Bonny Doon Case

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  • Topic: Wine, Varietal, Vitis vinifera
  • Pages : 8 (2560 words )
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  • Published : March 27, 2012
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1. Current Outlook/Position of Bonny Doon
Bonny Doon Vineyards, a successful winery business based in Santa Cruz, California, has grown from selling 5,000 cases of wine a year in 1981 to 200,000 cases a year in 1999. To keep growing and be more profitable, the business must choose amongst three possible strategic directions. The first strategy is to start importing wines from Europe into the United States. The second alternative is branching into a retail outlet for unusual wines of great value, accompanied by a high level of service. Lastly, the business’ D.E.W.N could be expanded to include wines not made by the company itself but by other wineries that follow the same values and philosophy.

2. INDUSTRY ANALYSIS
The size of the wine market in the U.S., measured by tonnage, is estimated to be 2.5 million tons of crushed wine grapes in 1998. About half of the tonnages crushed are red wine grapes and the other half are white wine grapes. The best wineries are located in the Napa Valley and Sonoma region, whose wines receive high praises from critics. The per capita wine consumption in the U.S. is only about 2.02 gallons per adult as compared to 16.2 gallons in France and 15.8 gallons in Italy. Thus, demand for wines in the U.S. has huge potential for continued growth. At the same time, there is increasing demand for U.S.-made wines abroad.

Bargaining Power of Suppliers: High
Bargaining Power of Suppliers: High
I. Porter’s 5 Forces Model Analysis
● decreasing number of vineyards to secure grape supply as vineyards are being bought out by land developers ● difficulty in convincing vineyards to produce high quality grapes because they would have to produce less in quantity, resulting in less profits for the vineyard ● decreasing number of vineyards to secure grape supply as vineyards are being bought out by land developers ● difficulty in convincing vineyards to produce high quality grapes because they would have to produce less in quantity, resulting in less profits for the vineyard

Threat of Substitutes: Low
Threat of Substitutes: Low
Barrier to Entry: Medium
Barrier to Entry: Medium

● substitutes of wine (non-alcoholic beverages such as soft drinks and coffee) tastes different than wine ● Per capita consumption of substitute beverages in the U.S. (soft drink: 54 gallon, coffee: 30 gallon) is already high compared to wine (2 gallon), and demand for wine is still growing

● substitutes of wine (non-alcoholic beverages such as soft drinks and coffee) tastes different than wine ● Per capita consumption of substitute beverages in the U.S. (soft drink: 54 gallon, coffee: 30 gallon) is already high compared to wine (2 gallon), and demand for wine is still growing

● sizable capital investment required to purchase a winery ● knowledge of viticulture and varietal blending required to successfully run a winery business ● need to establish relationship with suppliers and distributors

● sizable capital investment required to purchase a winery ● knowledge of viticulture and varietal blending required to successfully run a winery business ● need to establish relationship with suppliers and distributors

Industry Rivalry: High
Industry Rivalry: High
● competition from imported European wines
● highly competitive wineries from regions such as the Napa Valley and Sonoma offer high quality wines under premium brands ● many competitors in the industry that offer affordable wine at or below $10/bottle (e.g. Best Cellars, Wine Brats, Bonny Doon, etc.) ● competition from imported European wines

● highly competitive wineries from regions such as the Napa Valley and Sonoma offer high quality wines under premium brands ● many competitors in the industry that offer affordable wine at or below $10/bottle (e.g. Best Cellars, Wine Brats, Bonny Doon, etc.)

Bargaining Power of Customers: It Depends
Bargaining Power of Customers: It Depends

● buyer of expensive wines have medium bargaining power as they are...
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