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 entry1. Supply-side economies of scale (Intel)2. Demand-side economies of scale (ebay)3. Customer Switching costs (SAP software)4. Capital requirements5. Incumbency advantages regardless of size6. Unequal access to distribution channels7. 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

PsychographicInterestsActivitiesOpinionsHabitsLifestyleHobbies

Behavioral How people use the

product What roles people have in

the buying process How people respond to the

product

CountryRegionGeographical BordersLanguageHistorical geo-political

Age and life cycleLife StageIncomeGenerationSocial classGender

DemographicGeographic

France off-trade vs. on-trade

Pricing

Projections

Emerging Market Trends

China Case Study

China Case Study