Caso 5 Deutsch Casella

Topics: Wine, Table wine, Italian wine Pages: 23 (10371 words) Published: April 25, 2015
For the exclusive use of c. muller, 2015.
NA0302

The Deutsch–Casella Joint Venture and
[ yellow tail ]® Wines: Trading Up or
Trading Down?
Armand Gilinsky, Jr., Sonoma State University
Raymond H. Lopez, Pace University

We should be very proud of our portfolio of wine brands, but we admit that the [ yellow tail ]® story has redefined and refocused our firm over the last decade. While the current economic environment creates uncertainty for most businesses, we must be confident of our ability to navigate uncharted waters and continue to compete in global markets. —Bill Deutsch

These were the words of Bill Deutsch, founder and chairman of W. J. Deutsch & Sons, a New York-based importer, to his son, Peter. W. J. Deutsch & Sons was joint venture partner in the export and sale of the [ yellow tail ]® brand of wines from the Casella family winery in New South Wales, Australia. It was early February 2009. W. J. Deutsch & Sons’ wines were sold to trade intermediaries (wholesalers and distributors) with marketing and promotional support and in turn, offered to retailers and consumers at fair market prices. See Glossary of Useful Wine Industry Terms at the end of this case, which presents a schematic diagram of the wine industry value chain. Bill opened a strategy session with his management team. They met to review final 2008 revenue and cost data and decide on a strategy for the next two years. Success of [ yellow tail ]® wines, the core brand in W. J. Deutsch & Sons’ portfolio of brands, was expected to play a crucial role in the company’s future, now guided by Peter Deutsch, CEO, Bill’s son.

John Casella, Managing Director of Casella Wines, then joined the meeting on the speakerphone from his home in Australia: “What are your feelings about going down market on price? Do you believe we could adopt a differential pricing strategy for the white wines in our U.S. and even our Caribbean markets, while maintaining prices on our red wines?”

Peter Deutsch mused, “Could ‘trading down’ by customers actually benefit the firm and the brand? Would recent promotion strategies be sufficient to maintain current [ yellow tail ]® sales volumes?” He considered whether or not to leave pricing on all brands unchanged, adopt John Casella’s suggestion to drop prices on some brands but not others, or possibly even raise prices on some or all brands despite a turbulent economic outlook for 2009 and beyond. Then again, perhaps it was now time to consider new brands from other producers besides the Casellas, to add more diversity to

Copyright © 2014 by the Case Research Journal and by Armand Gilinsky, Jr. and Raymond H. Lopez.

The Deutsch–Casella Joint Venture and [ yellow tail ]® Wines

This document is authorized for use only by claudio. muller in 2015.

1

For the exclusive use of c. muller, 2015.

the Deutsch wine portfolio. Peter felt that he had to be careful to decide on a course of action that would benefit all stakeholders in the brand, not only in the short term, but also for years to come. After all, [ yellow tail ]® had been the number one imported brand in the United States for only six years.

A Changing Landscape
During the global recession that had begun in 2008, for many wine producers and importers, survival was at stake. Wholesalers and distributors had become reluctant to take on any new wine inventory until existing levels were depleted. Restaurants and hotels that sold wine “on-premises” severely curtailed new wine purchases. To reduce existing stocks, “off-premises” retailers, such as chain supermarkets and specialty wine shops, began using quantity discounts and special limited-time promotions. Numerous small-to-medium sized domestic wine producers and importers, unable to sell through traditional wholesale channels, began going into default. See Appendix for background information on the domestic wine industry in early 2009. After more than a quarter century of wine consumers’...

Bibliography: Anderson, K., ed. (2004), “World’s Wine Markets: Globalization at Work,” Edward
Elgar Publishing, United Kingdom.
Bieler, Kristen Wolfe (2006), “Behind the [ yellow tail ]® Phenomenon: How It Happened and What’s Next?” Beverage Media Group, February, pdf download.
Coffey, B. (2003, December 9), “The Kangaroo Leaps,” Forbes, 170:12, 66.
Frank, M. (2009, November 15), “Family Man,” Wine Spectator, 119–124.
Interviews with Bill and Peter Deutsch, White Plains, New York, January–March, 2011.
Macmillan, R. (2008, May). Silicon Valley Bank 2008–2009 State of the Wine
Industry
Silicon Valley Bank, 2008–2009 State of the Wine Industry, April 2009.
Steiman, Harvey, “Australia’s Edge,” Wine Spectator, May 15, 2003, 43–64.
Steiman, Harvey, “Australia’s Reds Roll On,” Wine Spectator, September 30, 2003, 86–94.
Steiman, Harvey, “Australia’s Red Wines Blaze Ahead,” Wine Spectator, October 15,
2006, 108–119.
Steinberger, Mike, “Not Such a G’day: How Yellow Tail Crushed the Australian Wine
Industry,” Slate Magazine, December 23, 2009.
Shanken Communciations, Inc., New York, New York, 10016.
For the exclusive use of c. muller, 2015.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Deutsch Essay
  • Caso Essay
  • Caso Essay
  • 5 Essay
  • 5 Essay
  • Guia Caso Essay
  • Essay about Caso Bauregard
  • Essay about Caso Wells

Become a StudyMode Member

Sign Up - It's Free