wine industry group 5_section 2
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Crafting Winning Strategies in a Mature Market:The US Wine Industry in 2001Group 5 Section 2:Abhijeet Chandak – FT162002Arunima Shivangi – FT162023Bhavana Gurnani – FT162027Kaushik Gurav – FT162047Pranav Vashi – FT162065Vansh Bhatia – FT162100
How attractive is the American wine industryBarriers to Entry: High for budget and low for Premium• Economies of scale• Capital / investment requirements
aren't high• Low labour cost• Inexpensive leasing options for
machinery• Wine being produced from California
to Alaska
How attractive is the American wine industryBargaining power of buyers :High• Very low switching costs• Marked by oversupply with demand lagging; only 10 % drink wine regularly• Consolidation of distributors:
only 2 major distributors/state number of distributors dropped from 5000 to 250
• Consolidation of Retailers: top 10 supermarkets controlling 55% of US Market A handful of supermarkets demanding popular wines at low prices
How attractive is the American wine industry Threat of Substitutes: High
• 35% drink alcoholic drinks but not wine• Threat is low for premium category• Craft Beer/Beer and spirits most preferred• Turnover:
2.4 times a year for premium wines 70 times a year for Beer
How attractive is the American wine industry Competitive Rivalry : High• Clearly differentiated product categories: Budget and Premium• Intense competition within budget segment led to consolidation: Top 8 companies make 75% of wine volume• Boutique wineries have no incentive to grow • Big players put millions into marketing expenses
Should a company enter the wine industry? What strategies to follow?• Premium Wine industry
• Attractive industry with low barriers to entry• Differentiation strategy – Produce premium product and sell at a
premium price• Focus on creating brand loyalty
• Budget Wine industry• High barriers to entry• Prime recommendation would be to avoid entering this industry• Potential entrants should considering with strong financial backup• Win over the competition through cost leadership and focus strategy
What strategy should an established player follow?• Premium Wine industry
• Market would remain small with little potential for growth• Limit production • Deliver a niche product in the premium segment at a premium
price • Focus on retention of customers
• Budget Wine industry• Keep costs low• Concentrate on generating huge volumes• Strengthen the distribution network to reach maximum number of
customers