Industry Characteristics Essay
According to The Global Drinks Market: Impact Databank Review and Forecast 2001 Report the wine market was 2. 55 billion cases, which is expected to increase by 120 million cases by the year 2010. The rate of growth was 2. 2 percent in the year 2001 and increased by another 1. 2 percent in 2002. The chief growth area is expected to be in the major wine consuming nations like UK, US, Australia and South Africa. In addition, the lesser developed markets like China and Russia are also expected to expand.
The top 25 brands accounted for only 7 percent of the global market, which makes it unique among other alcoholic beverages, where the market share is dominated by branded products. Wine is again categorized into categories like popular or jug, premium, super-premium or ultra-premium and specialty wines in the increasing order of cost. The global market of wine products is ruled by Italian wine producers who control about 26. 5% of the market followed by France controlling 22. 9% and Spain about 14. 4% of the market share.
The remaining countries exporting wine are Australia, Chile, US, Germany, Portugal, South Africa and Moldavia with market shares ranging between 5. 5 –
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The market itself is expanding in all segments like retail and wholesale, and the production capacity is also increasing in proportion. The major change in the market is expected to be due to the present trend of globalization trend. The companies are hence tending towards mergers and acquisitions to take advantage of the newer markets and consumers. This is due to the very localized nature of the market and the difficulty in knowing the local network and also consumer preferences. C. 5 Forces Analysis of Competition
Industry Rivalry: In terms of industry rivalry the industry is highly fragmented and so while the entry is not a big issue the market share becomes a problem Threat of New Entrants: The fragmented market also makes fplace for the possibility of other newer entrants to enter into the market. Threat of Substitute Products: While people who consume wine essentially know about the unique tastes, yet the presence of other alcoholic beverages available makes for a whole new area of competition, where the companies have to compete with other competitors as well as other alcohol based products.
Bargaining Power of Suppliers: The fragmented nature of the industry means no standard cost. This means that the manufacturers are almost entirely dependant on the wine-suppliers to get their products into the market and so price-margin calls for extensive bargaining. Bargaining Power of Buyers: Consumers too can easily switch from one buyer to another in which case the sellers have the additional burden of keeping their buyers happy in terms of price while taking care of their profit margins.