Winery Industry Analysis

Topics: Wine, Marketing, Names of large numbers Pages: 3 (710 words) Published: December 7, 2012
1) The First Question:
The size of global wine industry ranged from 130 billion to 180 billion in retail sales. Three categories, table (< 14% alcohol volume) dessert or fortified (>14%) and sparkling (champagne). Table wine consumption stands for the dominate market share. There’re 5 segments, jug or commodity (< $3), popular premium ($3-$7), super premium ($7-$14), ultra and luxury (>$25). Jug wine consumption is nearly 38% of case sale but only 13% of the retail sales. The economics of the particular wine, the gross margin from the wholesaler and retailer is 41% and 9% compared to 12% from wine producer.

Five forces analysis to Winery Industry:
Threat of the new entry: Low
The wine making industry is a capital intensive business, which requires a large amount of investment to get the working capital and acquire of the land, especially the land in the better geographic location, such as California’s central coast and France. From exhibit 10, we can see that estimated investment for every 100-acre Napa Valley Ultra-premium vineyard is nearly 16 million USD. In addition, it takes more than 6 years for the grapes to harvest and age. The time cost is very high to all the new entries. So the threat of the new entry will be low.

Bargain power of the customers: High
According to Exhibit 11, top 5 distributors controlled nearly 33% of the national market while top 10 controlled 45%. That means the wine producer heavily reply on their customers, the distributor, who can big bargain power to the wine producers. For every single wine producer, its wine would stands for only limited percentage among all the wine products the distributors are selling. This relationship is similar to the relationship between P&G and Wal-Mart.

Bargain power of the supplier: Low
In wine industry, the raw material is the grape. Because the quality of the wine heavily depends on the quality of the grape, the wine producer often establishes the long-term...
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