Wine Industry Essay Example for Free

Wine Industry Essay The analysis provides information on the two international wine brands (Banrock Station and Bordeaux) that from different kinds of world wine producers, New World and Old World, enter into the same market of the United Kingdom. Also, this report analysis why these wine corporations go to oversea, why choose England, and how achieve success in England applying Global-Local Model to judge which strategy the companies adopt. In addition, this report focusing on marketing. Banrock Station expands global market because of the saturate Australian wine market. The report apply the product lifecycle to explain this, and apply the object, strategy and tactic model to analysis why Bordeaux wine export internationally and why expand wine market in England in order to improve the consumption by volume and value terms and increase profits. Then, this report also explain the reasons why Banrock Station choose British market by PESTEL model, and analysis political, economic and law aspects in detail. Banrock Station Company focuses on the innovation which involves conservation projects and Eco-mate packaging to sustain its competitive advantages. Nevertheless, Bordeaux wine choose standardize more than adapt in two specific areas: promotion and product. 1. Introduction . The worldwide wine industry is divided into two parts: Old world and new world. Old world wineries are Characterised by long-established and relatively unchanging methods and location of wine production mentioned by Glenn and John (2009). France, England, Italy, Germany belong to Old World wineries. On the contrary, the New World wineries appreciate new technology and non-natural chemicals. Australia, New Zealand, North America, South Africa, Chile and Argentina are named New World wine makers (Anderson, 2003). Banrock Station is located in Kingston-on Murray, in South Australia. Banrock Station was set up in 1994, as one part of Hardy Wine Company (Natures a big winner at the station, 2005). The property of the company includes approximately 1,068 hectares of floodplain and wetland, as well as 307 hectares of woodland buffer. Today, Banrock Station, not only is one of the most well-liked brands in Australia, but also is the label which is growing fast in the United Kingdom. In addition, this company exports wines to more than 50 countries in the world, such as the United States of America, Italy, Canada, Japan, France, Spain and China. Bordeaux wine is a global brand from France. In the Bordeaux vineyard, there are 60 Appellation dOrigine Controlee (AOC), which is judged the largest French A. O. C wine region. Bordeaux wine comprises numerous popular wine brand, for instance, Malbec, Merlot, Cabernet Sauvignon, Cabernet Franc and Semillion. Each Bordeaux wine has its own character. Blending drives persistent flavour and overall quality. In the case of aromas, hundreds of active molecules in the wine interact during the blending process to create a new wine with a complexity, delicacy, and richness that surpass by far the simple addition of the characteristics of each of the assembled wines (http://www. bordeaux.com). 2. The Reason for going oversea and entering British wine market Now, Australia has been the fourth largest nation exporting wine, followed by France, Italy, Spain, and the UK is the biggest nation where Australian wine export (Australian wines in the British Wine Market, 2004). As seen from the graph 1 of the Product Lifecycle, in 2007, the Australian wine market go into maturity stage. Consequently, the Australian wine corporations are all face this problem, of course, including Banrock Station. First of all, it confronts fierce competition in domestic market, because there are over 60 regions producing wine, for instance, Barossa Valley and Eden Valley in South Australia, Hunter Valley and Cowra in New South Wales, Granite Belt and South Burnett in Queensland, Derent Valley and Coal River Valley in Tasmania, Goulburn Valley and Geelong in Victoria, and Blackwood Valley and Peel in Western Australia (A+ Australian Wine, 2011). In addition, the competitors come from other countries also effect the Banrock Stations sales, such as Constellation Brands from America, Malivoire Wine Company from Canada, Bordeaux Wine from France, Tenuta Monte Rosola from Italy, and Esteban Martin from Span. France is a well-known wine country in the world. According to the report named Wine in France (2010, 2007), in 2006, The French wine market grow by 1. 6% to reach a value of $35. 1 billion, in contrast, this market just grow by 0. 2% in 2009, these statistics show the growth of French wine market is very slow. Therefore, for the local companies, the space of development is small and it is also difficult to increase the companies consumption and income. In addition, both domestic and global market, New World wineries have pounded the French wine (Superleague bouquet, 2003). Because of this and France is considered to the empire of wine by the consumers worldwide, the competition in France is very intensive. In terms of global wine trade, the percentage of New World wine has increased from nearly 5% to exceed 28% during last 2 decades (Rothfield and Wittwer, 2008; IWSR, 2008). This paragraph apply PESTEL model to explain why Banrock Station Company and Bordeaux wine entry to Great Britain. For Australia and France, England, as one of the largest wine market, is keeping stable developing. In 2003, the Great British wine market went up by 2. 9%, reaching a value of about $10 billion, and this raised by 3. 1%, achieving a value of nearly $11 billion(wine in the United Kingdom, 2004 2010). The industry profile of wine in the United Kingdom (2010, May) reports that thanks to the undesirable climate for planting grapes, although there are few vineyards in the country, the United Kingdom imports the mass majority of wine from foreign wine makers. In 2003, the wineries in the UK produced only 10. 20% of the market share in their own country (Wine in the United Kingdom, 2004). By comparison, there is few things agitating by French and Australian wine makers toward nature climate and soil where grows vine (Unleash the war on terroir, 2007). Also, the stable economic and political regulatory environment and the government policy of generally opening to the trade and investment contribute to building a really low risk environment to do business and low barriers to entry this wine market throughout England. In France, however, the government has imposed a ban on oversea takeover bid for the companies. Besides, the Risks to Realization of Potential Returns rating refers to how risky an investment in the food and drink industry of the country is, according to Business Environment illustrated. The Risks to Realization of Potential Returns rating of the UK is higher than France (United Kingdom Food Drink Report, 2009). As a result, it is much easier and more safe to enter British market than in France for Australian companies. In the 1970s, the new laws give the local England supermarkets the rights to sell wine; this increase the consumption of oversea wines in Great Britain, especially the New World wines (Anderson, 2003). For example, it is legendary that, since 1960, the per capital wine consumption of Australia has grown up twice every decade in the British wine market (Rothfield and Wittwer, 2008). 3. Strategy analysis. 3. 1 Innovation of Banrock Station in Great Britain Compare to other wine companies, like Jacobs Creek and Nottage Hill, Banrock Station is a special one, because it not only is a wine maker, but also has a responsibility for ecological conservation. The Good Earth, Fine Wine is Banrock Station slogan (www. banrockstation. com), and this perfectly contains this companys two essential commitments: one is the contribution to the sustainable environment, for example, one of the conversation projects is named Eden project cooperated with the UK tell everyone how people can make contribution to protecting environment everydady (www.edenproject. com), the other one is the production of good quality wines. The core of companys promotion activity is donating conservation works. According to Pritchard Chris, the company announced Banrock Station has contributed A$1 million (C$880,000) to preserving and rehabilitating the wetlands all over the world, recently, and supporting a information centre for the Wild Bird Trust of British Columbia to organize and manage the data of avian, which is a perfect evidence. According to the journal article of Charity alliances reap rewards, Banrocks ? 125,000 sponsorship has financed wetland rehabilitation and exhibits at WWT Centres, as well as 10% of the costs of monitoring and maintaining 1700 hectares of wetlands in the UK. These help Banrock Station to reap the reward and enhance the image of the brand from both old consumers and potential consumers, for instance, as a grocery brand, Banrock Station has become the sixth fastest expending in the Great British (Charity alliances reap rewards, 2002). Rebecca Hopkins who is a spokesperson of Banrock Station, states We have successfully positioned ourselves as a brand that cares about the environment, and it is obvious that people like that. The corporation has involved in nearly 100 conservation projects throughout the world, this is real evidence, not just talking (Pritchard, 2002). To be an environmentally friendly business is wise means to increasing the reputation of the company. Moreover, Banrock Station Company focuses on the high-technology, as a New World winery. Today, Banrock Station uses Eco-Mate which is a new environmental package. There is an increasing number of customers concentrating on convenience. Therefore, the predominant character of EcoMate is convenient means it is easily to squeeze out the air and retain wines or other things (such as fruits and vegetables) fresh, lighter as well as, because of its weight is only 1033 grams, compare to a liter of bottled wine, is 60% lighter. Because of this, it is helpful to reduce the cost of package and transport cost. When the cost is down, Banrock Station can easier to maintain competitiveness. In addition, it is 100 percent recyclable and is totally made of renewable materials. According to Miriam Leenders, who is the Global Marketing Manager of Banrock Station, the company is focus on the environmental conservation projects. As well as he claims, It was a natural progression to give our customers the choice to buy our wine in an enviro-pack(Ecomate makes Banrock Station even leaner and greener). 3. 2 Standardization of Bordeaux wine in Great Britain From the graph 2, it can be know that Bordeaux wine adopt cost leadership strategy, and standardize more than adapt in th UK. This part discuss why Bordeaux wine like to standardization in British market, particularly in two parts of marketing mix: promotion and product. Firstly, looking at the promotion. As Bordeaux wine is positioned internationally a luxury wine brand, it is considered an expensive wine by both French and British customers. What is more, there are three main distribution channels in France, which are supermarket and hypermarkets (with 49. 10% of market share by volume in 2009), on-trade channel (with 32. 70% of market share by volume in 2009), and specialist retailers, at 14. 3% (Wine in France, 2010). The story of distribution channel in British wine market is similar to the Frances. Meanwhile, the leader of distribution channel of that is also supermarket and hypermarkets, presenting 48. 10% of market volume. On-trade channel accounts for 18. 70% share of total volume, which followed by the specialist retailers, with 23. 60% share (Wine in the United Kingdom, 2010). Thanks to the similar product position and distribution channel between France and Great Britain, it can save cost of promoting products if standardize the promotion strategy, although there is a few of difference between them. Move to product of marketing mix, Old World constraints of strictly controlled appellations and wine making practices, Anderson (2003) says, in comparison, New world producer are free from this (like Banrock Station). As a consequence, it is more difficult to meet customer need for Bordeaux wine. Standardization of product is the direct and good way to save cost because the company can use same machines and employ same kind of works. These reasons contributing to Bordeaux wine export same wine products to the UK market. 4. Recommendation Facing lots of competitor, for Banrock Station, it is wise to make whites and reds go green which means the company focuses on environmental achievement and corporation social responsibility, this influenced by the Australian business guide which is Green is gold and has succeeded far beyond expectations for the brand, especially ture in Australia. Innovating EcoMate package is a good example. Because of this, the company sets up an environmentally friendly example among consumers, which will also add value the products and increase the brand reputation. A simple SWOT analysis gives the information that one of the strengths of Bordeaux wine is its brand (Stuart and Smith). Being an Old World wine producer, Bordeaux wine has a long history of making wine and has a good reputation. Therefore, Bordeaux wine can maximum the strength, such as in the package, make the brand name bright to attract consumers, then achieve more profit. In order to counter the growth of Old World, it is the time to give up the age -old production methods (Carol, 2010). References: Anderson, K. (2003). Wines New World. Foreign Policy, 136, 46-54. Australian wines in the British Wine Market: A Hedonic Price Analysis. (2004). Retrieved from http://0-web. ebscohost. com. library. newcastle. edu. au/ehost/resultsadvanced? sid=79c09e98-6add-4a64-ab77-252566211746%40sessionmgr4vid=5hid=15bquery=(UK)+and+(wine)+and+(supermarket)bdata=JmRiPWJ0aCZ0eXBlPTEmc2l0ZT1laG9zdC1saXZl A+ Australian Wine. (2011). Wine Regions. Retrieved from http://www. apluswines. com/en/wine-regions. aspx Charity alliances reap rewards. (2002,July 18). Marketing (00253650). Carol, M. (2007, April, 9). Bordeaux goes to the lab. Business Week (00077135) Ecomate makes Banrock Station even leaner and greener. (2008, Apirl). Food Magazine, p. 18. Glenn, B. John, O. (2009). Old World, New World, Third World? Reconceptualising the Worlds of Wine. 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