Letter of transmittal

To,
Lorna Scott,
Inverroche Distillery,
Still Bay, South Africa

Date: 04/08/19

Anwesha Sahoo
Zenith Consultancy,
Gurugram, Haryana
India
110038

Dear Lorna,
Subject: Report on views of expansion of Inverroche in the United States of America
With reference to the case in hand regarding the expansion of Inverroche in the US market, a
detailed report has been attached with this mail which addresses all the challenges posed in
front of Inverroche in following the above stated point
Fynbos infused gin is a new entrant to the markets of America. Though it poses a great
challenge as a new entrant in white spirits and crafts spirits division, tapping inside the vast
liquor market of America is not that easy. But the fact that the artisanal gin has a preceding
reputation in South Africa might help in pointing out the good points in favour of the expansion.
Starting from scaling up to an entirely new bigger market, there are various other problems
analysed in the enclosed report.
Regards,
Anwesha Sahoo
Senior Consultant

Executive Summary
Inverroche Distillery was founded by Lorna Scott in the village of Still Bay, at the tip of
African continent. Its uniqueness lies in the fact that it’s handcrafted gin from the indigenous
flora called ‘Fynbos’ and that it sought to “reconnect people to each other and the natural
environment”. It started off as a home industry and in just 6 years it has expanded to the craft
distillery. It became the market leader in South Africa. With this preceding reputation Lorna
was approached to expand the business in America as well. So, with all the data available in
the case I have presented my analysis regarding the expansion in this detailed report.
Situation analysis
The analysis of the current situation of the inverroche brand is done below. Considering all
the factors are considered with exhibits while drafting this situation analysis.
 problem statement
 decision statement
 alternatives available
  criteria for evaluation
 recommendation

Table of contents
(to be done)

Situation analysis
Value and Brand story:
Inverroche has come around to be a brand that exhibits handcrafted extravagance items with
one of its kind and generally South Africa. The band name, Inverroche symbolises and tells a
story of the indigenous flora which contributed to the emergence and survival of modern
people.
Distributors and Distribution Channels:
Lorna Scott established a relationship with a wholesaler within the US east coast and has shown
her inclination for building and maintaining solid connections with her wholesalers. The offer
from American business visionary for selling of Inverroche gin in the other part of US may
undermine her existing relationship with the east coast wholesaler. Scott felt that US was
sufficient for her to have one or more than one agent.
Consumer Preference:
The crafted spirits industry has one of its kind stories to reach the lobal brand name. The
inclination for supporting small scale local businesses over multinationals reflected how the
consumer’s gave brands like Inverroche a chance. Inverroche has scored well in worldwide
competitions, showing an inclination towards fynbos infused gin in worldwide markets.
American Market (White spirit and Artisanal Gin) Craft spirits market is the fastest growing
sector in the US, with the market volume of 52 Million litres. Craft distillery industry has also
grown in the US by almost ST (-around 1600 distilleries), indicating increasing competition in
the segment. Inverroche is the market leader in the artisanal segment in South Africa, however,
it's market share has declined from 51.6 % in 2017 to 42.2% in the 2018 reflecting the
challenges ahead for Inverroche. The segment has also become increasingly competitive from
two locally produced gins in 2012, it has grown to around 135 (of which around 80 are fynbos
flavoured) by 2018 - thus, reducing the competitive advantage of fynbos infused gin for
Inverroche.
The South African Gin market is classified into three main segments:
 White Spirits
  Cocktail
 Artisanal
In 2016, the sales of the volume of gin witnessed a growth of 11%. The artisanal segment of
the market had seen the fastest growth in sales in the South African liquor market since 2014
Artisanal Gin market witnessed a growth of 154% in 2018, valued at R 87 Mn (-USD 68 Mn),
indicating a potential for growth in the domestic market
Challenges:
Lorna Scott has successfully established Inverroche as a market leader in South African for the
artisan gin segment. Having said that, she might find it difficult to establish her brand in the
overseas market if she uses the same business model. For instance, Inverroche's initial success
in the South African market did not require focused marketing, as it primarily depended on
word-of-mouth publicity, and was facilitated by tourists visiting the region. Establishing the
presence of the brand in overseas market (e.g. American) may require different marketing
strategy.
Product and Uniqueness:
Inverroche Gin may be a handcrafted (artisanal) gin arranged by utilizing rare greenery called
"fynbos" of the Western Cape and within the southern-most tip of South Africa. Inverroche has
three fynbos-infused gins: Inverroche Classic, Inverroche Verdant & Inverroche Golden from
diverse sources and distinctive sorts of fynbos. Sales of Inverroche has multiplied each year
since 2011 when the initial bottle was sold at USD 15.
Decision statement
The specific question to be answered is whether inverroche is going to expand in a bigger
market like America or not.
• Options available
Either Lorna can create a new brand in the US or she can focus her attention on growing the
local South African markets, where she had direct control of the brand story, product quality
and customer service.
Further, she can also concentrate on increasing the distributors from South Africa itself where
she has complete control over the quality and her recipes of making fine fynbyos gin
distillation. The reason being given the absolute facts in exhibit-4 that us market is
comparatively a larger market.
Given the fact that scot has not entered into any exclusive agreements with distributors, she
could join hands with the American distributor in distributing her existing brand without
affecting her loyal small-time distributors.

• Criteria for evaluation

Lorna should be evaluating the sales data in South Africa and based on that she should judge
whether there is a need to expand to a new region. It can be seen from the 5-month sales data
in 2018 that the exports have grown exponentially, and the local revenue generation is similar
to the previous year. Another evaluating factor could be the tastes of people in the target market.
The case mentions an increasing market demand for Gins in the US.
The major criteria for evaluation is the market proportion of America. Since this brand of gin
is already being served in 19 different countries, it will be a major benefit to tap into a huge
market like America.with total volume of 30,416 million liters and 1,998 million liters in sales
of white spirit, it is very obvious any good the brand will tap for market expansion.

Another major criterion for evaluation is inverroche is an artisan gin.the advantage of craft
spirits is the appeal of being manufactured in limited quantity from a small-time but the
company with rich heritage and legacy.if this brand goes with the same name in mass
production, it might lose its credibility as a premium small manufacturer of artisan gins.

The three flavors which are coming out of the distillery should be tested for different markets
as sometimes you would need to adapt to the consumer demand of other countries. Since
America is already a big market for liquors more options in terms of flavors might give an edge
towards the competition.

Evaluating the options

There are two options in front of this brand.
 Direct expansion
 Diversification

By direct expansion they can get in touch with the American entrepreneur and start
expanding directly in America or them could diversify. A separate brand for America
can be created utilizing the innate flora of the American continent.

•Recommendation
Based on the available data, Lorna should go forward with the expansion in the United States.
Although the South African white spirits market is growing faster than the United States
market, the scale of the market is huge in the US, 30 million litres and the scope for market
development. She should try to use a marketing strategy apt for this new region, based on the
feedback received from the tasting sessions.