the frame of two additional focus groups the receptiveness of consumers towards the different products and various product elements was tested (Annex 6, p. 21-27). Eventually, quantitative research was conducted in order to find out whether the main results gained through qualitative research apply to a higher number of consumers and to test further
3 assumptions which arose during the research process. Its most important part consisted of measuring participants’ receptiveness towards the concept of red and white Port Fresco, the drink which turned out to be most likely to promise success in the previously conducted product test (Annex 7, p. 28-47). It is important to mention that the conducted research was affected by various limitations (annotated in detail in the respective annexes).
Situation Analysis
Scope
In order to be able to make informed decisions about how to position and market Niepoort’s port wines, the market environment needs to be taken into account (Wood, 2014). Port wine has been and will be competing in the alcoholic drinks market. Yet, this is a large market which is divided into subcategories in consumers’ minds. Qualitative research with consumers of alcoholic beverages has disclosed that they differentiate alcoholic drinks according to the occasion in which they are consumed. Drinks to accompany a meal differ from drinks for social situations, such as enjoying free time with friends in a bar. Currently, port wine is mainly consumed as a dessert wine after dinner – a rather luxurious and rare thing to do for an average German citizen. In order to increase port wine consumption in Germany, it needs to become a typical drink for social situations – an occasion in which especially young consumers drink alcoholic beverages more commonly (Annex 9, p. 52). By implication, the following paragraphs examine the subcategory of “alcoholic drinks for social situations”.
Customer Analysis
Which needs does Niepoort have to satisfy in order to be accepted as a drink for social situations, one that you order at the bar while chatting with friends or colleagues? What would prompt people to try it (Dolan, 2014)? Qualitative research detected that consumers tend to have a preference for drinks which are not too sweet, refreshing and unobtrusive in taste. A mixed drink is perceived as attractive;
4 however, it should not be too complex. People like to know what they are drinking, which is easier to capture if a beverage consists of two ingredients than of five. Consumers seem to be curious to try something new and value to receive not only a beverage but a whole sophisticated experience when ordering a drink. This includes the preparation by the bartender, the glass in which it is served as well as the decoration that comes along. Besides word of mouth, these aspects also immensely influence consumers when it comes to trying a new drink for the first time. Moreover, they enjoy learning about an alcoholic beverage, including the discovery of new ways to prepare it, new brands and quality levels (Annex 3.2, p. 14). Overall, the choice of an alcoholic beverage in a bar appears to be a low involvement decision.
Euromonitor International’s report on Alcoholic Drinks in Germany highlights the trend towards non-traditional blends of alcoholic drinks as well as premium products which increasingly happen to be from a small artisanal brand rather than from a leading brand or private label. Along with growing health concerns, these conditions lead to the fact that Germans consume less alcoholic drinks but at higher price points than in past years (Euromonitor International, 2015a).
The gathered insights indicate that, in order to fulfil consumers’ requirements for a drink for social situations, Niepoort’s port wines will need to be introduced to the market in form of a mixed drink or mixer for several different drinks.
Company Analysis
What competencies and resources does Niepoort own to satisfy customers’ needs (Dolan, 2014)? First of all, Niepoort is a producer of excellent port wines, including high quality products at affordable prices. The port wines are as well mixable and versatile as spirits but have less percent alcohol per volume (ca. 20%). Niepoort’s port wine bottles captivate with a unique vintage design which turned out to highly appeal to young consumers (Annex 6.2, p. 27). Regarding production capacity, it will be easily possible to increase production of selected ports by 100% of volumes
5 currently sold in Germany from one year to the next. However, this will still result in relatively low volumes, considering that the wine producer sold only 47,745 litres of port in Germany in 2014 (Annex 10, p. 53).
The company behind this great product is a 173 years old family wine business that sets its sights on using their expertise to unite traditional wine making with innovative approaches (Niepoort, n.d.). Out of 10.2 M Euros total revenue, Niepoort generates 1.7 M Euros in Germany by selling its wines to a German wine importer that takes care of further marketing and sales activities (the channel structure is further explained in “Collaborator Analysis”). 18.5% of these revenues are achieved by port wine sales (Annex 10, p. 53). Thus, Niepoort is only a small player in the market. Nevertheless, the wine producer enjoys a very high standing and reputation among wine professionals and connoisseurs (Annex 1.2, p. 7). In 2015, Niepoort’s wines and port wines were presented at the Bar Convent in Berlin (an international fair for the bar and drinks industry) for the first time. Hence, it can be assumed that a decent number of bartenders in Germany are already familiar with the name Niepoort (Annex 2, p. 10 and 4.2, p. 17).
Collaborator Analysis
Niepoort complies with many requirements to serve a wide range of consumers in the environment of drinks for social situations. Nevertheless, they lack cocktail mixing expertise as well as knowledge about and sufficient access to the most relevant sales channel bars (obviously not only bars sell cocktails and mixed drinks but also hotels, restaurants, cafés and clubs, however, it can be assumed that bars play a crucial role for the introduction of a new drink; thus, the term “bar” will often be used generically for all mentioned kinds of outlets in this work).
Who should Niepoort enlist as a supporter and what would motivate those collaborators to contribute to the initiative (Dolan, 2014)? Two parties are of immense importance: A distributor including sales force and bartenders. In Germany, Niepoort has exclusively liaised with Ardau
6 Weinimport for around 50 years. The importer is responsible for storage, order processing and fulfilment, transportation and promotional activities. Niepoort benefits from a strong partnership and Ardau’s extensive network and expertise in the German market. Overall, the importer and distributor serves five channels with Niepoort’s products: Specialist retailers and wholesalers, online retailers, industrial clients (mainly the company BASF) and the hotels, restaurants and cafés (HORECA) channel (Annex 11, p. 54).
Bars are already part of the distribution network, however, they have to gain more center stage (Annex 1.2, p. 2 and 2, p. 10). In order to convince Ardau Weinimport that they would benefit from shifting resources, substantial proof for the anticipated success of the concept needs to be provided.
Bartenders and bar managers play a crucial role for the launch of a port wine drink. If they do not like it, there is no chance it will spread. Interviews with German bartenders revealed that they think highly of port and embrace the idea of offering it in a mixed drink. To become a supporter, they demand a high quality product with an appealing design, inspirations and instructions for how to mix and serve it as well as the guarantee that they can sell the drink at a reasonable markup (Annex 4.2, p. 17).
Competitive Analysis
Who competes with Niepoort in meeting the needs of consumers (Dolan, 2014)? Qualitative and quantitative research showed that people seem to consider a port wine drink to be similar to mixed drinks that contain spirits (Annex 6.2, p. 27 and 7.3.5, p. 46). It also showed that they tend much rather to think about specific mixed drinks than about alcoholic beverage brands (Annex 3.2, p. 15). Thus, it seems reasonable to scrutinize the market of alcoholic drinks, in particular the spirits category, rather than specific brands or companies. The competitive landscape was characterized by different drink trends in the past years, the most recent one being gin tonic (Annex 4.2, 17). As a result, gin saw the strongest growth and is expected to grow further, along with rum and whiskey.
7 Drink trends are said to be driven by the marketing and sales efforts of big companies such as Pernod Ricard Deutschland which owns popular brands and holds the largest volume share (6%) of the German spirits market. Nevertheless, the premiumisation and individualisation trends create opportunities for small brands which continue to fragment the alcoholic drinks market (Euromonitor International, 2015).
By promoting a mixed port drink for social situations, Niepoort will gain a first mover advantage. Nevertheless, the company has to be prepared that with increasing popularity other port wine producers are likely to follow. Especially big port producers could easily gain market share if Niepoort does not ensure that the drink is closely linked to the brand Niepoort in consumers’ and bartenders’ minds. The strong and well established companies Sandeman, Taylor’s and Dow’s have been identified as most dangerous competitors in this respect (Annex 10, p. 53).
Context Analysis
The assessment of the context in which Niepoort would position its port wines completes the situation analysis (Dolan, 2014). Mainly five dimensions have a bearing on the company’s actions: Demographics, economy, cultural trends, legislation and taxation in Germany. On the one hand, the aging population reduces the customer base as well as per capita consumption (with age people tend to consume less alcoholic drinks). This development is further driven by an eco trend and growing health concerns. An uncertain economic outlook continues to restrain consumers from visiting on-trade outlets which directly impacts sales of alcoholic beverages. On the other hand, Germany has a growing base of well-educated, trend oriented consumers. Especially the young generation is characterized by an individualized, modern lifestyle leading to rising expenditures on indulgences, premium taste and quality features (Euromonitor International, 2015a).
In regard to legislation, Niepoort needs to keep in mind that the minimum age for purchasing and consuming alcohol with higher alcohol percentages than beer and wine is 18. Advertisement of
8 alcoholic drinks underlies mostly voluntary based regulations. However, considering the big issue of underage drinking in Germany, it seems appropriate to follow a strict code of conduct which is adhered to by all players in the industry. It includes not addressing or showing young people, athletes or drivers in advertisements (Euromonitor International, 2015a).
Port wine is liable to the German “Branntweinmonopolgesetz” – a law regulating operations and sales of alcoholic drinks and spirits being distilled. It claims a specific amount per litre of pure alcohol. In addition, the VAT of 19% that has to be paid on every alcoholic drink sold (Euromonitor International, 2015a).
SWOT Analysis
All findings from the situation analysis for the establishment of Niepoort’s port wines as a fashionable drink in the German market can be compiled in a SWOT analysis (Annex 12, p. 55). This evaluation of the external and internal marketing environment builds the underlying basis for strategic decisions as well as for the design of an action plan (Wood, 2014). To put it in a nutshell, there is an opportunity for Niepoort to position its port wine in form of a mixed drink as a new fashionable drink. Main barriers will be a limited budget due to a comparatively small company size as well as the present image of port being a drink for the old generation and only special occasions.
Key Success Factors
Conducting a SWOT analysis enables the identification of three key success factors that will be crucial in reaching the objectives of this plan. The most important aspect is the product itself. If the majority of people do not like it, there is no way it will succeed. It is vital to create not only a drink but a memorable experience that appeals through its high quality taste and attracts attention through its look.
Furthermore, a strong niche brand that highly appeals to the selected target has to be created. Its subject consists of the drink as well as the endorsing brand Niepoort. Only if the drink is highly
9 associated with Niepoort, word of mouth that pays into the company’s account will take hold – an indispensable element of marketing communication for a firm with such a limited budget.
Lastly, the development of the distribution network will be an essential part of the marketing strategy. This includes making the drink available in a range of appropriate on-trade outlets as well as bonding with and educating bartenders and bar managers.
Marketing Strategy
Objectives
The objectives describe what the marketing plan is trying to achieve. They can be understood as the major guideline that determines the following strategies and tactics (Calkins, 2006). Overall, the financial goal of this plan is to increase Niepoort’s profits by growing sales of port wines in Germany - more precisely, sales of the ports Rabbit Dry White, Ruby Dum and Tawny Dee, which are part of the product series Niepoortland (a series designed by the artist Regina Pessoa, based on “Alice in Wonderland”). These port wines fulfil important criteria for being sold as a fashionable drink in the form of a mixed drink: They are well mixable, affordable and the bottle design appeals to consumers. The implementation of the following plan is supposed to result in steady growth of the relevant port wines over a five years horizon, leading to sales of ca. 330,000 bottles for Port Fresco in year five and an overall net present value for this initiative of ca. 465,000 Euros (the financial planning is explained in detail in “Financials” and in Annex 21, p. 69-70).
Complementing the financial objective, the secondary objective of a marketing plan explains how the business will achieve the financial goal (Calkins, 2006). The sales increase of Niepoort’s port wines will be attained through growing the German port wine market by broadening the range of occasions for which consumers consider port wine as suitable.
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Segmentation and Targeting
The goal of segmenting a market and selecting one or more segments to target is to identify a group of consumers for which the firm can develop a compelling positioning. It is recommended to first look at usage patterns of customers as they are good predictors for specific behaviours related to the category or brand (Tybout, Grayson, 2010). Since the purpose of this plan is to introduce one or more new port wine drinks, it is not possible to examine past behaviour connected to it. However, looking at the whole category of drinks for social situations in Germany, one can differentiate consumers and non-consumers of alcoholic beverages. It can be inferred that urban citizens are more likely to encounter the new drink which justifies a further division of consumers according to this geographic criterion.
Regarding demographics, age is an important variable to investigate as it tends to impact interests, attitudes, activities and spending power (Gupta, 2014). Quantitative research showed that while older consumers of alcoholic drinks tend to have more disposable income (Annex 7.3.8, p. 50), younger consumers go out more often at night and consume more alcoholic drinks when they go out (Annex 7.3.7, p. 48-50). Accordingly, one can infer that they spend a much higher share of their disposable income on alcoholic drinks. Another important aspect to consider is young consumers’ little knowledge about port. Whereas it will be tough to make a 50-years-old reassess port wine, this appears to be a lot easier when targeting a more open minded 25-years-old consumer. The conducted research supports this assumption: Whereas 59% of 20 to 34-year-olds stated they have never tried port, this is the case for only 21% of 35 to 60-year-olds. The young group showed a lower level of product knowledge (Annex 7.3.1, p. 38-40) as well as a higher level of receptiveness towards the idea of offering port in the form of a mixed drink (Annex 7.3.3, p. 42). Furthermore, the younger cohort demonstrates more opinion leadership in this field (Annex 7.3.6, p. 47-48).
11 The measure opinion leadership is significant for an additional segmentation of the market according to psychographics and benefits sought. Being a new, obscure drink containing a product with such a strong heritage and unique flavours, it is likely to not appeal to the stubborn beer advocate but to individuals that seek a sophisticated experience and are interested in making a stab at new and different aromas when enjoying a drink in social situations.
Another demographic criterion that seems to deserve consideration when looking at alcoholic drinks is gender. Even if qualitative research showed that tastes between males and females tend to differ, it also showed that port wine mixed drinks seem to succeed in catering the taste of both groups (Annex 6.2, p. 24-25). Furthermore, the conducted survey revealed that there is no difference in the level of receptiveness towards the general concept of a mixed port wine drink between young males and females (Annex 7.3.3, p.42-43). Hence, Niepoort would redundantly limit potential profits by only targeting the female cohort.
Positioning
The positioning determines where consumers should place a brand or product in their minds. Key aspects of the marketing strategy are summarized in the positioning statement which serves as the major guideline for decisions about marketing tactics (Kotler and Keller, 2011).
For the case of Niepoort’s port wines, the first step is to define the subject of the positioning statement. There are two reasonable options: Positioning Niepoort’s port wines or positioning one or several specific drinks. As mentioned before, people seem to rather think about different drinks (e.g. Gin Toni, Mojito, etc.) than about the specific brands of alcoholic beverages they are mixed with (Annex 3.2, p. 15). Hence, the first assignment is to position the subcategory of port wine mixed drinks in the head of the consumer. As explained more in detail in “Product” the testing of different port wine drinks developed by bartenders indicated that introducing a white and red Port Fresco (white and red port wine mixed with tonic water) promises to produce the greatest success. It is for
12 this reason that the following positioning statement as well as the marketing tactics aim for placing the Port Fresco by Niepoort in the market and thereby persuade solely non-users to use the subcategory of port wine mixed drinks.
The first element of the positioning entails specifying the target (Calder, 2010). As elaborated in “Segmentation and Targeting”, young (20 to 34) urban and fashionable Germans who are consumers of alcoholic drinks were identified as the most suitable segment to serve.
The next step is to appoint when the targeted consumers should consider Port Fresco. The best way to ascertain the frame of reference for the product is to understand how potential customers define the market in their minds (Percy and Rosenbaum-Elliot, 2012). As described before, customers tend to cluster alcoholic drinks according to the occasion in which they choose them and perceive a port wine mixed drink as similar to mixed drinks with spirits, such as long drinks and cocktails (Annex 9, p. 52).
The third part of the positioning answers how the brand or product is superior to others in this frame of reference. In order to find a compelling point of difference, it is advisable to combine a competition based approach with a customer based approach (Tybout and Sternthal, 2010). The former implies the identification of features and benefits that distinguish the product from the one of competitors and that are valued by consumers. Qualitative and quantitative research revealed that research participants liked Port Fresco especially for its innovativeness (Annex 6.2, p. 27 and 7.3.4, p. 43). Moreover, a not too sweet and refreshing taste is very important to them (Annex 3.2, p. 14 and 7.3.4, p. 45). The customer based perspective focuses on how consumption of a product or brand is relevant to consumers’ lives in a more abstract meaning. Qualitative research uncovered that young consumers tend to seek a sophisticated experience that allows them to show that they have a demanding palate when choosing certain alcoholic drinks (Annex 3.2, p. 14).
13 As it is important that the claimed point of difference is credible, the positioning also comprises a reason to believe (Tybout and Sternthal, 2010). The promise that Port Fresco provides a sophisticated experience with an appealing taste can be substantiated by the fact that it is based on the merger of long port wine tradition and the best contemporary art of cocktail mixing.
In conclusion, the positioning statement for Port Fresco by Niepoort is assembled as the following:
To young (20 to 34), urban and fashionable Germans who are consumers of alcoholic drinks (target), white and red Port Fresco by Niepoort are port wine mixed drinks for social situations (frame of
reference), that offer a new, sophisticated, not too sweet and refreshing experience that allows
connoisseurs to demonstrate their good taste (point of difference), because it is based on more than 170 years of port wine tradition coupled with the best contemporary art of cocktail mixing (reason to
believe).
In order to further develop the subcategory of port wine drinks and the brand Niepoort in this regard at a later stage in the product life cycle, a positioning statement for the later growth stage was developed. It is further explained and illustrated in Annex 14, p. 58.
Considering the importance of establishing Port Fresco by Niepoort as a strong and unique niche brand, its intended identity was captured in Kapferer’s brand identity prism. The definition of Port Fresco’s identity serves as an underlying basis for the brand’s presence and communication in all respects. It is depicted in Annex 13, p. 56-57.
Marketing Mix Product
Products that meet customers’ needs and expectations are the major building block in marketing success. A product’s value should be built upon a thorough understanding of customers, the organization’s objectives and capabilities as well as the environment in which the product will be
14 placed. It takes shape in the benefits delivered by its features, quality and design, packaging, labelling and branding as well as supplementary services (Wood, 2014).
As depicted in the situation analysis, the investigation of consumers’ needs revealed that the objective of broadening the range of occasions for port wine cannot be met without creating a mixed port wine drink. Consequently, several port wine drinks were created in collaboration with skilled bartenders and tested by target consumers. A detailed description of the product development process is illustrated in Annex 5, page 19. Qualitative research showed that it is advisable to not introduce a range of port wine drinks to the market right in the beginning since this might overwhelm consumers who are so far completely unfamiliar with the world of port (Annex 6.2, p. 25).
The product testing lead to the decision to introduce a white and red Port Fresco endorsed by the brand Niepoort (Annex 5, p. 19-20 shows the recipes and images of the drinks). The drink’s features comprise the mixture of Niepoort Dry White Rabbit, Ruby Dum or Tawny Dee and tonic water. This mixture delivers the benefit of a new, pleasant, refreshing and not too sweet taste which simultaneously contributes to the company’s goal of offering a drink that will be consumed frequently for different occasions. The offering of both, white and red port responds to differing preferences regarding red and white wine as well as sweetness (the red port is sweeter). Moreover, the selection of port wines assures an affordable price for the new drink. Tonic water gives people a little hint about the taste of the drink and is an easily accessible ingredient for bartenders. The simple mixture of two ingredients serves the customer’s need for an easy to understand drink and the bartender’s preference for an easily mixable cocktail (Annex 3.2, p. 14 and 4.2, p. 18). Finally, the fact that the drink can be prepared with three different port wines and that it contains a relatively high level of these is conducive for Niepoort’s objective of increasing port wine sales. Port Fresco also corresponds to the trends towards non-traditional blends of alcoholic drinks and a lower consumption of alcohol (a Port Fresco has a lower alcohol level as many long drinks and cocktails).
15 The high quality of Niepoort’s port wines – including the most affordable ones – ensures value for money for the consumer. However, the conducted survey disclosed that some participants apprehend that only a low quality port wine would be used to mix such a drink or that the mixing deteriorates the port’s actual quality (Annex 7.3.3, p. 43). In order to prevent this misgiving and to fulfil the customers’ need to demonstrate their advanced taste, physical appearance of the drink as well as the port wine bottle has to convey premium quality and sophistication. Beyond that, the drink should have a unique look which makes it easily recognizable. This makes consumer behaviour more public which enables social influence. In turn, social influence is an important trigger for things and ideas to go viral (Berger, 2013) – a typical trend symptom and an extremely beneficial effect for a company with strongly limited financial resources.
In further consequence, it is recommendable that the firm initiates the production of unique Port Fresco glasses which are branded with the Niepoort logo (similar to the one shown in Annex 5, p. 20). This glass is substantially different from common glasses and appeals to both males and females (Annex 6.2, p. 26). Due to the fact that it will not be affordable for Niepoort to hand out Port Fresco glasses to every on-trade outlet in the distribution network, an appropriate replacement needs to be defined. A common snifter glass (usually used for whiskey) turned out to be most suitable as it is still unique (no other mixed drink is usually served in such a class) and consumers as well as bartenders showed appreciation for the idea (Annex 6.2, p. 26 and 8, p. 48).
Another product design element consists of the decoration that comes with the drink. For the white Port Fresco a rosemary sprig has been chosen. Target customers assessed it as fancy looking (Annex 6.2, p. 26), it is not commonly used for any other drink and a bartender confirmed that it is an easy to access and cheap ingredient (Annex 8, p. 51). Aside from that it fits the trend towards herbal flavours currently rising in Germany (Annex 4.2, p. 18) and complements the white port’s aromas.
16 Regarding the red Port Fresco possibilities are limited due to the dark colour which led to the selection of an orange slice.
Just as the choice of the glass the choice of decoration will eventually be made by the bartender. However, Niepoort can still influence the appearance of the Port Fresco by suggesting bartenders to prepare the drink in the above defined way. Many bartenders appreciate guidance on the part of the producer (Annex 4.2, p. 17-18).
Finally, the port wine bottle also forms an important part of the product appearance. Qualitative research revealed that it is redundant to change the bottle design or labelling as it quickly aroused attention among target consumers and was evaluated as catchy, special and attractive (Annex 6.2, p. 27). In addition it embodies the traditional roots of the product which is a part of its positioning statement.
Altogether, the three prominent elements glass, decoration and bottle design found supporters and opponents among the target group. Nevertheless, attributes that do not polarize at all are unlikely to be eye-catching and evoke the required arousal.
Considering branding, the name Port Fresco was chosen as it provides several advantages. “Port” gives an indication about the beverage’s ingredients and arouses curiosity (Annex 6.2, p. 25). In order to avoid the risk that the new drink competes directly with Gin Tonic, the second part of the name was chosen to be “Fresco” and not Tonic. Beyond that, ”Fresco” alludes to the drink’s Portuguese origin and to its refreshing taste – a benefit highly appreciated by customers. Although it would be possible for Niepoort to legally protect the name Port Fresco it is not advisable to do so as it would inhibit a wide spreading of Port Fresco in Germany.
17 In line with the developed positioning statement (Annex 14, p. 58), Niepoort should promote a range of different port wine drinks at a later stage in the product life cycle in order to extend and boost the growth phase (several recipes are listed in Annex 5, p. 19-20).
Place
A well-conceived organization of distribution channels ensures value creation for consumers and thus contributes to a company’s competitive position and profitability (Coughlan, 2010).
When determining an appropriate channel structure for Port Fresco one has to bear in mind that incorporated channel flows involve two different products: The port wine needed to prepare Port Fresco and the prepared drink, ready for consumption. Furthermore, it has to be taken into account that Niepoort’s wines and port wines are already distributed in the German market through a well established channel structure (as described in “Collaborator Analysis”).
Analysing the current channel structure’s potential to properly serve Port Fresco end-users’ needs reveals a demand-side gap: Usually consumers try new mixed drinks in bars and other HORECA outlets. Currently, Port Fresco is not available in these outlets nor is the needed port to mix it. Moreover, as Port Fresco is a novel, yet unproven product, consumers need to get informed about it.
Closing these gaps requires the determination of channel members and the flows they have to perform in order to meet the described service output demands. HORECA outlets are the type of channel members to be chosen to perform crucial flows such as physical possession of Niepoort’s port wines as well as promoting and preparing Port Fresco. Regarding the exact identity of these channel partners the focus should lie on fashionable bars that offer high quality drinks. First, such outlets will contribute to manifest an image of sophistication around Port Fresco. Second, interviewed managers who run bars with the described profile expressed that they are generally interested in
18 including new (port) drinks in their portfolio (Annex 4.2, p. 17). In addition, consumers stated that they would be most likely to try a new drink in a nice bar (Annex 3.2, p. 14-15). In terms of distribution intensity one has to take Niepoort’s limited budget into account. Deciding for a selective distribution mode and thus targeting only a few outlets makes it possible to build strong relationships with key personalities.
Moving up the channel one has to decide whether Ardau Weinimport is a suitable partner to lead the launch of Port Fresco and ensure the described outlets’ supply with Niepoort port wine. The distributor is responsible for a range of channel flows for Niepoort’s products in the German market. However, the level of collaboration between Ardau and the selected outlets is not sufficient to eventually ensure that service output demands are met. Complementing the current channel structure by incorporating a brand ambassador (sales representative) appears to be the best solution as it enables Niepoort to further use the valuable resource of having a well-founded, successful partnership while establishing Port Fresco in new outlets. Ardau states that they have a keen interest in strengthening operations in the HORECA channel and that they are already considering the employment of a brand ambassador for this purpose (Annex 2, p. 10-11). The ambassador has to credibly promote Port Fresco in selected bars which includes explaining the product port, pointing out its high quality, giving instructions on how to prepare Port Fresco, showing how it can create value for channel members and providing them with merchandising material. Qualitative research found that bartenders would expect Niepoort and the distributor to take these actions in order to earn their trust (Annex 4.2, p. 17-18). As a result, the brand ambassador has to be a well connected bartender who is highly esteemed by his or her fellows. Due to budget limitations only one ambassador should be hired.
The above depicted channel structure is designed to promote three developments over time: Ardau is supposed to grow its competencies in selling directly to the HORECA channel. Port Fresco
19 is meant to be offered mainly in certain cities (Cologne, Dusseldorf, Frankfurt on the Main, Hamburg) first before spreading all over Germany. Moreover, starting as a rarely consumed new niche drink in the beginning, Port Fresco will become a frequently consumed lifestyle drink over time. A chart illustrating the important flows between channel members as well as schedule capturing the above described developments in numbers can be found in Annex 15, p. 59-62.
Price
Pricing decisions need to be consistent with the company’s marketing strategy and the product’s positioning (Nagel, Hogan, Zale, 2011). Currently, Ardau sells Niepoort’s Ruby Dum port, Tawny Dee port and Dry White Rabbit port for 8,96 Euros per 0,75 litres bottle to members of the HORECA channel and for 7,40 Euros to specialist retailers (the pricing split per channel is depicted in Annex 16,p. 63). These prices reflect the market conditions of the port wine category that Niepoort’s port wines have been positioned in so far as well as production costs. The crucial question is, whether 8,96 Euros also reflect the value of the ports as an ingredient of Port Fresco within the category of alcoholic drinks for social situations.
A key concept in value-based pricing is the calculation of a product’s total economic value. The economic value is the price of the customer’s best alternative (reference value) plus the worth of what differentiates the offering from the alternative (differentiation value). Differentiation value may be both, positive or negative (Nagel et al., 2011). Qualitative research revealed that customers consider different alcoholic drinks as the best alternative for a Port Fresco. Whereas some stated that they would be most likely to swap wine for a Port Fresco, others mentioned long drinks and cocktails (Annex 6.2, p. 27). However, consumers seem to agree that important differentiation values are sophistication of the drink as well as the alcohol content and quality (taste and tolerance) of the used essence. Taking these differentiation values into account, the price of a Port Fresco should be somewhere in between the one usually charged for a glass of wine and the one for a cocktail.
20 Quantitative research confirmed this inference: By far the largest share of survey participants stated that they would expect a Port Fresco’s price to be similar to a Hugo or Aperol Spritz – common aperitif drinks in Germany which are usually priced between wine and cocktails (Annex 7.3.5, p. 46).
Taking a bar manager’s perspective, a price of 8,96 Euros per bottle would lead to production costs of around 1 Euros per drink if it is prepared as suggested. As bar managers usually calculate drinks prices according to target margins, most bars would choose a price between 4.50 and 5.50 Euros including VAT per drink, depending on location and set-up of the outlet (Annex 8, p. 51). Lying between the price of a medium priced glass of wine and the price of a cocktail, this price range reflects the true economic value of a Port Fresco for the targeted customer. Thus, Ardau should recommend its clients to set the price for the new drink at ca. 5 Euros and stick to the current unit price of Niepoort’s Ruby Dum, Tawny Dee and Dry White Rabbit port.
Therewith, the skimming price strategy is chosen, a generic strategy often used if consumers place great value on a product’s differentiating attributes.
Promotion
Moving on to promotion, one has to bear in mind that no matter how consumers come in contact with Port Fresco – may it be at the point of sale, through the website, social media channels or a specific event – this encounter will give information about the product. Thus, the way to reach consumers should not be seen in isolation but in an integrated way (Wood, 2014). The approach of integrated marketing communications (IMC) takes this into account and entails the planning of all types of messages about a brand or product in order to meet an appropriate set of communication objectives and support the defined positioning (Percy and Rosenbaum-Elliott, 2012).
The first step in IMC planning is to select a target audience for promotional activities out of the target market to which the entire marketing mix is addressed (Percy and Rosenbaum-Elliott, 2012). In particular in the view of the fact that Niepoort’s marketing budget is very limited, an audience being
21 highly likely to respond positively to communication initiatives should be selected. The primary target audience narrows the target market down to “other brand switchers” (people who enjoy drinking various different alcoholic drinks as opposed to consumers who usually stick to their preferred drink) who have a keen interest in alcoholic drinks. A profound understanding of the target audience’s behaviour serves as guidance for the communication strategy. It is captured in a behavioural sequence model (Annex 17, p. 64).
In terms of action objectives, communication initiatives should aim for product trial in the first place as Port Fresco is a new product. However, repeat purchase is obviously equally important. Since distribution is a key success factor for the new drink, the secondary audience will be bar managers and bartenders. The goal is to make them include Port Fresco on their menu and recommend it to guests.
The second step of the planning process consists of setting communication objectives. One can distinguish two universal aims: brand awareness (recognition and recall) and brand attitude. The behavioural sequence model illustrates that in case of Port Fresco the brand item choice takes place at the point of purchase, meaning that brand recognition is what communication should primarily be geared towards. It requires displaying Port Fresco as it will appear when being sold in a bar (together with the port wine bottle to illustrate endorsement by the brand Niepoort). Regarding brand attitude, the goal is to create favourable brand attitude as customers are currently unaware of Port Fresco and should evaluate it as a brand that meets their needs in the future. For the secondary audience, bar managers, building brand recall is crucial to make them thinking of Port Fresco when ordering supplies and giving recommendations to guests.
Having defined the target audience as well as communication objectives, the determined positioning statement needs to be adjusted for serving as the basis of the creative idea. Initially, one has to decide whether to position the brand centrally or differentially within the product category and
22 whether the statement should be user- or product oriented. Considering that one cannot claim that Port Fresco is the best or major brand in the category, serving all needs, it has to be positioned differentially. Bearing in mind that communication targets the specific segment of people with a keen interest in alcoholic drinks and that social approval plays a role for them in this regard, the positioning statement should place the user as the hero.
Furthermore, one has to identify the underlying motives of consumers to choose Port Fresco in order to find out the best way to convey the drink’s major benefit. Sensory gratification and social approval appear to be prominent drivers with the first being the strongest one. Thus, communication should focus on the key benefit of offering a new, sophisticated, not too sweet and refreshing experience (sensory gratification). This benefit should be emphasized by drawing attention to the emotional consequence of choosing Port Fresco since the underlying motivation for the product choice is positive (transformational).
The positioning statement should be complemented by a “must mention” for advertising and communication materials which is the drink’s good taste. Furthermore, communication has to downplay the image of port as an old people’s product.
The above developed guideline lays the foundation for the creative idea. According to the Rossiter-Percy-Bellmann grid the communication for Port Fresco should be executed in a unique way that focuses on images, conveys emotional authenticity and is liked by the audience.
Furthermore, it should be created in a way that boosts virality (again, with regard to a limited marketing budget). Building viral content requires the enhancement of emotion, social currency (pass on information that will make people look smart, funny and in-the-know), triggers (link the message to a time or place so that these serve as subtle reminders for the product) and stories (share memorable stories instead of facts) (Berger, 2013).
23 The collected insights are vital for creative agencies to build addressing communication materials. Thus, they were transformed to a guideline for professional creatives in form of a creative brief (Annex 18, p. 65). Furthermore, a basis for the creative idea was already developed (Annex 19, p. 66).
Besides ensuring a consistent brand presence, marketing communication also includes the selection of appropriate tools (Wood, 2014). One differentiates the push strategy, in which intermediaries are encouraged to carry and promote a product, and the pull strategy, in which consumers are encouraged to demand it. For the launch of Port Fresco, it will be crucial to gain bar managers’ trust. As mentioned before, this is to be reached by hiring a brand ambassador who is a respected bartender and promotes the new drink directly to channel members by educating them and providing samples. Selected bars will be provided with point of sale merchandising material (mainly Niepoort branded Port Fresco glasses). Furthermore, most influential bartenders will be invited to port wine cocktail mixing workshops. These activities will be limited to Cologne and Dusseldorf in the first year of this plan before moving on to Frankfurt in the second, Hamburg in the third and finally covering cities all over Germany in the fourth and fifth year (refer to Annex 15, p. 59-62) for the reasoning behind this selection). Besides these locally limited initiatives the launch of Port Fresco will be supported by PR targeted towards trade publications and blogs for members of the bar scene (e.g. Mixology). Moreover, it will be represented at the bar convent in Berlin through Ardau, the brand ambassador and a representative of Niepoort every year (as it was already the case in 2015).
Even though pushing Port Fresco into the market by means of channel members, they in return expect Niepoort to encourage demand on the part of consumers. First of all, the drink’s launch will be supported by a Port Fresco by Niepoort website. It will be complemented by involving several social media channels such as Facebook, Instagram, Pinterest and Twitter. Niepoort should use these channels for spreading engaging content. Using sweepstakes to raffle of sponsorships of grapevines
24 (tagging grapevines with the names of winners) or the opportunity to participate in the wine harvest in Portugal does not create many costs but is likely to create buzz. PR should aim for sending press releases to niche publications read by the target audience. In addition, several events will be sponsored. Partnering with “Winevibes”, “Weinmomente” and events hosted by the recently launched magazine “Schluck” would ensure that Niepoort perfectly reaches the target audience. In order to especially support the spread of Port Fresco in the selected cities where additional sales efforts will be made, a Port Fresco pop-up bar handing out samples and selling port wine drinks will open at different times and different places. A detailed marketing tool implementation schedule is shown in Annex 20, p. 67-68.
In order to leverage synergies, Niepoort should encourage joint promotions with a tonic brand. Aqua Monaco, a German start-up producing sodas and tonic waters with new flavours that is currently gaining popularity, was identified as a suitable partner.
Financials
The financial planning for this marketing plan is based on the objective-and-task budgeting method (Wood, 2014), adding up costs for completing all the marketing tasks needed to achieve this plan’s objective of leading to steady growth of Niepoort’s Dry White Rabbit, Ruby Dum and Tawny Dee port over a horizon of 5 years, leading to sales of ca. 370,000 bottles and a contribution margin of 310,000 Euros in year five, 7.5 times higher than without launching the Port Fresco initiative. Ca. 330,000 bottles will be used for the preparation of Port Fresco, resulting in sales of almost 5 M drinks. The initiative has a net present value of ca. 465,000 Euros, a significant number in relation to Niepoort’s yearly revenues of 1.7 M in the German market. Annex 21, p. 69-70 gives a detailed overview and explanation of performed calculations.
25 Implementation and Control
In order to ensure that communication initiatives go hand in hand, a schedule for their implementation was set up (Annex 20, p. 67-68). To control whether the execution of the marketing plan leads towards set objectives, metrics that will be measured frequently have to be defined (Wood, 2014). Most importantly, sales volumes of the relevant ports should be tracked quarterly basis. In order to check if the complementing goal of introducing Niepoort’s port wine as an alcoholic beverage for a range of occasions is met, the number of bars carrying it has to be recorded. In regard to budget limits it does not make sense to measure communication objectives such as trial, repurchase, brand recognition and brand attitude by means of market research. However, the company should still try to get a sense for these metrics by listening to feedback from channel members and paying attention to the content of PR clippings and comments on social media. Beyond measuring whether the firm moves towards its objectives, Niepoort should also observe competitors’ actions and how the launch of Port Fresco impacts the attitude of loyal consumers towards Niepoort.
In order to be prepared for unexpected developments, contingency plans have to be thought through. In case channel members do not show sufficient interest in the new drink, collaborating with an additional distributor with better relationships to targeted bars and similar outlets should be considered. If Niepoort realizes that its limited budget is not enough to create buzz for the new drink among consumers, the company could collaborate with other port wine producers in a joint promotion. In case it turns out that consumers do not try Port Fresco as their lack of knowledge about port outfaces them, sampling towards end-consumers should be intensified. In order to prevent revolt among port wine lovers, Niepoort should encourage Axel Probst, Germany’s most popular port wine expert, to support their idea in public. Lastly, to be prepared for higher demands than Niepoort can respond to with its own production capacities, the company should look out for opportunities to buy port wine of equal quality from other producer.
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