Positioning Strategy of Accolade Wines - Case Study Example

EXECUTIVE SUMMARY This report highlights the positioning strategy that Accolade Wines, one of the leading wine producers of Australia can develop to enlarge its market base by targeting Asian countries like China and India. Both this countries has emerged as significant markets of wine importing countries. The company in order to capture the same needs to apply a dual strategy for brand consciousness, with price-quality products for positioning its products. Since the markets are price sensitive a price penetration is considered to be a suitable strategy. With alluring profits many competitors had gained entry in market; however brand plays an important role in success which Accolade Wines through its positioning strategy can definitely achieve and ensure higher returns and profits from the same. TABLE OF CONTENTS 1.0 INTRODUCTION 3 2.0 COMPANY OVERVIEW 3 3.0 CHARACTERISTICS OF CHINESE AND INDIAN WINE MARKET 4 4.0 AUSTRALIAN GOVERNMENT STRATEGIES FOR ASIAN MARKET 5 5.0 MAJOR COMPETITORS IN CHINESE AND INDIAN MARKET 5 6.0 POSITIONING STRATEGY 6 7.0 BARRIERS TO OVERCOME 7 8.0 CONCLUSION 7 9.0 REFERENCES 9 1.0 INTRODUCTION The Australian wine industry in the recent years has faced serious challenges like structural oversupply, water availability and declining sales in an increasingly changing global market. Number of entries in the wine industry has increased significantly and has thus resulted in an intense competitive market with lower profits and declining sales. However there is still immense opportunity for wine producers in the global forefront (Snow, 2007). Grape growers and wine makers who understand the consumer needs and changing market trends can take the same as business opportunity to enlarge their existing market base and generate higher returns. This report focuses on the positioning strategy of Accolade Wines a leading Australian wine producer in Asian markets particularly China & India. The report highlights national strategies for positioning Accolade Wines in the Asian market along with competitors positioning strategies in similar market, major characteristics of Asian markets and barriers that the company may face in positioning its products in the Asian market along with measures to overcome the same to create a global base and capture Asian markets with higher returns and profits to the company. 2.0 COMPANY OVERVIEW Accolade Wines is Australia’s largest wine makers with its global operations in North America, UK, South Africa, New Zealand, Australia and some parts of Asian markets. In January 2011, the company was sold to Australian private equity company Champ Private Equity and was finally renamed as Accolade Wines. The company has been successful in covering a global market with its presence in about 80 countries of the world. The business is the largest wine company by volume in UK and Australia. The company has been successful in creating a brand name of its own and has a variety of wines in its product category. The company provides employment to over 1700 employees with its headquarters situated in South Australia. Delivering best quality wines has been the main objective of the company and the company has done extremely well in maintaining the same. 3.0 CHARACTERISTICS OF CHINESE AND ASIAN WINE MARKET Both Chinese and Indian wine market shows similar characteristics which has been discussed as under (Fallowfield, 2008) Markets are price sensitive. The potential real market of imported wine shows promising signs of growth in recent years Demand for quality wines is increasing significantly especially in the elite class of this countries. There are immense number of domestic wine producers whose sale has degraded due to fine quality wines being imported from foreign countries like Europe, Africa etc Government of these countries allow a permissible limit of wine to be imported which has been increased to cater the increasing demand of imported wine in the country High custom duty of over 100 percent is levied by government of both the countries thus making imported wine costly. Entry into Chinese and Indian wine markets are much easier when compared to other Asian countries like Japan, Indonesia etc due to lower government regulations. Thus, both these markets can be considered to be specifically viable countries which can be targeted by Accolade Wine to create its impact and brand image in Asian markets and further ensuring higher returns and growth of the company at global level. 4.0 AUSTRALIAN GOVERNMENT STRATEGIES FOR ASIAN MARKETS Wine Australia has recently called on all Australian wine producers who are interested in exploring the obstacles and opportunities in Indian and Chinese market to join its first ever Australian Wine Industry Study Mission. Further the Australian government has recently tied up with the Chinese Government to allow subsidy to Australian Companies setting up a unit in China. Indian government has also recently proposed Australian giants in wine manufacturing to set up a unit in India and the same will be treated as tax free unit in Indian boundaries (Joseph, 2009). Australian government earns a major income from its wine producers and in benefit to the Australian wine producers has promised to lower export duties if the same are exported to Asian markets. Australian government in order to ensure fine quality of wines has also recently replaced the mandatory pre-export testing of all wines with a more rigorous presence (Liu and Wang, 2009). 5.0 MAJOR COMPETITORS IN CHINESE AND INDIAN MARKET The Chinese wine market is a fast paced market. Demand for fine quality wines in the Chinese and Indian market is usually catered by French, American, Chilean and Australian wine companies. The main competitors in this market for imported wines come not from the Chinese or Indian wine companies but rather from the other forms of alcoholic beverages. Vintage Wine Company of Australia has recently tapped the opportunity in Chinese and Indian wine market to create a brand image of its own via supply of good quality wine at affordable prices. The company has mainly targeted the bigger metro cities of these countries to make a new market of its own. The company has still not set up its own unit in this markets and much of the wine is exported to this countries (Hori, 2000b). Local wine manufacturers like Dragon Seal and Great Wall has also emerged as tough competitors to foreign brands in the Chinese and Indian markets. With rapid increase in Wine market new entrants have entered the market at global level. Many Australian small wine manufacturers have recently decided to bring inferior wine at cheap prices and are also giving tough competition to other domestic wine producers and companies like Vintage Wine’s premium quality wines with low cost inferior quality wines (Scott, 2000). 6.0 POSITIONING STRATEGY Accolade Wines should look to target the Chinese and Indian markets by developing a strategy to export high quality wine at lower profits in order to first make its presence felt in the market and create a brand name of its own for the specified market. It is a well known fact that any company operating in these countries requires middlemen to make its products available on a continuous basis (Bretherton and Carswell, 2001). The company needs to acquire right distribution system for the same. A price penetration strategy will be appropriate to create a brand image of its own followed simultaneously by product differentiation strategy to tap both inferior and superior quality wine markets. The company in order to lower its cost of production can at a later stage look to develop its own unit to cater the market demand (Hori, 2000a). Embedded marketing techniques needs to be developed for creating product placement for targeting specific groups and creating brand consciousness. Hence a dual strategy of brand awareness strategy with price-quality strategy is suitably appropriate to cover the Chinese and Indian markets. 7.0 BARRIERS TO OVERCOME Both Chinese and Indian markets have a major barrier of brand recognition. Once a brand is recognized the company enjoys super normal profits in its products and services offered. Accolade Wines via its dual positioning strategy of brand awareness and price-quality strategy can definitely find it easier to create a brand name of its own. Further the company is a well renowned in many parts of globe which gives the company an added advantage to create its presence in this Asian markets. Further Chinese government imposes an import tariff on wine of 14%, VAT of 17% and consumption tax of 10% on bottles with 2 liters or less (Handley and Lockshin, 2007). Not much can be done to lower such tariffs however by lowering the mark-up Accolade Wine can provide quality products at lower prices than its competitors. Australian exporters are required to register new products with the Indian Government which leads to delay in business operations. However Accolade Wine can shorten the delay by making a treaty with Indian Government and ensure smooth running of its business in a shorter span of time. 8.0 CONCLUSION The report gives a complete picture of how Accolade Wine can tap the Chinese and Indian market with its dual positioning strategy of brand consciousness and high quality wine at lower price. This market has shown increasing signs of huge market opportunities and many Australian companies had already made its presence in such market. Accolade wine in order to capture this market should look for product placement strategies for targeting specific groups. A price-penetration strategy will be most suitable for Accolade Wines as the markets are price sensitive. A complete distribution system has to be developed to further ensure that products are available at ease and demand for wines are catered by exported wines rather than domestically produced wines. Accolade Wine can certainly at a later stage look to develop a smaller unit in countries like China and India to overcome the high import duties levied on its products. 9.0REFERENCES Bretherton, P.B., and Carswell P. 2001. Market Entry Strategies for Western Produced Wine into the Chinese Market. International Journal of Wine Marketing, 13(1): 23-35 Fallowfield G. 2008. Spreading the message in Asia. Wine & Spirit International, June, 70-71. Handley, I., and Lockshin, L. 2007. Wine Purchasing in Singapore: A Supermarket Observation Approach. International Journal of Wine Marketing, 9(2/3): 70-82. Hori K.I. 2000a. A taste for the finer things in life. Wine & Spirit International, June: 49-50. Hori K.I. 2000b. Where only the strong survive. Wine & Spirit International, June: 52-53. Joseph, R. 2009. Wine, Marketing and the Media: Think Different. Australian and New Zealand Wine Industry Journal, 14(6): 79-83. Liu, H., and Wang, Y.P. 2009. Co-ordination of International Channel Relationships: Four Case Studies in the Food Industry in China. Journal of Business and Industrial Marketing, 14(2): 130-150 Scott, J. 2000. The ANZ Australian Wine Marketing Conference Proceedings, Adelaide, SA: The Australian Wine Export Council. Snow, C. 2007. Here be Dragons for Australian Wine Producers,” Australian and New Zealand Wine Industry Journal, 12(3): 288-291. Read More