strategy Archives - Eli MatherEli Mather

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August 23, 2012

Vermont Hard Cider’s Strong Move

By ceding control of distribution for Strongbow to Heineken, Vermont Hard Cider is making a strong and smart strategic move.

Photo Credit: Dave Linger

Recently the Wall Street Journal reported that Vermont Hard Cider, who manufacturers and markets the domestic Woodchuck Hard Cider brand is giving control of Strongbow, the #2 cider brand by sales in the US to the Dutch brewer Heineken. Here is a link to that article.

This is a classic strategy play, give up market share to grow the market for everyone. Clearly Heineken will back Strongbow with more marketing dollars than Vermont Hard Cider could have provided, benefiting Strongbow, and likely taking share from the Woodchuck brand. However, some estimate that the Hard Cider market could grow 4X over the next 5 years, and with the marketing budgets of international brewers such as Heineken, you can bet more drinkers will seek hard cider in their stores. Woodchuck Hard Cider, the current US market leader, with 24% of the US hard cider market, will likely benefit from the increasing American appetite for hard cider.

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What GrubHub’s CEO took from the Freemium Strategy

Today’s Wall Street Journal reports on the Freemium model. When it works, and when it fails. Additionally, Matt Malone, GrubHub’s CEO, also shared his experience of switching from a freemium to a subscription model after testing his product and listening to his customers.

Link to WSJ freemium article here

Link to Matt Malone’s perspective here

First the successes: The article cites Dropbox Inc., LinkedIn Corp., and Skype Inc., as examples of companies successfully building a free user base through positive network effects who recommend and rely on others using their services. Some percentage (1%-2%, according to David Cohen, founder and CEO of Tech-Stars) of the free users then pay for premium features or bring in paying users through word of mouth.

It is easy to see why the freemium model is so attractive to startups, but the liability of a large freeloading user base is increased operating costs, and potentially negative reviews of your brand if you fail to meet expectations.