Is the premium wine segment an attractive market?

The premium wine market carries favorable growth opportunities for Sandlands Vineyards based on industry research, and promising indicators for potential success include branding, direct-to-consumer sales, and technology. In focusing on the attractiveness of the premium wine market segment, pestle analysis is critical. Therefore, on the political and legal factors, the wine sector’s level of control is very high in the U.S. In 2005, a ruling by the Supreme Court permitted wine manufacturers to sell directly to customers and retailers. Apart from the production, distribution, and selling of wine at the state and federal levels, it is strictly regulated and highly taxed. The sector, on economic factor it encounters rising volumes and higher prices on long courses. Statistically, 40% of the U.S. market’s alcoholic intake is wine. The wine industry is estimated at $66 billion, and 70 % of that is manufactured in the United States domestically. About 90% of all wine production comes from California, particularly in the Napa and Sonoma Valley, where millions of visitors see the wine regions and sample the wines each year (Esty & Saldutte, 2019).

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Socially, customers are in favor of higher quality wines and are shifting away from lower-cost segments. For instance, reading through the case study shows that consumers love wine, and as of 1965, American wine consumers have grown from about one gallon per year to two

Over time more than 40% of all wine buyers said they bought a bottle of wine for more than $50 and above, while one-third of this percentage drank wine frequently and accounted for 80 percent of consumption and purchase (Esty & Saldutte, 2019). Technologically, the introduction of grafting technology has sought to promote resistant rootstocks during the growing phase. Also, equipment (including bottling machines, pressing and processing tools) is available from different suppliers. Sandlands has been able to penetrate the market by using social media and posting their wine list on their mobile application. Environmentally, California is the capital of wine production because it has the best environment for producing a variety of grapes. The local people have embraced; thus, it will not be a challenge for Sandlands Company to source raw materials mainly for the old vineyards, which is its core source of raw material. However, there are restrictive zoning and environmental regulations and the rising cost of land, which may threaten the business venture. Moreover, the temperatures and rainfall have adverse effects on the overall production yield, taste of wine, and grapes’ quality.

Does Sandland Vineyards have a competitive advantage in the premium wine market?

A SWOT analysis reveals that Sandlands could maximize its business to exploit unclaimed opportunities in new demand and undervalued prices. By focusing on size and price rises, it should resolve the challenge of generating sustainable income. Sandlands has the advantage of buying the Eastside meat facility off the market, which gives them a fair price. Also, there is the selling potential of vineyards in Lodi and Contra Costa areas where it can buy. Since there are two strategic groups, Sandlands fall under those who produce premium wines using old-vine wines selling above $10, which is not highly competitive and crowded (Esty & Saldutte, 2019). Its primary focus is on class and prestige rather than maximizing profits using the best production techniques set apart from its peers. Seasoned Vineyard owners who have seen a substantial rise in grape prices over the past few years find that cost increases are difficult to pass on to new buyers, who suggest that they have a lower tolerance of indulgence than previous years. The competitive situation faced by Sandlands Vineyards is the restricted supply and high prices of local vineyards for investment properties. A traditional prosperous business existence for vineyards lasts for several generations. Thus, Sandlands will have competitive edge and be there for generations if it is vertically integrated when it buys the Eastside Meats plant because it will control its production process and supply chain.

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Passalacqua should purchase the winery and abandon his work at Turley to fulfill his life-long dream and take the next step in his corporate strategy. It will provide an opportunity to exploit its wine-producing competitive advantage and allow vertical integration to achieve sustainable profitability and an NPV of USD 250,000 in a five-year plan. Since the first production of the wine, Sandlands has gained popularity; however, the product has been insufficient since Tegan uses Turley’s facilities and works only in his free time on Sandlands wines. Tegan initially intended to make wine affordable ($24-$28), but most of his customers have advised him to increase the process due to his wines’ consistency. It is also important to note that Sandlands wines rank in the top 5 of the wine lists, which shows the product’s quality and the vast growth potential (Esty & Saldutte, 2019). It is, therefore, advisable for Tegan to make a prudent decision and use his limited resources and purchase the Eastside meats facility. He will develop into a winery and tasting room, which will potentially allow him to be in control of the company and see the company’s growth through the sourcing of grapes, production process to the supply chain.

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the strategy that you will recommend for Sandlands Vineyards?

The problem that Sandlands faces is that, aside from the meat processing plant worth $500,000, few assets are available for sale as of now. With vineyards at a new record high in demand rate, prices are skyrocketing, making it extremely difficult to determine if a high price or a boom is warranted. Passalacqua should purchase the winery based on financial analysis, business strategy, and strategic orientation. Given three different cases, he should invest in the Eastside Meat facility, maximizing cash flow at a discounted price by purchasing the facility for $500,000, which is on an off-market price, and turning it into a developed vineyard. To secure the investment’s success, consider increasing sales prices and volumes based on a sensitivity analysis. He should also integrate the business vertically and purchase some grapes from external sources and targeting DTC and DTD sales at an 80/20 ratio. Moreover, he should build on his excellent reputation and further improve his brand and consumer relationships to pursue a growth strategy. For example, in the luxury wine market, the study suggests a moderately competitive level and the value of brand and product offering, being well-connected across the supply chain and using emerging innovations in the sales process.

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Additionally, in the premium segment, customers who buy costly wine emphasize the brand in their buying decision. Tegan should leave his employment and give full attention to his budding company, which shows excellent growth potential. He should increase human resource capacity, a business strategy to produce more wines and drive more sales. He should also consider buying old vineyards since 6000 acres are under the 5900 grapes growers, with 90% of the growers has less than 100 acres. While 50% of growers have than 5 acres with smaller vineyards, growing for premium wines, which may not be enough for the wineries around the region (Esty & Saldutte, 2019). Buying will ensure enough, and sustainable supply of grapes from old vines as Sandlands pursues growth in the wine sector.