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The Wine Industry in the United States

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Autor:   •  May 15, 2018  •  Case Study  •  1,008 Words (5 Pages)  •  22 Views

Page 1 of 5

Table of Contents

EXECUTIVE SUMMARY 2

INDUSTRY OVERVIEW 3

COMPANY OVERVIEW 3

SITUATION & POSSIBLE SOLUTIONS 4

EVALUATION OF POSSIBLE SOLUTIONS 4

RECOMMENDATION 5

Executive Summary

The wine industry in the United States is huge with a total retail value of $60 billion. There has been significant growth in the number of wine consumers over the last 50 years. The market however is regulated, which makes it difficult for new players. However, the competition between existing players is quite high.

Sandlands vineyards is a small winery run by Tegan Passalacqua, who developed it while working at Turley wine Cellars using Turley’s equipment. Within few years of its inception, Sandlands has made quite a name for itself. However, since Passalacqua uses Turley’s equipment he is required to limit his production.

Tegan Passalacqua is now interested in investing his own money into the eastside meats and develop it into a full-fledged winery with a tasting center for Sandlands. This would also give him an opportunity to unite his other business – Kirschenmann Vineyards.

This report will list and evaluate the possible options Passalacqua has and will provide a strategic recommendation, which will provide him a sustainable competitive advantage.

Industry Overview

In the United states, the Wine Market in the is huge with total sales of 399 million cases with a retail value of $60 billion in 2016. The per capita wine consumption in the US has grown from one gallon per year in 1965 to two gallons per year in 2016, that shows that the market is growing.

Although there is no correlation with quality, the primary criterion for evaluating wins in the industry are taste and price. The market is further segmented into two categories (based on price) – Value Segment: Costing less than $10 per bottle & Premium Segment: Costing more than $10 per bottle.

While the size, growth rate, barriers to entry (highly regulated) for the industry are favorable, the is fierce competition between the existing players. Also, due the number of choices that customer have, the buyer power is also high.

Company Overview

Sandlands Vineyards is a small winery which produces old-vine wines and is owned by Tegan Passalacqua, who also co-owns the Kirschenmann vineyard. In 2009, Passalacqua made the first wines – a Syrah & a Mataro – using Turley’s facilities. He simultaneously worked as head winemaker at the Turley Wine Cellars.

After experimenting with different vineyards and grape varieties, Sandlands Vineyard released its first batch of wines for sale in 2014 and it received a lot of praise. As Sandlands wines gained popularity, Passalacqua started to increase in list of wines. By late 2017, his wines were served in top restaurants of the country.

Originally Passalacqua wanted to make affordable wines ($24 - $28). Given the quality of his wines, many people advised him to raise prices.

Also two of Sandlands wines are listed in the top 5 of the wine rating lists, which is a testament of the quality of the wine.

Situation & Possible Solutions

Tegan Passalacqua created Sandlands with the core purpose of making his own wine. For years he has been using Turley’s facilities to do so, due to which he is unable to produce bigger volumes. Also, Passalacqua is working on Sandlands wines only during his free time.

With a family to support and limited resources, Tegan Passalacqua is faced with the decision to

1) Use the limited resources ($500,000) to buy the Eastside meats and use the facility to develop it into a winery & a tasting room

2) Save the resources and buy an old-vine vineyard.

Evaluation of Possible Solutions

1) To buy the Eastside meats and use the facility to develop it into a winery & a tasting room

This idea of buying the eastside meats and converting it to a winemaking facility is a bold move. With the Sandlands brand name gaining popularity, this would be the perfect time to expand. However, let us look at the Pros and Cons of this decision

Pros:

• Even with an Investment of $500,000, Sandlands would be have positive margins

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