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Case Study - Sandlands Vineyards

1) Perform a strategic analysis of Sandlands Vineyards in the US Wine Market taking into consideration of:

  1. a) segmentation, 
  2. b) consumer change, 
  3. c) competitive responses and 
  4. d) prioritisation of limited resources.

2) Using strategy frameworks, what strategy would you recommend for Sandlands Vineyards based on the identified business opportunities available?

https://hbsp.harvard.edu/tu/cdc1966b

Perform a strategic analysis of Sandlands Vineyards in the US Wine Market

Wine is a tough, competitive and expensive business to venture. With all the liberty that comes with one being an entrepreneur, wine business proves to be harder than even a day’s employment. The United States is now the largest wine market in the world with wines from Sandlands Vineyards. This report emphasises on strategic analysis of Sandlands Vineyards in the U.S. wine market taking into consideration segmentation, consumer change, competitive response, and prioritisation of limited resources. In addition, using strategic frameworks, a strategy will be recommended for Sandlands Vineyards for the wine business. A brief conclusion summarises findings.

Grapes growers in California were only 5,900 who use approximately 600, 000 acres of land (The Wine Institute, 2016). The leading grapes producer Bronco Wine Company owned 40, 00 acres of land. This land generated $182 million. Furthermore, 90% of grapes farmers in California owned land less than 100 acres while 50% of farmers owned less than 50 acres of land. Vines start producing fruits three years after they are planted and remain productive for use 20-40 years (Thonton, 2013). An acre of land produces 2-10 tons of grapes which make more high-quality wines and fewer low-quality wines. 65 cases of wines are obtained from each ton of grapes. The major challenge that grape farmers experience is the rise in the cost of land.

Wine in the U.S. is manufactured by pressing fermented grapes to produce an alcoholic beverage. Even though there are a variety of grapes present in the United States for making wine, only ten types of the grapefruit account for 80% of the wine manufactured in California. There is also a significant difference in the appearance of wines. Wine is sold as white, red or rose. The most popular white wine are Pinot Gris, Sauvignon Blanc, and Chardonnay. The most popular red wine includes Merlot, Pinot Noir, and Cabernet Sauvignon. The three popular types of wines in the U. S. market are table wine, sparkling and dessert wines. Taste is a very subjective factor in the wine business in the United States. Winemakers characterize wine as either acidic, tan, alcoholic, sweet, fruit, or body (Esty & Saldutte, 2018). Wine consumers prefer a balanced wine that is inclusive of all the tastes blended.

Consumers of wine are divided as either alcoholic or non-alcoholic. In the alcoholic beverage market, 15% represent win in the total dollar sales. 24% of adults who consume alcoholic beverages prefer wine. About two-thirds of the total consumers who take wine take it once per week. The rest one third drink wine frequently and account for the total of 80% wine consumption and purchases. Consumers for wine range from overwhelmed customers who prefer cheap wines to enthusiastic customers who prefer wines that are more expensive (Esty & Saldutte, 2018). Esty and Saldutte (2018), adds that frequent drinkers of wine characterise wine by brand and price. Price signifies quality. A wine bar might have on average between 400-800 types of wine. Most consumers do not relate cost to the taste of wine.

Identify business opportunities available for Sandlands Vineyards

For a long period now, baby boomers remain the largest consumers of U.S wine (Dobrow, 2017). According to Veseth (2017), baby boomers represent the millennial generation (people born in (1981-1996). Baby boomers are the most significant consumers in the wine market because they go for the most expensive wine bottles (Veseth, 2017). Veseth goes on to add that baby boomers account for 55% of total sales and revenue in the market segment. However, according to Dobrow (2017), baby boomers or the millennial generation is declining to compare to four years ago when they accounted for 44% of in the wine market segment. Dobrow (2017) adds that the millennial generation is expected to rise over the years.

According to research conducted in the U. S to determine the wine consumers’ DNA, the findings are essential for Sandlands Vineyards. The study summarises wine consumers into six groups: image seekers, everyday loyal, engaged newcomers, price driven, enthusiasts, and overwhelmed (Veseth, 2017). The six groups differ in age and gender. For example, the overwhelmed group consists of mostly females. Enthusiasts are the subject of consideration by winemakers and the account for 15% of total wine profits according to the survey. Image seekers are more like enthusiasts, but they are not as committed to wine. Engaged newcomers are the critical focus in the market segment. They account for 24% of the total wine profits, but they are not loyal to wine. The crucial takeaway from consumer change is that it is highly segmented regarding age, gender, loyalty, price and brand.

  70% of the total wine consumed in U. S. is brewed locally with 90 % produced in California. There are four wine producing regions in California Lodi, San Joaquin Valley, Napa, and Sonoma Valleys. Napa and Sonoma Valleys are the famous wine-producing regions attracting millions of tourists. The remaining 30% of the wine is imported from Australia, Italy, France and other nations. Sandlands thus has stiff competition from the other wineries. Sandland's advantage is that three-quarter of the wine in the market is produced locally. Therefore, there is ready market (The Wine Institute, 2017). Since Sandlands Vineyards has settled to make wine in less popular counties like San Joaquin County, the business is likely to boom and thrive.

Land available in California for setting up a winery was limited. Majority of the growers accounting to 90% had less than 100 cares and 50 acres of land for farming grapes. Land was also very expensive to acquire with strict zoning regulations (Esty & Saldutte, 2018). Sandlands Vineyard tackles the scarcity of land by settling in unpopular area characterised by small lands where there were no majority of grapes growers. Therefore, Sandlands Vineyard had quite a chunk of land all by itself. Another limited resource was service of a skilled wine maker (Esty & Saldutte, 2018). Passalacqua tackled this scarcity by making use of his experience gained at his former winery. Passalacqua also used to influence of his former colleagues and friend for advices on how to obtain and maintain competitive edge.

Recommend a strategy using strategy frameworks for Sandlands Vineyards

Sandlands Vineyards should capitalise on working with small old vineyards that most people avoid (Lawrence, 2016).  This strategy will help Sandlands Vineyards to do things differently and thus stand out from the crowd. Additionally, Sandlands Vineyards use the old classics grapes that are forgotten by other winemakers. Apart from differentiating his style from the rest, this strategy allows Sandlands Vineyards to create and maintain a good relationship with the farmers who are vital to the success of the venture.

Sandlands Vineyards should concentrate on the production of two common types of wines: red and white wine. These are the most preferred types of wines by the consumers. Moreover, as earlier mentioned, loyal customers and wine lovers are more concerned about the brand and price of the wine about quality. Old vineyards have a history of producing tasty and good quality wines, Sandlands vineyard has the advantage of falling in that category. Thus, Passalacqua should capitalise on that advantage and maybe name his wines starting with the name Sandlands (Bonne, 2013), for example, Sandlands Blanc.

Passalacqua having worked in Turley had the experience of making outstanding and tasty wines. Thus, Passalacqua could use his expertise in making good quality wines that are affordable and enjoyable to drink. Sandlands Vineyards should strategically locate its winery in counties that produce low-quality wines such as Contra Costa and San Joaquin counties. Settling for this location, Sandlands Vineyards will dictate how the style of growing the grapes and production of wine.

Sandlands should employ blockchain as a disruptive game changer in the wine industry. Research shows that the future of the wine industry is the blockchain (Miquel, 2018). Blockchain is the 21st century future of any transactions. The technology is highly sophisticated by easy to use. Blockchain is important in the wine industry because it disrupts the long stages of transactions and distribution chain. Moreover, blockchain allows consumers to gain some sensitive information about a bottle of wine. In this regard, blockchain will allow Sandlands consumer to verify the ingredients used to manufacture the wine, exact vineyard location, contacts of the company as well as originality of the drink. Blockchain is a good investment for Sandlands to adopt.

Conclusion

Wine is a lucrative business in U. S. and especially in California. Sandlands Vineyards is located in a strategic place with a promising market and potentially high returns. Even though there is a ready market for wines in U. S. The market is highly segmented. Thus, it is paramount for Sandlands Vineyards to understand the dynamics of the U. S. wine market for a successful business. Passalacqua enjoys the advantage of having a wine production experience from his current employer. Therefore, it is not as complicated for Sandlands Vineyards as it would be dealing with a green venture altogether. Passalacqua knows the dynamics of the market, the tricks of making good quality, affordable, tasty and eye-catching wine.

References

Bonne, J. (2013) The new California wine: a guide to the producers and wines behind a revolution in taste. Berkely, CA: Ten Speed Press.

Dobrow, D. (2017) We are right: millennials are changing the wine market! Copper Peak Logistics (online). Available at: https://copperpeaklogistics.com/right-millennials-changing-wine-market/ (Accessed 28 Sept. 2018).

Esty, C. B. and Saldutte, G. (2018) Sandlands Vineyards: HBS strategy case. SSRN (online). Available at: https://ssrn.com/abstract=3133189 (Accessed 28 Sept. 2018).

Lawrence, J. (2016) California’s affordable cult wines. Wine-Searcher (online). Available at: https://www.wine-searcher.com/m/2016/06/california-s-affordable-cult-wines (Accessed 28 Sept. 2018).

Miquel, J. (2018) How will blockchain technology change wine? SocialVigneros.com (online). Available at: https://socialvignerons.com/2018/09/11/how-will-blockchain-technology-change-wine-interview-with-maureen-downey/ (Accessed 7 Oct. 2018).

The Wine Institute (2017) 2016 California wine sales in U.S. hit new record: 238 million cases with retail value of $34.1 billion. Wine Institute (online). Available at https://www.wineinstitute.org/resources/pressroom/05012017 (Accessed 28 Sept. 2018).

The Wine Institute (2016) Wine consumption in the U. S. Wine Institute (online). Available at: https://www.wineinstitute.org/resources/statistics/article86 (Accessed 28 Sept. 2018).

Thornton, J. (2013) American wine economics: An exploration of the U. S. wine industry. Berkley, CA: University of California Press.

Veseth, M. (2017) Anatomy of the U.S. wine market: challenges & opportunities for Veneto wines (online). Available at www.tv.camcom.gov.it/docs/Corsi/Atti/2015_06_23/US_Wine_Market (Accessed 28 Sept. 2018).

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[Accessed 17 July 2024].

My Assignment Help. 'Sandlands Vineyards Essay: A Case Study.' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/gsbs6060-strategic-management/strategic-analysis-of-sandlands-vineyards.html> accessed 17 July 2024.

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