Canadian Red Wine This Is Business Plan
- Length: 20 pages
- Sources: 8
- Subject: Agriculture
- Type: Business Plan
- Paper: #36141299
Excerpt from Business Plan :
In 2002/2003 alone, sale of Canadian red wine increased by more than 15% over previous years ("Wineries in Canada" para. 2).
In the domestic Canadian market, Canadian consumers have been drawn to Canadian coolers, but domestic beer and wine have been losing ground to imports, with imported beer and wine products posting an average growth rate of 15.5% and 10.4%, respectively, over the last five years. Red wine has countered this trend to a great degree so that red wine shows a clear dominance over white wine, with 55% of the total volume of red and white wine being red wine. Between 1993 and 2000, red wine increased in sales volume more than did imports, but this trend slowed after that time. For the provinces, only Saskatchewan, Yukon, and Prince Edward Island show higher sales for domestic red wine than for imported brands, as can be seen in the following chart:
Control and Sales of Alcoholic Beverages" paras. 108).
A survey taken in 2004 showed that alcohol consumption in Canada was on the rise as total volume sales of alcoholic drinks increased 4.3% in 2003 and 7.1% in current value terms. This trend was accompanied by the fact that consumers were turning to more expensive, premium products across the board, and the aging of the population was sis shift as older consumers sought more sophisticated premium wine and spirits. Younger drinkers constituted the most dynamic sector of the Canadian market for alcoholic drinks, though, with a growing consumer base of 19 to 35-year-olds seeking more fruit-flavored alcohol and more premium lager, making this group the fastest growing segment of the Canadian beer sector ("Alcoholic Drinks in Canada" paras. 1-3).
Competition in Canada has increased as Canada has become one of the key importers of Australian wine. In 2002, Canada became the third largest wine market for Australian wines, after the U.S. And the UK, with Australian imports rising by 16 per cent in 2001 to around $C1.6 billion and are still rising. To keep this situation moving in the same direction, though, Australian wine producers must maintain quality, value for money, and a consistent supply. Canadian consumers are particularly drawn to the Wolf Blass Yellow Label Cabernet Sauvignon ("Australian Wine Sales in Canada Surge" page).
The Canadian market may be about to change in a way that would alter sales domestically. The market is aging as health concerns are increasing, which may mean that Canadian consumers will also be attracted to the reported health benefits of red wine as well. An increase in disposable income also contributes to a desire for more premium products. Another influence on the market has been the Canada-United States Free Trade Agreement beginning in 1989 after years of negotiation. In 2000, imports accounted for roughly three-fourths of Canadian wine consumption, with approximately 78% of the wine imported into Canada being from the European Union. At the same time, U.S. exports to Canada averaged four million gallons per year out of total U.S. exports of approximately 10 million gallons, and in 1988, U.S. wines represented 12.6% by volume of wine imported by Canada. Canada and the United Kingdom stand as the largest U.S. wine export markets:
This small market share was the reason for the considerable interest in the Canadian market by the U.S. government and California wine producers. In 1987, before CUSFTA, the National Trade Estimate (NTE) on Foreign Trade Barriers (U.S. Trade Representative) estimated the loss to the U.S. wine industry at $20 million to $30 million each year and considered the Canadian market to be worth $100 million to $175 million annually if all existing barriers were removed. Canada is not a large wine producer or exporter. Canada's wine exports to the U.S. In 1992 were 31,000 gallons, worth $260,000. (Heien and Sims para. 5)
Of particular import was the fact that the free trade agreement required the elimination of three specific wine-related discriminatory practices, including "listing practices," referring to the determination of which wines are to be allowed to be sold by the liquor control board in each province; pricing practices on the additional "markup" formulas for imported wines as compared to domestic wines; and new distribution practices requiring Canada to treat U.S. wines as if they were domestic wines. The United States was most concerned about listing practices in the government-operated liquor control boards because of the limited number of U.S. wines available in Canada. The elimination of such barriers also means that it is easier to import Canadian wines into the United States as well.
The changes were seen as most beneficial to U.S. producers, but they may also be useful for Canadian producers now that the Canadian dollar is stronger than the U.S. dollar for the first time in decades.
The American Market
The market has been changing with demographic shifts in the United States and with changing perceptions of alcohol consumption both positive and negative. One interesting development has been the emphasis on wine as a healthful product and as a health aid, in part because of news stories about reduced heart attack risk and other health benefits. Various foreign wines have found a market in the United States, a market that has been growing, and there are signs that these wines are being accepted more and more by the consumer who might previously have turned to French and California wines only.
A survey shows much about the wine-drinking public in America and its preferences. In America, 42% of adults drink wine, and in all 60% sometimes drink alcoholic beverages, some more than one type. America is not usually considered a wine-drinking nation, but these figures are not insignificant. Still, the United States ranks only 29th among the world's countries in per capita consumption of wine. On average, Americans drink 1.8 gallons of wine per year, or 9 bottles per person. The French, by contrast, lead with an average 19.5 gallons per year or 98.5 bottles per person. Most Americans who do drink wine do so only occasionally. In terms of all wine drinkers, each consumes on average a single glass of wine a week, and only 5% of Americans can be called frequent wine drinkers, consuming an average 5.9 glasses, or about one bottle, per week. The data indicate as well that there are demographic differences that are strong. On average, wine drinkers are better educated and earn more money than non-wine drinkers, and frequent wine drinkers climb even higher in these categories. The prototype of the American wine drinker is a female about 45 to 64. She is college-educated and probably lives in a household that is upper income. She typically drinks at home, usually during a meal, and particularly at dinner (Matthews 24).
Wine has a particular image in America as well, a generally positive image when compared with other alcoholic beverages. Acceptance of wine drinking seems to rise with educational level, and this may be related to an increased awareness of health trends and study data. There is a belief that wine can be healthful (Matthews 25), though medical research sometimes supports this proposition and at other times denies it. Even if the issue is not settled, though, the belief that wine has healthful properties is strong and governs the buying decisions for many people. Of course, there is also some belief that red wine is not as healthful as white wine, which would mitigate against the products being considered. Still, the trend is positive. Wine also has an image as a status symbol, which helps explain why its use increases with education and income level. Wine is generally used to facilitate some social interaction in the home, and there is a positive association with sociability (Matthews 26).
American wine-drinking habits generally shift very slowly, and changes are first noted by restaurateurs. They noted in the 1970s when people began moving to chardonnays. In the late 1980s the shift was to Merlot. More recently, a shift has been noted toward alternatives such as Pinot Noir. Chardonnay and cabernet remain the customers' red and white wines of choice. At the same time, there is a growing trend toward value which has brought about a reduction in prices in many restaurants. This does not necessarily bode well for some low-priced wines, however, for some restaurant owners have been eliminating their lowest-selling selections, such as wines from Italy, Australia, and Spain (Heimoff 31-32). This trend as well might mitigate against success for wines from Canada, which are also likely to be in a medium to low price range compared to the better established American brands and the French imports.
Various shifts have been taking place in the U.S. consumer market that would be important for any plan to import wine. U.S. consumer spending for food and beverages was increasing at only about 0.2% per year between 1989 and 1992. Among the reasons for this were changing consumer demographics, a slowing growth of population, shifting buying habits, and concerns about the economy. Economic concerns at the present…