European Market With a Chilean Term Paper
- Length: 10 pages
- Sources: 18
- Subject: Agriculture
- Type: Term Paper
- Paper: #66979132
Excerpt from Term Paper :
Thus, despite the high per-capita incomes in Scandinavia, consumers are value-conscious. Unlike Germany, Scandinavians are willing to pay more for wine, and recognize quality differences.
Like Scandinavia, the Netherlands is open to wine imports. With historical connections to Spain and Portugal, and without alliances with Italy or France, Dutch wine drinkers are friendly to imports and to the Spanish character found in Chilean wines. Like Scandinavians, the Dutch have high per-capita incomes are willing to spend for super-premium wines. They are unwilling to 'overpay' for quality, however, and are likely to compare the quality of an 8 pound Chilean wine to similarly-priced products from Australia, the U.S. And other major wine exporting countries.
Chilean Wine Promotion in Europe
Chile is not alone in wanting to increase wine exports to Europe. Australia and the United States have developed significant market share and see growing exports to European markets. The Wine Australia organisation has researched the European market, and predicts country- and segment-changes in wine demand. The UK has long been Australia's number one wine importer, but overall trends there are static. The biggest growth is coming from "secondary" markets, such as Belgium, Denmark, Sweden and the Netherlands. In those countries, Australian wine imports in which the per-case prices have exceeded AU$90 have changed as follows (Thomas 2007):
Chile signed a free trade agreement with China in 2007, which envisages a cut in tariffs on Chilean wine exports to China over the next 10 years. Chile's target is to become China's number one wine import source (Alcyon 2007).
Chile's largest wine producer and exporter by far is Concha y Toro, which has seen year-on-year growth between 12 and 30% in recent years (Food&DrinkEurope.com 2003). Concha y Toro has pursued a policy of emphasizing "super-premium" wines, which sell for over US10.00 per bottle at retail. As a result of their success in exports, the overall image of Chilean wines has been improving vis-a-vis other world wine exporters.
Segmentation by Retail Outlet
Wine is sold at significantly different prices in different retail venues. The lowest-priced (wholesale) prices come from sales for private label and bulk wines. Discount superstores (e.g. Tesco, Metro, and Carrefour) come next in pricing, although some hypermarkets attempt to use premium wines at lower prices in order to attract wine-savvy customers. Retail shops and liquor specialists are higher in pricing, while restaurants offer mark-ups of 2 to 4 times the retail "High Street" price.
The customer expects different levels of personal interaction and advice depending on the venue. One way to regard wine price vs. venue is the amount of interpersonal interaction and recommendation used in the wine purchase decision:
Private label grocery store
None -- depend primarily on store reputation
Bulk purchase (e.g. "wine from Chile")
Lowest (wholesale and retail)
None -- no personal interaction; sold primarily in hypermarkets
Some, if store owner is enthusiastic
Corner wine shop
Shop owner and employees "push" favourite wines; know their customer and what they like Restaurant
Highest (2-4X retail)
Most important: most people try new wines at restaurants (Frost 2007)
High -- with tailoring to specific wants or needs
National market, chosen retail segments
This medium-sized producer has several positive trends in its favour in entering the European market now as opposed to a few years ago. The perception of Chilean wines as competitive on the world market, particularly through the active promotion of Concha y Toro, has opened retailers' and consumers' minds for other super-premium wines from the region.
Confusing brand images from major EU producers has made it easier for well-positioned non-EU wines to gain share, particularly in those countries which do not have significant wine production. Favourable exchange rates vis-a-vis the Euro and the UK Pound have made Chilean wines more affordable when compared to super-premium wines from Europe. The earlier success of the Australian and U.S. wine brands has also opened peoples' minds in some European countries.
As we've seen from the above analysis, some very large wine markets would not be wise choices for the Chilean producer; regional preferences and a high market-entry cost make it unlikely that a marketing effort in those countries would be a wise investment.
Given that this wine producer has no market share in Europe at the moment, it would be wiser to establish its brand and a loyal customer following in smaller markets. It should also choose markets where the marketing expenses are reasonable, while achieving a brand image.
This author would argue, therefore, for a triple market entry strategy, with some differences in positioning in each of the chosen market introduction areas:
For Scandinavia, the company should pursue country-by-country advertising in order to establish an image. Since there is only one buyer in 3 of 5 Scandinavian countries, it can efficiently pursue those buyers with an argument for taste and value.
For the Netherlands, the company can pursue a "value-pricing" strategy, orienting its advertising and in-store marketing to comparisons against other well-known, non-European and European super-premium wines costing a good deal more.
For the UK, which is arguably the largest 'prize' in Europe, the company may consider a regional roll-out, with a concentration at first on restaurants and wine bars, rather than going directly to the (very tough) buyers at the major supermarkets. The goal should be to build longer-term brand awareness, then use demand-pull to come to the retail outlets.
It is always tempting to go after the biggest markets (France and Italy), the most populous (Germany) or the markets with the highest disposable income (Switzerland, Norway, Luxemburg). In the case of this Chilean producer, it may also be tempting to pursue the Spanish market, given language and historical ties.
A better, market-driven strategy is to focus resources where they can bring the best return. Market share is easiest to gain in countries where the market (in this case, for non-EU super-premium wines) is growing fastest. Thus the best countries for market entry include the five countries of Scandinavia, the Netherlands, and, gingerly, the United Kingdom.
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Frost, D. "Selling Wine: Most People Don't Prefer Wine in the Bottle, They Prefer it in a Glass." RestaurantOwner.com. 2007. http://www.restaurantowner.com/public/381.cfm (Accessed November 24, 2007).
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Thomas, G. Western Australian Key Trends and Market, a European Perspective. Economic Trade, London: Western Australia, 2007.
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Measured in thousands of hectoliters: one hectoliter equals 100 liters
Source: Global Wine Production, Consumption and Trade, 1961 to 2001: A Statistical Compendium (Adelaide: Centre for International Economic
Studies, 2003), by Kym Anderson and David Norman (Anderson 2003)…