The Situation Analysis
CUSTOMERS
Customer Analysis in the United States: The Scarborough Wine Market Report recently released new research on the average American consumer of wine. The report states that within the last three month, approximately 39% of all Americans over the age of 21 have purchased a bottle of wine. In addition, 33% of purchasers have a household income of over $75,000. Furthermore, of those surveyed, 39% of purchasers had attended at least some college. The report went on further to state that 25% of purchasers were between the ages of 21-34 and 45% of purchasers were between the ages of 35-54. In a recent annual Yankelovich MONITOR survey of American adults, research has found that wine consumers exhibit
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They have higher disposable income and they would enjoy high quality wine either in formal dinning or socializing events. It is true that Taiwanese consumers are very sensitive about price; however, they are willing to pay premium for quality goods.
COMPETITION
Competition Analysis in the United States:
Domestic:
The competition found within the United States is comprised of two distinct categories: national and international. The national aspect of competition is composed of several key states. Each state has numerous wineries, which compete both directly and indirectly within the wine market. California:
California produces the largest amount of wine within the United States, accounting for approximately 90% of all American production. In 2004, wineries in California numbered over 1,600.
Washington:
Washington falls into the 2nd position with a 2% market share of all wine produced within the United States. In 2004, wineries in Washington totaled over 323.
New York
New York is the 3rd largest produced in the United States with a less than 2% market share. In 2004, there were 203 wineries operational in New York.
Within each of the top three wine producing states, many wineries stand out on numerous award lists. These ranks change dramatically over the
The winery industry can be categorized into red and white wine segments. The red wine segment, measured by tonnage of varietals crushed, has grown at a compounded annual rate of 4.7% for 10 years from 1989 to 1998, and a year over year growth rate of 8.2% from 1998 to 1999. Judging by the strong growth rate experienced in the red wine segment, it is reasonable to conclude that the red wine segment is in the growth phase of the life cycle model. In addition, production of red wine varietals which are relatively unknown such as syrah and sangiovese nearly doubled in a year from 1998 to 1999. The white wine segment, however, is at the mature phase of its life cycle as the segment shrunk slightly by 0.42% from 1998 to 1999. Overall, the industry is still at the growth stage lead by growth in the red wine segment.
The structure of the wine industry is quite different around the world. The barrier to entry is relatively higher in the New World than in the Old World. Referring to the market data on the level of concentration in 1998, people can see a few players dominate the markets in Australia and the U.S. while the level of concentration is quite low in Europe. Therefore, the rivalry in Old World is intense there.
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 dynamics of the global wine industry are better understood through a brief history of wine as well as an overview of the wine making process. Some countries have longer historical and cultural ties with wine then others and that can affect the quality and perception of the product in the eyes of the consumer. Also, the conditions in which the wine grapes are raised and the processes used to make the wine can create a superior wine and therefore a competitive advantage.
Valley Winery was founded in 1933 and has risen to be the largest domestic producer of wine in the US. The company has more than 40% of market share in the US and
Wine production involves two parts of economic activity – viticulture and wine making in the winery. In the global context, wine production is dynamic due to the influence of globalization, technological advancements and extensive research. These have essentially influenced the nature, spatial patterns and the ecological dimensions of the wine industry.
The buyer’s power within the wine industry varies between different places in the world. There are for example strategic differences between Europe and the “New World”. The “New World” includes countries like the US, Australia, Chile and South Africa. In Europe there is a big competition
The supply of grapes, apples, bulk wine and grape juice concentrate for Vincor’s wine products comes from a combination of sources. Privately owned vineyards (Canada, U.S., Australia) provide somewhere between 35% to 57% of the raw products needed to
Retailers. The current trend, further than the wine market, is clearly the concentration of the “off-premises” retailers. The well known Wal-Mart and others became very large retailers, concentrating as well high bargaining leverage. For example, Costco is currently the largest wine retailer in the U.S.
The Robert Mondavi Winery became one of America’s most innovative, high-quality winemakers in the late 1960s and early 1970s. There are over 1 million wine producers worldwide and no winery accounted for more than 1% of global retail sales. Because of this and the fact that there are many substitutes, there is an issue to try to gain economies of scale and become a leader in the wine market. Wine tends to stay it its local region, which makes it harder to compete with its substitutes. In the strategic analysis portion of this case analysis, we discuss Porter’s Five Forces and how they affect the Robert Mondavi Winery. We conclude that in order for the winery to stay
The United States wine industry is a 12 billion dollar industry and is composed of 7,000 wineries and around 1,800 different companies. The three major companies within the industry are Constellation brands, E&J Gallo, and The Wine Group Inc. The industry has made its way through the economic crisis at a better rate than some of the other U.S industries however in order for them to continue to see any type of growth it is important that they acknowledge their issues and find ways in which they can rectify them. The majority of the issues among the industry are problems that cannot be directly controlled by individual wine companies. Therefore it is imperative that wineries find away to use these issues to their
I would recommend U.K market because both in volume and value U.K is being importing higher than U.S. U.K has easy procedure to distribute nationwide than U.S. U.K has a perfect platform to excel in branding and building the image. U.S is lacking in distribution, numerous different markets and there are more domestic wine producers. Therefore, I would definitely recommend U.K. and in terms of distributor; I would recommend distributor who had worked in 1996 because Montgras gained 75% of sales through restaurants. Moreover, the fixed tax of £1 makes this a great market for reservas regardless of retail price. The expensive wines might be at least twice the quality lower end wine in terms of quality of the wine
For the purposes of this case analysis of E. & J. Gallo Winery, the wine industry is composed of all alcoholic beverages that contain between eight and twenty percent alcohol by volume. This distinction is based on the assumption that beer and the typical malt liquor contain less than eight percent alcohol by volume. The twenty percent limit is a result of state and federal tax and licensing laws. The three top competitors that are identified in this case study are E. & J. Gallo, Canandaigua and Mogen David.
an industry trade publication, as shown in the analysis presented in Exhibit 1. Domestically produced wine, predominantly from California, made some inroads into the
Eastern China Consumers in Shanghai are increasingly preferring light beers with lower alcohol content. This is caused mainly by recent health awareness trends, especially among females. The market for rice wine is currently the highest in Eastern China, but it is lacking popularity among young consumers, and demand for this product is expected to decline in the coming years. When it comes to grape wine, consumers in Shanghai are becoming more sophisticated in their choices, and more high quality imported wines are being introduced to the market. Although rising consumer awareness of the dangers of over-consumption of spirits will result in a decline in sales in Eastern China, traditional spirit drinking provinces, including Shandong and Anhui, will continue to see a high demand.