Innovative Maori Product Improvement An Analysis of Tohu Wines (2)

Innovative Maori Product Improvement: An Analysis of Tohu Wines

Grace Li

1. Introduction

Tohu Wines is a Maori-owned wine enterprise established over 20 years ago in Marlborough, New Zealand. The company is Maori-based business that gets its competitive advantage from using home grown raw materials using cultural and traditional values of the Maori people, to make both inorganic and vegan wine selections, and plans to introduce an organic brand to its portfolio. Tohu Wines has attracted global attention from this business model, including an emphasis on using home-grown products and a supply chain that is chiefly founded on the Maori way of life. The company prides itself of bearing the responsibility to uphold the legacy of the forefathers and founding members of the Maori community, who believed in the value of hard work, fairness, creativity, and being one with the natural environment (Tohu Wines NZ, 2021). Tohu Wines focuses on creating internationally recognized products based on aroha (love) and a different selection of wines that speak to the rest of the world about the traditional values of the Maori people. The Kaumatua range of wines in inspired by revered Maori elders known for their wisdom and leadership, the Whenua selection is a gift from the land and the Turangawaewae, the place where humanity stands, and the Manaaki range is based on the deeply held values of the Maori including kindness, excellence, and guardianship (manaakitanga, rangatiratanga, and kaitiakitanga) (Tohu Wines, 2015). Guardianship or kaitiakitanga, defines preservation and conservation of the land, through practices in agriculture and production that are considerate of the earth and all that is in it. While Tohu wines include various selections such as inorganic and vegan wines, the production process adheres to kaitiakitanga values that define the land, the forest, the sea, and the people as members of the same family in a broad concept of sustainability.

Kaitiakitanga remains as the main core value that directs Tohu Wines as a business and its relationship with the environment. In this regard, Tohu Wines’ vineyards are SWNZ (Sustainable Winegrowing New Zealand) certified and all products are also carboNZero qualified. The carboNZero system of accreditation assures consumers that specific products have been verified independently and certified as being carbon neutral. Therefore, Tohu Wines certification from SWNZ and carboNZero is evident that the company’s vineyards and practices therein are aligned to guidelines that guarantee the ecologically sustainable approaches are applied from production to bottling. Its different brands that include Riesling, Chardonnay, Pinot Noir, and Pinot Gris (Tohu Wines, 2015) have been recognized as paving the way for sustainable practices in growing raw materials and packaging in line with guidelines from various bodies that target growth.

Even with the elegant design and a focus on being one with nature, Tohu Wines has not performed very well in the international wine market. The main reasons for the poor performance include the increased competition from more established brands, new entrants, and a lack of brand awareness for Tohu Wines products. Therefore, an issue emerges to combine the creative design, the focus on nature, the emphasis on a traditional approach, and a supply chain of handcrafted solutions with better and innovative market approaches in an attempt to steer the company forward. The aim of this current report is to identify a gap in the company’s market to introduce the proposed innovation to solve customer problems. It will also develop a market evaluation of the proposed improved innovation process using relevant evidence to support the launch of the proposed improved innovation. These elements will all be applied and integrated with relevant Maori values to generate enhanced value for the new improved innovation. Lastly, the report will undertake a business risk assessment for the introduction of the new/improved innovation for the business enterprise and adopt the Lean Canvas model to give innovative suggestions through analysis.

The current report is divided into several sections. The first section, the introduction, focuses on giving a brief introduction of the product and the company. The second section is an analysis of the current problems that Tohu Wines is facing, including a perspective of the solutions from a customer’s positioning and a review of its alignment to Maori values. The third section performs a deep analysis of the proposed solutions. The fourth section then gives an analysis of risks. The last section will conclude the analysis giving a restatement of the major issues found within the discussion.

Problem Solution Unique Value Proposition Unfair Advantage Customer Segments

A organic wine segment market gap

Conformity to the wine business traditions without any Maoriculture uniqueness

Conventional bottling that is not unique to the brand positioning

Similar composition of wines to those in established international market

Zero application of an eco-friendly design in packaging

Green Marketing

Use different fruits unique to New Zealand (Kiwi fruits) to make the wine

Use sustainable packaging away from the conventional wine bottling Sustainably grown products, hand crafted, and made using traditional Maori wine making techniques in line with Maori values of caring for the environment and excellence, creativity, and kindness Eco-friendly and sustainable packaging

Unique fruit use in wine making

Organic products

New Zealand wine market

Australian food and beverage sector

Organic-inded consumers

Populations conscious on health consumption

The upper middle class

Existing Alternatives Key Metrics Channels Early Adopters

Going Green

Green Marketing

Sustainable production

Organic products Consumer satisfaction

Customer retention

Sales

International market expansion Social media

Website

Supermarkets

E-commerce websites High disposable income

Eco-conscious

Organic product enthusiasts

Upper middle class

Health-conscious consumers

Cost Structure Revenue Structure

Product cost

Tax

Storage cost

Delivery cost

Promotion cost B2C

B2B

Figure 1: Lean Canvas Model for Tohu Wines

2. Analysis of Entrepreneurial Opportunities

The section will identify the gaps and opportunities available for Tohu Wines through an analysis of the company’s business activities. It will also provide business innovation proposals in line with the Maori values.

Identifiable Problems

Tohu Wines has a major problem when it comes to its performance within New Zealand and in its international markets in the US, the UK, Canada, Netherlands, Ireland, Germany, and Belgium. The main reasons for the poor performance include the increased competition from more established brands, new entrants, and a lack of brand awareness for Tohu Wines products. Another problem is that the company has been slow to make decisions that are relevant to market changes. As a result, other wine companies have moved with pace in response to market changes. In terms of the decision making problem, the company is run on a trust comprised of more than 3000 Maori families (Scoop Business, 2003). Decision making and policy formulation takes a lot of time and every member of the decision making unit must be considered.

From a consumer’s perspective, the problems present a number of issues. First, Tohu Wines is unable to compete effectively, limited by the large size of the competitors, more costs associated with its sustainability agenda, new entrants, and little brand awareness for Tohu Wines products. Additionally, Tohu Wines distinguishes its brand from other wine through the Maori brand, yet it has not achieved this agenda with success. The brand has not stood out and made a name for itself as a Maori-focused product. The idea of selling the Maori culture to the world has been clouded by the need to conform to traditions present in the Wine industry and market. This has especially been evident by how the company packages its products. Therefore, another major impediment to an improved product is the use of a conventional packaging that is not unique to the brand positioning. Tohu Wines uses the same bottling design as any other wine company. While this can be seen as an advantage in maintaining conventionality to the wine culture, it is a problem to the company’s competitive advantage. In an attempt to break away from a “me too” strategy, Tohu Wines must use a presentation/bottling/packaging design that is unique to its culture, agenda, business model, and in line with the sustainability orientation. At present, the customer interprets the wine packaging designs as a reference to every other wine company or brand. As shown in image 1 below, the bottling design employed must not be 100% similar to the industry standards, in order to create uniqueness and to attract customers’ attention as a part of the promotional strategy.

Image 1: Sample Tohu Wines bottling compared to other wine brands

Tohu Wines lacks uniqueness. Although the company uses sustainably grown products harvested and grown in line with Maori values of gentleness and kindness as well as guardianship to the natural environment, these values cannot be distinguished from every other brand available in the market because the end products, including packaging are all similar. The only uniqueness that the company has is the names given to the different ranges, segments, and brands of their products. Therefore, the consumer is not able to differentiate Tohu’s products from those of the competition because the botting design and he composition of the wines are similar to the industry standards. The main competitors of Tohu Wines in the New Zealand domestic market, including those that already have footing in the Australian market, include: Chard Farm, Matariki Wines, Stonecroft, Martinborough Vineyard, Canterbury House, and Gibbston Valley Wines. To stand out from the competition, Tohu Wines must differentiate its product, suggestively by using the same Maori culture and planting traditions to grow kiwis for use in the wine making business. Because the traditionally-brewed wine has an increasing market demand, the kiwi wine suggested can be grown as an alternative product, to create uniqueness and to ensure that Tohu’s value proposition remains intact and noticeable.

The third problem is how the company, despite its value proposition of remaining true to the environment and the consumers, uses zero application of an eco-friendly design in packaging. Sajjad, Eweje, & Tappin (2020) highlight an ever increasing number of consumers demanding environmentally friendly products. Tohu Wines markets itself as sustainability-focused brand, conscious about the natural environment from the way it grows its raw products to the production process. However, these elements are not reflected in its packaging. For a company to be seen as having exceeded consumer demands and expectations in relation to remaining true to environment-related issues, a critical part of the strategy must include packaging of products (Essien, Baroutian, Dell, & Young, 2019). In agreement to this position, Drew, Cleghorn, Macmillan, & Mizdrak (2020) found that packaging is now a global communication tool and a way to market a brand. A customer is more likely to purchase a product that adheres to environmentally friendly packaging compared to brands that use the traditional packaging. As such, eco-friendly designs in packaging as a way to add value to the customer, because they include a need satisfaction in a design/packaging that meets expectations on environmental conservation (Baird, Hall, & Castka, 2018). Tohu Wines must consider the use of eco-friendly packaging and design in order to cater to a market that is increasingly driven towards conservation of the environment. That said, the main innovation suggested as a way of improving the brand is an introduction of a unique traditionally-brewed and organic range of wines, complete with a unique traditional-style packaging that makes the brand stand out.

2.2 Discussion of Customer Segmentation Relevant to Tohu Wines

Customer segmentation would be applicable for Tohu Wines in its endeavour to improve its performance in both the national as well as international markets. The company would be able to effectively apportion resources to different target markets, identify target groups, and enhance customer service and loyalty (Johnson, Danner, & Bastian, 2017). In the national market, Tohu Wines has not fully dominated the market due to intense competition and other issues identified above such as a lack of uniqueness, conformity to traditional wine expectations, and new entrants that are providing cheaper products for the same level of quality.

For the geographical segmentation, Tohu Wines is sold in New Zealand and in the international market. Specifically, it is exported to the UK, Holland, USA, Canada, Belgium, Ireland, and Germany (Tohu Wines NZ, 2013). These markets are wine consumers interested in popular wine varieties from all over the world. However, Tohu Wines has not fully penetrated into the Asian market. In China, for example, the competition is not as high as it is in Europe and America. Therefore, Tohu Wines should begin a new focus on the Chinese market to take advantage of the high population and the reduced competition.

In terms of demographic segmentation, Tohu Wines targets high income earners with high disposable income. The company targets the upper end market with an aim to create a culture of consuming Maori-made wine. The justification for the high prices include the production process that adheres to sustainability standards.

Behavioral segmentation is also a critical factor in segmenting the market. Increasingly, more customers are looking for sustainably produced commodities in the market (Sogari, Pucci, Aquilani, & Zanni, 2017). Therefore, Tohu Wines can target these customers by presenting its brand as one that follows sustainability as part of its organizational culture. Targeting lifestyle enthusiasts for the proposed new product would be an effective strategy as the group has high disposable income and is prepared to pay premium price for quality products.

2.3 Suggested Solutions to the Problems Identified

It is suggested that Tohu Wines introduces a unique traditionally-brewed and organic range of wines, complete with a unique traditional-style packaging that makes the brand stand out. While the suggested product is not new in the wine market, using Maori values and culture in the production process will add value and provide. An innovative product (a Maori-culture traditionally brewed wine segment) will help to create a new customer segment, targeting consumers who want to consume products that are sustainably produced. Additionally, the new innovative product will be packaged in an appealing manner, using biodegradable materials that can be reused, in line with the guardianship agenda. The future of the food and beverage industry is moving more towards foods that are organically and sustainably grown. Therefore, Tohu Wines will be well positioned to address the emergent changes in all aspects of their production.

In the international front, Tohu Wines has an identifiable gap: a lack of uniqueness despite priding itself of being a quality exporter of the Maori culture. The Maori culture should not be diluted by the popular market traditions in the wine industry. As more customers move towards organic consumption, the company can combine its sustainability prowess, together with a new organic product, made using traditional methods of Maori wine making, and packaged in a creative packaging reflective of these characters. The end product will be uniquely representative of the Maori culture, not just in the name but also in the production process, taste, and quality. The product will also be rare because no other company produces such segment of wines. The main distinguishing factor that the company will have in the international market is the Maori heritage. By adding traditional concepts in the production process, introducing an organic brand, and packaging it in an eco-friendly and attractive design, Tohu Wines will have solved the problems facing the company from a consumer’s perspective.

3. Tohu Wines Market Evaluation

This third section analyses innovation at Tohu Wines using four main aspects that include; unique value proposition, unfair advantage, channels, and cost structure and revenue.

3.1 Unique Value Proposition

Baldassarre et al. (2017) define a unique value proposition as the statement that best and clearly defines the benefits offered by a company to the consumer, how it solves customer needs, and the distinctions of the product from the competition. For Tohu Wines, the unique value proposition is as follows: Sustainably grown products, hand crafted, and made using traditional Maori wine making techniques in line with Maori values of caring for the environment and excellence, creativity, and kindness. A number of things emerge from the above mentioned unique value proposition. The proposed innovative product is aligned to this unique value proposition. First, is that the products made by Tohu Wines are sustainably grown, with an emphasis on the environment and caring for the natural elements. Second, the product is unique from the competition because it is hand-crafted and uniquely made using Maori wine making techniques. Third, it solves the customer needs for a unique product, one that is different, considerate of lifestyle needs such as health and class, and in line with modern elements of ensuring care for the environment through eco-friendly methodologies applied in design and production. The proposed innovative product will include organic, hand-crafted, sustainable range of wines, made using traditional Maori wine making techniques and packaged in eco-friendly products to change the perspective of just another wine company in the market. These values are different from any other wine maker in the industry, especially those targeting the Chinese and European markets.

3.2 Unfair Advantage

To push the proposed new wine segment into the proposed Chinese and European markets, Tohu Wines should apply the unfair advantage suggested in the production process to stand out from the competition. According to Satz (2020), an unfair advantage represents a concept that may not be copied by competitors with ease. The Maori culture and values are uniquely available for the Maori people in New Zealand. While other Maori people are likely to enter the wine market and copy Tohu Wines strategy of hand crafting a specific variety of wines and making them using traditional techniques, it is highly unlikely that they would have the same expertise, quality control, leadership, and culture. Tohu Wines has an advantage of being in the market since 1998 (Tohu Wines NZ, 2013). In this period, the company has learnt to grow its own vineyards to reduce the reliance on third party suppliers. This is another advantage because then it is able to regulate quality and quantity as per need. Combined, the ability to regulate its own supply and to make a new line of wines using uniquely Maori traditions would give Tohu Wines an unfair advantage.

3.3 Channels

The new proposed product is specifically made to suit the upper market needs of the Chinese and European markets. the wine market demand for the traditionally hand crafted wine segment will appeal to the high income earners in China and Europe, especially in the Netherlands, Germany, and Belgium where Tohu Wines already has made a name for itself. To get the new product going, vigorous digital media campaigns will be required. For the Chinese market, there is a need to use locally accepted social media platforms such as WeChat, Sina Weibo, and QQ. For the European market, magazine advertisements, social media marketing through Instagram and traditional print media including billboards would be the best option.

3.4 Cost structure and revenue

The cost structure for Tohu Wines’ business model can be separated into value-driven and cost-driven in line with (Reen et al., 2017). Based on the value proposition presented above, the new proposed segment of wines will create uniqueness through old Maori wine making techniques, complemented by an organic production, and eco-friendly packaging to add value. The product is created as both a value and cost driven product. In terms of value, the benefits are as outlined to the consumers including organic, sustainable, and hand-crafted wines packaged in an eco-friendly packaging. For cost, the product will be marketed as a superior high quality wine using premium pricing to target the upper class market in China and in Europe. The costs therefore include product costs emanating from the growing of kiwis and grapes, producing, adherence to sustainable agro-practices, management of the wines, use of traditional Maori expertise, research and development, packaging equipment, eco-friendly certification, manufacturing overheads, and human capital.

Revenue streams will include a B2C and a B2B approach, targeting consumers directly and other businesses respectively. The B2C market is the main target for the new product, aiming to create a culture in the wine industry. B2B includes a list of other entities such as hotels, restaurants, hospitality firms, supermarkets, night clubs, and so on. These B2B partners will be critical in redefining the product through individual target markets.

4. Risks and Key Metrics

The following section evaluates the possible risks of the proposed improved product in Tohu Wine’s business process and provides solutions to use key metrics to avoid or reduce risks.

4.1 Inventory Risks

Inventory risks are defined by Badenhorst-Weiss & Naudé (2020) as the chance that a business might not sell all of its products or the probability that there will be a decrease in value of the inventory stock. The wine industry faces high inventory risks, especially the proposed new product for Tohu Wines. Although consumers are quickly moving towards organic and sustainably produced products, and eco-friendly packaging is preferred, it is highly likely that these trends may be overtaken by others in the market. Therefore, there are risks in inventory management because the new product may fail in value or the reception may not be as expected as consumer needs are fast changing. To measure and assess the inventory turnover rate for the new product, day sales of inventory can be use. To improve the rating customization of the products through the eco-friendly design as suggested earlier and pre-sales can be carried out.

4.2 Customer Satisfaction Risks

Using the B2C and the B2B modes introduces a risk of reduced customer satisfaction. To increase customer satisfaction customer retention and satisfaction indicator metrics can be used. Tohu Wines can use customer satisfaction metrics to improve its position through being a responsible supplier, following its guardianship agenda and sustainable operations. Active customer service should also be top of the company’s plan. Social media provides a key area for improved customer services ad relations.

5. Conclusion

Tohu Wines has a very attractive value proposition. However, it lacks uniqueness because of how it conforms to industry standards in terms of packaging and the composition of wine. Therefore, the present report has given a number of suggestions on how to make an improved and innovative packaging design as well as crafting an alternative product to solve these problems. The company does not adequately use its Maori heritage to create a unique value proposition and an unfair advantage for its products. Therefore, the new product will aim at meeting these needs. It will include sustainability, environmental protection, health benefits to consumers through an organic foundation, and packaging that sums up the new design for a wine brand. The packaging is not in any way reflective of the carefully-crafted product that is made from organic plants that have been grown and produced in line with the Maori values of manaakitanga, rangatiratanga, and kaitiakitanga.

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