University of South AustraliaSchool of Marketing
MARK 5033 – Marketing Strategy and Planning
Group Assignment cover sheet
Group Assignment name: TWE Group
Details of group members:First, using the table below, allocate a member number to each person in this group.
Member Number
Student Name Student ID UNISA e-mail address
1 YUTING HUANG 110112497 [emailprotected]
2 SHUFAN WANG 110120749 [emailprotected]
3 YINGXU LI 110074891 [emailprotected]
Contribution rating:Member Number
Rating bymember 1
Rating by member 2
Rating by member 3
Student signature
1 40% 40% 40% YUTING HUANG
2 40% 40% 40% SHUFAN WANG
3 20% 20% 20% YINGXU LI
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MARKETING STRATEGY AND PLAN 2015
YUTING HUANG
SHUFAN WANG
YINGXU LI
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Context
1.0 Exclusive summary.........................................................................................................5
2. Introduction.................................................................................................................................6
2.1 Global vision of wine market..............................................................................................62.2 About TWE.........................................................................................................................82.3 Focus on China...................................................................................................................92.4 Current Situation...............................................................................................................13
2.4.1 Internal situation....................................................................................................132.4.2 External situation...................................................................................................142.4.3 Competition situation.............................................................................................15
2.4.4 Current consumers’ situation.........................................................................................162.5 Project Approach...............................................................................................................17
4.0 TWE’s current strategy..........................................................................................................21
5.0 Marketing Strategy.................................................................................................................23
5.1 Mission and direction................................................................................................235.2 Targeting and Positioning Decisions.................................................................................23
5.2.2 High-Flyers segment..............................................................................................245.2.3 Upstarts Segment...................................................................................................245.2.4 Positioning.............................................................................................................24
6.0 Marketing strategy and planning for luxury brands...........................................................25
6.1 Planning direction and objectives.....................................................................................256.2 Planning for distribution channels and logistics...............................................................256.3 Planning for communications and influence.....................................................................266.4 Planning for products and brands......................................................................................286.5 Product Mix......................................................................................................................306.6 Products Attributes............................................................................................................306.7 Products Life Cycle..........................................................................................................306.8 New Product Development...............................................................................................316.9 Marketing Programs (2015)..............................................................................................31
7.0 Planning for Commercial brands..........................................................................................41
7.1 Specific Objectives...........................................................................................................417.2 Brands & Products............................................................................................................417.3 Why branding top 3 foundational brands first?.................................................................427.4 Why choose these brands?................................................................................................437.5 Regions of China..............................................................................................................437.6 Human recourse & marketing teams.................................................................................447.7 Distribution channels........................................................................................................447.8 Marketing Communications tools.....................................................................................467.9 Customer Service..............................................................................................................477.10 Marketing Programs and Budgeting...............................................................................47
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8.0 Metrics and control................................................................................................................57
8.1 Expectation of luxury wine..............................................................................................598.2 Expectation of commercial wine.................................................................................59
9.0 Conclusion..............................................................................................................................62
Appendix 1 shows the portfolio of Treasury Wine Estate..........................................................63
Appendix 2 Brand Awards in FY13 (Cited From TWE’s Annual Report 2013).....................64
Appendix 3 Rose only...................................................................................................................66
Appendix 4 ASC Fine Wine.........................................................................................................67
Appendix 5 Marco analysis..........................................................................................................68
Appendix 6 Internal analysis.......................................................................................................73
Appendix 7 Competitor analysis..................................................................................................78
Appendix 8 Market & Consumers..............................................................................................83
Appendix 9 Industry Analysis......................................................................................................89
Reference.......................................................................................................................................91
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1.0 Exclusive summary
Treasury Wine Estates is an established Australian wine company. Generally, the wine
market has shown the sign of increase in the global market. This paper mainly focuses
on Chinese market which is considered as exciting potential wine consumption
country. The current strategy of TWE is maintaining the sales of commercial brands
while increasing luxury wine brands.
In the consideration of Chinese wine market, the marketing strategy needs to be
changed into maintaining luxury brands, however growing commercial wine brands.
Marketing team of TWE in China would recruit a group of professional sales
managers and train numbers of sales person who are aware of Chinese culture and
consumer behaviors. The team would be separated into two departments, one is
focusing on commercial brands and the other is concentrating on luxury brands.
Different departments have respective objectives and programs to fulfill the success of
the business in China.
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2. Introduction
2.1 Global vision of wine market
The wine industry has become progressively globalized over past decade. The market
is constantly restructuring from its fundamental basis in order to comply with the
trend of this development (Thorpe, 2009).
It has been pointed out that the wine export volume of Chile and South Africa has
been increasing since 2013 while Australian wine exportation has been fall into a
crisis of decreasing in volume (General Administration of Customs of the People's
Republic of China, 2013). According to the Rabobank (2014) second quarter report,
the sparkling wine that produced by Italy increased its exportation volume by 40.2%
in the year of 2014, however the red wine exportation of Italy decreased at 4.4% in
2014, though its exportation value rose up at 7.3% (Rabobank, 2014).
In the continent of Europe, the export volume of Spain has dropped 10.9% while
exportation value increased 6.5% which achieved 260 million due to the increased
average price in Spanish in early 2013 (Rabobank, 2014). However, during the second
half year of 2013, the average price slightly decreased until January 2014, which
motivated a small boom of sales volume. Since Spain achieved an excellent grape
harvest, Rabobank predicts that Spain would have a continuous trend of increasing in
wine exportation this year (Rabobank, 2014). Nevertheless, in 2013 US’s exportation
of wine increased 6% with 11% decrease in exportation value (Rabobank, 2014). In
addition, Chile has been enjoying its remarkable escalation in both exportation
volume (+50%) and value (+4.9%) (Rabobank, 2014).
The report also indicated that bulked wine occupied more than half of market share in
the present exportation of wine.
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Graph 1 Total Global Wine Exportation (Bulked Wine)
2005 2006 2007 2008 2009 2010 2011 20120
5000
10000
15000
20000
25000
30000
35000
40000
Total Global Wine Exportation (Bulked Wine)Total Wine Exportation
(Rabobank, 2014)
World production of wine has stabilized over the last decade despite a sharp decline in
an earlier decade (Thorpe, 2009). This has been accompanied by increasing
production of wine in a growing number of new world wine (NW) producer while
falling output in the old world (OW) wine producing countries such as France, Italy
and Spain (Thorpe, 2009). The OW contributed 43% of global wine production that
dropped from 54% in 2010, and 25 per cent of global consumption of wine that
decreased from 35% in the year of 2010 (Morgan Stanley Australia Limited+, 2013).
Wine production from NW has constituted enormous threats and challenges towards
OW in rapidly expanding in the third markets (especially in Chinese market).
Treasury Wine Estates, as the new representative of NW wine has huge potential yet
to be discovered and developed in the future.
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Graph 2 Global Wine Industry- Production and Consumption 2013e1
17%
13%
17%
11%
6%
13%
6%
7%
7%3%
World Wine Consumption
Fance Italy US Germany SpainChina Argentina UK Russia Romania
(Morgan Stanley Australia Limited+, 2013)
17%
17%
12%
8%5%
7%
4%
4%
4%
4%
3%
15%
World Wine Production
Italy France Spain US Argentina ChinaAustralia Germany South Africa Chile Russia EX-top 10
(Morgan Stanley Australia Limited+, 2013)
2.2 About TWE
Treasury Wine Estates (TWE) is unique global wine organization with over than 80
wine brands including Penfolds, Wolf Blass, Rosemount, Lindemans, Catello di
1 e=MS estimates 8 / 93
Gabbiano, Pepperjack, Wynns Coonawara etc.. Since the establishment of Australian
Penfolds by Dr. Christopher Rawson Penfold and his wife Mary at Adelaide in 1844, a
winemaking legacy of new world wine has been created. With 12,000 hectares of
vinetards and 19 wineries over the world, the sales of TWE about 32 million 9L cases
and NSR (net sales revernue) about $1.6 billion, more than 4,000 employees are
working for the company across 12 countries.
Table 1 comparison of region performance between 4 main regions in 2013.
Region Volume(m 9L cases) NSR $m NSR per cases EBITS EBITS margin
ANZ 8.6 600.8 70.22 110.1 18.3%
AMERICAS 30.4 704.0 45.69 66.8 9.5%
EMEA 6.7 248.5 37.08 16.0 6.4%
ASIA 1.4 135.4 97.14 54.5 40.3%
2.3 Focus on China
Asia is an exciting area for TWE because it presents 26 per cent of the whole profit
(TWE 2013). The key markets in Asia region are Singapore, Malaysia, Thailand and
Great China etc. In the year of 2013, the NSR of TWE grown to $135.4 million and
the organization predicted a continue increase of sales in the year of 2014 (TWE
2013). The import wine market in China has the greatest potential worldwide and
drive increasing international suppliers to export grape wines to this region (Mitry
2009). Statistics from China Customs, the volumes of Chinese import grape wines
were 376,841,194 L (decreased 4.46% compared with 2012), and the value was 1,
555, 638, 5479 USD (decreased 1.64%). Even though there is a slight down trend, no
denying that China is still a potential market whose volumes of import wine increased
6 times since 1978 (Ritman 2012).
Here are some statistics of import wines, both bottled wines and bulked wines
from China Customs:
Table 2 Top 10 Regions of Import Bottled Wines in 2013
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Rank Country Volume (L) Value(USD)
1 France 128,735,587 658,507,721
2 Australia 36,408,820 225,983,524
3 Chile 25,528,775 100,024,112
4 Spain 19,758,556 91,657,801
5 Italy 19,649,249 90,111,606
6 America 12,697,990 73,563,958
7 Argentina 4,477,105 22,454,792
8 South Africa 4,592,477 22,294,873
9 New Zealand 1,910,200 19,834,972
10 German 3,441,175 18,892,546
The volume of bottled wines went to 287, 748, 3 L (increased 5.47 per cent compared
with 2012), and the value went to 1,447,822,358 USD (increased 0.7 per cent
compared with 2012).
Table 3 Top 8 Regions of Import Bulked Wines in 2013
Rank Country Volume (L) Value(USD)
1 Chile 58,061,618 66,636,691
2 Spain 12,662,298 12,644,885
3 France 5,798,444 10,115,525
4 Australia 4,158,253 7,049110
5 America 2,957,437 5,165,058
6 South Africa 1,975,812 1,661,403
7 Portugal 975,798 988,731
8 Italy 288,548 987,872
The volume of Bulked wines down to 89,092,809 L (decreased 26.67 per cent
compared with 2012), and the value down to 107,816,189 USD (decreased 25.21 per
cent compared with 2012).
Table 4 Top 10 Provinces of Import Bottled Wines in 2013
Rank Region Volume (L) Value(USD)
1 Shanghai 89,881,728 487,613,128
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2 Guangdong 60,971,972 303,009,474
3 Beijing 21,137,575 120,308,128
4 Zhejiang 22,463,847 73,877,907
5 Fujian 26,972,568 81,671,220
6 Shandong 16,195,467 73,877,907
7 Tianjin 11,143,367 55,653,035
8 Jiangsu 12,761,023 53,885,414
9 Liaoning 4,005,169 29,243,871
10 Sichuan 2,261,582 14,838,958
From the statistics above, it is obviously shown that Shanghai, Guangdong and
Beijing, as the main consumption region of import bottled wines, occupied over 60%
of the whole market share, and they occupied 31.2%、21.2% and7.3% of the whole
market share separately.
Table 5 Top 10 Provinces of Import Bulked Wines in 2013
Rank Region Volume (L) Value(USD)
1 Shandong 46,716,017 55,769,571
2 Hebei 26,077,136 28,747,212
3 Guangdong 4,103,034 6,634,921
4 Shanghai 4,214,961 5,750,016
5 Tianjin 2,547,930 3,122,272
6 Fujian 1,617,811 2,819,476
7 Beijing 1,251,246 1,601,215
8 Jiangsu 1,538,054 1,383,264
9 Zhejiang 124,572 494,308
10 Xinjiang 192,000 293,255
Compared with statistics of import bottled wines, top 3 regions of import bulked
wines are Shandong, Hebei and Guangdong. Shandong and Hebei provinces, which
are undeveloped regions, occupied over than 80% of the market share.
Current distribution systems of import wines
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Main origins of import wines
Main import retailers
Distribution Channels
RETAIL ON TRADE OFF TRADE DIRECT
OFF TRADE
Supermarket Convenience Store Souvenir Boutique
ON TRADE
HOTELS
RESTAURANTS
KTV
SPA
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BARS
DIRECT
DIRECT
TO
CUSTOMERS
DIRECT
TO
COMPANIES
2.4 Current Situation
2.4.1 Internal situation
As mentioned at Appendix 6, there are several strengths and weakness of TWE. Here,
the internal situation mainly focuses on TWE’s serious issue.
Firstly, TWE has faced a stressful financial situation recently. Based on TWE’s annual
report, it is easy to find that TWE’s cash and cash equivalents decreased more than
60%, which should be taken seriously. The reasons can be concluded as: (1) Too many
brands used by TWE lead to cost of large capital, because each brand need different
fees to maintain in terms of management and advertising. (2) Some luxury brands are
still on building which shows that high invest but low returns in short time.
Secondly, incomplete distribution system in TWE required to be improved as soon as
possible. It can be noticed that the distribution network still has problems need to be
fixed. The reasons include: (1) The poor wine knowledge of importers and retailers
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lead to hard expand wine culture to customers; (2) The sales management lack of
wine background affect the poor marketing efficiency. All of this incomplete
distribution network could affect the TWE’s revenue and profits directly.
2.4.2 External situation
Here, the TWE’s situation mainly based on PESTEL analysis, which are political
factor, Economic factor, Social-culture factor, Technological factor, Economic factor
and Legal factor. For TWE, some significant trends of the Chinese macro
environment on the wine industry and what are the implications for TWE marketing
strategy will be discussed in following graph.
Business Trends Implication Opportunity/Threat
Political: Reduction in tariffAnti-corruption
Impacts on TWE’s business OpportunityThreat
Economic:Increased in income of Chinese people
Improvement of imported wine in item sales and vales
Opportunity
Social culture:Urbanization
Enhancing brand awareness by western educated
Opportunity
Technology:E-Business
More channels to sell imported wine Increasing customer
Opportunities
Ecological:Haze weather
Might barriers of explore Chinese market strategy
Threat
Legal:Government against drunk drivingSafety low of imported and exported food
Impact of development of imported wineReduction in imported wine quantity
Threats
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2.4.3 Competition situation
According to the appendix 7’s competition analysis, the competition situation of TWE
in China can be concluding as:
(1) TWE’s wine shows better quality but higher price in China. While compare with
Chang Yu, the TWE’s price shows in TWE’s Annual Report & Chang Yu Pioneer
Wine Co. Ltd. 2013 Semi-annual Report, indicates that the price of TWE Luxury
brand is 10 times higher than that in Chang Yu. And the price of commercial and
medium brands of TWE is significant higher as well. Although the TWE’s wine has
quality advantage, this price gap has affected TWE’s market competitiveness
significantly in China.
(2) The market position of old world wine in China affects TWE’s wine export. The
research from China Customs 2013 shows that France, as a famous region of old
world wines, takes over than 35 per cent of the whole volume of import wines. This
old world wine always shows high quality and long history. Since this old world wine
still a major import wine in China, TWE’s wine as new world wine export to China
will be affect significantly. This is because the wine of TWE and the old world wine
has similar characteristics which are both expensive and high quality.
(3) Fake wine are popular in China also affects TWE’s wine export. Based on the
research from the most popular electrical commerce website (www.taobao.com) in
China, the congeneric wine of TWE like Bin 389 only sale 25-150RMB, while this
need to cost 500-600 RMB bought from TWE. In Chinese wine market, plenty of
clients lack of distinguishing the fake and real wine. Therefore this may disturb
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TWE’s market occupancy and profits.
2.4.4 Current consumers’ situation
It is necessary to analyze the TWE’s target consumer in China means that TWE has to
understand the consumers’ culture, hobbits, behavior, dissimilarity and so on. Here,
the situation of consumers in China could affect TWE can be shows as:
(1) Consumers’ Disposable Income is quite low in China (See Appendix table 1). This
situation indicates that most of Chinese consumers will only spend money on
necessities in daily life, while only small part of rich consumers will buy the luxury
products. TWE’s wine mainly focuses on luxury brand and normally is expensive to
most Chinese.
(2) Confucian Tradition in Chinese could reduce the requirement of wine. Confucian
tradition is the main culture that has affected Chinese activity for 5000 years. Chinese
consumers nowadays are influenced by this particular culture more or less (Wong &
Aaron, 1998). Under this tradition’s affect, consumers who are rich or has high social
status would need to buy a luxury wine. Others seems to very low demand for the red
wine in China.
(3) Red wine is more popular in a business dinner in China ((Liu & Murphy, 2007).
The term of occasion in Chinese is mainly focus on who the one socialize with rather
than the place. Normally a bottle of red wine is necessary when people discussing
about the business deals on dinner time, no matter younger or older generation.
Because this red wine can be considered as respecting to the clients and shows that
they have higher social status.
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2.5 Project Approach
This report will develop a marketing strategy plan includes specific marketing
programs as well as supervision and control methods spanning from 2014 to 2015
for Treasury Wine Estates Australia in Chinese market based on the insight of a
comprehensive analysis of internal and external environment, industrial and
competitors and consumer behaviors. Chinese market is chosen to be to focus in this
repost not only because its current fast growing wine market and foreseeable
continuous development but also Australia is one of the major wine exporter to this
country.
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3.0 SWOT analysisSTRENGTH
STRENGTH / WEAKNESS
EFFECTREFER TOOPPORTUNITIES THREATS
Long & rich history Increased the market capabilities All Old world wines have longer history
Portfolio of brandsIncreased competitive capabilities
Demands of commercial wines Multi – distribution channelsTraditional white wines distributors are considered selling grape wines
Chinese are lack of wine knowledgeHard for retailers to know all of wines from TWESome of TWE’s commercial brands are not well-known in China
Strong brand name and recognition
Increased the competitive capabilities
All
Well- known old world winesFake winesSmall Australian competitors take advantages in Chinese market
A commitment of quality, diversity and innovation
Increased market and competitive capabilities
New generationsNew birth policy family could have one more childWesternization – young generation would become more willing to accept new products and try something newIncreasing concern of food safety – foreign brands become popular
Old world wines –better qualityYoung generations tend to be more self-awareness thus increasing difficulties to target the market
Varieties of products from different regions
Increased competitive capabilities
Westernization Consist with traditional culture – motivate purchasing
Regulation to limited promotion
Screw caps & Increased market capabilities Increasing demand of import wines inChina Not tradition, Chinese can not accept
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NNPB bottles
Sales management Increased market capabilities AllBad environment influence recruitment international workers
Multi – distribution channels
Increased the market capabilities
New industries such as wedding and funeralTraditional white win distribution channelsChinese wineries looking for import wines (packaged their own labels)
Sales owned by retailers are lack of wine knowledge
Highly trained human resource
Increased company capabilitiesUnhealthy environment in China become the barriers of TWE’s recruitment
Large scale of production Increased the production capabilities
All Anti- corruption campaignOld world wines – small scales , quality and high premium
High priceOld world wines – higher pricesConsumers are getting knowledge toward wines COO is important
Domestic brands –lower pricesDecreasing demand of luxury wines in China
W STRENGTH / EFFECT REFER TO
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EAKNESS
WEAKNESS OPPORTUNITIES THREATSSome luxury wines cannot satisfy customers’ needs
Decreased market performance Technology databaseDecreasing demand of luxury winesOld world competitorsDecreasing price of Chile’s wines
Increased cost of production
Decreased the production performance
Technology of scale productionDecreasing prices of Chile’s winesBad weather condition
Excessive brandsDecreased marketing management capabilities
Increasing demand of commercial winesCustomers are lack of wine knowledge, they choose wines based on brands
Incomplete distribution network
Decreased the market capabilities
Multi channels Fake winesSmuggled wines
Bad financial situation(low rate of capital turnover)
Decreased the company’s capabilities
Build up more commercial brands – the turnover of luxury is 14 – year, but commercial is only 5 years
Decreasing demand of luxury wines
Decreased sales of premium wines
Decreased market performance Attract more investment More competitors come into Chinese market
High initial funds for brands management
Decreased the company’s capabilities
Cooperate with big retail stores in China (ASI fine wine)
Too many brands need to build upStrict advertising laws
Not familiar with Chinese culture
Deceased market capabilities Nil Environment affect recruitment in China
Lack of innovation Decreased market performance NilSome small brands take advantagesCape Jaffa–BiodynamicPost love- telling love story
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4.0 TWE’s current strategyCurrent global strategy of TWE is divided to 3 levels. Firstly, build up exceptional
brands. Secondly, increase the production and supply of luxury and premium wines.
Thirdly, maintain the scale of production of commercial wines, and expand market
globally.
Consequently, TWE’s current strategies as follows:
Mainly focusing on luxury and premium wines.
Building up exceptional brands to against with old world exceptional portfolios.
Maintain the volume and value of commercial wines.
Expand the global market
Key issues:
However, TWE’s global strategies can hardly fit in China based on SWOT analysis of
Chinese market. There are some key issues TWE needs to pay more attention.
Opportunities:
Increasing of GDP and average disposable income
Increasing urbanization rate
Westernization affect consumer buying attitude and behavior –more willing to
accept and try new products by increasing young generation
Free trade agreement between Australia and China
China (Shanghai) Pilot Free Trade Zone
New birth policy (family could have one more child)→increase the youth
population
Increase in number of agencies and organizations established more platforms to
do grape wine education programs including A+ Australian Wine, Wine
World.com.cn ( in China)
More professional retail stores in China
Increasing online shopping webs including C2C and B2C
Increasing demands of commercial wines
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Increasing concern about safety of food made in China
Customers are getting knowledgeable towards the importance of COO
Threats:
Increasing competitors come into Chinese market
Old world wines are still the biggest player with longer history of winemaking,
quality and well-known wines, and high premium in Chinese market
Domestic wines with lower prices
Decreasing prices of Chile’s wines
Adulterated wines and smuggled wines disturb the order of wine industry in
China
Anti – corruption campaign played by president Xi lead to decreasing demand of
luxury wines
Strict advertising laws
Regulations to limited promotion
New policy against drunk driving
Retailers unable to get full information about portfolio of TWE’s brands
Chinese purchase wines based on familiar with brands because of the lack of
wine knowledge
Younger generations tend to be more self – awareness thus increasing difficulties
to target the market
Limitation rate of manganese for import wines
Unhealthy environment influence TWE’s recruitment in China
What does TWE need to do immediately?
Based on the key issues in Chinese market, TWE need to change the marketing
strategy according to the local situations.
Building up exceptional brands to against with old world exceptional portfolios
Maintaining the sales of luxury and premium brands.
Select some and mainly focus on building up some competitive commercial
brands.
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Building up the linkage between TWE’s luxury brands and TWE’s commercial
brands.
Expand wine market into second and third-tier cities.
Building up sound and complete distribution channels.
Building up a professional sales team with wine knowledge.
Doing education programs to enhance customers’ wine knowledge.
5.0 Marketing StrategyIn this section, it provides some details about reasonable TWE’s strategies that will be
taken from 2015 to 2017 in Chinese market. And these strategies are made based on
the macro analysis, internal analysis, market analysis, competitor analysis and
Customer analysis.
5.1 Mission and direction
The mission of TWE is to bring the organization’s quality wines and knowledge of
new world wines to Chinese customers in order to meet Chinese buyers’ needs of
grape wine consumption. The priority mission of TWE would be to enhance the brand
awareness of exceptional portfolios, maintain the sales of luxury brands, and increase
the profitability of commercial brands.
5.2 Targeting and Positioning Decisions
As discussed in consumer analysis section, Treasury Wine Estates could target three
major customer segments, as follow:
Youth Generation Segment
In demographic terms, the youth generation segment consists of people in China who
are 18-35 years of age and have been well educated, probably have higher disposable
income. From the view of consumer behavior, this group of people usually purchases
a bottle of wine for daily use or sometimes during the private dates. Since the
consumers who within this segment were generally the freshmen to the society,
therefore they have relatively lower disposable income while they do have an
increasing demand in social activities. Hence, it is worth to put more focus on the
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commercial series when promoting wine to them.
5.2.2 High-Flyers segment
The high-flyers segment comprises those person who are age 36-44 years, have had
higher education (master or PhD degree) and disposable income. They usually have
relatively comprehensive knowledge towards red wine and be aware of their personal
preference. Their purchasing attitude tend to be rationalization in term of focusing on
cost-efficiency rather than depending on the recommendations. During their daily life,
they would choose red wine over any other alcohol drink due to wine’s supposed
health benefits. In consumer behavioral terms, this segment of customer often
purchase luxury wine for business negotiations and gifts exchange while commercial
wine for their daily use and private date. Therefore, TWE should provide as much
information for this segment as possible in order to allow them think
comprehensively, thus reach the purchase decision.
5.2.3 Upstarts Segment
The upstarts segment is the group of customer that marketing theory called ‘heavy
buyers’, it consist of customers about 50 years old who has made a great fortune in a
very short period of time by opportunistic investment while have relative lower lever
of education. They used to live in an unsatisfactory life style, however they seem to
get lost in balance when the life suddenly changed dramatically. This group of
customers would purchase luxury wine for nearly every circ*mstance includes daily
use, private date, business functions and gift exchanges. They tend to hold the
purchasing attitude that buys the most expensive one rather than the most appropriate
one.
5.2.4 Positioning
Differentiated marketing would be useful to reinforce the positioning of TWE as the
wine company with the best capabilities to meet the consumer demands and
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satisfaction by creating the possible wine purchasing experience. The products of
TWE should roughly divided into two segments—luxury wine and commercial wine.
Each consumer segment will have a corresponding promotion to motivation
consumes’ buying. This positioning would assistance TWE to have strong connection
with its customers in the targeted segment, thus create TWE own competitive power
in the industry.
6.0 Marketing strategy and planning for luxury brands
6.1 Planning direction and objectives
Based on the analysis of market positioning, TWE’s luxury wine brands should put
more attention on maintaining the sales rather than increasing. In Chinese wine
market, the major target consumer segment for TWE to develop its luxury brands is
the upstarts group plus some of the high-flyers. Though they have had full capability
of purchasing luxury wine, they were still a small proportion of people when look at it
from the entire population of China. In addition, TWE should withdraw part of the
dealership from ASC Fine wine that is the only wine agent where has been authorized
to sell luxury wine of TWE in order to control the process of market expansion in
China.
Establish a professional sales and marketing team in terms who armed with
professional wine knowledge and comprehensive understanding of Chinese
market and Chinese consumers’ purchasing behavior.
Maintain the sale of luxury wine while increase the sales of commercial
brands
Increase the distribution channels mainly focus on first-tier cities
Cooperate with five star hotels and government
6.2 Planning for distribution channels and logistics
Online Shops
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Have a comprehensive cooperation with ASC Fine Wine to expand the market and
grow brand awareness among Chinese consumers. ASC has a positive relationship
with a Chinese domestic logistic company that could deliver parcels 24 hours a day, 7
days a week (holidays are not excluded). This special tactic brings much convenience
to consumers that meet customers’ satisfactions. TWE could take ASC as a distributor
rather than a franchiser after withdraw the dealership from ASC.
Clubs & Five Stars Hotels
Clubs and Five Star Hotels are considered as the premium distribution channel in
Chinese wine market. Upstarts and some of the business person would like to choose
these two places for dining or business negotiation, therefore clubs and hotels are
appropriate places to create brand awareness within the target segments.
Duty Free Stores
Since there is no importation tariff in the duty free stores, the price of luxury would be
relatively lower than other distributors. Though the price is not the dominant element
that motivates upstarts’ purchasing, it still could be a very attractive component to
those business person as they may considered it is quite cost efficient.
Government
Though the sales may partially affect by anti-corruption campaign run by Chairman
Xi, TWE still could introduce its red wine to Chinese government as red wine could
be used as a way of diplomacy.
6.3 Planning for communications and influence
Advertising & Promotions
Due to the strict advertising law issued in recent years, social media has become more
and more popular within many businesses
WeChat (Chinese version of WhatsApp) has a public communication platform
which allows TWE to public relevant information includes seasonal sales, how
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to select wine, recommendation of food, limited edition information etc.
WeChat also allows consumer to subscript these information.
Sina Weibo (Chinese version of Twitter) is another great platform for TWE to
grow its brand awareness. Until the end of 2013, the users of Weibo has been
achieved 500 million that includes 46 million daily active users as well as 120
million monthly active user (Ji, 2013). Apply an official account
QR (quick response) code can delivery certain information when consumers
scan the code by smart phone and tablets. TWE could involve this modern
technology into its communication method. Consumers can get information
about food recommendation of particular wine by scanning the QR code on
the label as well as whether the bottle of wine is really or not.
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6.4 Planning for products and brands
Luxury Brands
DetailsLiquor Style Varietal Price (RMB) Capability
Penfolds
Grandfather Fine Old Liqueur Tawny Port
Dry Red Shiraz Mourvedre
2428 Outstanding wine quality The most famous wine brand in
Chinese market Attracting brand name since it
sounds like a good wish 2008 Grange received a perfect
score of 100 point from Robert Parker’s Wine Advocate
Penfolds Grange 2009
Dry Red Shiraz 2004
Penfolds BIN 389 Dry Red Shiraz 1500Penfolds BIN 311 Tumbarumba Chardonnay
Neutral, Medium Bodied Whites
Chardonnay 999
Wolf Blass Platinum Label Shiraz
Dry Red Shiraz 3880 Well-known brand within Chinese market
Attracting brand name International Wine Challenge
2013 Red Winemaker of the year
Twelve 90+ scores form Wine Advocate and Wine Spectator
Wolf Blass Black Label 2007 awarded Best Red Blend at the Five Nations Wine Challenge
Presidents Selection Cabernet Sauvignon
Full-Bodied Reds Cabernet Sauvignon
2340
Presidents Selection South Australia Shiraz
Full-Bodied Reds Shiraz 1888
Wolf Blass Label Merlot
Red Merlot 1566
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Heemskerk
Pinot Noir Dry Red Pinot noir 3999 2008 Heemskerk Coal River Valley Chardonnay Pinot Noir wins the Regional Trophy at the 2013 Decanter World Wine Awards
Chardonnay Pinot Brut
Sparking White Chardonnay Pinot Noir
2240
Chardonnay Dry White Chardonnay 1887
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6.5 Product Mix
Limited edition
Limited-edition products are produced limited times and often in small quantities in
order to draw consumers’ attentions by the chance of special occasions or event and
increase brand awareness (Wood 2010). It easily get customers buzzing because the
products are considered as out of ordinary and suggest both urgency and exclusivity.
Therefore, TWE could create a series of wine especially supply for special occasion,
such as Valentine’s Day, Christmas and other Chinese traditional festivals. Word of
mouth about this series of products could spread quickly through social media, further
increasing demands and adding to the feeling of excitement and customers when they
are involved in a purchase circ*mstance.
6.6 Products Attributes
High Quality
The luxury series of TWE should insist in producing high quality wine and limited in
amount to meet the sense of unique and excitement that consumers might hold. To
assure TWE is competitively distinctive, attractive and valuable to customer
6.7 Products Life Cycle
Luxury wine has a relatively longer life cycle since it usually takes much longer time
to produce, some of the red wine even take more than a decade. This situation on the
one hand create the urgency of the product that make motivate wine consumer to
purchase in haste, on the other hand it may cause the situation that the inventory could
not meet the quantity consumer needs, thus reduce the consumers satisfaction. To
solve this problem, TWE could launch a pre-order campaign which allows consumers
to have an expectation while the company also could have a certain time period of
time to prepare.
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6.8 New Product Development
Instead of developing a new range of luxury wine in Chinese market, it is better to
launch a new idea bundled with a special series of wine. For example, TWE could
select a series of wine to cooperate with Roseonly (see appendix 3) that sell a bottle of
luxury wine much higher than its market price with the idea of ‘unique’. In ancient
China, parents usually reserved big jar of Chinese spirit and buried under the
sycamore tree in the backyard when their baby girl was born, and they would take that
jar of spirits out and share with guests at the day of the daughter’s wedding.
Nowadays this tradition is hardly to be inherited due to the rapid urbanization.
However, there are still a number of Chinese want to keep it habit, therefore TWE
could take this opportunity to select a series of wine that could preserve for a long
period of time bundled with this tradition and sell at a much higher price level.
6.9 Marketing Programs (2015)
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Month Programs/Products Festival Event StakeholdersBudgetin
g (RMB)Objective
January Launch advertisem*nts campaign on
TV, magazines (high-end business
magazines), newspaper & social
media (WeChat, Weibo)
Create TWE’s official WeChat
and publish promotion and wine
knowledge information towards
customers daily
Print QR code on the every
bottle of luxury wine
New Year’s Day
IT Department
Marketing team
Public Relation
Department
300,000
Build up brand
awareness among
consumers (e.g.
when mention
about perfect wine
for gift exchange,
people would
think about
TWE’s wine)
TWE organize wine testing events in
some big cities
Send official invitations to VIP
customers by mails or emails
Invite wine expert(s) from
Quarterly
Wine Tasting
Event
Wine specialists
from Australia
TWE’s sales
managers
TWE’s sales
30,000 Educate retailers;
Educate customers
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Australia to the event persons
February Launch a special pair of bottles
wine for Valentine’s Day-e.g.
Heemskerk Sparkling Rose &
Sparkling White
Advertising in retails, road
advertising board & magazines
Valentine’s Day
Marketing team
PR department
Retailers
50,000
Continuous
building up brand
awareness
Promotion
Increase sales
Chinese New Year Parties
(Shanghai, Beijing, Shenzhen &
Hong Kong)
Outstanding staffs, Retailers and
VIP customers would be invited
to the party
Award outstanding retailers and
staffs
Some Chinese celebrities would
also be invited
Chinese Lunar
New Year
All staffs
Retailers
PR department
Cooperate with
Hilton Hotel
200,000 Celebration
Increase sales
Create buzzing
among media
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Launch New Year special wine
(limited editions)
Promotion
Advertisem*nt in whole range
of platforms
March
Promotion
Promote wine especially for
women (Penfolds BIN 311)
the advantages of wines to
women (heart, skin, weight
control)
Cooperate with clubs,
restaurants and five star hotels
International
Women’s Day
Retailers
Sales person
Restaurants
50,000
Increase sales
Increase brand
awareness
Improve
consumers’ wine
knowledge
April Promotion
Launch a promotion that allows
consumers know more about
TWE’s whole range of wine
Qing Ming
Festival
Create brand
awareness
Allow consumer
know both luxury
34 / 93
Assist commercial wine
promotion
and commercial
wine
TWE organize wine testing events in
some other big cities
Send official invitations to VIP
customers by mails or emails
Invite wine expert(s) from
Australia to the event
Promotion
VIP consumers could have
chance to reserve limited
edition wine
Quarterly
Wine Tasting
Wine specialists
from Australia
TWE’s sales
managers
TWE’s sales
persons
Wine education
Promote sales
Increase brand
awareness
May
Assist the promotion of commercial
wine- if buy 3 commercial wine, get
1 luxury wine at 10% off
International
Labors’ Day
Increase sales and
brand awareness
Promotion
Advertise the advantages of Mothers’ Day
Wine education
and increase brand
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red wine for women
Continue promote Penfolds
BIN 311
awareness and
sales
Assist commercial wine promotion-
Ads on official website
Dragon Boat
Festival
Increase
commercial
wine’s sales
June
Promotion
Range a short trip for VIP
customers to visit Australian
grape vineyard
VIP consumers would get a
bottle of luxury wine as a gift
Mid-Year
Sales
Promotion
Sales Person
Market department
Tourist Agency
Wine experts
100,000
Boom up the
brand awareness
Improve
consumers’ wine
knowledge
Create buzzing
July Online order & delivered
within 24 hours
Consist with commercial
wine promotion- launch the
idea of ‘love wine’
Qi Xi Festival
(Chinese
traditional
Valentine’s
Day)
Increase sales and
brand awareness
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Social media advertising
August Assist commercial wine promotion
Fashion
Wedding
Expo
(Shanghai)
Increase
commercial
wine’s sales and
brand awareness
Create buzzing
September Assist commercial wine
promotion- HR support,
venue support
Launch the idea of ‘reunion’
Social media advertising
Mid–Autumn
Festival
Retails
Sales person
PR department
Marketing
department
Exhibit TWE Luxury wine
Consist with commercial
wine promotion
All exhibit staffs would
receive a discount of luxury
The 92th
China Food
and Drinks
Fair
37 / 93
wine
Provide luxury wine tasting
Build up long-term
relationship with other
exhibitors
October Promotion
Provide wine to Chinese
government as a ceremony
sponsors
Assist with commercial wine
promotion
Large social media
advertising
National Day
Wine specialists
from Australia
TWE’s sales
managers
TWE’s sales
persons
Marketing
department
PR department
Create buzzing
Increase sales of
both luxury and
commercial wine
TWE organize wine testing events in
some big cities
Send official invitations to VIP
customers by mails or emails
Quarterly
Wine Tasting
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Invite wine expert(s) from
Australia to the event
Assist commercial wine
promotion by providing HR,
logistic support
Social media advertising
TV news advertising
Official website advertising
Double
Eleven
Hilarity2
Create brand
awareness and
increase sales of
commercial wine
December Promote to heavy buyers
Five stars hotels, clubs would
receive a discount when
purchase
If place next year order now,
would receive 5% off with free
shipping
Christmas
Increase next
year’s sales
Increase brand
awareness
Increase
commercial wine
awareness
New year promotion
Delivery for VIP customers as a
New Year’s Eve Increase sales
2 Double Eleven Hilarity is well known as a ‘bachelor day’ that merchant use to aggressively make sales on their inventory.
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gift (well paged with cards)
Customers would receive a
500RMB voucher as a gift when
purchase next year
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7.0 Planning for Commercial brandsBrowsing the portfolio of TWE’s brands, reveals over 70 commercial brands and
some of them presenting high quality with competitive prices. The direction of
commercial wines is to distributing products through the traditional Chinese white
wine channels, resulting in higher market share and penetration levels.
7.1 Specific Objectives
For commercial brand, the main marketing objectives are:
Select some competitive commercial brands and launch 20 commercial brands in
China in the first year
Build up the top 3 commercial brands together; build up the linkage between
selected top 5 commercial brands and well-known luxury brands, including
Penfolds and Wolf Blass.
Build a marketing team with comprehensive knowledge of TWE’s commercial
wines
Achieve a brand awareness of 50% among Chinese.
Increase the sales of commercial brands by 200% in 3 years
Increase the distribution channels
Distribute commercial wines to both big cities and small cities
Cooperate with some big organizations
7.2 Brands & Products
TWE would select (1) 5 commercial brands with a price range of 400 RMB to 250
RMB, (2) 5 commercial brands with a price range of 250 RMB to 100 RMB, (3) 7
commercial brands with a price range under 100 RMB. All brands have varieties of
wines including dry red wines, dry white wines, and sparkling wines. All selected
brands , both launched brands and new brands in China, will be bundled together to
build up brands’ awareness and use the same distribution channels.
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Table 6 shows the top 7 priorities of competitive commercial wines.
Brand Region
Example
Liquor Style
& VarietalCapabilities Price
COLDSTREAM
HILLSAustralia
Dry red
Pinot Noir
Trophy &Gold at the 2012 Dan Murphy’s
National Wine Show of Australia
Beautifully textural, ripe tannin
328RMB/750ml
PEPPERJACK AustraliaDry red
Shiraz
No.1 selling red wine in AU
dark fruit flavors, high tannin level, 288RMB/750ml
WYNNS Australia
Dry red
Cabernet
Sauvignon
90+ scores from Robert Parker’s Wine
Advocate(8 times)
Rich plummy fruit and vanilla aromas
238RMB/750ml
MATUANew
Zealand
Dry white
Sauvignon
Blanc
Best Sauvignon Blanc in the Southern
Hemisphere
Vibrant, herbal & salad greens aromas
198RMB/750ml
Rosemount AustraliaDry white
Chardonnay
Balanced white, white peach, nectarine ,
grapefruit
Foundational brands (good reputation)
158RMB/750ml
Bringer Americas Dry Rosé Foundational brands (good reputation)
Cheap price98RMB/750ml
Lindeman's AustraliaDry white
Chardonnay
Foundational brands (good reputation)
World of mouth98RMB/750ml
7.3 Why branding top 3 foundational brands first?
TWE, firstly, would consider enhancing the brand awareness of top 3 foundational
brands including Rosemount, Bringer, and Lindeman’s. Because:
They are foundational brands of TWE.
They are already launched in Chinese market and witness a good reputation.
Products of top 3 commercial brands have competitive price advantage.
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7.4 Why choose these brands?
Varieties of liquor styles, origins, prices, and brands with good qualities.
The table below shows summaries of product marketing decisions
Product mix and product lines Product attributes
Increase the number of commercial wines
Increase the number of individual wines in each brands
Launch new products under the exciting brands
Increasing new brands
Increased the brand awareness
Satisfy Chinese customers’ needs of commercial wines
Enhance the brand awareness and identification
Innovate some new commercial wines telling wine stories
Product life cycle New product development
Introduce new commercial wine brands
Grow top 3 commercial wine brands to a maturity stage
Replace some slow – selling wines
Add new wines within innovation ideas including ecological, love stories
Test market the wine by different marketing activities
Launch new products
7.5 Regions of China
In order to market wines more effectively,
TWE will divide the country into 8 parts
(see the map). Moreover, each region will be
headed by regional managers.
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7.6 Human recourse & marketing teams
The manager of TWE in Great China is Liu, Ruijun who works for TWE for over than
10 years and a 7 years experience of working in a beer company before.
People, who are leading the marketing team, are important because human resources
can enhance the capabilities of the organization. In order to build up a professional
marketing team to do sales in China, TWE would recruit people as follows:
Marketing managers who will (1) do marketing analysis, strategy and changes
with the time. (2) Build up the brands by using advertising etc. (3) plan marketing
campaigns to promote commercial brands etc.
Regioner managers who will (1) mainly focus on their own region (2) divide each
region into several parts (3) implement the strategy and planning in each region.
Sales men are leaded by regional managers who will do (1) training before
working (2) go to cities to connect with local retailers and find out more
distribution channels etc.
7.7 Distribution channels
TWE would use multi- distribution channels to deliver wines.
Executive retailers
The top 3 commercial brands would use executive retailers which mean they have the
unique rights to sell these brands in the particular areas. And the executive retailers
will be selected based on regulations. The main 4 regulations are as follows:
1. Retailers need to have a store over than 200 square meters.
2. Retailers need to select more than 5 commercial brands of TWE (except top 3
commercial brands).
3. Retailers need to satisfy sales projects (based on the scale of cities) in each
period. And they will be awarded based on the award regulation.
4. Retailers need to buy wines valued 2,000,000 RMB for the first time.
All these retailers will be selected by regional manager and regional sales will have
responsibilities to connect with retailers daily.
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On trade distribution
On trade refers to the business with hotels, bars, clubs and restaurants etc.
1. Cooperate with hotels such as five star hotels, commercial hotels and offer them
wines with different range of prices.
2. Contract with bars and offer them cheap wines, especially sparkling.
3. Offer senior clubs quality wines with good reputation, especially some awarded
wines.
4. Offer different prices of wines to restaurants based on the per capita consumption
of the restaurants.
Off trade distribution
Off trade refers to sell wines to supermarkets, Souvenir Boutique, and Convenience
Store.
1. Souvenir Boutiques (similar to BWS in Australia) selling different types of
alcohols will have priorities. They have loyalty customers and multi - distribution
channels so that they can segment more customers.
2. Supermarkets also will be considered because people go to supermarket daily.
3. Convenience store is another off trade distribution channel. For example, Seven
Eleven opens 24 hours every day.
Direct to customers
There are a lot of online business websites which can be used as other distributors.
For example, B2C websites such as amazon.com.cn can be a good option. Shunfeng,
one of China’s biggest express companies, open 518 stores who offer online shopping
and direct diliver to customers in China on May 18th 2014. It is a good chance to
cooperate with Chinese best quality express service company.
Contract with organizations in special industries
According to SWOT analysis, related industries can be a good opportunities including
wedding industry and funeral industry who have increasingly demand of grape wines.
1. Wedding industry
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Increasingly Chinese new couples choose wedding consulting companies to plan their
weddings. It is a good opportunities for TWE to cooperate with those firms.
2. Funeral industry
Funeral industry is a new industry in China, and TWE would consider cooperating
with Funeral firms result in the Chinese culture of having dinner after a funeral.
7.8 Marketing Communications tools
In order to generate the brand awareness and increase the association of TWE as a
wine estate, increasing advertising would be played in platforms including TV, radio,
outdoor, internet, print etc. Moreover, other marketing communications tools would
be used such as sales promotion, personal selling, direct marketing, public relations
etc. the following tables shows TWE’s marketing communications tools
Communications Activities
ADVERTISING
Targeted magazine advertising (Chinese Wine magazine etc.)
In – store advertising to promote seasonal packages
Small TV advertisings in regional televisions to grow brand awareness
Create TWE’s official Wechat and deliver advertising and promotion
information by using push approaches
Use social media such as weibo to connect with customers
SALES
PROMOTION
Short – term promotion buy 10,000 RMB of wines get 20% off the
purchase price to retailers
Half price promotion of some slow – selling bands to customers
Buy 3 get 1 free for new launched commercial wines to customers
Sales of specific brands to customers on season
Bundling several brands together and offer reduced price to promote in
holidays such as Chinese New Year
Set up a system ‘point-of-purchase of retailers’ to encourage retailers to
promote TWE’s wines (if they finish the seasonal target, they will get RMB
5,000 value of wines return)
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PERSONAL
SELLING
Traditional personal selling - get feedback directly from customers
Internet personal selling – directly sell wines to customers
DIRECT
MARKETING
Email TWE’s web address to customers
Email the online promotion to loyalty customers
PUBLIC
RELATIONS
Organize wine testing events to wine lovers, Offer free trial of wines to test,
and promote sales during events
Sponsor Chinese festivals, such as New Year Party, and offer free drinks
Sponsor wines to wedding shows and do promotion during events.
China National Food, Wine and Spirits Fair in Chengdu
Hong Kong International Wine and Spirits Fair
China International Grape Wine Exhibition in Guangdong
Offer free wines to some public relation companies
QR code
7.9 Customer Service
60 per cent of customers are purchasing wines on trade or off trade which means it is
difficult to offer perfect customer service to customers. However, TWE organizes a
wine education program to train sales and waiters.
7.10 Marketing Programs and Budgeting
The table following summarizes monthly marketing programs for the first year and
the budgets. Further planning of the next two years will be established based on the
performance of the first year and the changes of external and internal environment.
Marketing programs will start in January 2015.
47 / 93
Month Programs/Products Festival Event Involvement Budgeting Objective
January Create local and online advertising about
information of New Year promotion
Customer Sales Promotion
Bundling top 3 Commercial wines together
with others (e.g. Buy 3 get 1 free)
Create TWE’s official Wechat and deliver
promotion information
New Year’s Day IT team;
Marketing team;
Store
employees;
Public Relation
department
100,000RMB
Build up linkage
between top 3 and
others;
Increase sales;
Increase
information
distribution
channels
TWE organize wine testing events in each
regions
Retailers and VIP customers are invited
Invite one of wine testers from TWE in
Australia to present
Retailers organize wine testing events in their
own stores.
Sales person from TWE are invited
Monthly Wine Testing
Event (Education
program)
Specialists from
Australia
TWE’s regional
managers
TWE’s sales
persons
30,000RMB Educate retailers;
Educate
customers
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Testing promotion – if buy on testing, 15%
off
Weekly wine education program
Deliver wine information (including new
promotion, new products, wine
knowledge) by Wechat
February Launch new wines about love story
Buy wines get chocolates for free
Advertising in stores
Valentine’s Day Marketing team
PR department
Retailers
50,000RMB
Promotion
Increase sales
Chinese New Year Party (Shanghai)
All Staffs, Retailers and some customers
participate the party
Some Chinese actors are invited
Award outstanding retailers and staffs
Launch New Year special wine
Promotion
All commercial wines 20% off
Chinese New Year All staffs
Retailers
PR department
Cooperate with
Hilton Hotel
200,000RMB Celebration
Increase sales
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Advertisem*nt in different platforms
Same as first month Education program
March Promotion
Launch a women’s wine
Advertise the advantages of red wines to
women (hart, skin, weight)
Cooperate with restaurants
International Women’s
Day
Retailers
Sales person
Restaurants 50,000RMB
Increase sales
Increase
distributors
Build up brands
Sponsor Amazing Wedding
Sponsor wines
Direct sales to customers
Direct connect with wedding consult
agencies
Bridal Expo
(Amazing Wedding)
Sales person
PR department
Marketing team 30,000RMB
Connect with
wedding
industries;
Direct marketing
Public relation
Direct to retailers (find out traditional
white wine distribution channels)
Connect with competiotors
Hangzhou
International wine and
wine exhibition
Sales person
Marketing team 50,000RMB
Find more
distributors
Same as first month Education program
April Promotion
Promote cheap price wines (below
Qing ming Festival Retailers 10,000RMB Increase sales
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RMB150), all 20% off
Advertising
Targeted magazine advertising (Chinese
Wine magazine)
In- store advertizing
HR department
Sales team
Grow brand
awareness
Sponsor Hilton Hotel
Sponsor wines
Increase on trade distribution channel
Direct to customers
Wedding Bridal Expo
at Hilton Hotel
(Guangzhou)
HR department
Regional
managers 50,000RMB
Build up
relationship with
Hilton
Hotel(increase on
trade channel)
Connect with wedding consult agencies
Increase on trade distribution channel
Fashion Wedding
Expo(Beijing)
HR department
Sales person 10,000RMB
Increase
distribution
channels
Exhibit TWE’s commercial wines
Grow brand awareness
Increase on trade and off trade distribution
channels
China National Food,
Wine and Spirits Fair
in Chengdu
All staffs 180,000RMB Increase
distributors
Connect with
retailers
51 / 93
Connect with retailers
Advertise in exhibition
Launch new wines
Advertisem*nt
Exhibit TWE’s commercial wines
Grow brand awareness
Increase on trade and off trade distribution
channels
Connect with retailers
Advertise in exhibition
China Import and
Export
Fair(Guangdong)
Regional staffs
from 3 parts
100,000RMB
Increase
distributors
Connect with
retailers
Advertisem*nt
Same as first month Education program
May Promotion
20% off for Special wine portfolio
International Workers’
Day
Retailers
Sales person50,000RMB
Increase sales
Promotion
All red wines 15% off
Advertising
Advertise the advantages of red wines to
women
Mothers’ Day Retailers
Sales person
HR department
10,000RMB Increase sales;
Advertise wine
information to
educate customers
52 / 93
Promotion
Buy 3 get 1 free
Dragon Boat Day Retailers
Sales person30,000RMB
Increase sales
Exhibit TWE’s commercial wines
Grow brand awareness
Increase on trade and off trade distribution
channels
Connect with retailers
Advertise in exhibition
The 6th
China(Guangzhou)
International Wine And
Spirit Exhibition 2015
All staffs
80,000RMB
Increase
distributors
Connect with
retailers
Advertisem*nt
Same as first month Education program
June Sponsor Shangri La Hotel
Sponsor wines
Increase on trade distribution channel
Direct to customers
Wedding Bridal Expo
at Shangri La Hotel
(Beijing)
Regional
manager
HR department 50,000RMB
Enhance
relationship with
Shangri La Hotel
(increase on trade
channel)
Exhibit TWE’s commercial wines
Increase on trade and off trade distribution
channels
The International Wine
And Spirit Exhibition
2015 (Shanghai)
Regional
managers
Sales person
20,000RMB Increase
distribution
channels
53 / 93
Connect with retailers
Same as first month Education program
July Chinese Valentine’s Day
Promote Love wines
In-store advertisem*nt
Online order and 24-hour deliver
Qi Xi Festival Retailers
Marketing team
Regional sales
team
10,000RMB
Promotion
Increase sales
Connect with wedding consult agencies
Increase on trade distribution channel
China Wedding Expo
at Shanghai
Marketing team
Regional
managers and
sales
20,000RMB
Increase brand
awareness
Same as first month Education program
August Sponsor Shangri La Hotel
Sponsor wines
Increase on trade distribution channel
Direct to customers
Wedding Bridal Expo
at Shangri La Hotel
(Guangzhou)
Regional
manager
HR department20,000RMB
Increase
distribution
channels
Same as first month Education program
September Promotion Mid–Autumn Festival Retailers 10,000RMB Increase sales
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Buy 3 get 1 free
In – store advertisem*nt
Sales
Exhibit TWE’s commercial wines
Increase on trade and off trade distribution
channels
Provide free drinks to exhibitors
Connect with exhibitors and build up
relationship with TWE
China Import and
Export
Fair(Guangdong)
form Sep to Oct
Marketing team
HR department
150,000RMB Contract with
business
exhibitors (direct
customers)
Same as first month Education program
October Promotion
All wines buy 3 get 1 free
Further discount – 10% off
Small TV advertising
National Day All distribution
channels
Sales 10,000RMB
Increase sales
Same as first month Education program
November Biggest promotion
Online promotion (all 30% off)
Advertising online
Double Eleven Online
Shopfest (taobao)
Sales 50,000RMB Increase sales
55 / 93
Same as first month Education program
December New year promotion
Big organizations – buy 100 box get extra
25% off
Individuals -
Christmas Sales
Marketing team
PR department
Promote to big
organisations
Same as first month Education program
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8.0 Metrics and controlWith development of marketing strategy in TWE, to measure the effectiveness of
TWE’s advertising strategy would be conducted. This metrics will evaluate brand
awareness in terms of luxury wine and commercial wine. Obviously, TWE would
measure each different strategy effectively or different type of promotion they take.
For instance, the planning of communication of luxury wine is advertising of in-store
promotion, store manager could do register for customers who are at end of pay. It can
measure promotion results are which product is loyalty consumer prefer, how many
new customers we acquire. For example, the planning of communication in
commercial wine focus specifically on social media such as WeChart, which TWE
share corporate and product information, understand brand consciousness and provide
quickly customer support. Among the many metrics to measure social media results
are how many followers TWE WeChart accounts and blogs engage, how many times
the brand is mentioned in other blog info and the amount and type of brand comments
made on WeChart.
The marketing control assumes that the Treasury Wine Estates is able to make change
after implementing the marketing plan. It can be reflected by two types of marketing
controls that are productivity control and strategy control. To be more specific, the
purpose of productivity control is to evaluate the performance of marketing plan of
TWE that relate to the efficiency of key marketing activities such as promotion in
product extension and product cooperate. These are supported by communications
productivity that is brand awareness increasing without higher budgets. For example,
spending 50,000 RMB on promotions to cooperate with clubs and five star hotels and
to promote wine to women particularly. It may increase brand awareness of TWE.
What is more, brand awareness would be measured through questioner survey (Brown
2008). Questions like ‘which imported brand comes to you mind when about an
Australian wine products?’. This unaided question will be followed by questions such
as ‘have you ever tried Panfold?’. This outcome of this investigation will afford
information that identifies that effective of our marketing promotion to boost brand
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awareness. Another is strategy control that evaluates marketing’s performance in
managing strategy area in TWE relative to consumer relationship, and shows the
importance of whether the TWE is forging relationship with consumer. This
evaluation would be identified through acquiring customers in terms of three
consumer segments such as young generation segment, high flyers segment and
upstarts segment to achieve different demands in terms of luxury wine and
commercial wine. In evaluation of luxury wine terms, in order to maintain the sales
volume of luxury wine that come from upstarts segment and some of high-flyers,
there are some programs can be used to control such as improving loyalty and
increasing satisfaction. The example of improving loyalty, making VIP Golden card
for upstarts segment that are major luxury wine buyer, this means cardholder has 20%
off for luxury wine. Another is create a rule within VIP Golden card that cardholder
has special opportunity to get 50% of any products in birthday date, but just use this
card once only. Another example is to increase satisfaction that set tasting room in
store for customer to provide excellent service within wine knowledge of pourer and
tasting protocol, which evaluate by systematic monitoring. In evaluation of
commercial wine terms, to increase the sales volume of commercial wine that is from
youth generation and most of high-flyers, there are some programs should be used to
control that include building loyalty, supporting positive perception. One example of
encouraging and stimulating purchasing is producing member card and VIP sliver
card (based on consumer’s sum of consumption in store) for youth generation
segment and high-flyer segment that can has 10% and 12% off for any products.
Additionally, the example of supporting positive perception, enhancing advertising of
wine knowledge with positive attributes for upstarts segment, it is associated with
following positive attributes: Genuine taste, Good value for money, Good for health,
Support country of origin and more. The outcome of consumer strategy could
significantly affect TWE ability to carry out objective of increasing sales volume.
Thirdly, the controlling of financial budget strategy, this financial budget would be
conducted every three months to provide a more detailed analysis of individual
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campaigns in terms of luxury wine planning budget and commercial wine planning
budget, as both of sales are growing and thereby the expense of $ 730,000 and $
1,370,000 to conduct two budgets can only be provided once each year. With TWE
increases, these budgets would be conducted more often, as to carry out immediate
feedback on different advertising strategies and allow TWE to adapt to a changing
marketplace.
8.1 Expectation of luxury wine
TWE withdraw the sales right of luxury wine due to the sales power of luxury wine in
ASC Fine wine before, and mainly focus on maintaining item sales in Chinese market,
which take account for 40% approximately. This can be achieved by communication
tool and distribution channels to gain the objective of maintaining sales of luxury
wine. To be more specific, in terms of communication tools, using platform of social
media such as Wechat and Sina Weibo advertise some information that contain sales
promotion and wine selection for customers to enhance brand awareness. Consumer
also can use QR code to identify whether the wine is really or not. Clearly, these
advertising methods are carried out through professional team. On the other hand, to
achieve maintaining the sales of luxury wine that could through multi-distribution
channels such as online shops, cooperation with five stars hotels and clubs, duty free
stores. For example, making ASC Fine wine as own distributor to achieve the
objective, this is because ASC Fine wine already had good relationship with existing
consumer that is strength for TWE. In addition, setting shoppe in five stars hotels and
clubs is way to attain sales of luxury wine due to people in upstarts segment or
business events prefer to choose those places for themselves. Moreover, because of
more and more business people studying abroad, luxury wine without tariff fee in
duty free shops could motivate these consumers purchasing behavior.
8.2 Expectation of commercial wine
Due to selling commercial wine is major planning in TWE; there are some expected
effects on growth of distribution channel and product practical effect through using of
media platform. Firstly, with the outlook of Chinese wine market is continued growth,
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commercial wine in distribution channel will expect to increase 2 ways including
franchisee that built on executive retailers and official website online order. These
could expand commercial wine market in second-tier cities. In order to attain this
objective, some programs and rules should be taken. For example, franchisee should
base on executive retail shop to build up. It should take the rule of same promotion
and same price with executive retailers, but could create new room that base on the
scale of cities for limited free tasting. In addition, setting official website online order
for selling commercial wine with free deliver, which offer the same products as real
shop. It is convenient for people who do not want to go out for shopping. Secondly,
the expectation effects on media mix, the sales of commercial wine will improve 20%
through heavy advertising and sales promotion. One example is advertising in
Christmas day that pre-launch promotion information in official WeChart while put
advertising in Television for consumer. And then make promotion such as bund
products together with reduction in price to meet customer demand. In addition,
setting shoppe wine exhibition with free tasting also is good way to achieve
expanding sales of commercial wine. One the other hand, everyone knows
commercial wine in TWE by using media platform. This is reflected increasing in
brand awareness particularly in top 3 commercial wines that are Rosemount, Bringer,
and Lindeman’s. Thirdly, education programs with positive attributes led to increase
knowledge of purchasing behavior and aspect of drinking wine. For example,
appearance/presentation of wine in store have been shown when consumer makes
purchase. This is because brand awareness would be increased.
Previous Current
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Luxury wine
Commercial wine
Sales Strategy
Focusing on advertising of luxury wine
Maintaining commercial wine sales
To maintain luxury wine Focusing on commercial wine
Effective
Increased in luxury wine Steady state of sales for
commercial wine
Keeping high sales of luxury wine Growth of commercial wine To achieve the balance of the
sales satiation
Distribution ChannelsStrategy
Distribution channels have not separate to luxury wine and commercial wine respectively Confusion in distributors
Separate Strategy for luxury wine and commercial wine such as: Online shops, Cooperation with clubs and five stars hotels, Duty Free stores and Governmentluxury wine
Executive retailerscommercial wine
Effective
Growing of luxury wine sales volume
Some of commercial wine sales improvement
No significantly effects on distributors
Expanding of two wines of distribution channels
Especially increase in luxury wine distribution channel on first-tier cites
Social media and Promotion Strategy
No separately strategy for each level of brands
Separately strategy for luxury wine and commercial wine such as: Social media (Wechart, Sina weibo and QR code) luxury wine
TV ads, different promotion in stores, discount and public relations events commercial wine
Effective
Increasing of wine sales Enhancing brand awareness
regional
Increase in wine sales Boosting brand awareness around
first tier cities and second tier cities
Education programs strategy
There is little educated programs for products
Lots of educated programs in terms of wine knowledge aspects
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Effective
Lack of wine knowledge Misunderstanding in wine
knowledgeA correct understanding of wine knowledge
9.0 ConclusionIn conclusion, from the analysis of current situation in Chinese market, TWE would
change current strategy (which is growing luxury brands and maintaining commercial
brands) to a new strategy (which is growing commercial brands and maintaining
luxury brands) in Chinese market. This paper reset the strategy of TWE in China and
creates separate feasible plans and programs for both luxury brands and commercial
brands to drive TWE to be successful in China.
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Appendix 1 shows the portfolio of Treasury Wine Estate.
ANZ (Australia &New Zealand)
19 Crimes Abel's Tempest Angel Cove Annie's Lane
Baileys of Glenrowan Coldstream Hills Devil's Lair Fifth Leg
Great Western Heemskerk Ingoldby Jamiesons Run
Killawarra Leo Buring Lindeman’s Matua
Metala Mildara Penfolds Pepperjack
Robertson’s Well Rosemount Estate Rothbury Estate Saltram
Seaview Secret Stone Seppelt Squealing Pig
St Huberts T'Gallant Tollana Valley of the Giants
Wolf Blass Yarra Ridge Yellowglen Wynns Coonawarra Estate
North America &South America
Beringer Vineyards Chateau St. Jean Cellar No. 8 Colores del Sol
Greg Norman Estates Etude Meridian Los Hermanos by Beringer
St. Clement Sledgehammer Souverain Santa Barbara Collection
Stags’ Leap Winery Tierra Secreta
Europe
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Castello di Gabbiano Maison de Grand Esprit
Appendix 2 Brand Awards in FY13 (Cited From TWE’s Annual Report 2013)
WOLF BLASS International Wine Challenge 2013 Red Winemaker 90+ scores from Wine Advocate and Wine Spectator double gold medals at the China Wine and Spirit Awards Best Red Blend at the Five Nations Wine Challenge Ranked equal second among the world’s leading Cabernet
Sauvignon based blends
LINDEMAN’S Number One in four countries: Norway, Canada, Sweden
Netherlands Best Values’ from Wine Spectator 2012 Lindeman’s Bin 50 Shiraz awarded Matthew Jukes’ 100 Best
Australian Wines 2013–14 2012 Lindeman’s Bin 95 Sauvignon Blanc awarded gold medals
PENFOLDS 2008 Grange -perfect score of 100 points from Robert Parker’s
Wine Advocate & Wine Spectator 2008 Grange –perfect score of 20/20 from Schweizerische
Weinzeitung and a ‘Best of the Best’ honouree for International Red Wines in the Robb Report
Winery of the Year ‘Best Launch’ at The Drinks Business Awards 2013
BERINGER 2009 Knights Valley - r Top 100 Wines of the Year in Wine Spectato Beringer Quantum- 92 points in Wine Spectator 2011 vate-92 points from Wine Spectator 2009 Private Reserve Cabernet - 93 points from Wine Advocate Brand refresh for Beringer Classics
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ROSEMOUNT ESTATE 230+ awards at the 2012 Royal Queensland Wine Show 15 wards at the 2013 International Wine Challenge Rated outstanding winery in the James Halliday Australian Wine
Companion 2013 Best Other Red Varietal Blend at the 2012 Royal Melbourne Wine
Show
Commercial Brands
WYNNS COONAWARRA ESTATE 90 + SCORES
PEPPERJACK AUSTRALIA’S NO.1
COLDSTREAM HILLS TROPHY
HEEMSKERK BEST SPARKLING
YELLOWGLEN NEW LAUNCH
DEVIL’S LAIR BEST DRY RED
SEPPELT TROPHY
MATUA NZ PRODUCER OF THE YEAR
STAGS’ LEAP 93 PTS
GABBIANO PLATINUM
CHATEU ST.JEAN HOT BRAND
GREG NORMAN ESTATES GOLD
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Appendix 3 Rose only
Rose OnlyRose Onlyhttp://www.roseonly.com.cn/High-End Online Florist’s Shop
One individual could only shop once by ID card
Founder Perry Pu
Found Date 04-01-2013
Brand Name Roseonly
Slogan Trust roseonly, trust love
Products Rosa freedom, Rosa damascene ,Rosa centifolia
Packaging Hand- made, quality, gorgeous
Celebrities Yang,Mi Li,Xiaolu Li,Yudi He,Jiong
Distributions Branches in Beijing & Online Stores
Prices 399 – 10,000 RMB
Roseonly, as the unique luxury florist store has introduced an offbeat marketing
concept into Chinese market that sell the most expensive roses around the whole
country (even the whole world). The average price of a twig of rose is around
400RMB which roughly equals to 68AUD (includes packaging), and a box of nine
roses bloom sells at 1314RMB that is about 235AUD (the pronunciation of 1314 is
similar with the ‘a life span’ in mandarin). However, the price is the most surprising
element yet, the innovation of Roseonly is that one individual could only purchase
once in this store (includes online shopping and in-store shopping), which means there
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is a zero in purchase frequency. Ironically, the company has been in a well operating
situation since it’s funded. It is difficult to say whether this marketing strategy is
feasible for the brand growth, however it could be considered as a masterpiece of
tactic by taking it as a brand promotion since it has been created extreme force of
public opinion, which has been impelled extensive brand awareness.
Appendix 4 ASC Fine Wine
ASC Fine WineASC Fine Winehttp://www.asc-wines.com/en/
The only wine agent that has been authorize to sell TWE’s luxury wine High-End Online Wine Store Receive the wine that purchased online within 24 hours
Founder Don St. Pierre, Sr & Don St. Pierre, Jr
Found Date 1996
Slogan Bring the finest wine into China
Products Wolf Blass, Penfolds & other luxury wine from other companies
Distributions Online Shops, supermarkets, shopping malls, restaurants & retails
Price 200RMB-2000+RMB/bottle
ASC is the greatest fine wine importer in China sells more than 1,200 different kinds
of wine from 14 different countries. ASC has been position itself at high-end luxury
wine importer that provides Chinese consumers the
extensive choices and unparalleled quality of wine.
It has been qualified to be the wine education provider in
China which approved by Wine and Spirit Education
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Trust (WSET). If TWE could have a positive partnership with ASC rather than simply
authorize the dealership to ASC, the prospect of expanding China’s wine market is
immeasurable.
Appendix 5 Marco analysisPESTEL analysis
A Political, Economic, Social-culture, Technological, Economic and Legal (PESTEL)
Analysis examines the macro-environmental factors that influence the industry.
Political Factors
The wine industry in China enjoys a favorable political environment since China
becomes the member of World Trade Organization (WTO). Hence, increasingly
foreign competitors enter to the market to gain market share in China. From the year
2000 to 2012, import wines by China, both bottled and bulk wines, increased from 3.8
million cases to above 43 billion cases (Insel 2013).Specifically, from preferential
policies applied by Chinese government, the tariff for Australian wines is reduced by
3% from 2010 to 2012, and reduce 2% for year 2013 and 2014 (Ritman 2012).
However, with Xi, who took the China’s top post in 2012, starts the biggest Anti-
corruption campaign to consolidate his power, the volumes of import wines,
especially luxury wines, witness a sharp decreasing trend in the decent because most
of foreign wines are purchased for bribing officials. According to statistics from
Chinese Customs, it shows that the volumes and values of import wines in 2013 are
decreased compared with statistics of 2012 (2014). Focusing on TWE, the conpany is
mainly concentrating on luxury brands, such as Penfolds, Wolf Blass. And form
TWE’s annual report, statistics shows that the higher Net Sales Revenue was mainly
driven by increased volumes and allocation of Penfolds Luxury wines in China (TWE
2013). But, statistics presented by China Customs shows that Australia (as one of the
main winemaking region by TWE) witnesses a deep decreasing of export volume in
Chinese market in the year of 2013 (about 28.2% compared with last year). As a
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result, TWE is facing an unpredictable challenge since 2013 and the situation will
continue to influence TWE in Chinese mareket in the following years.
Economic Factors
Fresh economic figures for the year of 2014 released by China's National Bureau
show that GDP grew by 7.7% to 56.88 trillion yuan (2014). Moreover, The State
Council of China predicts that it will continue to retain at this level in the future years
which means that China will continue in a stable economic situation. From average
income respect, the statistic figures published by China’s National Bureau shows that
per capita disposable income in China increased 8.1% compared with last year which
was 18,311 yuan (2014). Moreover, Chinese government’s work report released that
the unemployment rate of China dropped to 4.05% last year. All these statistics show
that Chinese people have more disposable income which presents exciting growth
opportunities for international organizations to enter the market. TWE is
unexceptional take advantages since the year of 2009 when ASC fine wines took the
exclusive franchise of Brand Panfolds (one of its reputational brands). Then, more and
more TWE’s brands enter to Chinese market to satisfy Chinese demand. Even though
most of import wines are facing challenges in this market because of the influence of
global economic recession, China is still a market with enormous potential.
Social-culture Factors
Statistics released by Chinese Customs display that consumption of import wines are
mostly in big cities, such as Shanghai and Guangzhou, which occupied over 50% of
whole volumes (2014). It mainly because middle class in big cities change their
consumer behaviors influenced by western educated new generation, increasing
western expatriates and international companies enter to big cities.
China’s urbanization process is recognized as internal migration which means
increasing people are living in cities rather than rural areas. Statistics presented by
China Human Development displays the urbanization rate of China has increased
rapidly from 17.9% go to 52.6% between 1978 and 2012, with an average annual
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addition at 1.02% points (2013). And Chinese government predicts that nearly 300
million people are expected to move to big cities in the next two decades (China
Human Development 2013). As a result, it will produce more middle class and
witnesses the change the behaviors of increasing urban customers. To be specific,
more and more urban residents start to drink grape wines especially import wines
because they regard COO (country – of - origin) as an important factor while
purchasing (Mitry 2009). Therefore, increasing people prefer to drink grape wines
influenced by “red wine rush” in modern cities in China. TWE, as a unique global
wine company, within over than 80 brands of wines, has already take advantages in
the market.
Technology Factors
Statistics from China's National Bureau present that china now has over 600 million
internet users (CNNIC, 2014), representing the largest population of net users in the
world. Companies expend investment to create a more transparent and convenient
online shopping environment for netizens to do online shopping (Gong 2013). Since
the first B2C (Business to Customer) website, 8849.com established in 1999, China’s
e-commercial develop rapidly (Weng and Lee, 2009; Shanghai Business Review,
2010). And then the biggest online shopping web taobao.com established by Mr Ma in
2003. From now on, rapidly increasing netizens search information of the products
and then purchase online which is good news for import products because they can
reach more customers, present their products in their homepage and then ordered by
customers online. For TWE, it releases latest news on their internet such as new
products, promotion information. For example, ASC Fine Wine, who is the exclusive
retailer of Penfolds in China, offer online purchasing service and customers can order
Penfolds wine products and the order will be delivered in 24 hours.
However, it also has a bad effect such as increasing counterfeit goods and fake
products sold on the internet. Compared with western market, C2C (customer to
customer just like eBay in Australia) e-commercial is widely used in China which
occupied over than 90% of total online sales (CNNIC, 2014). For example, buyers are
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allowed shop in C2C bazaar B2C brand stores in taobao.com which is the largest
online shopping website. But online suppliers are selling fake wines to customers
which will influence the reputation of brands. For example, Chinese government
released the news that Chinese security officers detected a case of 40 million fake
wines online. Evidences have shown that there are some online retailers selling fake
Penflods on taobao.com. It is unbelievable that the price of Penfolds Bin 389 Cabernet
Shiraz is only about 25 yuan in China.
Ecological Factors
According to the news report, millions of people in China are breathing hazardous
dense chemicals and haze has covered about 4 million square kilometers of China in
2013 January (Xu 2013). These chemicals are polluted by power plants, heavily
polluting factories and vehicle plants and it links to unhealthy development of
economic (Xu 2013). Experts warned that haze in China in more horrible than that of
SARS epidemic because there are more carcinogenic in Haze weather than cigarettes
and it widely influence the health of the whole generation. Evidences have shown that
increasing people have heart disease, stroke, cancer, cerebrovascular diseases and
birth defects in China (Xu 2013). Moreover, it will become a big barrier of foreign
executives to work in this country result in the bad working environment (Thomas
2014). About 50% of investigated companies are concerning the air pollution issues
will be the difficulty for recruiting and retaining top foreign executives in China
(Thomas 2014). Referring to TWE, smog causes problems for recruitment executives
to work in China which will be the barriers of explore Chinese market strategy.
Legal Factors
Recently, several laws are decreed by Chinese government which will impact on
import wines in China. Firstly, Chinese government implements new laws against
drunk driving. Therefore, Chinese drivers will be examined by using random breath
test and if the alcohol level in their blood is higher than 80% of every 100 milliliters,
they will be facing the driver license revoked forever and 3-month in prison (Road
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Traffic Safety Law 2012). Secondly, from the latest Import and export food safety
law, Chinese government decreed a new limit of 2 mg/L manganese for import wines
(2014). As a result, more than 23 percent of the import wines are rejected due to the
unacceptable levels of manganese (Grapegrower & Winemaker 2014). Since the wine
advertising regulation executed on 21 February 2014, wine advertisings are not
allowed to place at above province platforms. Moreover, wine TV advertisings forbid
drinking alcohol actions, direct or indirect reveal functions such as eliminate stress
and anxiety, etc (SARFT 2014). If wine companies disobey any one of the refutations,
they will be punished based on China Law of Advertising. According to the
regulations decreed by Chinese government, TWE is facing difficulties managing
across culture.
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Appendix 6 Internal analysis3.1 Internal environment
This section outlines the strengths and weaknesses of TWE in terms of internal
analysis.
3.1.1 Strengths
There are some internal capabilities of TWE result in supporting the organization to
take advantages in Chinese market.
Outstanding People working for TWE in Asia
In order to realize the ambition to become the most successful wine company over the
world, TWE employs many talent people working for the organization. The general
manager of Great China is Mr Liu who has 10 years experience in consumer goods,
beer and wine specifically in Chinese market.
The portfolio of our brands
TWE holds 82 brands in 3 production regions which are ANZ (Australia & Zew
Zealand), America and EMEA (Europe, Middle East &Africa). Brands of the
organization can be divided to 3 levels including exceptional brands, luxury and
masstige wines, commercial portfolio. TWE produces several exceptional brands such
as Penfolds Grange Bin 95, Australia (2006). And there are also some luxury
portfolios of luxury wines offered by TWE including Penflods (such as Penflods BIN
389, BIN 407), Wolf Blass, Lindeman’s, Beringer, Rosemount Estate. Some of
commercial brands present a quality with reasonable price, such as Wynns
Coonawarra Estate, Pepperjack, Coldseream Hills, Heemskerk, Yelloglen, Devil’s
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Lair, Seppelt, Matua, Stags’ Leap, Gabbiand, Chateu ST.Jean, Greg Norman Estates.
A commitment of the quality
All wines offered by TWE are committed with good quality because the organization
put the quality of wines ahead of quantity. There are some evidences presented in
FY13 (shown in Appendix). For example, one of the exceptional brands owned by
TWE, Penfolds Grange Bin 95, Australia 2008, is awarded a perfect of 100 points by
The Wine Advocate. It was the second time it won the award since 1976 and it is a
strong statement of the successful of this brand. According to latest news released by
TWE, the company won 84 awards in International Wine & Spirit Competition
(IWSC), including 9 of gold awards.
Varieties of TWE’s Products from different origins
TWE produces varieties of products including red wines, white wines and sparkling.
And different products witness the need of different Chinese customers such as
business people，wine lovers， high income consumers，white-collars, and average
customers.
Types of red wines including Shiraz, Merlot, Cabernet sauvignon, Malbec, Pinot
noir, Zinfandel, Sangiovese and Barbera.
Types of white wines including Chardonnay, Riesling, Sauvingnon Blanc,
Semillon, Pinot Grigio and Pinot Gris, Verdelho.
Best sparkling wines in Australia with significant carbon dioxide in it.
Different origins of wines including Australia, New Zealand, America etc.
Packaged with screw caps & NNPB bottle
All wines from TWE are using screw caps instead of corks to keep wines sealed and
oxygen is hardly ingress into the bottles. Since screw caps successfully used in wine
industry in Australia, wineries form TWE started to use screw caps which effectively
prevent bottled wines from oxygen and of cork taint. As a result, increasingly
wineries, both new world wines and old world wines, are using screw caps because it
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can prevent wines’ aromatic and tannins.
Most of TWE’s wineries are using Narrow Neck Press and Blow (NNPB) bottles
which are 18% to 28% lighter than regular wine bottles. And it is significant for
international market, including China, because it will reduce the cost of distributions.
Trade events and education programs in China
Some education programs as follows:
Wine Australia won the ‘Best Wine Culture Promotion Organization’ awarded by
China magazine.
Work with A+ Australian Wine specialists in China to release latest news of
Australian wines to Chinese customers.
One of TWE’s retailers, ASC Fine Wines – The first provider of WSET programs
in mainland China
TWE held Wine testing events in big cities and some secondandthird-tiercities
Trade events participated by TWE
China National Food, Wine and Spirits Fair in Chengdu
Hong Kong International Wine and Spirits Fair
China International Grape Wine Exhibition in Guangdong
Sales management in China
The office of Great China is located in Shanghai which is the biggest city of China.
And sales region has been divided into 4 areas which are East Region, West Region,
North Region and South Region. Regional managers in each region working together
with their sales team to build up TWE’s brands and improve the sales. Compared with
the performance in past years, TWE’s professional sales team of China is now
focusing more on small cities and devotes to reach more customers.
Multi distribution channels
TWE distributes different brands by using different channels. On trade is mainly used
for luxury brands which be delivered to bars, five-star-hotel, restaurants, SPA and
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KTV. Some of well-known brands are authorized by specific retailers who have the
unique right to sell the brands in specific regions. Some other commercial brands are
distributed to hypermarkets, convenience stores, souvenir boutique.
3.1.2 Weaknesses
There are still some weaknesses of TWE existed which will affect the performance of
the organization in Chinese market.
Some of wines are in short supply
The expansion of TWE’s sales in China has been limited by the shortage of some
premium brands, including Penfolds Grange Bin 95, Australia 2008, in the market
(from TWE Annual Report 2013).
Increasing cost of production
The cost of wine production increased seen from Annual Report 2013. The cost of
goods sold increased by 2.09 dollars per case result in the bad weather condition in
the year of 2011 in Australia and America.
Excessive brands result in difficulties of branding
There are more than 80 brands in TWE and over 30 brands are now existed in China.
TWE pays more attention on well-known brands such as Penflods and Wolf Blass
because it is a tough work to build up all of these brands. As a result, some of the
reputational brands suffer a passionless treatment in China including the NO.1 sales of
Shiraz in Australia– PAPPERJACK. Therefore, as annual report mentioned that
everyday brands building relates to investment in advertising and promotion.
However, TWE now is considering cost cutting, the organization are lack of
investment and hardly invest millions dollars to build up 80 brands in China.
Incomplete distribution network and business system
Even though TWE built up varieties channels to distribute its wines, the distribution
network is still incomplete and the business system is still effectiveness. The reasons
are as follows. Firstly, importers and retailers are lack of education and wine
knowledge result in difficulties of delivering wine knowledge to customers. Secondly,
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most of sales managers are major in marketing but lack of wine background and it is
hard for TWE to train all sales. Thirdly, it existed irregular operation in some souvenir
boutiques. All these factors influenced the effective operation of distribution network
and business system.
Bad financial situation
From the TWE’s Annual Report 2013, it is obviously shown that TEW is facing
financial problems. From the annual report, it is obviously that the cash and cash
equivalents decreased from 28.6 to 10.8 between 2012 and 2013 even though the
working capital increased. Here are some reasons.
The time required from winemaking to selling of luxury brands will take about 14
years while the time of commercial brands is only about 5 years. But, TWE is
mainly focusing on Luxury brands rather than commercial brands. To conclude,
TWE need to invest more money to build up luxury supply chain until it rewards.
Foreign exchange is another risk as the Australian dollar presents a strong
performance which will affect the export trades.
There are too much brands owned by TWE, and the organization is still in the
process of adjustment. It results in lack of money to invest in all brands.
Decreasing sales of premium wines
According to the latest news from TWE’s website, the volume of TWE’s export wines
in China decreased 17% because of the decreasing need of luxury wines influenced by
Anti-corruption campaign.
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Appendix 7 Competitor analysis1.0 Competitors of TWE in China
The competitors of TWE can be divided into domestic companies, old world wine
exporters, new world wine exporters (except TWE) and ‘fake’ wine makers.
2.0 Domestic companies
The top three domestic wines are Chang Yu, Great Wall, and Dynasty which occupied
over 49 per cent of the whole market share of China (Lin 2013). Take Chang Yu
Company Limited for example, it is the leader of Chinese grape and it holds about 20
per cent of the market share in china in the year of 2009 (Lin 2013). Here are some
comparisons between Chang Yu and TWE (cited from TWE’s Annual Report &
Chang Yu Pioneer Wine Co. Ltd. 2013 Semi-annual Report).
Name Chang Yu Company Limited (wines) Treasure Wine Estate
ProductsGrape Wines, Brandy, Sparkling,
Healthy Wines, Ice WinesGrape Wines, Sparkling
RegionsEastern Region, Middle Region,
Western RegionAMERICA, ANZ, ASIA, EMEA
History 120 years 170 years
Reputational
Brands Jiebaina,
Penfolds, Wolf Blass, Rosemount,
Beringer, Lindemans, etc.
Marketing
network
3 levels mainly composed of the CY’s
salesmen and dealers
4 levels, executive, non-executive, retailer,
others
NSR 326,349,976AUD 135,400,000AUD(Asia)
Cash and 16,081,426AUD 10,800,000AUD
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cash
equivalents
Prices
Commercia
l8 - 12 AUD 15 – 22 AUD
Mudium 15 – 22 AUD 50 – 200 AUD
Luxury 50 – 80 AUD 300 – 800 AUD
Prices Of
Some
Brands
Jiebaina (Red Wine) 8AUD (700ml) Wolf Blass (Shariz) 20 AUD(750ml)
Cabernet Sauvignon 16AUD (750ml) Penfolds Bin 389 (2009) 75AUD(750ml)
CHATEAU FIP 83AUD (750ml) Penfolds Grange 660AUD(750ml)
From the table above, it is obviously shown that
Strengths
TWE owns more well-known brands and the wines produced by TWE present
higher quality than that of Chang Yu’s
TWE has longer history of winemaking and sells its wines widely over the world.
Compare the distribution channels between TWE and Chang Yu, TWE is mainly
based on retailers which reducing the cost of business while the sales of Chang
Yu mainly relies on salesman.
Weaknesses
Compared the prices of wines between TWE and Chang Yu, they present that
wines of TWE more much higher than that of Chang Yu’s.
The NSR between these two organizations show that Chang Yu still occupied
more market share than that of TWE in China.
Retailers of TWE are lack of knowledge about TWE’s wines while salesmen from
Chang Yu are more pensionable and knowledgeable.
3.0 Old world wine exporters
From the context presented in part two, it is obviously shown that old world wines are
still the major import wines in China. France, as a famous region of old world wines,
takes over than 35 per cent of the whole volume of import wines (China Customs
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2013). For example, wines from Bordeaux are the most famous wine region in France
and this region counts for 60 per cent of the best quality French wines.
The following table shows the comparison between old world wines and new world
wines.
Attributes Old world wines New world wines
RegionsFrance, Italy, Spain, German
Portugal, Austria
Australia, America, Chile,
Argentina, New Zealand
History Hundreds to thousands 2-3 Hundreds
Planting Nature way New technologic irrigation
Winemaking Low output, but high quality Industrialized - production
Regulation Standardized No
PackagingRegion, style
Corks, Traditional heavy bottles
Grape varieties, Color
Screw caps, NNBP bottles
Scale Small Large
Craft Traditional New Technology & Management
TasteGraceful, Balance
Tradition
Varieties, Passionate,
Fruity Aroma
Well-known
Brands
Châ teau Latour,
Chateau Lafite Rothschild
Penfolds, Jacob’s Creek
Chateau Ste. Michelle
From the table above, it is obviously shown that
Strengths (TWE produces new world wines)
The taste of new world wines is more varieties, passionate with fruit aroma
compared with old world wines
New world wines are using new technologies to plant and make wines resulted in
the harvest are less affected by climate changes.
The scale of production of new world wines is larger than that of old world.
The average prices of new world wines are lower than that of old wines.
New world wines are using screw caps and NNBP bottles to reduce its cost.
Weaknesses
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Old world wines witness longer history and more reputational brands
Old world wines pay more attention on quality than quantity.
Old world wines have strict regulations and divides wines to A.O.C, V.D.Q.S, Vin
de Pays, Vin de Table.
The premium levels of old world wines are higher than that of new world wines’.
For example, Lafite’s price is soaring over than 30 per cent in last decade (Lin
2013).
4.0 New world wine exporters (except TWE)
Most of TWE’s wines are from America, ANZ, and EMEA. And statistics from China
Customs has shown that Chile is a competitive exporter in Chinese market especially
in the performance of bulked wines.
Weaknesses
The prices of wines from Chile are much lower than that of TWE’s.
The volumes of bulked wines export to China is much small than that of Chile’s.
Even though there are over than 80 brands owned by TWE and TWE takes advantages
in Chinese market. Some other new world wineries show competitive performances.
Here are some performances of Brands owned by Orchid Wine Estate (an Australian
wine estate only focus on Chinese market).
Jerrassa Estate, an Australian brand only launched in China, used to be the best
sells of South Australian wines in Chinese market in the year 2012.
Cape Jaffa Wines uses biodynamic to make an organic wine and launched in
China in 2013.
Pollen Wines launched a series of wines named Post Love in 2013 in China. And
it is not only about quality but also about telling a story to customers.
Also, there are some other new world wine brands
Jacob’s Creek is the best sales of Australian Bottled Wines in China in 2013. And
from the Annual Report of Jacob’s Creek 2012, the sales of its wines increased 32
per cent. The objective of Jacob's Creek in China is sales reach to 800 million to
1600 million in 2014.
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5.0 ‘Fake’ wines and smuggled goods
“Fake” wines exist in China and it leads to negative effects of reputation of TWE’s
wines. Search one of famous Chinese C2C website, www.taobao.com, it is easy ro
find out some fake wines. The examples are as follows.
Brand Fake wines’ prices Normal prices
Penfolds Bin 389 (2009) 25 – 150 RMB 500 – 600 RMB
Grange 250 – 600 RMB 4000 – 10000 RMB
“Fake” wines: http://detail.tmall.com/item.htm?spm=a230r.1.14.1.WlIRAq&id=36456537033&ad_id=&am_id=&cm_id=140105335569ed55e27b&pm_id=
Some business men are still selling smuggled goods of TWE’s wines which will
produce negative effects. Many high-end wines are passed through the zero tax zones
of Hong Kong and Macau to Chinese market to avoid high tax.
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Appendix 8 Market & ConsumersIt was evidence that Chinese wine consumers are mainly in the catalogue of well-
educated, higher income and aged between 18 and 55 years old. From the perspective
of gender segmentation, one study found that the most common purchase frequency
for male was between once or twice a quarter and twice a year (Liu, et al., 2014). The
general purchase frequency for female was once a quarter to twice a year (Liu, et al.,
2014). Therefore, the actual difference between the genders was negligible small.
Chinese customers considered that wine was not dispensable in their daily life, or
even a kind of luxury products that they unable to afford during the era of material
deprivation and economic depression, they would like to spend every cent on the
necessities. However with the mushrooming economy during 1990s followed by a
steady and feasible economic increase in 2000s, the disposable income in the families
of China’s urban cities (and rural areas) has a corresponding growth, consumers
nowadays have more spare money to spend in those product which could improve
their quality of life. Thus it can be obvious to find out that China has the huge
potential in wine market.
Table 1 China Major cities Annual Disposable Income (Top 10)3
2013 China Major Cities Annual Disposable Income (￥)
Rank City 2013 Note1 Shenzhen 44650 NA2 Shanghai 43851 9.20%3 Dongguan 42944 NA4 Guangzhou 42066 10.50%5 Ningbo 41657 9.50%6 Xiamen 41360 10.10%7 Shaoxing 40454 9.60%8 Beijing 40321 10.60%9 Nanjing 39881 9.80%10 Suzhou 39079 NA
3 The currency exchange of AUD to Chinese Yuan is 1:5.81 at 18 June 014 83 / 93
Average 41626.3 9.90%It is worth to highlight that the young generation of today’s China occupies a unique
and significant position in the society due to the well-recognized birth policy
implemented in 1979. Young people who aged 18-35 (TWE’s the most potential
customer bases) happen to be deeply influenced by this policy as they virtually has
become the ‘focus spot’ within the family. Unlike the old generation, they have been
holding a more complex attitude and perception towards the marketing mix (products,
price, place, promotion, people, process and physical environment). (Gong, et al.,
2004). According to Table 2, it is clearly showed that there was about 30 per cent of
population is occupied by this group of people. In addition, with the relaxation of
Chinese birth policy that a family could have one more child if the parents are the
only child in their respective family, the market and consumer base would keep
expanding in the foreseeable future.
Table 2 the Sixth Demographic Census of China (2010)4
2010 The Sixth Demographic Census Total Male Female ProportionTotal Population 1332810869 682329104 650481765 100
0--4 75532610 41062566 34470044 5.675--9 70881549 38464665 32416884 5.32
10--14 74908462 40267277 34641185 5.6215--19 99889114 51904830 47984284 7.4920--24 127412518 64008573 63403845 9.5625--29 101013852 50837038 50176814 7.5830--34 97138203 49521822 47616381 7.2935--39 118025959 60391104 57634855 8.8640--44 124753964 63608678 61145286 9.3645--49 105594553 53776418 51818135 7.9250--54 78753171 40363234 38389937 5.9155--59 81312474 41082938 40229536 6.160--64 58667282 29834426 28832856 4.415--34 425453687 216272263 209181424 31.92
(National Statistic Bureau of People's Republic of China, 2010)
4.2 Confucian Tradition VS. Western Culture
4 Due to the sufficient data and limited transparency of Chinese Government, the 2010 demographic census is the latest and the most accurate data that collected from official website
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Generation after generation, Confucianism-the traditional culture values from a
unique system has been deeply influenced Chinese consumers, the young generation
is no exception. Confucian tradition is the main culture that has been penetrated
China’s 5000 years culture. Chinese consumers nowadays are influenced by this
particular culture more or less (Wong & Aaron, 1998). The main reason that leads
Chinese consumers’ consumption of a bottle of foreign wine is well known as ‘face’
(mianzi). Face is a slang describe a mentality which people highly value other’s
impression in terms of their apparel, behavior and deportment within the same
interpersonal circle and is claimed as the key motivation that explain much of their
buying behavior (Wong & Aaron, 1998). Confucian culture predisposes consumers on
the focus of public meaning of the product rather than the product itself (Wong &
Aaron, 1998). Consumers with Confucian culture are usually under the pressure of
achieving others’ expectation to preserve their self-esteem. Face is significantly
important to Chinese in their process of decision making when purchase a product in
order to get other’s good impression about oneself. Thus, Chinese consumer would
willing to purchase red wine simply because the group members considered the wine
is decent.
Furthermore, the social hierarchy system has been also profoundly influencing
Chinese consumers. For example, a son must obey what the father said regardless of
right or wrong in ancient China, though this principle has been gradually relaxing
since the China’s economic reformation era, it still affect most of consumer’s
decision when they were in a buying situation. Therefore, consumers would willing to
purchase wine if the parents asked so. In addition, wine has been seen as a luxury
product in China, this concept has been accepted by previous generation on a large
scale, and luxury product has been viewed as socially appropriate in a large number of
situation (Wong & Aaron, 1998). Thus, a person would purchase a bottle of luxury
wine since he/she consider it would be an honor event to the family.
Also, people with Confucian culture background would be suffering from the stress of
being embarrassed. The consumption of wine among Chinese customers highly
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emphasize on their public reputation among the group of people. For example, if the
majority of people drink wine in a particular occasion, then the person who drinks
beer or foreign spirits would be isolated imperceptibly (Wong & Aaron, 1998),
challenging the group’s norm is often discouraged.
It is noteworthy that Chinese wine consumers are more like to purchase luxury wine
as the gifts exchange, which also is the influence of ‘face’ concept. Some of new rich
Chinese would not purchase a bottle wine unless it is expensive. Though this
phenomenon is far from universal, it is still a matter of concern when TWE is
developing its marketing strategic plan.
Nevertheless, Chinese young generation has been grown up under an astonishing
economic development within a short period of time, which provide many
opportunities for them to extend their insight towards the world and change their
perception of purchasing by influencing them with strong storm of westernization
(Gong, et al., 2004).
Worshipping towards western brand is not a new phenomenon in China any more due
to the effect of westernization. Today, young generation usually hold a wish list that
full of western brand such as Nike’s sneakers, Levi’s Jeans or Gucci’s tote bags. For
example, Starbucks has become the most popular place for gathering among Chinese
youth that were considered as typically tea drinkers (Gong, et al., 2004). Unlike the
old generation’s patriotism, the young generation has been more open-minded while
they are still involved in Confucian culture background, they are holding quite
positive attitude towards western products. For the first time in Chinese history, young
people were seen as full-fledged consumers commanding respect in current
development of economy and expansion of market (Gong, et al., 2004).
This type of Chinese young consumers tend to be more independent within the group
and hold the attitude that ‘loyal to oneself’, which owing to the open-door policy that
invite the western culture into China. Young consumers are seeking prestige and status
in products that could represent their taste and attitude (Li, et al., 2009). Therefore,
they tend to select the product that is unique but less expensive in order to satisfy their
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desire towards novelty, in another word, the young generation tend to put more focus
on cost-efficiency. In addition, red wine has been given a sense of life style that is
romantic and relaxed, young people in China buy the idea of red wine more than wine
itself.
4.3 Price & Occasion
It has been evidence that price related strictly to the occasions (Liu & Murphy, 2007).
The term of occasion in Chinese is mainly focus on who the one socialize with rather
than the place. There were no significant distinguish between older generation and
young generation. Both of them think it is worth to purchase an expensive bottle of
wine when they are involved in business dinner as it’s include more strangers (Liu &
Murphy, 2007) When there was a private date, young generation would be more
willing to purchase a relatively expensive bottle of wine when compare with the old
generation (Liu & Murphy, 2007).
4.4 Health Concern & Country-of-Origin
Traditional Chinese medicine is intrinsically major part of Chinese culture proposed
that the aim of medication is to improve health by focusing the whole condition of
human body rather than simply treat the signs or symptoms of a particular disease,
therefore promote the quality of life (Somogyi, et al., 2011). It has been believed that
liquor could stimulate the function of medicine into effective work, accelerate the
blood circulation, drinking small amount of liquor occasionally would help to
maintain expected fitness (Somogyi, et al., 2011).
Put the well-known health benefits of red wine aside, with the continuous increasing
misgivings and uneasy feeling towards China’s food safety, more and more customers
are holding negative attitudes on food that made in China. Those food product that
were made in modern western country have been having an increased advantages
towards Chinese market. Chinese wine consumers believe that even though the wine
may not provide expected benefits to them, at least they do no harm (China Food and
Drug Administration, 2013).
4.5 Word-of-mouth
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Wine indeed is an expensive product, consumers usually do not discern whether or not
the wine meet their expectation of quality of taste. However, customers often use
extrinsic factors over quality in their decision making process (Camillo, 2012; Hu, et
al., 2008). Word-of-mouth is an important element of the decisive factors. For
example, wine consumers’ buying decisions depend on other’s (such as colleagues,
family members, friends etc.) overall assessment or recommendation of the product.
Kolyesnikova (2008) pointed out that wine markets are complex environments for
wine consumers, especially for Chinese wine customers due to their limited wine
knowledge, because wine market usually are fragmented and often have a wide
variety of products. As a result, wine consumers are likely to rely on other’s
introduction.
4.6 Brand and Labeling
Brand and label are the first image deliver certain wine information to the consumers.
Brand also represent a promise made regarding what customers can expect from a
product (Gordon, 2002). For example, Penfolds’ such good reputation among Chinese
consumers has to be owing to its brand name. ‘Benfu’, it Chinese name means a
thoroughfare towards the prosperity and wealth, which sounds like a good wish. Wolf
Blass, another TWE’s top luxury wine brand in China, also benefit from its ingenuity
brand name.
Many of Chinese consumers stated that they could hardly understand the foreign
language on the label, therefore such information like food suggestion for the wine,
technical information and the story behind the bottle of wine should be translated into
Chinese on the label in order to effectively delivery necessary information to the
consumers. Furthermore, due to the limited knowledge of wine, Chinese consumers
are seeking a kind of sense of security in terms of knowing whether the wine they are
drinking gives out a positive image to maintain their face, the information on the label
could ease their anxiety somehow (Hu, et al., 2008).
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Appendix 9 Industry Analysis
Industry Analysis
There are five forces to analysis wine industry in terms of bargaining power of buyers, bargaining
power of suppliers, threat of substitutes, threat of new entrants and existing competitors (Porter
2008).
Bargaining power of buyers
Wine sales have two mainly types to sell wine, which are franchiser and exclusive shop. But final
client is consumer whose bargaining power influences the final wine price. There are three aspects
to relate to bargaining power of consumers in terms of wine consumption elasticity, expected
prices and wine supply and demand.
Buyer has greater flexibly in wine consumption. It is mainly from the social needs and individual
needs. To be more specific, the social needs attach more importance to social information that is
transported from wine. This is reflected the brand of wine, price, packaging and items flavor, but
the individual needs pay more attention on wine flavor and cost performance (Wine market in
China 2010).
The consumer price expectation of wine is floating with the product brand. In terms of social
communication, consumer has lower sensitivity in personal consumption (Wine market in China
2010). In addition, the consumer with price sensitivity is low for the famous brand of wine, on the
other hand, consumer with price sensitivity is high for the average brand of wine especially in the
lack of identification ability of consumers (Wine market in China 2010).
The relationship between wine supply and demand is one of the most important factors to
influence bargaining power of consumers. With the growing of the wine market supply, wine
products are diversified to reflect different countries, tastes, brands and prices wine product range.
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These are to improve the bargaining power of consumers.
Bargaining power of supplier
For an Australian winey, one of the major supply decisions lies with the key product ingredients
such as wine grapes and juice that are mainly from Australian wineries (Sheales et al 2006). It has
several chooses that include owning the vineyard, buying grapes and buying juice. These two
options in purchasing grape and juice to improve wineries bargaining power of Australian supplies
is commonly strengthen in imported market of rich in wine grape growing experience.
Threat of Substitutes
Wine is gradually be recognized by the market, although there has difference of market
positioning to compare with spirits and beers, the substitutes between themselves still strong. To
compare with spirits, beer and wine are developed after that, and the result of them market
development is steady occupying spirits market. For example, wine consumption in Australian has
increased. In other words, it is moving from beer consumer to wine consumer that caused by
changing in the consumer habits. According to data by Jenster (2008), beer consumption has
decreased broadly from 137.4 liters in volume down to 92.8 liters in volume from 1980 to 1999,
but wine consumption has risen from 13.0 liters in volume in 1980 to 20.4 liters in volume in 1999
（ Chameeva 2009 ） . In addition, winein Chinese market is facing competition between
traditional spirits and low price beer that competition strategy as switching to brand product that
are located in medium level of market. Clearly, it could attract more consumers from tradition
consumers.
Threat of new entrants
In general a winery is not an easy business to start due to it is complex industry and complex value
chain. That means it is facing a series of issues that include capital, land, materials, technological
employees, brand and market. And a strong knowledge base is also required in order to make high
quality wine and understand the complexities of the industry. Therefore, it is very difficult to enter.
However, due to opening of import and export market and the decline in import tariffs in Asian
market especially in the Chinese market (Jenster 2008). The requirement of Chinese market has
increased rapidly and thus there are relatively to entrance.
Rivalry among existing competitors
Although wine in the Chinese market has increased fast, there are many competitors in wine
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industry such as different imported brand products from old or new worlds. It increases the wine
market more competitive. To compare with dominating Chinese wine, the imported wine from
Australia accounts for 21% of volume sales, while France wine is 40% of volume in China in 2011
(Jeremy 2010). As imported wine is competed in the high-end market, its market share in terms of
revenue is high. Therefore, Australian wines have a powerful opportunity to showcase in wine
wares to the Chinese market.
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