StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Market Opportunity Analysis on Australian Wine - Case Study Example

Cite this document
Summary
This case study "Market Opportunity Analysis on Australian Wine" focuses on providing a critical assessment of developments in the global wine budget and the expected future challenges. The report presents the attractiveness of China and the United States for the marketing of Australian wine…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER98.7% of users find it useful

Extract of sample "Market Opportunity Analysis on Australian Wine"

Market Opportunity Analysis on Australian Wine: Attractiveness of the Chinese and United States Markets Executive Summary The following report presents an attractiveness of China and the United States for marketing of Australian wine. The report provides a critical assessment of developments in the global wine budget and the expected future challenges facing Australian wine producers and marketers. The report finds that although Australian wine has been imported to the United States for a long time, China has recently emerged as a leading foreign market for Australian wine. This is partly because China’s economy has in the recent years recorded impressive economic growth rates and that China has a very large population with many potential consumers. Table of Contents Executive Summary 1 1.Introduction 3 2.Situation Analysis of China’s Wine Retail Market 4 2.1.Micro-Factor Analysis: Customer Analysis, Competition And Product-Related Factors 4 2.2 Macro-Factor Analysis: Socio-Cultural, Economic-Financial, Politico-Legal and Technological Factors 5 3.Situation Analysis of the US Market 6 3.1 Micro Factor Analysis: Customer Analysis, Competition and Product-Related Factor Analysis 6 3.2 Macro-Factor Analysis: Socio-Cultural, Economic-Financial, Political-Legal and Technological Factors 7 4.Assessment of Country Attractiveness 8 5.Conclusion 9 References 10 Pinney, T. 2007, A History of Wine in America, Volume 2: From Prohibition to the Present. University of California Press. 11 1. Introduction Australia’s wine and grape growing industries have grown remarkably since 1990 as a result of concerted efforts by the government and other stakeholders in developing export markets for Australian-produced wine. Currently, more than half of Australia’s wine is exported to various countries throughout the world. Because of the Australian wine industry’s exposure to the world market, continued growth and long term success rests on the industry’s ability to maintain a keen awareness of current developments in the global market. For instance, supply into the global market is expanding at a higher rate than the demand, a situation that is causing market prices of wine to decline. Low wine prices and the current supply-demand situation present critical challenges to the future development of the Australian wine industry (Pinney, 2007). Australia has good foreign trade relations with several countries and China has recently emerged as the fastest growing export market for Australia and is currently the third largest destination of bottled Australian wine. Although Australian wine is the second largest wine imported into China, the volumes are likely to decline owing to the fact that China is making efforts to make its wine industry more competitive in the global market. In fact, China is currently producing more wine than Australia, a situation which presents major threats to Australian wine exports to China (China Customs Bureau, 2009). On the other hand, Australia has maintained its strategic trade relations with the US for a long time. This has seen Australia maintain its wine exports to the US and the entire North American market. However, Australian wine exports to the US have shown signs of decline because of two reasons. One of these reasons is that the US has in the last two decades moved to boost its domestic wine production capacity by encouraging more grape production. The second reason is that emerging wine producers such as New Zealand, Argentina and South Africa are eying the US market thus presenting strong competition for the Australian wine industry. 2. Situation Analysis of China’s Wine Retail Market 2.1. Micro-Factor Analysis: Customer Analysis, Competition And Product-Related Factors In the past two decades, China has risen to become one of the most important wine markets in the world offering both generous profits and high growth potentials. By volume, China is currently the seventh largest consumer of wine in the world. Customer analysis of the Chinese wine market reveals that the market is divided by region, knowledge about wine brands and income level. In terms of knowledge, drinkers in cities and large urban centers are likely to consume imported wine than drinkers in rural areas (Austrade, 2009). Similarly, high income earners are major consumers of both domestically produced and imported wines. Accordingly, a conspicuous trend in China is that domestic wines (often low priced) are sold to individuals in the lower end of the pricing spectrum while imported wines are sold at the higher price end. In terms of market competition, three major producers account for more than fifty percent of wine sales in China. The largest brand, Changyu Pioneer wine accounts for 20% of wine sales in China. Other main producers are Dynasty Wine and Great Wall Wine. Foreign wine imports are rapidly expanding in the Chinese market. In 2010, wine imports grew to about 20% of total wine consumption. Reductions in trade tariffs following China’s membership into the World Trade Organization (WTO) have been a factor behind the growth of wine exports into China. Currently, about 20 million adult Chinese are consumers of imported wine. This figure is only a small fraction of the more than 200 million people who have the purchasing power to consume imported wine. As such, the future of wine imports into the Chinese market looks bright. 2.2 Macro-Factor Analysis: Socio-Cultural, Economic-Financial, Politico-Legal and Technological Factors China has for a long time enjoyed relative internal political stability, a factor that has ensured ongoing success of foreign trade relations with many countries. In 2001, China became a full-fledged member of the WTO, a move which opened its domestic market to foreign competitors. Consequently, export of wine products to China has soared up in the last few years. Moreover China is a founder member of various regional and international trade agreements, which implies absence of trade tariffs on some imported products (CBI, 2012). Technological capability and exchange rates are important macroeconomic factors that will greatly impact on the success of China’s import market (WFA, 2006). Logistics and distribution have been greatly improved by entry of multinational logistics companies into China. China’s central and local governments have made considerable efforts to improve the country’s infrastructure. There are significant investments made in developing the country’ transport infrastructure. This has made it easier for consumers in rural and remote areas to gain access to quality products including imported wine (China Customs Bureau, 2009). Despite China’s rapid urbanization program, a great number of people still live in rural areas, some of which have poor access and connection to the country’s main infrastructural network. For the people living in rural areas, knowledge of wine brands is relatively low. As such, marketing of imported wine to rural areas is a major challenge. China being the world’s second largest economy means that most households are medium income earners. This together with the low cost of living in China presents a ready market for imported wines. China has a large population in the age group 25-65, which is major market segment for wine. Therefore, China has attractive market potentials for imported wine (Vinitaly, 2005). 3. Situation Analysis of the US Market 3.1 Micro Factor Analysis: Customer Analysis, Competition and Product-Related Factor Analysis The US wine market is one of the fastest growing markets in the world, both in terms of consumption and production (Australian Wine Research Institute, 2008). The market has expanded rapidly over the past few decades in the wake of increased government support, growing young population, increased consumption and online wine marketing and purchasing. Rising awareness of the social and health benefits of taking wine, increased disposable income and the resulting consumer shift towards consuming premium beverages are major microeconomic factors driving the upward growth of wine industry in the US (SAWIS, 2006). The US has about 350 million people, a third of whom have the purchasing power to buy high quality wines. However, the small size of the US population compared to China makes it less attractive as an export destination for Australian wine. According to (Thorpe, 2009) most wine consumers in the US are in the age group 25-65. Recently, the female population has emerged as a major wine consumer group in the country. Unlike China where a significant portion of the population lives in rural areas, the US is a much urbanized country with well developed infrastructure. Therefore, most people in the US have good access to and knowledge of various wine brands including imported ones (Wine and Spirit Trade Association, 2005). Domestic production of wine is highly encouraged and developed in the US. For many years, the US government has encouraged local production of grapes through subsidies and other forms of support accorded to grape producers. As a result, there are numerous domestic producers of wine in the US such that domestic competition is enough to offer considerable barriers to market entry by foreign brands. An overriding point about competition in the US wine market is that wines from Australia, New Zealand, Argentina, South Africa and Chile are gradually replacing wines from European countries. This is because wines from Europe are too costly to produce and are not as tasty as wines from other countries (Thorpe, 2009). 3.2 Macro-Factor Analysis: Socio-Cultural, Economic-Financial, Political-Legal and Technological Factors The US has for a long time maintained its status, as the world’s largest and most developed economy. The country’s internal political environment is very stable and for this reason it enjoys good diplomatic and economic relations with many countries (GTIS, 2010). The US enjoys membership in many international economic and bilateral trade agreements. For this reason, the US exports many products as it imports other products from other countries. Technologically, the US enjoys one of the worlds most developed and modern infrastructure networks encompassing such important aspects as transportation, power, water and sanitation systems. This ensures rapid distribution of products to different parts of the country (SAWIS, 2006). According to Australian Wine Research Institute (2008), the US is high income economy with most of its people enjoying luxurious products more than any other country. The country’s free trade policy encourages inflow of foreign goods from different parts of the world. Moreover, the US is socio-culturally a heterogeneous society with large populations of Blacks, Hispanics and Asians in addition to the dominant White population. The huge number of immigrants into the US presents a good market for imported products (Selvanathan & Selvanathan, 2004). 4. Assessment of Country Attractiveness China being the most populous country in the world has huge potentials for a ready and growing market for imported wine. In 2009, China became the second largest economy in the world, after the US (in terms of purchasing power parity). Rapid economic growth in China has resulted in a middle class population with the capacity to purchase high quality imported products of all types including wine (WARC, 2005). For many Chinese consumers, wine is considered a healthier alternative to spirits and other alcoholic products. Business people and young urban professionals account for most of the wine consumers in China. Moreover, the domestic retail sector is experiencing steady growth, stocking a wide range of imported wines (CBI, 2012). Generally, wine sales in Asia have doubled over the past decades with China and Japan accounting for four-fifths of wine imports into the Asian market (Productivity Commission, 2005). Although China began importing bottled wines just two decades ago, it is only in the recent years that consumers have begun to develop a taste and preference for specific brands of imported wine. Since joining the World Trade organization, China has significantly reduced its tariff rate on imported wine, thereby creating more opportunities for foreign wine against highly taxed local spirits. Although China is emerging as a major wine consumer, the prospects for sustained growth are huge because of increasing urbanization and rapid increase in household wealth (Austrade, 2009). On the other hand, the US is a much developed economy with a very successful wine industry. Although domestic wine production is highly developed in the US, there are huge potentials for imported wine (Wine and Spirit Trade Association, 2005). For instance, grapes produced in the South Pacific are traditionally believed to produce taster wine than those produced in North America and Europe. For this reason, most America consumers have a strong desire for wine produced in New Zealand and Australia. Lifestyle changes in the US have been a major influence on the growth of wine consumption (Jenster & Cheng, 2008). Many Americans with fast-paced lifestyles have a strong liking for wines and other social beverages. All these factors together with the US open trade policy as well as political stability imply that the US will for a long time be an important destination market for Australian wines. 5. Conclusion By comparison, the Chinese market presents more lucrative opportunities for Australian wine than the US. One reason or this is that China has a very large population (about three and a half times that of the US) hence more potential consumers. Another reason is that China’s economy is growing at a higher rate. Household incomes for Chinese people are also growing at a higher rate. Infrastructural development is improving at an impressive rate throughout China. Relaxation of trade tariffs has opened Chinese market to foreign competition including Australian wine producers. That notwithstanding, the US has a highly developed infrastructure, ensuring rapid distribution of imported products. Moreover, the high urbanization rate in the US means that most people have increased knowledge of different wine brands. But since the US is a leading wine producer, sale of Australian wines into this North American market is not likely to be as attractive as the case with the Chinese market. References Austrade 2009, Food and Beverages to China. Australian Government. Viewed August 5, 2012, http://www.austrade.gov.au/Food-and-beverage-toChina/default.aspx Australian Wine Research Institute 2008, Survey Opens Door to China for Winemakers. Viewed, 18 March 2010, http://www.awri.com.au/information_services/media/rele ases/Chinese_sensory_2008.pdf#search="survey". CBI China Business Intelligence (n.d), China's Wine Industry Development and Import Analysis, viewed August 5, 2012, http://Chinabizintel.com/industry-updates/Chinas-wineindustry- development-and-import-analysis-part-1.html China Customs Bureau 2009, Accessed August 5, 2012, http://english.customs.gov.cn/default.aspx GTIS 2010, China Customs Data. Bottle Wine Imports. Viewed August 5, 2012, http://www.gtis.com/gta/. Jenster, P. & Cheng Y. 2008, Dragon win: Developments in the Chinese Wine Industry. International Journal of Wine Business Research, 20(3), p. 244-259. Available: Emerald. Pinney, T. 2007, A History of Wine in America, Volume 2: From Prohibition to the Present. University of California Press. Productivity Commission 2005, Trends in Australian Agriculture, Productivity Commission Research Paper, Canberra, June. SAWIS (South African Wine Information and Systems) 2006, Statistics of Wine Grape Vines as on 30 November 2005, South Africa. Available at (www.sawis.co.za). Selvanathan, E.A. and Selvanathan, S. 2004, ‘Economic and demographic factors in Australian alcohol demand’, Applied Economics, vol. 36, pp. 2405– 17. Thorpe, M 2009, The Globalisation of the Wine Industry: New World, Old World and China. China Agricultural Economics Review [online]. 1(3), p. 301-313. Available: Emerald. Vinitaly 2005, The World of Wine in Figures. Verona, Italy (www.vinitaly.com ). WARC (World Advertising Research Centre Ltd) 2005, World Drink Trends 2005, Henley-on- Thames, England. WFA (Winemakers’ Federation of Australia) 2006, WFA Vintage Report, Winemakers’ Federation of Australia, Kent Town, South Australia. Wine and Spirit Trade Association 2005, WSTA Wine Data Sheet October, London www.wsta.co.uk/english2/statistics.html Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Market Opportunity Analysis on Australian Wine - Attractiveness of the Case Study, n.d.)
Market Opportunity Analysis on Australian Wine - Attractiveness of the Case Study. https://studentshare.org/marketing/2037491-market-opportunity-analysis-on-australian-wine-attractiveness-of-the-chinese-and-the-united-states-markets
(Market Opportunity Analysis on Australian Wine - Attractiveness of the Case Study)
Market Opportunity Analysis on Australian Wine - Attractiveness of the Case Study. https://studentshare.org/marketing/2037491-market-opportunity-analysis-on-australian-wine-attractiveness-of-the-chinese-and-the-united-states-markets.
“Market Opportunity Analysis on Australian Wine - Attractiveness of the Case Study”. https://studentshare.org/marketing/2037491-market-opportunity-analysis-on-australian-wine-attractiveness-of-the-chinese-and-the-united-states-markets.
  • Cited: 0 times

CHECK THESE SAMPLES OF Market Opportunity Analysis on Australian Wine

Wine Industry Complications

The wine Industry has been increasingly become complicated on the onset of globalisation.... Globalisation has opened up opportunities for all wine companies to market their products in countries with prices competitive with other products.... France and Italy leads the production and consumption of wine globally but they have seen a steady decline of their market share along with other players such as the United Kingdom, United Stares, Australia and other European countries....
16 Pages (4000 words) Essay

Strategic Management - Globalizing an Australian Wine Company

The object of analysis for the purpose of this paper "Strategic Management - Globalizing an australian wine Company" is BRL Hardy, an australian wine company that holds a market leader position in wine exports 2/3rd share of its exports to Great Britain.... A bird' eye view on the australian wine industry, at this juncture, would be appreciable.... BRL Hardy is the second-largest sold wine brand in Britain's off-trade and is now on a drive to globalize its products to improve the size, impact, and reputation of its existing and future brands....
19 Pages (4750 words) Essay

Analyse an existing food and wine festival in Australia. 2750 Words

Barossa valley is a region which makes greater contribution to the wine production of the country; Australia compared to other regions and is also a tourist destination.... The Barossa food and wine event is characterized by the showcasing of world's top culinary talent in preparing wine and food products.... It provides an opportunity for tasting the best food wine and experiencing hospitality.... With the theme Celebrate the Blend the festival showcases the rich diversity of the Barossa region and celebrates the food, the wine and the people....
11 Pages (2750 words) Essay

BRL Hardy: Globalizing an Australian Wine Company

The author of the paper "BRL Hardy: Globalizing an australian wine Company" will begin with the statement that wine is the world's one of oldest commodities.... Contextually, BRL Hardy, which can be identified as a major australian wine producing company, was formed after the merger of the two major wine companies, i.... Hardy was well known and respected in the australian wine market for its quality of the wine.... However, as considerable profit was emerging from the home market in Australia, owing to which, both the companies merged to form BRL Hardy and concentrated in the australian wine market in order to earn substantial profits and stabilize their financial elements....
12 Pages (3000 words) Essay

Food and Wine Festival in Australia

The paper "Food and wine Festival in Australia" states that the goals and objectives of conducting the festival are to attract many visitors to their country and enrich tourism and gain more money.... The main aim is to enrich the food and wine industry.... (Settler's cove Noosa food and wine festival n.... ettlers Cove Noosa Food & wine Festival provides an unforgettable moment for the people who visited during the days of the festival....
13 Pages (3250 words) Research Paper

Emerging Wine Industry Market in Australia

This paper is prepared for a European company that has been operating in the wine industry and now it wants to enter into the australian wine market.... The first section is attempted to provide an insight into Australia and australian wine industry in terms of its competitiveness.... australian wine industry is found to be highly competitive for a new entrant.... This paper is prepared for a European company that has been operating in the wine industry and now it wants to enter into the australian wine market....
10 Pages (2500 words) Research Paper

Media Analysis: Australia-China Free Trade Agreement

For instance, in the year 2014, the Chinese city Shenzhen became a sister city with Canberra and it is from this revelation that one can draw this hypothesis that the australian and Chinese economies are strongly complementary.... "Media analysis: Australia-China Free Trade Agreement" paper illustrates the cultural compatibility and strategies that are used in a cross-culture environment.... This implies that the importation and exportation personnel are grooming the country for a very vital and benevolent opportunity....
6 Pages (1500 words) Coursework

Globalization and Marketing Strategies in Wine Industry

At present time Casella is credited with over one-third of australian wine exports to the US market.... his paper has the goal of providing strategic analysis concepts in understanding how globalization enabled transformations in the australian wine industry.... The paper 'Globalization and Marketing Strategies in wine Industry' is a meaningful example of a case study on marketing.... It is true that Casella Wines ascended too fast into the legion of Australia's top twenty wine exporting companies....
12 Pages (3000 words) Case Study
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us