Written Assignment 2 Gloria Cevallos
Formerly known as Stuart Cellars, now Bel Vino is one of the friendliest and finest family owned wineries in Southern California. Since their inception their goal has been to produce wine they are proud of sharing and selling at the right price. They strive to succeed in their industry by adopting wine making traditions of the Old World, meaning Europe and regions of the Mediterranean, while producing it at the local Californian wineries.
Producing 150 tons of grapes and 16,000 cases of wine per year, Stuart Cellars’ 49 acre estate vineyard is a winery like no other. For Stuart Cellars, the business of making wine, not only involves the process of making a superior wine that would satisfy
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After all, the fair value of wine is ultimately determined by how much disposable income there is and therefore how much the consumer is willing to pay.
Wine prices vary tremendously as it market fluctuates and we consider the fact that expensive wine not always equals great taste in the mind of the consumer. We all perceive the value of something very differently. Wine is one of those items that price doesn’t dictates quality. A person can be perfectly satisfied with a $5 bottle of wine even when is able to financially a more expensive one. Whereas someone else can never be satisfied is the price is not high as they have the perception that if something cost more is worth more. There a segment of the population that is always looking for what is discounted, without any regard for quality, taste or brand.
Lastly, we know that there are no simple answers to determine the final price tag of a bottle of wine; however with some degree of certainty, we can say that demand determines and promotes the price of an item. . However, high scores and good reviews from respected magazines or word of mouth, a label with a reputation of quality, rare and limited supplies combined, gives Stuart Cellars the right recipe for a successful pricing strategy.
Along with their pricing strategy, marketing and distribution are also factors they consider very closely as it adds to the final cost as well. In dealing with the distribution
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.
1) Evaluate the structure of the global wine industry? How and why is that structure changing? What threats do these changes present for Robert Mondavi?
Due to the fact that consumers have a plethora of premium wines (substitutes) to choose from and there is no penalty for switching between brands consumer buying power is fairly high, making consumers sensitive to price increases. As previously mentioned, the competition for sourcing quality grape growers is high making switching costs high as well. In order to circumvent the dependency on outside growers, Mondavi is starting to increase its internal sourcing capabilities.
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
What confuses most people in the selection of wines is that they don’t draw a line between these two categories:
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.
While bargaining power of buyers is ranked the least important of the five factors for Mondavi’s strategy, its importance should not be understated. One of the Wine is typically sold to wholesalers who then distribute to retail outlets. With the decreasing number of wholesalers and the consolidation of retailers, buyers negotiating power is increasing. It is difficult for companies like Mondavi to make consistent profits and maintain market share if they cannot keep products on retailers’ shelves.
When trying to determine the correct price, a number of factors must be considered: the market and its segments, the size of each segment, the ability to reach each segment, what distribution channels to target, whether to vary price by segment, the usefulness of promotional offerings, and whether the goal is to skim or penetrate each market.
Since Cork’d inception in February 2006, the company was designed for and by wine lovers. Time showed that this industry had such a demand that needed more dedication and that is when
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.
POINT: if the dollar is strong (weak), French wine is cheaper (more expensive) for an American. The value
In the most recent years, domestic sales of wine has declined constantly. The wine consumption is becoming more occasional. This is partially due to an aggressive anti-alcohol campaign and driving restrictions set by the local government, but also facilitated by a lack of marketing strategy: the wine market is loosing touch with the youth (the average age of wine drinker is gone up from 35 to 55) and young people are getting more keen to beer or alcohol pops.
Nowadays, in the “Old World” countries of Europe, where the bulk of the volume is still produced, this is of great concern. However, consumers, especially younger drinkers, prefer the high quality wine from famous brands which are imported into Europe by the “New World” player, and the growth rate is at average10% per
The reason being is because the wine industry has changed significantly over the past twenty years. The