Wine in Australia

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  • Produce on templates climates. Europe & States (Napa & Sonoma valleys), Chile, Argentina, South Africa, and Australia.Wine industry: Main competitors: Beers & liquors (part of the alcoholic drinks)Wine industry: Light wine, Sparkling wine, Fortified wine & Vermouth, Non-grape wine.Old World—France, Italy, and SpainLarger domestic market Learning curveImage as authentic Strong position in luxury segmentGovernment supportLong, multilevel value chainLack of big brand since limited resourcesToo many complex regulation and restrictionsChanging and shrinking domestic demandWeak in marketing and distribution activitiesNew World—U.S, Australia, and ChileLow cost in land and laborHigh productivityMore effective business modelStrong marketing skillsFlexible product development Close by many of the new marketsPoor image as "Cheap and Cheerful"Oversupply
  • Compound Annual Growth Rate (CAGR)
  • Some key facts:Population, GDP, Area: 7,682,300 square kilometres (country comparison to the world: 6) Population: 21,766,711(July 2011 estimated; country comparison to the world: 55) Population growth rate: 1.148% (2011 est.; country comparison to the world: 102)Currency: Australian dollar (A$ = 100 cents)Exchange rate: 0.984 (AUD / USD)GDP: 1.22 Trillion (2010 Est.)GDP per Head (PPP): $41,300 (2010 estimated, 17 over the world)GDP real growth rate: 2.3% (2011); 3.3% (2010); 1.2% (2009); 2.2% (2008)The position of Australia to Kyoto agreement could be changeable taking the last government which was formed with the Liberal party, with the help of green parties. At the same time, it has challenges and implication from the economic and political perspective. Australia is the second country per capita more polluter, after US.Easy to build a businessStable growth rate, inflation and unemploymentBehaviour of the exchange rate; compare with Chinese rate and other countriesGood position to export to Asia Pacific countriesFree Trade agreement with the Asia Pacific countries which represents the highest demand rate of growth.How to deal with the climate change? Australia has been one of the most affected countries. Are some impacts in the wine industry?
  • The elasticity of wine demand makes it vulnerable.Australian wine has strong tax advantage compared to imported wine.The market is highly fragmented. Three top products control 42.2% of market volume.Consolidation in the retail sector impose downward pressure on wineries profitability margins.The industry is vertically integrated. Still, companies buy grapes from independent farmers.FDI is almost USD $ 700 (agriculture figures, included wine)China’s perspective:Australia represents the 3th (third) main importer based on volume, but the 2nd (second) based on price. With a relevant growth of rate.
  • Here is presented the key main factor to take into consideration:
  • The investment is a must to be part of a successful producer.Increasing the competitive advantages through:Use the brand equity to increase the brand image of the Australian production (risk: dilution of my brand, slippage value)Achieve synergies:
  • Cost: It is important to make the difference between the potential growth rate of the potential partner, and its brand value. The recommendation is to seek a potential partner that does not have a strong brand due to this will be developed by the client (know-how).Facilities: The potential partner should have a vertical integration process which means the company should have under their assets the grapes crop, the production, and the distribution. This will assure the right assets to start with the Australian operation, and the necessary know-how of the Australian market.Complementary operations and products: The potential partner should have a complementary operation with the client which means the main products should not be a main competition for the client’s current products. Also, the Australian operation should create synergies which mean the facilities should have the enough production volume to assure a right products diversification for the future. 
  • This report is a first steps.The action plan should follow a deep analyse of the Australian Market. The goal is looking for available local players that fit with the client’s needs.StepsFinancial due diligence
  • Wine in Australia

    1. Rahul Rani@rvnrahulrvnrahul@gmail.com 1
    2. Objective: Why Australia?Analyse Australia • Wine IndustryGive a recommendation • Add value? • Pros & Cons 2
    3. Worldwide Wine IndustryOriginated and developed in EuropeWestern Europe is the dominant market for wine, accounting for 47% of the global salesAsia Pacific is the emerging and second large market, accounting for 17% * Data EuromonitorU.S. and China are the most 3 dynamic new markets
    4. Main Worldwide Markets Data: Euromonitor 4
    5. AustraliaBased on PESTLE analysis:Kyoto Agreement  Challenge for the whole Country • Affected by the climate changeEasy to build a business • Stable growth rate, Inflation and UnemploymentExchange RateGood position to export to Asian Pacific countries • Free Trade agreement with the Asia Pacific countries 5 • Current on negotiations with China (15th Round)
    6. Wine in AustraliaFive forces analysis:The industry is vertically integratedConsolidation in the retail sector • Pressure on wineries profitability marginsThe market is highly fragmented. Three top products control 42.2% of market volume A$ million 2005 2006 2007 2008 Total 2,759.90 2,765.60 2,979.60 2,532.90 UK 918.1 935.8 991.1 829.9 US 904 850.1 868.5 682.1 Canada 254.5 241.6 280.7 229.9 6 New Zealand 99.6 101.8 105.2 92.2 China 14.5 37.3 55.8 73.8 Euromonitor, 2010
    7. Key ConsiderationsPros: Cons:Country’s Stability Cost • Economic, Social, Political • “New world countries” & Environment Exchange RateDiversification of the • AUD appreciation production Price & ReputationMarket & Distribution • Average sales priceTrade with growing Over-production Markets • Grapes value • Asian Pacific countries (Vietnam & Philippines) • China 7
    8. OptionsInvest nowInvest afterNever invest 8
    9. RecommendationsInvestBe part of the 4th main exporterKnow – How • Leverage with a Quality Brand Key FactorsSynergies Ease of Business 10 Economic and Legal Stability 9 • Distribution Channels Environmental Initiatives 8 Cost 7 • Increase Products Portfolio Price and Reputation Position for Trade (proximity) 6 9 Segmented Market 7 Free Trade Agreements 6 9 Total (out of 80) 62 Favorable to our organization 78% Rating based on favorable to our Organization 10 - Very Favorable 1 - Unfavorable
    10. Issues on ImplementationLook for a Local Medium Player Cost: • Brand Cost v/s Potential Business Facilities • Vertical Integration (grapes , production & distribution) 10 Complementary operations & products
    11. Action PlanNext step: 6 MonthsAnalyse potential candidates Due diligence Production Brand creation: Advertising & New product position Increase potential distribution channels 11
    12. Venkata Naga Rahul Rani@rvnrahulrvnrahul@gmail.com 12

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