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This comprehensive analysis delves into the European wine market, examining the dynamics between wine manufacturers, suppliers, and buyers across the off-trade and on-trade sectors. We explore the competitive rivalry, buyer and supplier power, and the threat of new entrants and substitutes. Key factors influencing market segmentation, including geographic, demographic, and psychographic aspects, are discussed. Additionally, we cover essential methods for utilizing and analyzing market data. Stay informed on emerging market trends, including a case study on China's wine market.
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European Wine Case • Wine manufactures • Buyers – off-trade, on-trade • Suppliers – grape growers, bottles • How to use and analyze market data • Datamonitor, Euromonitor
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 entry • Supply-side economies of scale (Intel) • Demand-side economies of scale (ebay) • Customer Switching costs (SAP software) • Capital requirements • Incumbency advantages regardless of size • Unequal access to distribution channels • Restrictive government policies
Threat of Substitutes • It offers an attractive price-performance trade-off • Cost of switching is low
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
Psychographic Behavioral How people use the product What roles people have in the buying process How people respond to the product • Interests • Activities • Opinions • Habits • Lifestyle • Hobbies Geographic Demographic • Age and life cycle • Life Stage • Income • Generation • Social class • Gender • Country • Region • Geographical Borders • Language • Historical geo-political
