Friday, November 27, 2009

Marketing Management - Australian Wine

Winery’s Steady Growth to the Top Marketing Management Memo
The Key issue:
Witchmount Estate is restricting their market due to concentrating on defender strategies in their small local market. Market Expansion is required to take them to the next step.

Why is this concern?
This is a concern for many reasons. The most obvious is market size – it was stated that “Australians consume less than half the amount of wine per person that the three leading wine-producing countries” (Walker*, 2009, p377). Australia was ranked 8th in terms of Consumption in wine producing countries (Walker*, 2009), while production has increased. Production has reached levels that Australia is now the 5th largest wine producer. So while there is a market for Australian grown wines, a large percentage of this market is overseas, with very few Australians suppliers tapping into what is a very large potential international supplier.
This is also a concern as the local Australian market is reaching a form of saturation, due to having a large number of high quality wineries – all of which are now facing a price war due to high supply and low demand for their wine. This has led many to Guerrilla type tactics as they attempt to grab market share of the Australian market.

So how does this fit with the cases of Witchmount Estate?
Witchmount Estate is a well established Australian winery. They have established means to get exposure within both Victoria, and Australia as a whole. They now have a reasonable share of the domestic wine sales market within Australia through their distribution chain of resellers and integrators (hotels and restaurants) (Walker* 2009).

Where is the problem then?
They now find themselves concentrating too much on defender strategies. Whereas new markets need to be considered to move the company forward. Currently the only opportunity they have to sell wine to an international based consumer is via their local distribution network. Due to the unlikelihood that a visitor to Australia will not buy a bottle of wine from a reseller – this means that Witchmount are relying heavily that international tourists coming to the Victoria region, will visit their vineyard or drink it at their hotel.

So how is this solved?

Changing from a Defender Strategy to Share Maintenance:
Defender strategies do not work forever. Eventually new markets and new reputation will need to be sought to keep the brand name alive. My recommendation would be to go international (explained later in the article). By becoming an international brand, Witchmount Estate sets a point of difference between themselves and other competitors in the local market.
By pushing a Share Maintenance strategy (Walker*, 2009) developing a new area internationally – the respect will be reflected back into their local market.
This strategy can also be improved by making repeat sales easier, an example of this might be to give a discount to local sales if they ‘trade-in’ their old, empty Witchmount Estate bottles for discounts on a new one. This also creates a “Positive Network Effect” (Walker*, 2009, p208)

Grow an International Market by leapfrogging competitors:
By skipping a country-by-country distribution, and rolling out a full international strategy, Witchmount Estate effectively “Leapfrogging” (Walker*, 2009, p222) their competitors.
This could be done via their supply chain, where they arrange a contract to offer discounted wine to Airlines and their meal suppliers. This means they are effectively offering ‘sampling’ around the world. Increased production will be required, but this should not be too much of a problem as currently only 55 of 200 acres are planted with vines.

Another leapfrog activity would be to enter international competitions. Currently Tony’s goals are set to low – with him only wanting to achieve high prestige within the state of Victoria (Walker, 2009). These goals need to be lifted to continue forward. Without the shift in objectives, Witchmount Estate will enter a price-war with other local wineries over a very small market.

Walker, O, Gountas, J, Mavondo, F, Mullins, J. (2009). Marketing Strategy: A Decision-Focused Approach
N.S.W. Australia: McGraw-Hill

Indirect References:
Pride, W, Ferrell, O, Elliott, G, Rundle-Theile, S, Waller, D, Paladino, A,. (2008). Marketing: Core Concepts & Applications
Qld, Australia: Wiley