Marketing Analysis of Casella Wines Ltd - Case Study Example

ENTREPRENEURSHIP: The Case of Casella Wines Ltd By {Student’s name} Code+ course name Professor’s name University name City, State Date EXECUTIVE SUMMARY Wine is slowly but surely becoming a major income earner for marketers in Australia. Consolidated sales of wine exporting have increased significantly over the recent years. This report analyzes the marketing plan for Casella Wines Ltd. In so doing, the report defined the key objectives of Casella Wines Ltd, namely: to be the leading wine exporter across the globe, to be the pacesetter in health, quality, environment and safety and to maintain a steady supply and profitability in the wine sector. Casella Wines Ltd is an Australian based company that has for long dominated the wines and spirits market in Australia. Casella Wines Ltd is famous for wine, spirits, champagne and other brands (Kim & Mauborgne, 2005). The organization is committed to quality, reliability and cost effectiveness as far as production of wine and spirits is concerned. Australia’s Casella Wines, a family-owned firm that produces Yellowtail wine is not an exception to the effects of the recent developments. John Casella is the firm’s managing director. Casella Wines Ltd makes a variety of brands including Riesling, Moscato, Semillon, Blanc, Sauvignon Pinot Grigio, Pinot Noir, Chardonnay, Merlot, Shiraz, Grenache and Cabernet Sauvignon Kim (2012). Table of Contents EXECUTIVE SUMMARY 2 1.0 BACKGROUND 4 1.1 Goals 4 1.3 Culture 5 2.0 MARKETING 5 2.1 Market Share 5 2.2 Customer Analysis 6 2.3 Competitor Analysis 6 2.4 Selected marketing Strategy 7 2.4.1 The Product 7 2.4.2 Place /Distribution 7 2.4.3 Pricing Overview 8 2.4. 4 Promotion Strategy 8 3.0 SWOT ANALYSIS 10 3.1 Strengths 10 3.2 Weaknesses 10 3.3 Opportunities 10 3.4 Threats 11 4.0 THE ORGANIZATION 12 4.1 Management Team 12 4.2 Employment 13 4.2.1 Employment Benefits 13 5.2.2 Sales Revenue and Costs 17 5.2.3 The statement of Cash Flow 19 5.3 Break-Even Point of Sales 21 6.0 Conclusion 22 7.0 Recommendations 23 8.0 References 24 Appendix 2 26 1.0 BACKGROUND 1.1 Goals To be the market leader in wine marketer throughout the globe. To be the pacesetter in quality, health, safety and the environment in the wine industry. To maintain a constant supply and profitability of wine throughout the year. 1.2Focus To be the market leader in the wine industry across the globe through adoption of quality, health and safety practices as well as best farming practices, state of the art technologies and high quality products, taking into consideration economic and environmentally sound practices. 1.3 Culture Casella Wines Ltd aims at adding value to the quality of wine throughout the world, in order to create sustainable competitive advantage. 2.0 MARKETING 2.1 Market Share Effectiveness implies that a company must be able to satisfy clients’ demands. To achieve effectiveness, Casella Wines Ltd undertakes the following; they strive to understand the product features that are valued by various market segments; young and transitional consumers and established couples. The company also strives to understand the drivers of uniqueness, and also, how it can create and sustain the uniqueness. Also, the senior managers of Casella Wines Ltd communicate the product features, in order to create a positive perception amongst wine drinkers. In addition, the managers, ensure that the added uniqueness provide more value to the wine consumers. 2.2 Customer Analysis Casella Wines Ltd is accustomed to carrying out a research on the consumers’ needs, attitudes and opinions. Usually, a firm’s marketing strategy is mostly influenced by various factors, which includes; delivering value to the clients, consumer information sources, value drivers, market segments among others. Researching consumer needs is the key part towards developing an effective export plan. It is only by asking wine drinkers what they need that the Casella Wines Ltd can create market responsive wine brands. By researching on consumer needs, the company has discovered the latent consumer needs, and therefore, has set in motion the process of producing appropriate products. To be successful, the company has been in tune with the wine drinkers and produces only those wines that meet the clients’ expectations. 2.3 Competitor Analysis The Australian wine industry has been faced with numerous challenges recently resulting from structural oversupply in the domestic market, weak demand, persistently high exchange rate of the local currency and increasing competition from alternative alcohol-based products (Sun, 2010). The situation has been worsened by the increased campaign efforts against alcohol consumption in the domestic market. Casella Wines Ltd faces stiff competition from assorted types of wines within and outside the Australian market. These include Moutai, Wu Liang Ye, Dukang wine, Mediterranean wines among others. 2.4 Selected marketing Strategy The following is the selected marketing strategy for Casella Wines Ltd; 2.4.1 The Product A study conducted in 2011 by a London-based company found that per capita consumption of wine in Australia is very high compared to other countries (Wine.info.com, 2012). Australia is the largest wine consumer in the Asia Pacific region. However, as mentioned earlier, there has been an oversupply of cheap wine in the Australian market in the recent years. Business people and young professionals in urban areas account for the greatest percentage of wine consumed in Australia. The study indicated that the consumers believe that Australian produced wine is of higher quality. 2.4.2 Place /Distribution Casella Wines Ltd can use the available distribution channels to market its products throughout Australia. The company can involve renowned distributors to promote and distribute products in all cities, in Australia. As McKinsey & Co. (2009) asserts, the established distributors have developed a strong client base, including government and corporate organizations. According to Australian Wine Research Institute (2010), these distribution channels have been supporting new Australian exporters to promote and distribute their wine products. Marketing and distribution firms can assist Casella to sell its products in different places, in Australia. The company should focus on all potential consumers in both rural and urban areas. However, initial approaches should target top markets, especially first-tier cities such as Adelaide and New South Wales. These cities have large populations with relatively high incomes. Product distribution should then be supported by long-term promotion strategies. Importantly, Casella wines will need to strive to develop a relationship with the Australia consumers through a marketing campaign. Trade missions and trade shows are good suggestions for this company before engaging in wine cultural education programs and wine dinners. Brand building and marketing via distribution channels is also essential. 2.4.3 Pricing Overview Previous researchers on the wine market throughout the globe have stressed the importance of setting up a clear price mechanism. According to OaShaughnessy (1995) conducting constant researches on pricing allows marketers to plan for production level, assess the market profitability, and to understand the market price variables as well as the relationship between price and consumption. A research, which was done by Ferrell & Hartline (2010), indicated that wine prices keep on fluctuating throughout the year due to various factors. Casella Wines Ltd will determine the price of its products based on such aspects as competitors’ prices and cost of production. Based on this, the company shall consider the cost of production and the target profit. In addition, Casella Wines Ltd will also conduct a market survey before setting prices. The company shall also consider the competitor’s prices in order to set prices which are attractive (Ferrell & Hartline, 2010). 2.4. 4 Promotion Strategy The promotion strategy in strategic marketing plan aims at breaking down a promotion process from its theoretical perspective to practical perspective based on the predetermined objectives (Bird, 2004). Studies have shown that acceptance of specific brands of locally produced wine by Australian consumers is based on the initial promotional push. As noted earlier, Australian consumers recognize Australia as a producer of high quality products especially due to its green and clean environment policies. It is essential for Casella wines to brand its products as quality and sophisticated wine(Australian Wine Research Institute, 2010). Differentiation of the Yellowtail wine products is essential in order to increase consumer choices. 3.0 SWOT ANALYSIS 3.1 Strengths Casella Wines Ltd has an advantage in that its premium wine brand is recognized in the industry. The company, therefore, will not use huge resources to advertise its wine brands in the Australian market. The company will in turn use the retailers and consumers to advertise and promote the wine brands. In recent years, the company has developed a strategy aimed at maintaining a narrow product line. This has enabled the company to position itself well in the Australian wine industry. 3.2 Weaknesses The resources that are meant for advertising are usually smaller than that of the rivalry firms. Therefore, Casella Wines Ltd will not enjoy a large market share if it does not allocate huge amounts on advertising. Another weakness that can hinder Casella Wines Ltd from achieving its marketing goals in Australia is the stiff competition in the wine industry. The rivalry among wine manufacturing firms in Australia is stronger. More wine companies have launched new strategies in order to gain large market share. Thus, customers will switch to rivals products if Casella Wines Ltd does not produce market responsive wines. 3.3 Opportunities An increase in the Australian population provides a ready market for Casella’s wine brands. The number of young wealthy people in Australia is growing every day. It is believed that the young and wealthy people are the greatest consumers of wine. With the growing number of young people, the wines’ market share is bound to increase. The youths are believed to have a high disposable income. They are also known for spending much on wines and other beverages. Thus, this provides an opportunity for Casella Wines Ltd to exploit. 3.4 Threats Massive adverting campaigns by the competitors and hence expanding their market share. Such rival firms spend huge amounts of money to advertise their products. Wine is not a necessity implying that people can do without it. It is thus an inferior commodity, and therefore, individual demand for the product goes down once the income increases as people tend to consume other products, which they consider being more superior. With this regard, the consumers enjoy high bargaining power, and this is a threat to the company. 4.0 THE ORGANIZATION Casella Wines Ltd practice efficient and effective hiring and training procedures that will facilitate the attainment of the set objectives. Thus, the organization encompasses the right staff with the right leadership skills to make sure that the company achieves success. The care and compassion during the selection of candidates provide this company's success (Kao, 2010). Casella Wines Ltd Organizational Chart Figure 1: Management chart 4.1 Management Team The success of organizations in the modern business panorama largely depends on managerial leadership of the Chief Executive Officer (Enz, 2009). The CEO (John Casella) clarifies the Casella Wines Ltd strategic intent by setting a clear vision. He is required to build a strong organization; that is, come up with a common mission that drives both management and employees. In addition, the CEO is expected to shape the organizational culture; that is, build values and believes that will shape the organization positively. The CEO liaises with the executive and the marketing director, in order to enhance growth and profitability. Joe Casella is the director and he is entrusted with the role of ensuring that the company’s products are properly advertised. He has a marketing background, and is social and outgoing. In addition, he has superb communication skills. Moreover, Marcello Casella is also a director and he is in charge of security and inventory control. These are all key responsibilities that ensure Casella Wines Ltd run smoothly and error free. Hence, it is obvious that the management team at Casella Wines Ltd plays a crucial role with regards to decision making. 4.2 Employment 4.2.1 Employment Benefits Casella Wines Ltd employees are given 13 paid holidays annually as stipulated in the Holidays Act 1910 (SA). The employees also have 10 full vacation days. However, they must ensure that the vacation days are approved by the executive manager. Casella Wines Ltd understand the importance of sick days since everyone gets sick. As such, the company encourages its employees to take 10 sick days. 4.2.2 Labor and Employment Laws Australia has several labor and employment laws aimed at protecting the employees and employers against lawsuits (Ntumy, 1993). Casella Wines Ltd therefore, abide by all Australian labor and employment laws. 4.2.3 Taxes Australian employers are required to keep records of all employees, in order to determine the tax returns. . Casella Wines Ltd follow the Tax laws. Keeping good records also enable the company to monitor its progress, prepare financial statements and keep track of deductible expenses (Lynn, 2007). 5.0 THE FINANCIALS The financial analysis for Casella Wines Ltd begin from the point of the initial investment of startup costs. Further, it explain a 3 year financial projection for the sales revenue as well as related costs. Additionally, it explores the net income of the investor. It concludes by showing the profitability of the business with a break-even analysis. 5.1 Start-up costs Casella Wines Ltd was easy to start because the initial investment required was low. Table 5.1 Start Up Costs Breakdown STARTUP COSTS Fixed Assets 3,000 Insurance 1,500 Inventory 3,000 License Fee 500 Marketing Expenses 1000 Rent 3,000 Store Setup 1,000 Stationery 200 Lodge Setup 3,000 Others 2,000 Total 18,200 5.2 Projection of a 3 year financial Statement The financial reports for . Casella Wines Ltd start from January 1st each year and end on December 31st. 5.2.1 Balance Sheet The Balance Sheet for . Casella Wines Ltd demonstrates the basic financial situation for the first 3 years. Table 5.2 Balance Sheet Casella Wines Ltd BALANCE SHEET ASSETS 2015 2016 2017 Current Assets Cash and equivalent 8,500 10,200 12,240 Accounts Receivable 1,500 1,575 1,654 Inventory 9,000 12,600 17,640 Prepaid Expense 1,500 1,500 1,500 Total Current Assets 20,500 24,375 31,534 Fixed Assets Equipment 3,000 3,600 4320 Accumulated depreciation (300) (900) (1,400) Net property and equipment 2,700 2,700 2,920 TOTAL ASSETS 23,200 27,075 34,354 LIABILITIES AND OWNERS’ EQUITY Current Liabilities Accounts payable 750 788 827 Salary and Wages Payable 1,500 1,575 1,654 Payroll Tax Payable 115 120 127 Sale Tax Payable 550 578 606 Total Current Liabilities 2,915 3,060 3,214 Owners’ Equity Owners’ investment 20,285 20,285 20,285 Retained earnings 0 3,729 10,955 Total Owners’ Equity 20,285 24,015 31,240 TOTAL LIAB & OWNERS’ EQUITY 23,200 27,075 34,454 5.2.2 Sales Revenue and Costs Casella Wines Ltd sales revenue for 2015 and 2016 is projected to increase by 40% and 30 % respectively. As more people in Australian major cities know the business, the sales revenue will increase until and then stagnate. Table 5.3 Income Statement Casella Wines Ltd INCOME STATEMENT 2015 2016 2017 REVENUE Sales Revenue 160,000 224,000 291,200 Cost of Sales 96,000 134,400 174,720 Gross Margin 64,000 89,600 116480 Gross Margin % 40% 40% 40% EXPENSES Advertising 11,000 11,000 11,000 Depreciation 300 600 500 Insurance 1,500 1,575 1,654 Interest Expense 200 210 221 License Fee 500 500 500 Office supplies 600 630 662 Payroll Taxes 1,836 2,570 3,342 Rent 18,000 18,540 19,096 Salaries and wages 24,000 33,600 43,680 Telephone 1,200 1,260 1,260 Store setup 1,000 500 500 Lodge setup 3,000 1,200 1,260 Total Expenses 63,136 72,185 83,711 Net Profit 864 17,415 32,769 5.2.3 The statement of Cash Flow Table 5.4 Statement of Cash Flow Casella Wines Ltd STATEMENT OF CASH FLOW 2015 2016 2017 OPERATING ACTIVITIES Net Income 864 17,415 32,769 Depreciation 300 600 500 Net Cash from Operating Activities 1,164 18,015 33,269 INVESTING ACTIVITIES Purchase of property and equipment 3000 600 720 Net Cash Flow from Investing Activities (3000) (600) (720) FINANCING ACTIVITIES Paid-in- Capital 20,285 0 0 Dividends to the owners 864 13,685 21,814 Net Cash Flow from Financing Activities 19, 241 (13,685) (21,814) NET INCREASE IN CASH 17.585 3,729 10,735 5.3 Break-Even Point of Sales The break-even sales point (Table 5.5) indicates when the sales profit margin can cover the fixed costs during the operation period. The three year break-even sales for Casella Wines Ltd are $65,250, $62,013 and 63,673. Table 5.5 Break Even Sales Break Even Point Sales = Fixed Costs / Contribution Margin Ratio Break Even Sales Year 2015 26,100/40 %= $ 65,250 Year 2016 24,805/40 %= $ 62, 013 Year 2017 25, 469/ 40 %= $ 63673 6.0 Conclusion This report has undertaken a critical evaluation of the current strategies adopted by Casella Wines Ltd. As noted in the paper, entrepreneurs face issues in the event of starting and conducting their businesses. The decision to start a business venture is an opportunity to either make a breakthrough in accumulating wealth or the start of an activity that could consume one’s resources and leave them in a desperate situation (Dutia, 2012). Casella Wines Ltd is an entrepreneurial company because from humble beginnings, it has achieved extraordinary results. Based on the above analysis, it can be concluded that Casella Wines Ltd can be viable under all realistic scenarios. 7.0 Recommendations The company should employ a cost leadership strategy to attract clients and outdo competitors. After determining the needs of the business, it is recommendable for this company to establish a strong management and operating plan that will enable it to run effectively. Compared to other nations, it is relatively cheaper to operate business in Australia due to the efficient and transparent regulatory environment. However, it is always important to understand the laws put in place before to avoid future legal consequences. Casella Wines Ltd should secure financial assistance from banks and other financial institutions in order to expand its business and also purchase modern equipment. The company should implement the set objectives by pursuing a niche marketing strategy. Thus, the company should tap underutilized resources by segmenting the overall market, setting clear goals and objectives and positioning for the competitive advantage. In addition, the company should realize the set objective through value addition, boosting value addition, through awareness, branding, promotions and campaigns. Lastly, Casella Wines Ltd should continue practicing efficient and effective hiring and training procedures in order to facilitate the attainment of the set objectives. Thus, the company should encompass the right staff with the right leadership skills to make sure that the company achieves success. 8.0 References Australian Wine Research Institute 2010), Survey Opens Door to China for Winemakers. Bird, S. 2004. Marketing Communications. South Africa: Juta and Company Ltd. Dutia, S. 2012. Private Equity and Entrepreneurship: An Inequitable Match. Missouri: Ewing Marion Kauffman Foundation. Ferrell, O & Hartline M. 2010. Marketing Strategy. Ed: 5. London: Cengage Learning. Kim, C. (2012). Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard: Harvard Business School Press. Kim, C. & Mauborgne, R. 2005. Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard: Harvard Business School Press. McKinsey & Co. 2009. Preparing for China's Urban Billion. Retrieved 28th March 2013, http://www.mckinsey.com/mgi/publications/china_urban_billion/executive_summary.asp OaShaughnessy, J 1995. Competitive Marketing: A Strategic Approach. Ed: 3. London: Routledge. Sun, B. B., 2010. China: National Wine Market, Shanghai: Global Agricultural Information Network. Wine.info.com 2012. China Emerges in World Wine Market. Retrieved 28th March 2013, http://www.winesinfo.com/html/190/2006228163727593. APPENDICES Appendix 1 Public Holidays in Australia 1. New Year’s Day 2. Australia Day 3. Adelaide Cup 4. Good Friday 5. Saturday after Good Friday 6. Easter Monday 7. Anzac Day 8. Queen’s Birthday / Volunteers Day 9. Labour Day 10. Christmas Eve 11. Christmas Day 12. Boxing Day / Proclamation Day 13. New Years Eve Appendix 2 Owner’s Resume Personal Details Name: John Casella Sex: Male Nationality: Australian Career Objectives Leaning towards efficiency and effectiveness Education Course: Bachelor of Commerce (Finance) Organization Casella Wines Ltd Skills Excellent communication skills, flexible, quick learner, reliable, time management and computer literate. Read More