Mandate: Should Passalacqua Purchase East Side Meat in Order to Add a Winery into His Operations?
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COMM 401 – Strategy and Competition
Section E
John Molson School of Business
October 21st 2018
Sandlands Vineyards
Marc-André Dion – 27538294
Mandate: Should Passalacqua purchase East Side meat in order to add a winery into his operations?
Background
External Analysis (PESTEL + competitor analysis)
Internal Analysis (SWOT)
1 – Business strategy: Culture and Core Competencies
Unique resources, capabilities and competencies
VRIN ( Valuable, Rare, Imperfectly imitable, non-substituable)
2 – Statement projections, pricing strategy and break even
Implementation
Conclusion
Introduction
With a value of 60 billion dollards, the wine industry, the wine industry has experienced a significant growth in the United States. Although a very segmented industry, the competition is high and the margins are low for the small players.
A young wine aficionado, Tegan Passalacqua’s life has been revolving around wine for as long as he can remember. After a degree in public health, he landed a job with Turley Wine Cellars in 2003. Quickly earning the trust of its founder, he earned the opportunity to learn about wine and develop its passion along the way.
Passalacqua capitalized on his passion and experience to acquire the Kirschenmann Vineyard and The Sandlands Vineyards; the former being a vineyard and the latter, a winery exploiting old vines, a niche segment in the Californian winery landscape.
Today, Tegan and his wife Olivia, also working in the wine industry, are looking into the possibility of acquiring a nearby facility, Eastside Meat, which could be developed into a functioning winery. With an estimated cost of $500,000, the couple is wondering if this investment aligns with their resources, capabilities, competencies and personal objectives. The analysis will focus on the Premium and Luxury market.
Recommendation
External Analysis
The United States wine industry has experienced sustained growth over the last 5 years with a year-to-year average of +20%. In 2016, 399 million cases (12x 750 mL bottles) were sold, for a total retail value of $60 billion. Of that amount, 63% ($37.8B) was produced in California.
In this industry, the 2 main purchasing drivers are Price and Brand, although these two factors do not correlate with product quality.
External environment
The wine industry is one that is income-sensitive, global, affected by technological changes and heavily regulated. Heavily segmented by price, 70.8% of the total sales are for wines selling at under 12$ a bottle; wines selling from $ 3-5.99 account for 30% of the total sales. From a marketing perspective, the market has been segmented into 2 categories: Value segment, at under $10 a bottle, and the Premium segment for wines over $10. The Value segment represents 60% of the industry revenues. Wine makers in the US must share their market with a strong presence of European wines, and newcomers from around the world. Furthermore, the Value segment has been straying away from the craft toward a heavily technological production process relying on science to mass-produce consistent and affordable wines. In addition, the US regulations has been complicating the life of winemakers: restrictive zoning, strict environmental regulation and considerable taxation at both the federal and state level.
Market attractiveness