Blue Ocean Strategy: Rethinking Competition in the Drinks Industry

The Blue Ocean Strategy is more than just a business method – it’s a way to rethink how we define our markets and whom we serve. Instead of fighting in crowded “red oceans” of competitors, it invites companies to explore “blue oceans” – entirely new spaces where competition becomes irrelevant. This approach challenges companies to reconsider their value propositions and business models, aiming not to outperform but to redefine.

W. Chan Kim and Renée Mauborgne, the architects of this strategy, suggest that tomorrow’s successful companies won’t get there by battling rivals. Instead, they’ll win by creating “blue oceans” through what they call “value innovation.” This concept doesn’t just focus on better value for customers but on creating entirely new demand, rendering rivals obsolete and inviting fresh growth opportunities.

The Four-Action Framework: A New Lens for Business Models

To drive value innovation, Kim and Mauborgne propose a simple yet powerful framework: the Four Actions. These four questions challenge an industry’s established logic:

1. Eliminate: What factors that the industry takes for granted should be eliminated?
2. Reduce: Which factors should be reduced below industry standards?
3. Raise: Which factors should be raised above industry standards?
4. Create: What new factors can be introduced that the industry has never offered?

In the diagram above, the right-hand side represents value creation, while the left-hand side focuses on cost – two sides of the same coin that every business grapples with.

In most industries today, head-to-head competition often leads to nothing but a bloody “red ocean” of rivals struggling over a shrinking profit pool. While most companies remain in these red oceans, the strategy of creating uncontested spaces – or “blue oceans” – becomes a compelling way to escape from zero-sum battles and unlock new potential.

Case Studies in the Drinks Industry

Yellow Tail – Redefining Wine for the Casual Drinker

Yellow Tail, an Australian wine brand, approached the U.S. market in a way that sidestepped traditional wine competition. Entering the American wine scene without a major ad campaign, Yellow Tail made wine accessible, affordable, and, importantly, easy to understand. Rather than trying to appeal to seasoned wine enthusiasts, Yellow Tail targeted an underserved audience – beer drinkers and casual drinkers who might find wine intimidating or pretentious.

With a sub-$10 price point, Yellow Tail positioned itself as the wine you’d drink casually – with pizza or at a barbecue. Its branding was intentionally playful, with a kangaroo logo and colourful labels that made it clear: this wasn’t your typical wine. Simplified labels and smooth, fruit-forward flavours appealed to people exploring wine for the first time.

The result? Yellow Tail captured a significant share of the U.S. market, quickly becoming a top-seller by being approachable rather than exclusive. By redefining wine as an “everyday drink,” Yellow Tail not only opened wine to new audiences but also encouraged people to enjoy it casually, as they would a beer or cocktail.

Implementation of Blue Ocean Strategy at Yellow Tail:

• Product Differentiation: Bright, playful branding with a kangaroo logo; simple, approachable flavours.
• Accessible Pricing: Positioned near beer in price, appealing to casual drinkers.
• Point-of-Sale Marketing: Eye-catching in-store displays and strategic partnerships replaced traditional advertising.

Red Bull – Creating an Entirely New Category

Red Bull’s approach was strikingly different from Yellow Tail's but just as powerful in creating a blue ocean. In the late 1990s, the beverage industry was dominated by soda giants like Coca-Cola and Pepsi. Rather than competing in this red ocean, Red Bull focused on something unique: energy. Western markets had no “energy drink” category, but Dietrich Mateschitz saw an untapped need.

Red Bull didn’t try to blend in – it stood out with a small, premium-priced can that didn’t look or taste like soda. By targeting college students, extreme sports fans, and busy people looking for a boost, Red Bull created an entirely new market. Its approach wasn’t about beating soda brands; it was about offering something fundamentally different.

Instead of traditional advertising, Red Bull embedded itself in high-energy lifestyles through extreme sports events and unconventional stunts. The brand’s success came from connecting with people’s lives in authentic ways, building a culture rather than an ad campaign.

Implementation of Blue Ocean Strategy at Red Bull:

• Product Differentiation: Small, premium-priced cans with unique flavours – a complete departure from soda.
• Target Market: High-energy individuals, athletes, and students who needed a quick energy boost.
• Non-Traditional Marketing: Red Bull became synonymous with adventure, sponsoring extreme sports and bypassing mainstream advertising.

Lessons from Red Bull and Yellow Tail

When we think of market leaders, we often picture big ad budgets and intense competition. Yet Red Bull and Yellow Tail took another route, focusing on non-customers and reshaping their products to meet unique needs. Both companies avoided head-to-head battles, choosing to create new spaces for growth instead.

They each took on billion-dollar industries, not by outspending competitors but by finding an untapped audience and creating something just for them. Here’s what their success teaches us about blue ocean strategy:

• Focus on Non-customers: Red Bull didn’t go after soda drinkers, and Yellow Tail didn’t compete with fine wines. Both brands reached audiences who weren’t being served by the industry.
• Reframe the Product: Red Bull wasn’t just a drink – it was energy. Yellow Tail made wine accessible and casual. By shifting the category itself, they changed the way customers viewed them.
• Value Innovation: Red Bull set a premium for energy, while Yellow Tail made wine affordable and approachable. Each broke away from industry norms in a way that resonated with new customers.

Red Bull and Yellow Tail succeeded not by competing harder but by creating entirely new spaces in the market – a powerful reminder that sometimes, the best way forward isn’t to play the same game better but to create a new one altogether.

Richard Winfield is a thought leader with a particular interest in public transport, social policy and corporate governance. He is the author of The New Directors Handbook, creator of The Essential Directorship and Strategic Company Secretary masterclasses and curator of the CPD 2.0 Professional programme, which provides a stream of governance alerts and management insights.

With a successful career as a consultant, coach, facilitator, and trainer, he works internationally with individuals and teams at board level. He assists clients in bringing structure and clarity to their thinking.

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