The Global Wine Industry Marketing Essay

Published Date: 23 Mar 2015

The total volume of the global wine market in 1998 was measured at 6.8 billion gallons with 25 of the total volume accounting for wine that was purchased outside the country from which the wine was produced. This represents an increase over the 1991-95 period, during which the export segment of the market averaged approximately 17% by volume. The increasing trend for the export market since 1995 is due primarily to a change in the strategic priority that wine producing countries are placing on exporting as a method for growth. Historically, the market for wine was primarily one of local production and consumption. That paradigm has changed in the last few decades as a few of the more established wine drinking countries have seen their per capita consumption stagnate or decline.

At the same time, several wine producing countries around the world have begun to make an impact on the export market in an attempt to expand their industries beyond their limited local markets. The result of this shift in market focus for some of the older wine producing countries plus the rise of new wine producing countries around the world has caused an increase in the competitive nature of the global wine market.

Currently the U.S. is the fourth largest producer of wine in the world yet only accounts for approximately 4.2% of the total wine export market based on volume. In the past, a very common export strategy for U.S. companies was to export only the excess capacity that was on hand due to over production thus there was little focus on establishing a presence in the global market place.

This Industry Note provides background information relating to the third strategic priority of positioning U.S. wine as the high-quality, high-value product in global markets. An overview of wine and the current global wine industry will be given along with some examples of how U.S. wineries are implementing strategies to compete against foreign producers.

Overview of Wine

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.

Wine has been a part of Western history since the Neolithic Period. when cultures first started to develop permanent communities and stopped being traveling hunter-gatherers . One of the earliest written records of the consumption of wine is recorded in the Bible and the impact of wine on Mediterranean cultures became more pronounced over the years as the geopolitical situation stabilized in the region under the Roman Empire.

Varietal is a descriptive naming convention based on the type of grape used to produce a wine. Varietal is predominately used as U.S. industry marketing tool to segment the market and is not specific to a geographic location. Some common Varietals today are White Zinfandel, Riesling, Chardonnay, Burgundy, Shiraz, Petite Shiraz, Merlot, Pino-Noir, Zinfandel and Cabernet Sauvignon.

The wine making process is very complicated and as a result there are many opportunities to damage, as well as improve, the quality of the wine being produced. The wine making process starts in late Fall, when the grapes are cut from the creeping plant and laid on the ground in the sun to dry for a short period time. This is done to increase the ratio of water to sugar content in the grape, thus creating the opportunity to make a sweeter wine. Then the grapes go into a storage bin and are crushed to remove the juice. The longer the skin of the grape remains with the juice, the darker the wine will be. If a white wine is desired, then the skins of the grapes are removed soon after the crush, but if a red wine is desired then the skins of the grapes are left in with the juice for an extended period of time. The juice is then placed in a container made of wood or storage bin made of stainless steel for on average, a year. The aging process allows the natural yeast from the sugar in the grape to excitement and produce alcohol. The aging process also allows the wine to absorb flavors from the container that it is aged in. After aging for the appropriate time, the wine is bottled, labeled and shipped to the market.

SWOT ANALYSIS

Strength:

Climatic condition

Climate condition favorable in Philippines because the over production of fruits

There are only few winners in Philippines In terms of rm climate alcohol base ciders produced from apple have strong potential

Trade related factors

There have not been import fruits on imports

The factors proving the link agreement on internal trade (AIT) which come into effect in 1996 , Provides for improved distribution of alcoholic beverages inter provisionally

Technical related factor

Wine making may be throughout of as a mature technology

Some wineries adopting artificial tubular stoppers and other s screw caps , even for premium wines.

The labor forces in Philippines is highest for our studies so we get labor at a chipper for wine industry.

The wine market share which continuationaly growing

Weakness:

It is the basic weakness of our project that the country is new for us for this kind of industry.

For the marketing aspect is difficult to setup new distribution channel in competitive market.

When we setup new winery a wine sale when its become old so we can get return on project after 8 to 10 years.

The cost of project is high compare to other industry in term of risk and return.

We are not saying that it won't make good wine any more, just that is won't with same consistency and predictability .

Opportunities:

Philippine wine imports remained sluggish until the late 1990s due to the high price of wines in the market at that time, poor distribution, and perception of wine as a luxury product.

Sales picked up dramatically in recent years as both Old and New World suppliers began shipping full container loads of value-priced product, mostly sweet, fruity wines that appealed to local tastes.

Wine distribution also improved with more floor space dedicated to wine in supermarkets and specialty shops, greatly improving visibility and spurring a mass market.

The tourism sector of Philippines is faster growing so the foreign tourist will demand wine its one kind of opportunity.

Threats:

Bigger wineries have more marketing dollars, more sales leverage, more everything.

There are a number of very serious economic threats that cloud the short term outlook. Domestic inflation is high in Philippines .

The government estimate is about 10%, but I failed to find anyone who thinks that it is less than 25%.  Production costs are rising rapidly- labor, grapes and other inputs are increasingly expensive. Land prices for new vineyard projects seem to be growing exponentially.

I visited several wineries that were clearly focused on increasing efficiency in an attempt to claw back margin without sacrificing quality.  But I also heard rumors of wineries that were taking the perhaps desperate move to source lower cost grapes from other regions to stay in business. The concern was that quality would suffer and The Brand undermined.

For ex Can't emphasize this enough. If you asked me to buy vineyard next week with your money, and I had to make a best guess as to that land's value in the wine world relating to quality of wine on average over the next 40 years, I wouldn't pick Philippines at all. Even though we're not talking about buying land in Phillipines , we are talking about making wine from a region, and the long-term outlook in regards to climate change and the famous growing regions is probably a lot less positive than people want to admit.

Just like over-estimating the potential of the wine business is a very common mistake, under-estimating the immaterial/non-dollar prerequisites is probably an even more common threat to the possible success of a start-up winery.

Five Forces analysis of Philippines Wine Industry

Bargaining Power of Suppliers

The bargaining power of suppliers is low because of the following

The suppliers outweigh the buyers thus given them little or no bargaining power given increased plantings and favorable weather conditions in the past few years.

The oversupply of grapes has been a driving force to prevent prices from falling further due to this excess capacity so some producers had to resort to extreme measures.

Intensity of Rivalry

The intensity of rivalry between competitors in the industry is low because of the following factors

Rivalry was lessened because some competitors were able to differentiate their products although larger producers held advantages in scale and capital.

The smaller wineries were able to compete by consistently producing high quality wine in limited quantities.

The fact that there was no switching cost and that sales depended either on price or marketing for the lower and higher segments respectively

Bargaining Power of Buyers

The bargaining power of buyers is low because of the following reasons:

The industry is marked with undersupply with consumption covering way behind production.

This may allow them to demand only industry standards though it should be noted that many inexperienced wine drinkers feel confused about all the wine choices.

Threat of New Entrants

The threat of new entrants is moderate given the following reasons:

Economies of scale, Capital / investment requirements aren't high. "Using personal savings and loans from friends.

Customer switching costs is minimal "the basis of competition in the lower segments of the wine market is primarily driven by price, retail shelf space, and branding, competition at the higher segments was driven by more quality and brand image"

"Access to industry distribution channels is difficult for lower segments of the wine market but very accessible by brands in the higher market segment "Although many retail chains carried super-premium to ultra-premium wines"

The likelihood of retaliation from existing industry players is very low as no instances were stated.

Threat of Substitutes

The threat of substitute products like beer and spirits pose a threat to the industry. They limit price levels.

Buyers are more willing to substitute wine for other alcoholic beverages based on preference "research into Philippine consumption patterns show that of the remaining who are not regular wine consumers, half are teetotalers and the other half prefer beer or spirits"

The price of wine's substitutes are relatively cheaper "while all income levels consumed wine, higher income was associated with greater wine consumption" There is not any switching cost related to substitution"

Business model

Project at glance

1564342_f496

Red Grapes wine

Company Profile

Basic Information

 

Company Name:

The BAADDS BEVERAGES & Wine 

 

Business Type:

Manufacturer, Agent, Other

 

 

Main Products:

Grape wine  

 

Number of Employees:

5 - 10 People 

Factory Information

 

Factory Size (Sq.meters):

Below 1,000 square meters  

 

Factory Location:

Manila, Philippines  

 

Number of Production Lines:

2  

 

Number of R&D Staff:

Less than 5 People  

 

Number of QC Staff:

Less than 5 People  

Procedure

SR.NO.

PARTICULARS

1

Acquisition Of Land

2

Preparation Of Project Report

3

Finance Assistance

4

Building Construction

5

Arrangement Of Power

6

Acquisition Of Machinery

7

Installation Of Machinery

8

Appointment Of Staff & Labour

9

Trial Production & Shooting Problems

Total time period require for the commencement of commercial production 12 months.

Source: - http://www.alibaba.com/product-tp/126620131/Grapes _Fruit_Wine.html

Justification of Location

Manila- the capital of Philippines stands at high place for ease of doing business in World Bank report which examines the regulatory environment is conductive to do a business. And as Manila is a capital of country it is having the best transportation and infrastructure facility with its effective business climate.

Manila is having municipalities, offices, hotels, research parks, so there is huge availability of customer

Due to this location one can grab the benefit of import and export through all transportation facility as well as it can help to establish effective supply chain for our product.

The other benefits are

Chipper land cost.

Easy market reaches.

Low Labour cost & High enough labour availability

Product Detail red Grapes wine

From the Grapes bud is Grapes wine also known as 'tuba' in local Philippine dialect. In certain areas in the countryside, tuba is dyed red. When this local wine in Bohol . A Grapes grove in San Isidro, Duero, Bohol Philippines.

The traditional method for extracting Grapes red wine is extremely simple:

1) Climb a Grapes palm;

2) hack an immature Grapes from the bunch;

3) Trim off the husk and chop a hole in the top; and

4) Process in machinery and make wine and then make for drink .

Packaging of Grapes red wine:-

Packaging is the very crucial part of in our product because quality of the product is depend upon the way you are pack the Grapes red wine. Grapes red wineis non durable drink for extend the durability of the wine we'll highly focusing of the packing quality. For maintain the quality we'll use 6 layer tetra pack, will available in bottle and cans.Grapes red wine is available at 200ml, 500ml & 1ltr pack.

Once exposed to air, Grapes red wine begins to tumult, and rapidly loses most of its organoleptic and nutritional symptoms. To reduce the risk of bacterial growth, commercial bottlels are forced to sterilize the product using high-temperature/short-time pasteurization (the same technology used in long-life milk), which destroys some of Grapes red wine nutrients and almost all of the flavour

After five years of research and testing, has announced a simple cold preservation technology appropriate for small and medium-sized agro-industries that allows them to produce bottled Grapes red wine which, under refrigeration, stays fresh for from many days or weeks. That is long enough to satisfy domestic retail markets and to allow export to developed countries, where good quality Grapes red wine is in growing

demand.

Grapes red wine of good drinking quality is clear and colourless, with pH of 5 to 5.4 and a Brix level (a measurement of sugar concentration) of 5 to 6.5. Per millilitre, it should have a total microbiological count of less than 5,000, less than 10 of coliform bacteria, and zero faecal coliform. For small-scale processors without access to a laboratory for microbiological testing, the manual recommends some simple measures, such as checking the product for traces of fermentation or foreign objects, and giving it a "nose test" - a rancid odour, for example, indicates that the small quantity of fats in the liquid have oxidized.

Numerous medicinal properties of Grapes red wine reported are:-

Good for feeding to infants who are suffering from intestinal disturbances.

It Contains organic compounds which possess growth promoting properties

Keeps the body calm, cool and energetic.

Kills intestinal worms and weakness.

Presence of saline and albumen makes it a good drink in cholera cases

Excellent tonic for the old-age people and weak patients.

Cures malnourishment.

Effective in the treatment of kidney and urethral stones

Can be injected intravenously in emergency cases.

Analysis of red Grapes wine

Red Grapes Wine

Total solids%

5.4

Reducing sugars %

0.2

Minerals %

0.5

Protein %

0.1

Fat %

0.1

Acidity mg %

60.0

pH

5.2

Potassium mg%

247.0

Sodium mg%

48.0

Calcium mg%

40.0

Magnesium mg %

15.0

Phosphorous mg%

6.3

Iron mg%

79.0

Copper mg%

26.0

Product Specification:

pH

4.5

Total solids

4.71 g/100 ml

Sucrose

1.28 g/100ml

Total sugar

2.08 g/100ml

Ash

0.62 g/100ml

The machinery includes:-

Grapes  water and mix Alcoholic product collection in tank

Filter

Additive mixing tank

Volumetric filling machine

Grapes water storage tank 

Baby boiler

Autoclave

Benefits of the red Grapes wine :-

Grapes red wine can be kept in fridges for drinking elders which may not possible in case of tender Grapes s.

No need of a knife to cut it, and no worrying about the knife's cleanliness.

Patients in hospitals are safer from infection because no chopping and transfer to glass is involved. Just pierce, insert the straw and drink.

The inconvenience of keeping bulky tender Grapes s wine in a home/offices/hospitals are eliminated.

Also there is no more spillage over your body while tearing / cutting the sachets.

SUPPLY CHAIN OF WINE

Interpretation:

The supply chain of wine having major three steps of process or three parties plays an important role they are suppliers, Manufacturer, and customers.

SUPPLIER:-

Here, the rew material grapes and apple gets frome the farmers.as we know that in phillipines production of grapes are more.So we can get easily raw Grapes s from the farmers. And its directly send on daily basis to godown.

MANUFACTURE :-

There is the own manufacturing process and all operation like cutting, processing and packaging etc are done in proper temperature and all materials will be issued from store manager as and when process will required. After, mfg the finished goods transfer in to the stores of finished goods were also temperature will be maintained.

MANUFACTURING PROCESS

For several years wine making has been practised through the process called as vilification. This method is very simple for making alcoholic beverages.

The process of making wine involves six steps

Viticulture:

We knew that flavour of the wine is depending on the kind of grapes which are used in wine making process. The verity of grapes depends on the place they are grown so the climate of the place are depend that the quality of grapes.

Harvesting:

The second steps in wine making process are the harvesting of the sanely cultivated grapes. When grapes are ripped it is very important that the timing of ripping. The timing of the ripping should be such that the grapes have the apt combination of sugar, acid and moisture. The harvesting can be done by both the way either manually or mechanically, however most of the grapes wineries ripping it manually.

Crushing:

In this steps the harvested grapes is to crush and press so as to have their inherent flavour in the form of liquid. For that crushing fruits winery use the specialized machines. After the crushing and pressing the wines is referred to as must, at this stage the wine will turned into either red colour or white colour. When it leave must for certain period , the wine become red wine and in case you immediately crush the wine after processing the skin then the wine become white wine.

Fermentation:

After the grapes are being crushed and pressed the fermentation takes place since the grapes have good quantity of sugar and moisture. They easily get fermented with the reaction of wild yeast. In this step taken 10 to 30 days however this depends on the quality of grapes and climate.

Clarification:

The wine is being decanted from a take or barrel leaving precipitates and solids in the bottom of the fermentation tank.The wine makers are adding eggs whites, clay, or other compounds to wins.

Aging and bottling:

The final stage of the wine making process the aging is holding in barrels. The wine makers is verifying the bottling.

CATAGORIES OF CUSTOMERS

Target Customer

At the primary stage we'll focusing more on customer like homes, Restaurants, beer bar, wine store, luxiours hotels , Air lines, party organiser,Welcome drinks at marriage and other occasion.

PROMOTIONAL ACTIVATES:-

Here, as the company having daily delivery of finished products, it brings return products from customers which are not out dated and then use it as the test marketing to the customers. Company also give the lunch party of drinks.

Providing a free sample to the target sample in luxiours hotels .

Collaboration with bar to promote the product.

Uses of regional cable connection for TV add.

Marketing plan

Marketing Strategy :-

Here the company used major two marketing strategy which is as follow….

1.Sales Promotion:- here, company use sales promotion of those products like to give extra bottles with whole carets of 5 bottles

2.Test marketing: - it is used for attracting new customers and company do it in that place where company is going to expand its business and market like south philipiness And these products are given to the customers as ( BUY 2 GET 1 FREE)

FINANCIAL INFORMATION:-

Est.

Particulars

Amount

(In Rs.)

Production costs:

1750000

Direct materials

Direct labour

600000

Indirect production costs electricity, fuel

2290000

Other expenses:

300000

Sales expenses

Advertising

2000000

Miscellaneous expense

10,00,000

General expenses:

34000000

Office salaries

Suppliers (farmers)

7100000

General expenses Rent, maintenance.

30,500,000

Totals

22186400

Allocated Fixed Costs

86570000

Sales and Income data:

88

Selling price per unit

Expected unit sales

3,20,000

Target operating income for the period

1,000,000

Cost of Production per annum

250900000

Fixed cost:

Salary of employees,

Bonus,

Incentives,

Maintenance of staff and office.

Direct labour: 800 Employees

Skilled labour: 100 labours

Top management employees: 6

Technician: 33

Production In charge: 11

Engineer: 6

Field worker: 55

Unskilled labour: 900 labour paid on daily base.

Variable cost: transportation cost, packaging cost, misallenous expend etc.

Input: wine nuts 8,000 / wk, Dry nuts 7,000/wk.

Output: Wine: 8,000 x 250 ml bottles ; Total production: 2,000 litres/ week

Retail Price:: $95 per 250ml pouch

Workweek: 6 days (unskilled labour typically works 12 hr/day, 6 day/week)

Work year: 40 weeks, assuming down time due to machinery, raw materials etc.

Project Cost:-

The cost of this project in Indian currency for 2500 litres of tender Grapes wine per day is as follow and here it can be converted directly in paso on that basis.

Here the estimated prises are taken and the value of paso is taken the as 8.60 against Indian rupee:

Est.

Particular

Amount in DKK

Land and building

3.5 million

Plant and machinery

1.5 million

Contingencies

0.5 million

Preliminary pre operative expenses

1.4 million

Working capital (margin money)

1.5 million

Product Yield

Raw material    

10000

Cocoonuts Final product

2500 litres

Sales turnover

Rs.1.875 crores

IRR

18 per cent

Payable period

 3-4 years

Employment potential

30 persons

Conclusion

We come to conclude that for opening the Grapes wine in philipiness is quite easy as compare to other because of favourable political, Economical, Social, Technological, Environmental & legal as well as all the requirements for the production process like materials, labour, capital are easy available . Infect as our company is located in north sea so, raw material can be easily available at cheaper rate so we can sell our product in just 1.67dkk as well as with pouches too.

It is also possible that we can store the Grapes wine up to 21days (3 weak) safely with the help of using advanced technology. Which we can use in our organisation so, availability of Grapes wine is anywhere customer want.