Crafting Winning Strategies in a Mature

Market
Submitted by:
Section 1- Group 7
Attractiveness of the industry 1/3
Retailer and Distributor consolidation:
• Due to the consolidation, the number of distributors
dropped by 95% in about 50 years and just top 10
supermarkets like Costco controlled 55% of the
market. Thus out of 2500 producers only 2-4% of big 150%
producers had access to widespread distribution.
• As the bargaining power of retailers and distributors 100%
rose, they shifted the focus from low volume-high
priced wines to high volume-low priced wines in order 50%
to maximise their economies of scale.
0%
• This resulted in a very slow turnover for wine which
Budget Premium
was 2.4 times/year. Wineries producing less than
10,000 cases a year were not able to get any shelf volume sold sales
space to market their product.
Attractiveness of the industry 2/3

Investment:
• The entry into the wine market seems attractive due to abundance
of low priced grapes, low barriers, lower per unit production, subst DEMAND
antial real estate prices, considerable capital expenditure and low
administration and delivery costs and a shorter payback period (2 10%
4 to 30 months).
35%
• But due to distribution constraints, even with no opportunity to imp
rove sales figures, large producers are spending 40% of their bud 44%
get on marketing.
11%
• As a result of high number of entrants, the industry became very
fragmented with no company receiving more than 1% or retail
sales.
• An important point to note is that only 10% of the entire population core wine consumer
are our target consumers.
non drinkers
• With little or no demand there is a downward pressure on prices. prefer beer over wine
Should a company enter this industry

• Based on the above data, this industry attracts companies due to its lower investments but very unw
elcoming when it comes to demand and the hindrances in sales and distribution.

Entering this industry will not be profitable.

Average growth rate of Wine industry worth @ 1.5%

130 2001
2000
1999
1998
120 1997
1996
1995
110 1994