European Wine Case Wine manufactures Buyers – off-trade, on-trade Suppliers – grape growers, bottles How to use and analyze market data Datamonitor, Euromonitor

Industry Analysis

Rivalry Among Competitors Rivalry is greatest when: Competitors are numersous or are roughly the same size Industry growth is slow Exit barriers are high Rivals are highly committed to business and have leadership aspirations Firms cannot read each others signals

Power of Buyers Power increases if: Few buyers and larger purchase volumes Industry products are standardized Buyers face few switching costs Buyers can threaten to integrate backward

Power of Suppliers Power increases if: Is more concentrated than the industry it sells to (Microsoft) Supplier group does not depend heavily on the industry for its profits Switching costs are high (Bloomberg terminals) Suppliers offer differentiated products (Drugs) Suppliers can threaten to forward integrate

Threat of New Entrants Barriers to entry 1.Supply-side economies of scale (Intel) 2.Demand-side economies of scale (ebay) 3.Customer Switching costs (SAP software) 4.Capital requirements 5.Incumbency advantages regardless of size 6.Unequal access to distribution channels 7.Restrictive government policies

Threat of Substitutes It offers an attractive price-performance trade-off Cost of switching is low

Broader Industry Map

Rivalry Highly fragmented (top three hold less than 10% share) Forward integration (winemakers>retail): rare Backward integration (winemakers>grower): common New players restricted by regulation Vulnerable to substitutes

Buyer Power Supermarkets/Hypermarkets (41.8%) Retail concentration varies by country (FR/UK concentrated Carrefour/Tesco, others competitive) Switching costs moderate Produces can differentiate products Consumers demand variety Backward integration unlikely

Supplier Power Vertically integrated business, but: Large growers also source grapes, usually for lower priced products Independent growers can find alterative markets (sugar) and forward integrate Quality is important

Market Entry New company, diversifying, exporting Government regulation of alcoholic beverages Import taxes (moderate, except NO, SE) Advertising and drinking age regulations Margins low on non-premium products

Substitutes Alcoholic beverages: spirits/beer Low switching costs Per unit costs higher/lower (spirits/beer) Need for refrigeration Channels: some must have (restaurant) others don’t Use: occasions (i.e. champagne)

How can the European Market be Segmented? Geographic Demographic Psychographic Behavioral 14

Psychographic  Interests  Activities  Opinions  Habits  Lifestyle  Hobbies Behavioral  How people use the product  What roles people have in the buying process  How people respond to the product  Country  Region  Geographical Borders  Language  Historical geo-political  Age and life cycle  Life Stage  Income  Generation  Social class  Gender DemographicGeographic

France off-trade vs. on-trade

Pricing

Projections

Emerging Market Trends

China Case Study