Wine Industry Essay

Published: 2020-04-22 15:24:05
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Laurel Green Wine group is a Californian wine company positioned as tone of the four main USA producers. Nowadays, Laurel Green Wine wants to extend their green wine product to other markets. As the Asian and European markets are already dominated by French or Italian origin wines, Fontys Venlo team recommended entering the Canadian market. This market choice was taken due to the fact that most of the Canadian territory and weather is not as suitable for harvesting grapes as in other countries, like for example the USA; therefore there is a need for importing wine from other regions.

Furthermore, Canadian operations have a lower productivity level compared to that of their much larger Californian or Australian rivals, forcing Canadian wineries to produce in small quantities of top quality premium wines, leaving gaps in the markets. PESTEL Political| Tax policy Labour lawEnvironmental lawTrade restrictionsTariffsPolitical stabilityGoods and services Health and education Infrastructure of nation| Econonomical| Economic growthInterest rate (affects a firm?s cost of capital-business grows and expands)Exchange rate (affects the cost of exporting goods and supply and price of imported goods)Inflation rate| Social| Cultural aspects (significant increase in red wine consumption).

Health consciousness (consumption of one glass per day of wine is good for heart condition)Population growth rate (wine consumption in Canada is expected to growth 19% by 2014)Age distribution Career attitudes (vintners have being trained in the leading winemaking, education centers in Europe and California)Safety hazard analysis critical control (food safety program for Canadian wine sector)Sustainability (this factor ensure that products are produce in a fashion that minimizes environmental impact and this leads to growing area for R&D, technology and collaboration)|.

Technological| Researched and development activity (the new technology in terms of booth equipment and process is continually being adapted) AutomationRate of technological change (change to screw caps instead of sealed with cork event for premium wines)Cost, quality and lead to innovation (some wines are being bottled in soft inert plastic bottles or in tetra-pack, restricted to lower price)|.

Ecological| Weather (the climate limitations-33% domestic production)Climate (climate change that makes changes in the raw materials flavor)| Law| FTA Free Trade Agreement (Bilateral import-export of products)Taxes for alcoholic beverages (produce domestically at the points of shipment to provincial liquor board, where houses or industry-owned stores)Regulation (the government is responsible for regulating and controlling the sale of liquor with their respective jurisdictions)| Porter 5 forces.

1 Rivalry among competing firms in the wine industry Criteria: * Industrys competitive structure: There is a fragmented structure where no single company is able to influence the direction of the overall industry, yet a few competitors belonging to high quality wine regions have been able to consolidate the industry. [+/-] * Number of firms present in the market: Large number of firms. [+] * Level of product differentiation: Mainly when it comes to quality. [+/-] * Industrys demand: A growing demand could be assumed, due to the fact that the wine market is considered a growing business in comparison to other types of liquor like spirits, beer or champagne (Laurel Wine Group case study).

[-] * Exit barriers: The costs of leaving the market could be considered as medium, due to the fact that some of the machinery used is specialized, but other is not. As a result, some of the assets could be sold to other industries in case of leaving the market. [+/-] * Possibility of brand loyalty: Due to the nature of the product, if a consumer is satisfied with the quality, then there is a there is a possibility for him/her of becoming a brand loyalist. [+/-] Conclusion: High competitive rivalry. 2 Threat of new market entrants In order to enter the Canadian market, Laurel wine must put the followings into considerations Criteria: * Capital cost : The cost of starting up is high * Government and Legal Barriers : Canadian Food Agency.

* Absolute cost Advantage: This is would be low because they are not new in the market in terms of experience and can maintain low cost of production * Access to Input: The cost is not so expensive because Canada is suitable for growing Riesling, Chardonnay and Pinot Noir grapes etc. * Government Policy :The age requirement for alcoholic wine is 19 years old * Economies of Scale:

This would favour Laurel wine because of the expansion * Technology Protection: Intellectual property protection is active in the Canada Conclusion: The treat of New entrant is High 3 Threat of substitute products The available wine market in the Canada is low compare to other beverages. In this regard, Laurel Wine group is faced with completions from other types of beverages. Criteria: * Switching cost: the cost of a consumer in terms of time, transport, energy etc is low because most of the close substitutes are sold in the nearest shop.

* Buyers inclination to substitute: In this aspect, consumer can easily inclined due to the price of the wine compare to the price of other beverages * Price Performance: Consumer would definitely compare prices and goes for the product that suit their price performance if the substitute has a low price * Performance: The aspect of conservatism comes to play here. Some consumers prefer taking the wine of their forefathers or the one they knew and to convince them might be a difficult a little bit. Conclusion: The threat of substitute is high 4 Bargaining power of buyers Generally, the wine market totality in the Canada is relatively small where there are many sellers and few buyers.

Criteria * Few buyers and many sellers making the buyers power to be high as every consumers are important * Most of this consumers buys in small quantities making the buyers power to be high * Backward integration is high as consumers can easily plant this fruits and produce it by themselves * Price sensitivity : Most of the consumers are literate and would be able to compare prices, so the buyers power here is high * Substitute availabilities: Logically, all other beverages would be a substitute making the buyers power to be high Conclusion:

Buyers power is high and the opportunities that lies here is that these determining factors would give Laurel Wine the necessary skills needed in making sure that the quality of the products is improved innovatively to compete favorably with other products and also be on top of the business 5 Bargaining power of suppliers Criteria: * Companys importance as a customer: Laurel Wine Group could be considered as an important customer, as it is one of the four leading wine producers in the United States (Laurel Green Wine case study). [-] * Switching of suppliers: Laurel Wine Group is limited to buying grapes coming for the Napa Valley region; therefore there are smaller opportunities for switching suppliers.

[+] * Possibility of a backward vertically integration: There are chances for Laurel Wine Group to buy lands for harvesting their own grapes. [-] Conclusion: Medium suppliers bargaining power SWOT Strengths * Laurel is one of the four leading wine producer in United States. * High quality and origin of grapes. They are from Napa Valley, where wines are highly recommended all over the world. * Unique selling characteristic Green Wine, which appeal to customer as being healthy, and environmental friendly. Weaknesses * Laurel is not recognized by consumer as high quality product in Europe and Asia, due to the low California products reputation. * Laurel is not able to gain sustainable sales and turnover. Opportunities * Emerging of green lifestyle and eco-friendly trend.

* Growing wine market and consumption worldwide. * Possibility of getting approval for Land Winecertificate though being of high quality. * Three major distribution channels: Direct selling, regional liquor stores, and supermarkets. Threats * The competition becomes more intense, due the well-known old world wine market, and the new player (Australian wine). * Wine need to be tested and qualified due to the high standard. Artificial wines are not allowed to be distributed. * High substitute product. Key Issue Matrix | Strengths| Weaknesses| Opportunities| * In an eco-friendly context, Laurel offers green wine. * Laurel has a leading position in a growing wine market.

| * Laurel can use the opportunity of a growing market and the wide distribution channel, to get more sales. * Laurel could ask for a land wine certification to be recognize as a quality product. | Threats| * Laurel can use their experience as leading company to fight against the growing competition. * Laurel produces green wine, which can give an added value in comparison to substitute product. | * Restrictive laws such as the forbidden distribution of artificial wine can be use in Laurels favour to differentiate their product as a quality one. | Market Demarcation The laurel Salbatore wine production site would be situated in the North America, United State to be precise.

It is common knowledge that the demand for Laurel Sabaltore would be relatively high during the festive season compare to other season during the year. The Laurel Sabaltore wine falls under non-alcoholic beverages. In order to differentiate Laurel Salbatore from other competitors regarding the physical technical similarities, this would be done in the area of the physical appearance of the bottle. The bottle would be designed with a black glass antique-looking and long- necked 750ml bottle with a cork tap. Furthermore, the aspect of cross price elasticity must be considered as any little change in the price thats not prior and correctly communicated to the consumer would definitely have a slight change in the demand for Laurel Albatore. Objectives Mission| Vision| Marketing objectives|.

The mission of Laurel Green Wine is to penetrate the Canadian market, increase the consumption and the volume of high quality wine. | The vision of the company is to increase the consumption of wine among the 40 to 60 years population by 2014. | Economical * Increase the market share by 2014 in 15%. | | | Psicological * Laurel Wine Group will build brand awarness in Canada of 5% in 2013. * The company will increase in 5% the costumer satisfaction by producing healthy green wine by 2013. * Laurel Wine Group will increase the image by 5% in 2013. * Lauren Green Products will take as reference price in compare to primium products. | Strategie Strategy Fontys Venlo team recommends Laurel to adopt a market development strategy.

Laurel Green Wine was made from Napas grapes which are worldwide recognized, this will contribute positively to the wine? s reputation. Laurel Green wine wants to keep its green product because of the sustainability trend. On the other hand, it will be interesting for Laurel Green Wine to be on the Canadian market due to their Bi-lateral trade agreement between USA, Mexico and Canada : the ALENA. This partnership reduces the entry barrier and also helps in cost reduction. Target Baby boomer generation is sensitive to wine. Moreover, they pay attention to the environment concerns. It means that they are always concern with the origins of the product, and how sustainable it is. In Canada, 68. 5% are aged between 14-64 years old.

Baby boomer represent larger part of this 68,5%. Recently, the demographics analysis of wine consumption shows that women are more sensitive to the wine taste. Thats why, Fontys Venlo team recommend to focus on 40 to 60 years old women. Positionning In the wine market, Laurel Green Wine has to differentiate from the competitors by being sustainable. The notion of green wine refers to a healthy product, eco-friendly and a good quality. In order to be considered as being sustainable, Laurel has to take care about their production, and not using any life threatening chemical. To keep an image of quality and tasty wine, they have to moderate the alcohol content and not adding any sugar.

Wine is good for the health so far it is produced in a good way. Laurel Green Wine will be available on whole supermarket chains and major liquor chains. On the graph, we can find the main Laurel Green Wine competitors with their level of quality and how sustainable they are. Marketing instrument Marketing Mix Target group Laurels Salbatore Napa Valley Wines target group is made up of man and women (with a slightly focus towards woman), belonging to a middle-high to high class; from the ages of 40 to 60 years old and with an interest in high quality products and aware of sustainability issues. Product Product: Red wine Brand name: Salbatore (Laurel Napa Valley).

Functionality: The main objective of Laurels Salbatore Napa Valley wine is to provide its customers an enjoyable, healthy and high quality alcoholic beverage; that at the same time supports the idea of sustainability or eco-friendliness, which has been proven to be of importance in the Canadian social-cultural sector. Styling and quality: The product is meant to have the following characteristics, * A black glass antique-looking and long- necked 750ml bottle with a cork tap.

The bottles label will be made out of banana fiber paper, which is completely tree-free, acid-free and petroleum-free (obviously green); it will show the companys logo and wine name, along with the wines, origin, ageing year and alcoholic content. * Dry wine with no additives, no sugar and 100% natural; without added chemicals in the production process. * Concentrated cherry-red with saturated violet garnet hue.

Intense aromas with a predominance of ripe fruits, toasted, balsamic and eucalyptus sensations. Pleasant acidity with silky tannins and a lot of fruit. Elegant and extremely persistent. Packaging: No packaging will be used apart from the one needed for transporting the product to the points of sales (in this case a sustainable, reusable/recyclable packaging such as carton will be used). Place Lauren Green Group is being listed for this distribution channels as indirect: * Supermarkets (steinberg) with high quality products * Liquor stores (BC Liquor store) Lauren green products will have an indirect distribution because the wine is transported to the retailers and supermarkets as market legislation. Price.

A penetration price strategy of $15 will be used for the Laurel Salbatore wines introduction, in order to gain market share. This will be done with a price just slightly below the future intended price and letting the customers know that there will be a future increment, so consequently they accept a higher price. When the introductory stage is over, the price will be fixed up to $18. Promotion Product Life Cycle Introduction| Growth| Maturity| Saturation| Decline| Low salesHigh advertisingLow awareness| Growing awarenessGrowing number of competitorsFirst profits| Market share battle Slower growth| Harder battle Maximum profit| Turnover| A crucial and very important factor for being able to sell Laurel?

Salbatore wine is promotion, especially when it?s being introduced so recently to the Canadian market and it is still yet to be accepted by the customers. Laurel? s job is to communicate and transmit clearly to the target market the identity of high quality and sustainability that the product stands for. In order to achieve this, the following promotion tools will be used: * Sales promotion * Advertising * Sposoring It is important to mention that this promotion mix will focus only in the introduction and growth stages of the product? s life cycle. The introductory part of the product will be the most important one, as it is the first impression that Laurel? s Salbatore wine will give to its possible future customers.

To introduce Salbatore the focus will be in carrying out the following promotial activities: * Sales promotion: With the purpose of influencing the buyers at the point of sales, Salbatore will place a stand in the different supermarkets and liquor stores where the product is being sold. The main idea is that the customer is able to try before actually buying the products and at the same time that the sales person influences him/her to make Salbatore their final purchase decision (Appendix no. 2). * Advertising: Will be done creating a marketing campaign mainly by the use of billboards in high traffic areas (Appendix no. 3). The growth stage of the product? s life cycle will focus in sponsoring.

This strategy promotion is going to be use in the growth promotion stage, as sponsor of social events, for example, in a Polo match at the entrance of this event there will be a catering station so the consumers can be received ( introduce and re-introduce) with the tasteful experience of Salbatore wine. Another promotional instrument present in this stage will be advertising at the corners of the score Polo field for a better visibility and strongest presence among the attenders.

Another part of the social event full with our presence is the eating zone; the Salbatore wine will be in each table with a promotional label of 2—1 and the second bottle with 5% of discount. This strategy will fulfill the perception and awareness of our product into the costumers minds and bring more consumers as well as reinforce the product awareness. Appendix 1: Bottle image Appendix 2: Stand image Appendix 3: Billboard.

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