Case Analysis In The Wine Industry

Key success factors in the winery industry include competitive pricing, high grape quality, label and blend differentiation, and diverse distribution channels.

Ms. Quintana CEO of Northern Napa Valley Winery Inc. was considering conducting business with Trans Continental stores to sell excess grapes from the 2008 harvest. Prior to making a decision Quintana must determine how much of the harvest should be retained for the production of Northern Napa’s own red table wine. Quintana realized that the quantity of red table wine produced is closely associated to the sales.

The premium wine segment is quite concentrated with high barriers to entry making mergers and acquisitions a strong and prevalent growth strategy. With industry analysts forecasting the demand for premium wine to grow at 8% to 10% per year, many former non-rivals are now becoming a threat. Jug wine producers are entering the premium market and beer and spirit producers

The Variety of grapes planted in Grand Valley vary widely and the yield percentage is relatively low. The styles in wine vary from dry white and red with ice wine as well. Ice wine is a sweet and concentrated wine made from grapes that freeze on the vine. There are many different varietals of wine used in the Grand Valley which include red wines, white wines, and rose wines. White wines consist of merlot, Shiraz, and Cabernet Franc and rose wines consist of Rose’. The TTB, which is the Alcohol and Tobacco tax and trade Bureau, imposes many different requirements on an Ava such as evidence of the name of the proposed AVA is locally or nationally known as referring to the area, historical or current evidence that the boundaries are legitimate, evidence that growing conditions such as

The most important necessary inputs for the production of wine are grapes, bottles and labor. Concerning the grapes, there is an outstanding difference between the traditional wine producing countries for example in Europe (the south of France, Spain, Italy and Southeastern Europe) and big wine factories that operate as oligopolies like in the US and Australia. Due to the bond to traditions and the higher demand for quality in Europe most of the wineries here still stick to the original way of producing wine, including the growth of the grapes on the land around the winery, a so called vertical integration (which is often considered by producers where the supplier's price is too high or the offer is insufficient, in our case this trend results rather in traditional and cultural values than in financial ones). This eliminates the percentage of dependence on agricultural suppliers significantly, whereas concerning a big wine company the negotiation power of the supplier is quite high. These wine companies tend to have a low sensitivity towards the price they are charged, as grapes are a crucial component of wine production. However, in both cases the price of the grapes is always

However, Bonny Doon is vulnerable and reliant on its suppliers, as 80% of the firm’s grapes are bought from external growers. Bonny Doon requires unpopular grape varieties and grapes that meet high quality specifications (which decreases agricultural yields and creates a trade-off for growers). They need to develop long-term relationships with the growers to ensure uniformity and high production quality with respect to the firm’s key product input: grapes. On the other side of the value chain, the firm has preferred small-medium sized distributors for their product. This has enabled them to retain higher profits, despite selling wine in smaller quantities.

Vincor does market wine alternatives itself, as a way of dealing with substitute demand. Vincor makes cider and has a wine kit business division (Spagnols) that gives Vincor some product diversification. Partly because of the ease of competition and as part of the differentiation and protection of the Canadian wine industry, Vintners Quality Alliance (VQA), a quality assurance program that identifies Canadian premium grape content, assists in making start-up more difficult for those wishing to emulate Canadian wine brands. The dollars spent on marketing and brand loyalty play a large part in protecting market share and there are certain absolute cost advantages that contribute to establishing some barriers to new competition. Ultimately, there is little cost to the consumer when considering switching brands. Experimentation in wine drinking is often a characteristic of the wine drinking market and thus can contribute to promoting new substitute entry into the market.

To compute the optimal order quantity of each wine we firstly needed to compute the unit cost per bottle and the salvage value of each. From the description of the case we could easily identify that the unit cost of each bottle was 50% (gross margin) of the price plus the 1,25€ per bottle of the transportation costs. With this we computed the unitary cost of each type of wine.

1.What do McRae and Costa mean by introversion and extraversion? Is Subira introverted or extraverted? Find examples in the case to support your answer.

The “Blanc des blancs” that Valerian keeps in his “small refrigerator” (Tar Baby 14) is a kind of champagne made from Chardonnay grapes (Teague). Blanc des blancs is a particularly expensive form of champagne, which by contrast is more commonly made from a combination of different grapes. Blanc de blancs is a notable distinction to blanc des noirs, which is a form of champagne ordinarily made from Pinot noir grapes, in which the skins are removed shortly after being pressed to keep the wine light rather than dark (Schramberg).

In 2001 there were over 1 million wine producers worldwide, and no firm accounted for more than 1% of global retail sales. Because of this, it would be nearly impossible for the Robert Mondavi winery to dominate sales in any region. Due to Mondavi’s efforts, the winery became one of America’s most innovative,

The price of grapes depends based on how the grapes were treated prior to being sold. This has an effect on how much it cost to produce the wine, but it also affects how much the wine will cost to the consumer. There is a price different between fresh grapes and grapes that have been processed. In 2009 the average price for one ton of grapes was around $505. When examining the cost of producing wine there are many factors in which you have to look at. Factors many include but are not limited to, the grapes, the process of fermentation, the storage, the labor and time, the bottling/packaging, and of course the shipping of the products to the customers. The total cost of wine in California in 2009 was around 1.7 billion dollars, which included the production of 3.4 million tons of wine grapes.

The power of the supplier is very low since grapes are a readily available product both in the US and throughout the world. Most growers are also under contract with some of the major winemakers and therefore they are bound by law to provide grapes of specific quality to the seller. Grapes are an easily had agricultural commodity on the open market. This could change if the supply of grapes decreased significantly due

As we see from the table the price varies from $3 to over $25 that is the price range available to different kind of target market to fans to enthusiasts of the wine, the advantage that Mondavi Corporation can compete in all of them. Another fact that we see from he table is that Mondavi offers a variety of different brands; this as well helps to attract and interest a wider target market share. As we know form the case is that Mondavi wines are pushing its way on to the shelves around the world so the place a customer can get the Mondavi production is increasing through the partnerships with world partners. What is seems to be lacking is the promotion, the idea that the best promotion is the words of satisfied customer

Teaching Note: Exhibit 2 displays the calculations relevant to this decision. Chardonnay regular wine requires a 2 to 1 mixture of Chardonnay and generic white grapes. Therefore, the 18,000 pounds of Chardonnay grapes will be combined with 9,000 pounds of generic white grapes. The 27,000 pounds of grapes will result in an additional 9,000 bottles of new Chardonnay regular wine being produced. However, it will also result in a 3,000-bottle decrease in the amount of Blanc de Blanc wine produced, since some generic grapes will now be used for the Chardonnay-regular wine.