Friday, January 11, 2008

Stormy waters for Stormhoek

Lots of interest in the story about Stormhoek and Orbital going into administration that I posted recently, so I thought I would update it with a few more thoughts.

My first observation is that there has been a deafening silence from Hugh MacLeod on the subject of Orbital's problems. You'd think that the uber-blogger and chief communicator might have something to say on the subject so I am guessing that either a) he is so thoroughly ****ed off that he dare not discuss it or b) - much more likely - that there is stuff happening behind the scenes and he is waiting for that to be made public. I certainly do hope it is the latter.

Secondly, Alastair brought up the issue of the 4P's of Marketing (a subject I have covered before myself before) in the comments.

I do think that Stormhoek did manage to have a good Product, at an attractive Price and had managed to get reasonable distribution (Place) for the wine - and of course they were famous for the Promotion. Here was a brand NOT using Price as their main driver - hurrah!

The main reported reason for the failure of the business was a poor decision to upset a retailer by selling their wines cheaper to a competitor, resulting in them being delisted. Whether this is factually correct or not I do not know, but it reminds us that retailers have power over such young brands - and that without the P of Place/Distribution none of the other elements mattered enough, and the business suffered.

However, I would also suggest that there is another way they had suffered a little lately as Alastair's story demonstrates (see comment number 5). The focus had moved too far towards packaging and the image. There were regular label changes, including for Valentine's Day, special runs with new labels for facebook groups, awards dinners and Microsoft, etc. I'd suggest that all these distracted from the main business objectives and did not focus enough on getting fans to put their money where their browsers were and go out and buy the wine.

A small company cannot cope with lots of different labels and dispatching tiny lots of wines all over the place (for free!!). The key is focus, and in a competitive market like wine, to minimise costs. Instead, they started upsetting their fan base by fragmenting their product offering and making it harder to deliver on their promises.

The Wine Conversation needs to be as general and free-ranging as possible, and no brand could, or should, control it. Anyone can join in and so become interested in wine, whatever their angle is on the subject. However, as Josh pointed out, a winery or brand needs to sell wine in order to survive, and their conversation must ultimately lead people to the cash register.

I hope that Stormhoek 2.0 gets back to basics and uses its indubitable communication skills to get their product selling again.

More thoughts soon I'm sure when more news comes out.

[UPDATE: More news out now. See here. The Administrator is "optimistic" of reaching a deal next week.]


Peter F May said...

Sad news indeed about Orbital/Stormhoek. And as you say the man with the unfunny 'cartoons', so fast to claim credit when things go well, is uncharacteristically silent.

The OLN item you link to is mostly a rehash of the earlier exclusive. Today's Harpers says there more than 15 interested parties have been sent information packs by the adminsitrators.

Harpers also says "Too
many chiefs on “too high salaries”
also allegedly led to problems.
“Only £130,000 was spent on
marketing,” the source added.

Re 'Gaping Voids' marketing Microsoft -- looks like Bill Gates is getting out on time. Start selling those shares now :)

Robert McIntosh said...

well, humour, and cartoons in particular, can be a very personal affair, but I must admit I do like much of his work

I too have since read the Harpers piece and it seems to agree with my comments when it says "Delisting from supermarkets, expensive bottling and distribution in the UK and cashflow problems have been blamed for the company's demise" (link to Harpers in due course).

I'd say that the absolute amount spent on marketing is not the issue really as this is a vast sum compared to many other brands, but the need to focus, and the tendency to give more and more away to keep the profile high, were a little uncontrolled.

As for Microsoft, I think Bill Gates can deal with a Blue Monster. What he cannot handle is me buying his shares - anything I buy seems to tank! I now avoid buying shares to be fair to the companies invovled

Anonymous said...

I'm happy to report, it's the latter, just like you hoped.

I'm keeping schtum till next week. I'd love to go public, but no point doing it till certain events have transpired.

Thanks for the goodwill. I have to say, I've been deeply touched by all the well-wishers out there in the wine blogosphere :)

Robert McIntosh said...

Thanks Hugh

Glad to hear it and I look forward to hearing how it develops. I assume there are loads of people out there willing to help give it another go.