Situational Analysis of the UK Wine Industry - Case Study Example

Wine Marketing Name Course Name and Code Instructor’s Name Date Introduction UK has a tremendous wine industry that has been maintained at an approximately constant consumption level between 2006 and 2011. Due to unending demands on the market, the industry imports wine products from different countries across Europe, Asia US, South Africa, and from South American countries. For instance, these wine products are imported from Australia, Italy, France, US, Spain, Chile, South Africa, German, New Zealand and Argentina. There has been a significant change in imports per country for the last ten years. The Australian wine imports stand at +9 for past ten years. The UK wine market is segmented into three main market segments that any wine company can target when marketing their wine products. Australian Wine Company aimed at penetrating the UK wine market must work extremely hard in order to accomplishing its objectives given the fact that the market has many players (Giuliani, Morrison and Rabellotti, 2011). This is a marketing paper that comprehensively discusses the UK wine industry situational analysis; the external environmental issues that a company faces in an international market. Similarly, the paper will provide an intensive industry focused analysis including production, distribution patterns, current import trends and competition, and consumption patterns. Above all, the paper will provide a marketing strategy that the company can use to successfully market its wine products. Situational Analysis of the UK Wine Industry The wine UK market cannot be strongly related to seasons; notwithstanding this, during the summer season it has been found that there is always a sales increase (Giuliani, Morrison and Rabellotti, 2011). The external environment affects the marketing activities of any company particularly one that is expanding its operations to overseas markets. With regard to this understanding, an Australian Wine company that is aimed at marketing its products on the UK wine market will be affected rather impacted by the following environmental forces. Political/Legal Factors: Politics of any country affects its economic growth and hence it has a massive impact on the marketing practices of any company (Hall et al. 2012). For instance, legislations like minimum wage or anti discrimination laws, voluntary codes and practices, market regulation, trade agreements, tax levies, and the kind of government regime in power sill directly influence the company’s marketing activities (Giuliani, Morrison and Rabellotti, 2011). A company that does not conform to the country’s legislative obligations is likely to fail in its marketing pursuits. UK has a stable political environment thus favouring the development of business both from within and outside its borders. However, the country has high taxes on wine products, which have made them expensive (Hall and Sharples, 2008). Accordingly, there are other legislations that demand for reducing the wine glass size; this has an implication of decreasing the amount of wine consumed through on-trade businesses (Hall and Sharples, 2008). Economic Factors These are the national and global economic factors that have direct impact on marketing of any product. In this regard, the national and global interest rates together with the fiscal policy are the primary determinants of economic conditions (Giuliani, Morrison and Rabellotti, 2011). The economic climate dictates the consumption trends of the market. An economy that is undergoing recession has high levels of unemployment and thus low spending power and stakeholder confidence (Smyth, Russell and Milanowski, 2011). On the other hand, booming economies have low unemployment rates with high consumption rates due to high spending power and high stakeholder confidence. The UK wine industry like any other industry was affected by the 2008 recession, which resulted into low wine consumption rates. Similarly, the strong Euro resulted into an increase in wine prices thus low consumption (Hall et al. 2012). However, this phenomenon improved the returns in the new world countries like South Africa. Accordingly, it prevented European wine manufacturers from competing with new world wine manufacturers. Currently, the UK economy is slightly stable and hence favourable for investment. Socio/Cultural Trends These are the forces within the society such as family, friends, colleagues, and the media (Hall and Sharples, 2008). These forces have direct and indirect impact on consumer attitudes, interests and opinions; they shape how the consumer behaviour and trends. Population changes similarly, have a direct influence on the company’s marketing activities (Smyth, Russell and Milanowski, 2011). The change in population affects the demand and supply of goods and services within any economy. For this matter, an organization must position itself to provide products and services that are aimed at complementing the benefits of people’s lifestyle and behaviour. In UK, consumers have placed a high regard to their health, for this matter, peoples drink less wine due to their presumption that less wine is healthy (Giuliani, Morrison and Rabellotti, 2011). With regard to this, people spend less on wine particularly when wining outside; however, they indulge in drinking wine at home. More importantly, the binge drinking is a well known social stigma in UK, which has made many people to spend less on alcoholic drinks including wine (Hall and Sharples, 2008). Technology Advancement in technology has greatly transformed the manner in which businesses are operated (Matasar, 2006). For example, a company can use technology for the following purposes: information exchange, business management, and transmit and record information. Technology has created a society that expects instant results (Smyth, Russell and Milanowski, 2011). The advancement in technology has increased the rates at which information is exchanged between stakeholders (Hall and Sharples, 2008). A faster exchange of information is instrumental to businesses as it makes them to react aptly to changes within their operating environment (Hall et al. 2012). The UK Wine industry use different technologies in flavouring their wines. Accordingly, the use of marketing information management systems has been vital in reaching a wider customer base (Carlsen, 2006). Business Operations Under this section, the paper will discuss production, distribution patterns, current import trends and competition, and consumption patterns in the UK wine industry. Production: wine production in the UK is heavily affected by the cold UK climate, however, during the summer season, English vineyards thrive hence encouraging increased production of wine (English Wine Producers, 2013). For instance, there are over 400 vineyards in the UK that covers approximately 3,500 acres that are very instrumental in production of sparkling and still wines (English Wine Producers, 2013). Distribution patterns: in the UK, the best and major distribution channel for wine is through supermarkets. Supermarkets are the main stockists for wine products followed by on trade shops like pubs. Hotels and restaurants are also other distribution channels for wine products. Wine Consumption in UK Table showing the UK wine consumption from 2006 to 2011 Year 000s of cases 2011 129,615 2010 133,952 2009 135,000 2008 134765 2007 135,723 2006 133,242 WSTA (2012) From the above table, the wine consumption in the UK is approximately stable; there is less variation from one year to another. However, the wine consumption shows a significant in the year 2011. UK Wine Imports Table showing UK wine imports based on country of origin Country Volume (000s of cases) % (last 10 years) Australian 25,495 +9 Italian 19,529 +69 French 19,529 +34 USA 16,055 +59 Spanish 12,170 +78 Chilean 11,709 +83 South Africa 9564 +1 German 4800 -52 New Zealand 4787 +283 Argentina 2100 +62 WSTA (2012) The table shows that Australia is the key wine exporter to the UK wine market while Argentina is the least exporter. Market segmentation The UK wine market is segmented based on the demographics where age and gender are the main factors. It is vitally important to note that wine drinking in this market is not linked to a specific gender (Landsperger, 2009). Males and females are potential wine customers. In this regard, there are three major segments in this market that are based on age: the first segment comprise of individuals of ages between 25 – 34, the second segment consist of individuals aged between 35 – 65, while the last segment is made up of people aged above 65. Studies have also established that the third segment is a major wine consumer hence provides a potential market as compared to other segments (WSTA, 2012). Accordingly, WSTA (2012) postulated that there are approximately 36 million people consumers of wine in UK. Marketing Strategies (4p Mix) The best marketing strategies for Australian wine in the UK market should be based on the 4p marketing mix: product, place, price and promotion (Smyth, Russell and Milanowski, 2011). The marketing mix is used as an essential tool in marketing-by-marketing professionals (Hall and Sharples, 2008). The marketing mix tools identified above will be discussed independently in this section. Product: this is a seen item that satisfies consumer demand. It is a tangible good or intangible service. In this regard, tangible products are things that have independent physical existence. The Australian wine products that are positioned to satisfy the consumer demands include Sweet Red Wine, Dry White wine, Semi Sweet, Sweet Rose, and Fortified Wine. The alcohol content in these products ranges between 12.5% - 13.5%, the sugar content is approximately between 4 - 8g/l. Similarly, they are packaged as from small quantities of 75cl. Place: for products to reach the end users they must be placed in strategic locations for ease of access (Giuliani, Morrison and Rabellotti, 2011). For this matter, Australian wine should be distributed using strategies like intensive distribution to reach a wider market, selective distribution to reach the three market segments selectively. Accordingly, exclusive distribution can be used to reach a specific market like that of seniors. The major distribution centres for Australian wine are supermarkets, on trade pubs, and hotels and restaurants. Price: this is the amount of money that customer should pay for a product (Jackson, 2008). This is particularly important in determining the company’s profitability and survival in the market (Smyth, Russell and Milanowski, 2011). Price adjustment has a profound influence on the company’s marketing strategy. With regard to this, when setting the price for Australian wine, marketers must take into consideration the customer perceived value for the product. In this regard, pricing strategies like market penetrating pricing and neutral pricing should be used for marketing the Australian wine. English wine consumers are highly sensitive to price particularly due to hard economic times. The average spend per bottle of wine for at home consumers is approximately £5.02 while the average spend at restaurants per bottle is £15.37 (Gold, 2006). Following this establishment, Australian wine should be priced between £5.02 and £15.37 in order to attract a wide range of customers (Gold, 2006). Promotion: these are the methods that company use to communicate to different target markets about the product they are offering (Giuliani, Morrison and Rabellotti, 2011). Promotional strategies include advertisement, public relations, personal selling and sales promotion (Hall et al. 2012). Marketing of the Australian wine should comprise of an integrated marketing communication. For instance using different forms of advertisement, including TV and radio adverts during prime times, Billboards along major roads and in major towns and cities. Adverts can also be printed in the daily newspapers, and magazines (Dinkhoff, 2011). The company can also employ the use of direct marketing/interactive marketing that will help in interacting with customers in real time to provide them with the relevant information while at the same time capturing data with regard to what the customers really need (Freitag, 2005). The use of publicity and public relations will automatically help in attracting customers (Dougherty, 2012). Conclusion Marketing is the art of making the market aware of the products you are offering. UK wine industry comprise of different players. The industry imports its products from different countries across the world; however, Australia is the biggest wine exporter to this market. The industry has a stable business environment that is key in encouraging business investment both from within and outside the country. The political environment is stable, although the industry was affected by the 2008 global recession; the economy is favourable for business. Similarly, the social and technological factors are good for investment. The industry has three wine market segments that must be targeted by any company that want success in this industry. Marketing of Australian wine demands the use of the 4p marketing strategies for success to be attained. References Carlsen, J. 2006. Global Wine Tourism: Research, Management and Marketing. London: CABI Dinkhoff, M. 2011. UK Beer Industry Analysis: Porter`s Five Forces. New York: GRIN Verlag Dougherty, P. 2012. The Geography of Wine: Regions, Terroir and Techniques. New York: Springer Freitag, N. 2005. Critical the Impact of Culture on International Marketing Plans and Review of the French Wine Industry. New York: Grin Verlag Giuliani, E., Morrison, A., and Rabellotti, R. 2011. Innovation and Technological Catch-Up: The Changing Geography of Wine Production. London: Edward Elgar Publishing Hall, C., and Sharples, L. 2008. Food and Wine Festivals and Events Around the World: Development, Management and Markets. London: Routledge Hall, C., Sharples, L., Cambourne, B., and Macionis, N. 2012. Wine Tourism around the World. London: Routledge Jackson, R. 2008. Wine Science: Principles and Applications, 3rd Ed. London: Academic Press Landsperger, J. 2009. The impact of New World wines upon the UK market. New York: GRIN Verlag Matasar, A. 2006. Women of Wine: The Rise of Women in the Global Wine Industry. California: University of California Press Smyth, M., Russell, J., and Milanowski, T. 2011. Solar Energy in the Winemaking Industry. New York: Springer Gold, J.B. 2006. The English Wine Market. Institute of Cape Wine Masters English Wine Producers, 2013. Promoting the Fine Wines of England. Available at http://www.englishwineproducers.com/ The Wine and Spirit Trade Association. 2012. UK Wine & Spirit Market Overview. Available at http://www.wsta.co.uk/images/mr/2012marketoverviewweb.pdf Read More