Wine Market Case - Porter Five Forces
PONTIFICIA UNIVERSIDAD JAVERIANA
ESTRATEGIA EN ACCIÓN – WINE MARKET CASE
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In the following paper the reader will find a brief analysis of the wine industry in the U.S with the five forces of Porter.
The wine production history has been very important since the Egyptian civilization; they began to develop several rustic techniques to create the finest wine. Nowadays, using more complex techniques, wine experts have created a big variety of this alcoholic drink which could be divided in what the consumer wants: quality or price.
The five forces of Porter analyze the competitive intensity and therefore how attractive an industry is. The first force is the rivalry among existing competitors, which in this case the top 8 wineries in the U.S had 75% of the local wine production while the rest 25% was divided between 2.500 wineries. This shows the difficulty for the small companies to compete with the rest, not only because they have a small percentage of the market, also because of the sale price and the production costs that they manage.
The second force is the threat of new entrants. “The US wine industry witnessed tremendous growth with the number of wineries growing more than 24% to over 3,000 domestic producers overall” (p. 4). This growth reveals the high competition the industry is passing through and how consumers have hundreds of different choices, making it so hard for new the producers to join the market and succeed. Nonetheless, it is a threat for the existing companies which generally lower their prices to eliminate these new companies.
The threat of substitutes in this case is the problem that wineries have with the wine demand which is not as high as they expect. Just 10% of Americans drink wine regularly, while 46% prefers beer or spirits. Wine consumption is targeted to older drinkers who live in suburbs or urban areas, that’s why the percentage of beer drinkers or other alcoholic
ESTRATEGIA EN ACCIÓN – WINE MARKET CASE
-------------------------------------------------
In the following paper the reader will find a brief analysis of the wine industry in the U.S with the five forces of Porter.
The wine production history has been very important since the Egyptian civilization; they began to develop several rustic techniques to create the finest wine. Nowadays, using more complex techniques, wine experts have created a big variety of this alcoholic drink which could be divided in what the consumer wants: quality or price.
The five forces of Porter analyze the competitive intensity and therefore how attractive an industry is. The first force is the rivalry among existing competitors, which in this case the top 8 wineries in the U.S had 75% of the local wine production while the rest 25% was divided between 2.500 wineries. This shows the difficulty for the small companies to compete with the rest, not only because they have a small percentage of the market, also because of the sale price and the production costs that they manage.
The second force is the threat of new entrants. “The US wine industry witnessed tremendous growth with the number of wineries growing more than 24% to over 3,000 domestic producers overall” (p. 4). This growth reveals the high competition the industry is passing through and how consumers have hundreds of different choices, making it so hard for new the producers to join the market and succeed. Nonetheless, it is a threat for the existing companies which generally lower their prices to eliminate these new companies.
The threat of substitutes in this case is the problem that wineries have with the wine demand which is not as high as they expect. Just 10% of Americans drink wine regularly, while 46% prefers beer or spirits. Wine consumption is targeted to older drinkers who live in suburbs or urban areas, that’s why the percentage of beer drinkers or other alcoholic