Casella wines ? Export success

1.Identify its international markets

 US and North America identified o Distribution network – 44 states. o Size – initially estimated 20-30 thousand cartons to 100 thousand cartons, reality was 20 to 200 thousand. o Annual sales $3 million.

 UK o Some regional supermarkets hoping to expand to majors.

 Mainland Europe o Some beginning sales.

2.Describe and analyse the reason for its international expansion

 Increase sales/find new markets – domestic market oversupplied

 Minimise competitive risk

 Economies of scale

 Cushioning economic cycle

 Comparative advantage o High cost of labour and land in US.

3.Explaing the influences on this business in the global market

Political

Tensions between free trade and protection

 Globalisation seeing removal of barriers

 Eg. Quotas, tariffs, subsidies – statistics

 Exports of wine have increased from 3% of sales to 52% of sales in 2002. this equals $2.3 billion dollars or 414 million litres

 US greatest source of export growth

 Australia’s export policy has led to major reforms in the Australian wine industry

 ‘Rationalisation of wine production’ leading to overall efficiency giving them cost advantages over their competitors and reshaping of distribution lines.

 4th largest wine exported in the world with 5% of global market

International organisations and treaties

 1994 Uruguay multilateral agreement (WTO)

 Agreement to reduce protection on agricultural products (wines/grapes) by 36% by 2000

 UK has the largest export market of wine

Trade agreements

 US and Australia have strong trade relations and trade agreements

War in the Middle East

Weak economic conditions

Social

Consumer tastes

 Global markets have been increasingly integrated

 Growing demand for mass market, high quality wines and a recognisable brand

 Marketing of wines ‘other benefits’ has increased consumption globally

 Strong economic growth period sees wine viewed as a luxury good, something consumers buy when they feel conditions are good as their incomes are increasing. Also at this particular price range fluctuations do not vary with economic conditions

 Strong market for Australian markets taking off in the US

Financial

 Currency fluctuations

 Weak Australian dollar has helped making Yellow Tail a better taste at $7 and a lower price than its Californian counterparts which are hobbled by high cost of land and labour

 Currency fluctuations would have to get way about 70 cents for Casella to be unprofitable without a price change

Legal

 None mentioned

4.Explain the strategies used by the business to achieve its target markets