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Marketing Strategy Otilia Flandro Romanian Wines in the U.S. Market

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Romanian Wines in the U.S. Market . Marketing Strategy . Otilia Flandro. VIN. VIN. Recession and competition from import wines decreased local demand . EXPORT. Increase in i nterest to export to foreign markets. Second largest wine consuming country (volume). - PowerPoint PPT Presentation

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Page 1: Marketing  Strategy

Marketing Strategy Otilia Flandro

Romanian Wines in the U.S. Market

Page 2: Marketing  Strategy

OutlineStudy Purpose

Industry

Romanian Wines

Research Method

Findings

Recommendations

VIN

Page 3: Marketing  Strategy

Introduction

Recession and competition from import wines decreased local demand

Second largest wine consuming country (volume)

VIN

EXPORT Increase in interest to export to foreign markets

Open to foreign wines regardless of country of origin

Page 4: Marketing  Strategy

IntroductionVIN

The challenge: finding and creating demand for the product

Marketing is a crucial complement to successfully entering the US market

Page 5: Marketing  Strategy

ObjectivesDetermine what are the drivers for wine sales in the US retail and

distribution

Define Romania’s image in the US

Determine the US consumer’s perception about Romanian wines

Determine purchase intent and price point for Romanian wines

Define distribution barriers and opportunities for Romanian wines in the US

Make recommendations

VIN

Page 6: Marketing  Strategy

OutlineStudy Purpose

Industry

Romanian Wines

Research Method

Findings

Recommendations

VIN

Industry

Page 7: Marketing  Strategy

Wine industryVIN

External threat:beer, liqueur

Extremely competitive

Surviving in this industry is tough

Relatively low barriers of entry

Reasons to enter:• Creative nature• Glamor • Family tradition

Uncontrollable forces of nature: • Disease• Frost• Predators

Small vineyards

Perceived intricacies of choosing a wine

Multinational companies & MoneyCraft and tradition

Wines are thought of as pretentious

Page 8: Marketing  Strategy

ClimateVIN

The “wine belt” is the stretch of land around the globe between 35th and 51th parallel of north and south latitude where the climate is favorable for growing wine grapes.

Page 9: Marketing  Strategy

Old World vs. New World VIN

Within the wine belt, the industry distinguishes between two major regions:Old World New World

N

N

NN

O

O N

Page 10: Marketing  Strategy

New classificationVIN

The Old World-New World division does not include emerging wine producing countries such as China and India and does not account for particularities of Eastern European countries.

Old-Old Old-New New-Old New-New O NO N

N

N

NN

O NO

Page 11: Marketing  Strategy

Lead producersVIN

Source: OIV 2011

The competitive landscape is dominated by Italy and France who have been battling for the top position in wine production.

Romania fell below the 12th position in 2010

Page 12: Marketing  Strategy

Production vs. consumptionVIN

Source: OIV 2011

Germany and United States consume more than they produce

Significant consumption-production gaps in China and Russia

growing middle and upper-class is increasing demand for wine

Page 13: Marketing  Strategy

Lead exportersVIN

Source: OIV 2011

The top three producers are also the top exporters

Export Production

Australia surpasses USA, Argentina, and China in export

Moldova, Romania’s neighbor is a Top 12 exporter

Page 14: Marketing  Strategy

OutlineStudy Purpose

Industry

Romanian Wines

Research Method

Findings

Recommendations

VIN

Romanian Wines

Page 15: Marketing  Strategy

Romanian winesVIN

Pre-Communism Romanian wines

served and appreciated at the royal courts of

Europe

CommunismQuality of the wines

produced was sacrificed over high

yields

Post-CommunismMajor set back and

overinflated perception of the quality

1947–1989

Page 16: Marketing  Strategy

Post-Communist RomaniaVIN

Bureaucratic and slow to process external

funds

Efforts to revitalize wine industry:

USAID European Union

Little industry support from the Romanian government

Directed to vine replanting; no marketing

and business development tools

Ceased because of the threat of competing

with US wines

Page 17: Marketing  Strategy

Current situationVIN

Sweet wines

Bad country reputation

High domestic

consumption

Lagging business practices

Domestic entrenchment

Global economic crisis

Decreasing internal demand

Export

Page 18: Marketing  Strategy

Export opportunitiesVIN

Export

Romanian ethnic

communities

Bulk wine

Communistblock

countries

Distant markets where country image is neutral

China, Russia

United States

Blended and sold as table wine

Italy, Spain

Page 19: Marketing  Strategy

OutlineStudy Purpose

Industry

Romanian Wines

Research Method

Findings

Recommendations

VIN

Research Method

Page 20: Marketing  Strategy

Research methodVIN

Research

Qualitative

- 4 experts in retail - 2 distributors

- 7 producers - 4 industry experts

Quantitative

- Web survey - 81 respondents

Survey

United States 2011

Romania 2010

Interviews

Page 21: Marketing  Strategy

OutlineStudy Purpose

Industry

Romanian Wines

Research Method

Findings

Recommendations

VIN

Findings

Page 22: Marketing  Strategy

Drivers for sales in the USVIN

Grape variety

Taste/Quality

Price

Other factors:

• Farming practices (not using pesticides, natural yeasts) • Fit with the wine list/selection• Fit with the image establishment• Brand names trusted for their quality

Grape variety

Taste

Quality Price

Brand

Country of o

rigin

Region

Packaging

Vintage

94% 91%84% 81%

62% 59%

44%39%

29%

Factors considered when making a wine purchase*

*based on survey results

Page 23: Marketing  Strategy

PriceVIN

$50-$60*Recession

$10-$20*

*Boutique price

Average shelf price: $10

Page 24: Marketing  Strategy

Good wine:VIN

A good wine is dry, full body, slightly

fruity

A good wine stays with you, it’s memorable

…speaks for the place where it’s from…it speaks

for terroir, tradition, weather

Our customer is more important than our idea of good wine

Source: Interviews and survey

Page 25: Marketing  Strategy

Grape varietyVIN

Why is it important?

“Navigating “ wine list

categories

Demand for variety is seasonal

Pop culture can create demand

for a varietal

Page 26: Marketing  Strategy

Tools to sell a wineVIN

Shelf talkers In-store expert advice

Packaging

Naming

Shelf placement

In-store newsletter

Tastings

Story

Writers/Bloggers

Word of mouth

Page 27: Marketing  Strategy

Perceptions about RomaniaVIN

Beautiful mountains, pastoral

setting, lively folk music, friendly

people, medieval castles, gypsies

Castles, Transylvania,

Dracula

Gypsy, untouched countryside,

embroidery, folk art, lambs wool, pork products, castles

Very poor country,

Old world charm

3rd world country, former

communist block country

Gymnasts

Source: Survey

Page 28: Marketing  Strategy

Perception about Romanian winesVIN

1 2 3 4 5 6 7

1

2

3

4

5

6

7

ArgentinaAustralia

Chile

France

Germany

Greece

Hungary

IndiaChina

Italy

Moldova

New Zealand

Romania

South AfricaSpain

USA

Price

Qua

lity

The size of the bubbles represents availability. Widely available wines have a larger bubble.

Source: Survey

Page 29: Marketing  Strategy

Perception clustersVIN

Source: Survey

1 2 3 4 5 6 7

1

2

3

4

5

6

7

ArgentinaAustralia

Chile

France

Germany

Greece

Hungary

IndiaChina

Italy

Moldova

New Zealand

Romania

South AfricaSpain

USA

Price

Qua

lity

New-New World

Old-New World

New-Old World

Old-Old World

Page 30: Marketing  Strategy

Expectations about style of winesVIN

Earthy Full bodied Fruity Dry Light bodied Sweet Oakey

47% 45%

29% 29%20% 18%

8%

What are your expectations of Romanian wine in terms of style?

Source: Survey

• Chardonnay, Zinfandel type• Would taste like other countries• More like a German wine

Page 31: Marketing  Strategy

Purchase intentVIN

Extrem

ely Likely

Likely

Somewhat L

ikely

Undecided

Somewhat U

nlikely

Unlikely

Extrem

ely Unlikely

13%

20%

29%

20%

4%

13%

3%

If available, how likely are you to buy Romanian wine?

YES• Curiosity• Openness to trying new things• A price low enough to permit

experimentation • Previous experience with Romanian

wine, mostly based on travel to Romania

• A recommendation

NO• Lack of information about Romanian

wines• Bias about the region • Low quality of Romanian wines

available on the US market through ethnic distributors

Source: Survey

Page 32: Marketing  Strategy

Purchase by locationVIN

Restau

rant

Groce

ry store

Neighborhood liq

uor store

Chain liq

uor store

Boutique wine re

tailer

Discount r

etaile

r

Ethnic S

tore

68%

41%

26% 25%17%

9%2%

Frequency of purchase by location (once a month or more often)

• The restaurant segment looks more promising for the Romanian wines compared to wine retail stores

• Boutique retailers who are focusing on a limited, unusual selection of wines are intrigued by the obscurity of Romanian wines

• Only 17% of the consumers purchase wines once a month or more often at boutique wine shops

Source: Survey

Page 33: Marketing  Strategy

Price pointVIN

under $5

$5 to $7

$8 to $10

$11 to $15

$16 to $20

above $20

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Price consumers are willing to pay for a bot -tle of Romanian winePrice consumeers cosidered to be reason-able for a standard bot -tle of wine

Source: Survey

Consumers are willing to pay less for a bottle of Romanian wines

Page 34: Marketing  Strategy

OpportunitiesVIN

“Hipsters”

One grape variety

Domestic grape

Curiosity

Reasons:• Consumers like simplicity• Purchase based on variety• Strategy proven to be

successful by Australia (Shiraz), Germany (Riesling)

Reason: • Differentiation• Success of the Malbec

Always looking for new things

Mainstream consumers curious to try

something unusual

Trend setters

Page 35: Marketing  Strategy

Focus on the ethnic consumer

BarriersVIN

Lack of

cooperation

Distribution

Monopoly

Consistent supply

Economies of scale Quality

Importers

Exclusion of small producersPrice

Shipping conditions

Price Overpriced wines

Oxidized wine

Relationships with retailers and distributors

Quality

Reasons: Effect on: Result:

QualityPrice Entrenchment in ethnic community

Abuse from Communist forms of cooperatives

Relationships within the industry

Page 36: Marketing  Strategy

OutlineStudy Purpose

Industry

Romanian Wines

Research Method

Findings

Recommendations

VIN

Recommendations

Page 37: Marketing  Strategy

Recommendations for Romanian producersVIN

Focus on cultivating domestic grapes

Work with reliable distributors who are willing to invest in promoting Romanian wines on the

US market

• Competitive advantage stands in differentiation

• Domestic grapes intrigue the consumer

• Consider shortening the names of varietals

• 3 tier distribution system • Offer marketing support• Building relationships with

retailers

Page 38: Marketing  Strategy

Recommendations for export associationsVIN

Collaborate with other countries on building a favorable image in the US

Open collaboration between small vintners in order to reduce trans-Atlantic

transportation costs

Collaborate with consulates and other official economic development bodies

representing Romania in the United States

• Build trust and a trade platform between US and Romanian partners

• Good quality wines produced by small vintners do not have a chance to be tasted on the US market

• Economies of scale may drive down significantly the cost of import to the US

• Romania is tightly associated with countries in its geographic proximity

Page 39: Marketing  Strategy

Recommendations for distributors and marketersVIN

Focus on one grape

Focus on restaurant and bar outlets

Vertically integrate import and distribution in order to assure quality and quantity

Introduce wines at shelf prices under ten dollars to allow experimentation

Inform the consumer

• Proved to be a successful strategy for countries like Argentina or Australia

• Glass pour may represent a good opportunity to try a wine without committing a bottle

• Full control of quality and quantity

• “Experimentation price” for a bottle of wine is less than ten dollars

• Organize Eastern European or Romanian wine festivals

• Work with bloggers• Refrain from gimmicks