CASE

THE MARKET ENTRY STRATEGY SOCIAL APPROACH

Selena Cuffe did not plan to find the business project of her life in Africa when visiting the First Annual Soweto Wine Festival in Johannesburg, South Africa, in 2005. Until that moment, Selena only related that town with the historical events that led to apartheid. When she went to the wine festival, she was impressed by the high quality of the wines showcased and the stories behind them; vintners trying to thrive within an industry where they were underrepresented. One wine caught her attention and she wanted to know if it was sold in the U.S. but the exhibitor, Vivian Kleynhans, director of African Roots Wine Brands told her that they were already struggling to have distribution within South Africa, let alone the United States. Selena felt compelled to call her husband in the United States with the promise of a business opportunity. The wines were good and so was the cause of helping these entrepreneurs succeed. Selena’s husband, , listened carefully but reminded her that they needed to work out the numbers to see if it was feasible. A month later the  founded Heritage Link Brands with an office in Massachusetts, and started importing South African wines from indigenous producers. The couple financed the company with savings from their corporate lives and credit card debt; Selena became CEO and  became CFO. ‘‘We’ve had a dozen people ask about becoming investors, but we want to bootstrap as long as we can,’’ he says.1 The  had their mind clear right from the start about the focus of the company: it was not only going to educate consumers about the delicious wines Africa has to offer, but also provide the intriguing stories behind the wines.2 Their second office was established in California in February 2006. They conducted blind taste tests and packaging reviews all across the U.S. to adapt the product to the market while making contact with stores. Their first distribution deal was with Whole Foods Market, which allowed them to place the brand at the reach of their target audience: (1) African-Americans, (2) socially conscious consumers, and (3) young adults between the ages of 21 and 30 (the millennial consumers). They worked to obtain licenses to transact  business in other states and find warehouses to store the wine. Importing a product like wine or any alcoholic beverage into the U.S. is not as easy as many

would think, and the  found an obstacle that endangered the project: each state had different licensing requirements. Some even required supplier signatures, which Selena collected for the first batch of wine during a December 2006 visit to South Africa.3 Their main supplier in Africa was the South African Black Vintners Alliance; they started selling the Bowland brand and then the Seven Sisters (from African Roots Wine Brands). New additions came with time. Results for 2007 were not encouraging, forcing the couple to rethink whether the venture was viable or not; they decided to give it more time. It did not take long until they landed another major order: United Airlines requested 10,000 cases of Heritage Link Brands in mid2008. As time passed the  widened their focus, to be not only about selling black-owned and produced South African wines, but to also expand their offer to wines made elsewhere by people of African descent. They have divided their brands into collections: 1. The Continent Collection, which comprises wines produced by African people. Within this collection they sell the Seven Sisters, .’

Bowland, Women in Wine, and One World by  Vineyard, this last one is a Fair Trade4 certified wine. 2. The Diaspora collection, for wine produced by people of African descent throughout the world. Brands such as Divas Uncorked and Passages are sold under this category. Heritage Link Brands is not only selling wine but the stories behind the wines. They are getting involved in the process of connecting the South African and North American cultures by becoming key participants in the promotion of business relationships or, as Leigh Buchanan from Inc. magazine described the Cuffes’ business mission statement: ‘‘to promote cross-cultural understanding and economic opportunity for disadvantaged populations.’’5 The company’s strategy includes training sessions with the wine producers, because most of them are small producers, as well as potential new suppliers throughout the Western Cape, South Africa, in order to strengthen relations and develop commitment from the producers to attain deadlines. To assure this, they travel to South Africa two to three times a year. And so far, all efforts have paid off; with distributors in 41 states. Nowadays Heritage Link Brands’ wines are being served on American Airlines flights; sold at retailers such as Whole Foods, Albertsons, and Jewel Osco; and even served in restaurants at Disneyland.6 But Heritage Link Brands is not referred to by Selena as a social enterprise, ‘‘It’s not a thought that comes across our minds. My training is really about how to run a successful business and how to get the most profit you can out of something. People label the tenets upon which I live my life ‘socially conscious’ but it’s just the core of who I am. I want to do things that are taking things to the next level in a way that touches me,’’7 she said when being interviewed by Black Enterprise magazine after receiving the Black Enterprise Next of the Year Award for the  work. SELLING THE STORIES BEHIND THE WINES: SEVEN SISTERS AND M’HUDI The Brutus family lived in Pater , a small fishing village on the western coast of South Africa. The Brutus sisters and their baby brother left their town at a very early age when the family was evicted from their home, shortly after their father got fired from his job. Being separated and sent to live with nearby family members, they yearned to return but were not able to do so, given the unfavorable circumstances of the time, with apartheid ruling the country. Twenty years later, after reuniting with her sisters, Vivian Kleynhans established African Roots Wine Brands and launched the Seven Sisters brand, with a wine named after each sister, made to match the styles and personalities of each of them. Starting youngest to oldest, the range consists of a , Odelia; Pinotage, Rose-Twena; Chenin Blanc, Yolanda; Sauvignon Blanc, Vivian; Pinotage/Shiraz, Dawn; Merlot, June; and Cabernet, Carol.8 Vivian oversees the production and management of her brands in collaboration with the  Winery, one of the largest co-operative cellars in South Africa. She also serves as the chairperson of the South African Black Vintners Alliance (SABVA).9 It was Vivian’s booth that Selena first visited at the Soweto Wine Festival in 2005. Their story became widespread not only because it represented the chance for the Brutus sisters to thrive, but also, like Vivian explains, ‘‘We are working toward a legacy for our families that our parents never left behind for us’’10 (http://www.youtube.com/watch?v=9SBsKN_HE3s). The name  is derived from the Setswana word ‘‘mohudi’’ meaning ‘‘harvester.’’ It is also the name given to a heroine of a great African story. M’hudi fled her war-ravaged village in search of a new beginning. The story is one of courage, determination against seemingly impossible odds, and the relentless pursuit of one’s dreams and aspirations. The  family are the founders of the  Brand and the main characters in the M’hudi Wines adventure.11 When apartheid ended, the majority of South African businesses were owned by white people, and the wine industry was no exception. In 2003, Malmsey , a clinical psychologist, and her husband Diale Rangaka, a higher education administrator who lived in the North-West Province, decided to give up their successful careers and move to the Western Cape. Once there, they settled on a 42-hectare wine-grape and fruit producing farm in the  area just 15 km from Stellenbosch. In their own words, this was the first step to participation in a lifestyle, culture, and economic sector few black people had the opportunity to partake in.12 Until that moment they were not related at all with wine and the process of making it, but with the acquisition of the vineyard, they became the first black family to own one in South Africa. They had to rely on all sources of information to become knowledgeable about the wine-making process. With the help of their neighbors of  Wines, the Grier family led by Jeff Grier who mentored them, they launched the  brand in 2005. The wine was named after the heroine of Sol Plaatje’s novel, who inspired the whole family when making the decision to move to Western Cape.

heir wines have received accolades, and they are currently selling in the U.S. through Heritage Link brands and in the U.K. through Marks and Spencer. IDENTIFYING THE TRENDS AND THE UNITED STATES There are few alcoholic beverages served with food that also are beneficial to your health. Wine’s health benefits (under moderate consumption), are one of the reasons its consumption is increasing each year in many countries. Companies and distributors are including this feature as part of their marketing strategies to boost their sales. It is becoming part of the trend toward a healthy lifestyle, and the United States is not oblivious to this fact; the U.S domestic exports13 have increased steadily within the last few years,14 and China is becoming a promising target for this product. But local consumption has grown too; in 2007, 269 million cases were sold in U.S.15 The American market surpassed Italy, a key world consumer, in terms of wine consumption in 2007, and had been on pace to overtake France and become the world’s largest wine consumer within five years, according to the U.S. Wine Market: Impact Databank Review and Forecast, 2008 Edition report.16 Changing demographic trends are also explaining this phenomenon with an attractive market segment such as the ‘‘millennial’’ generation (ages 21 to 30).17 According to experts, these millennial consumers base their purchasing decisions more on convenience than price,18 and this represents a good opportunity for companies that want to get the most out of it. With over 7,000 wine brands being sold in the United States, but less than 300 labels selling more than 100,000 cases annually,19 26 percent of the market was covered by international brands in 2007,20 and small brands were the ones showing a better performance. But this does not mean consumers are just thinking of buying cheaper brands; they are also paying attention to quality and getting their money’s worth. According to Federico  from the International Organization of Vine and Wine (OIV), cheaper wines are much more palatable than they were 20 years ago due to the improved winemaking technologies.21 It is predicted that the American market will continue showing growth of volumes purchased, but decrease in average purchase prices.22 How can a marketing strategy based on the stories behind a wine be a decisive factor for consumers? According to expert Robert Smiley, director of the Wine Industry Programs at the Graduate School of Management from UC Davis, aiming at socially conscious consumers is not sufficient to sell much wine: ‘‘By and large, the wine has to stand on its own two feet as far as quality goes. If it’s good and priced right, it will sell.’’23 However, it’s being suggested by Wine Market Council research that new generations have shown a marked interest in wines with a story as well as imported wines. They also are more interested in finding out about wine online, via user reviews or even the winery’s own web site, than they are in wine critic scores.24 Then again, much of the market’s growth in the last decade has come from new brands and from producers barely noticed just a short time ago,25 and foreign brands seem to be taking advantage of this, with Chilean, Argentinean, and New Zealander brands coming onto the scene as a new alternative to traditional players such as the French, Italian, or Australian wines. With prices ranging within the US$ 10–20 range, Selena  Heritage Link Brands seems to be tapping into this market, with consumers who are thirsty for trying new tastes with interesting stories behind them. THE BELIEVER What sets  apart from most Westerners doing business in Africa is the extent to which, in heart and mind as well as ethnicity, she makes sense in both worlds. ‘‘I envision all of you as my brothers and sisters, and being able to share your story is like sharing my own story,’’  tells her audience, making explicit the connection she implies in every conversation. ‘‘There’s a feeling of home, a feeling of family. So that’s what motivates  feeling that I’m doing something with my family every day.’’

Questions for Discussion

1. What do you think about Selena  market-entry strategy? For what other cases would such a strategy be feasible to use for exports to the United States?

2. Please estimate the U.S. per capita market size of millennials (born between 1982 and 2001; please take only consumers within the legal age for drinking into account). Afterward, using the Internet, estimate how many bottles of wine they buy per year. Finally, what would be your reasonable estimate of the market size of this segment in U.S. dollars?

3. If you were a French, Italian, or Australian wine producer and you were exporting wine to the United States, what defensive international marketing strategy would you follow to prevent market share reduction to new competitive wines?