“Volume vs.

Value”

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Strategists:
Gorana Smailagic
Amun Bashir
Sheshi Xie
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Agenda

 Current Position
 Financial Overview
 Proposed Strategy
 Marketing
 Competition
 Risks and Contingencies
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Current Market Situation

Chilean Wine Exports
Quality Segment vs. Price
US
18%

Others
31%

UK
Holland
25%
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Denmark
5% Germany Canad
5% a

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Current Position Finances Strategy Marketing Competition Risks

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Current Market Situation

• Wine market is shifting from old-world
wine to new-world wine
• New world wine exports is expected
growth at 18.3% per year
• Increasing consumption per capita
consumption in UK and US
• Level of consumption of wine below
$5 is on the decline
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Current Position Finances Strategy Marketing Competition Risks

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SWOT Analysis
Strengths Weaknesses
-Largest winery boutique in Chile -Exports to US dropped about 130,000 to
-Differentiation: Focus on export quality wines 8,394 cases over 4 years
-Estimated 117,125 sales to United Kingdom -Two previous unsuccessful partnerships in
in 2001 the US
Opportunities Threats
-Promotions in UK supermarket chains to -Intensifying global competition due to
increase sales volume overproduction.
-Joint venture between two US importers to -Chilean wines perceived as low-price
penetrate US market alternative due to grape oversupply.
-New marketing channels: “Wines of Chile” -Deals with UK supermarkets could threaten
campaign distributor’s long-run position
-40 more Chilean wineries exporting to the US
since 1995.

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Current Position Finances Strategy Marketing Competition Risks

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Proposal
Export to UK and US
&
Offer two types of products

Mid-Low End: MontGras Reserva QuickTime™ and a

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High End: DeGras Qu i ck T i me™ an d a

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Current Position Finances Strategy Marketing Competition Risks

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Overall Target Sales

  2001 2002 2003 2004 2005 2006

US 8,394 31,296 54,197 77,099 100,000 122,902

UK 117,125 150,344 183,563 216,781 250,000 283,219

Total 125,519 181,639 237,760 293,880 350,000 406,120

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Current Position Finances Strategy Marketing Competition Risks

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UK Market Solutions

Partner up with Partner up with

Tesbury Resaurants and
supermarket to Specialty Stores
sell MontGras at to sell DeGras at
$14.99 $50

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Current Position Finances Strategy Marketing Competition Risks

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Profit from UK Sales

Market Marketing
  share Market Price Costs cost/case
Reserva 65% 6.79 4.13 1.2
DeGras 35% 25.99 8.02 6
    2002 2003 2004 2005 2006
montgras            
  cases 97723 119316 140908 162500 184092
  sales revenue 663542 810153 956764 1103375 1249986
  cost 403598 492774 581949 671125 760301
  marketing costs 117268 143179 169089 195000 220911
  total profit 142676 174201 205725 237250 268775
             
degras            
  cases 52620 64247 75873 87500 99127
  sales revenue 1367602 1669776 1971951 2274125 2576299
  cost 422015 515260 608505 701750 794995
  marketing costs 315722 385481 455241 525000 594759
  total profit 629865 769035 908205 1047375 1186545
             
total profit   772541 943236 1113930 1284625 1455320
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Current Position Finances Strategy Marketing Competition Risks

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US Market Solutions

Partner up with Partner up with

World Wine Cabo Imports to
Importers to sell sell DeGras at
MontGras at (price)
(price)

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Current Position Finances Strategy Marketing Competition Risks

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Profit from US Sales

marketing
  market share market price costs cost/case
montgras 40% 14.99 5.31 3.67
degras 80% 50.99 10.03 9.85

    2002 2003 2004 2005 2006

MontGras            
  cases 12518 21679 30839 40000 49161
  sales revenue 187648 324965 462283 599600 736917
  cost 66472 115114 163757 212400 261043
  marketing costs 45942 79561 113181 146800 180419
  total profit 75234 130290 185345 240400 295455
             
             
DeGras   2002 2003 2004 2005 2006
  cases 25036 43358 61679 80000 98321
  sales revenue 1276606 2210804 3145002 4079200 5013398
  cost 251115 434877 618638 802400 986162
  marketing costs 246609 427072 607536 788000 968464
  total profit 778882 1348855 1918827 2488800 3058773
             
Total Profit   854117 1479145 2104172 2729200 3354228
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Current Position Finances Strategy Marketing Competition Risks

 5 year export strategy in US and UK
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VS.
High end sales Low end sales
OR
Importers Distributors

OR
“Wine for Chile” Solo marketing
Campaign effort
VS.
Margin strategy Volume

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Current Position Finances Strategy Marketing Competition Risks

 Penetrating the US market
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Low End: MontGras Basic Wine

Low prices, High volume sales

Low end High end

distributor: PENETRATION distributor:
Cabo Imports World Wine
Importers

High end: DeGras Luxury Wine

Luxury bundles, Margin strategy
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Current Position Finances Strategy Marketing Competition Risks

 Penetrating the UK market
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Low End: MontGras Basic Wine

Low prices, High volume sales

High end
Low end distributor:
distributor: PENETRATION Harrods,
Tesbury specialty stores,
gift shops

High end: DeGras Luxury Wine

Luxury bundles, Margin strategy
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Current Position Finances Strategy Marketing Competition Risks

 Margin Strategy vs. Volume
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• Margin Strategy
– Will be used for high-end DeGras
• Want to keep supply lower
• Volume
– Will be used for low-end MontGras
• Can increase volume through promotion,
especially in UK supermarkets.

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Current Position Finances Strategy Marketing Competition Risks

 High-end vs. Low-end
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Low-end: MontGras Reserva

High-end: DeGras

Both wines will be sold in UK and US

market
There is demand.
Marketing efforts will differentiate our quality.

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Current Position Finances Strategy Marketing Competition Risks

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Marketing Dollars Focused on US
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and UK
Country Marketing Expense (US$)
Ireland 92,458
UK 87,633
US 32,757
Switzerland 21,824
Holland 21,790
Japan 13,028
Russia 6,618
Hong Kong 5,936
Thailand 4,473
New Zealnd 4,429

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Current Position Finances Strategy Marketing Competition Risks

 “Wines for Chile” is NOT an option
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• “Wines for Chile”

– Costs $18 million  too expensive
– Cases sold is unknown
• Solo marketing effort
– We can predict our sales and
revenue

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Current Position Finances Strategy Marketing Competition Risks

 4 P’s for US Wines
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Price Product
MontGras MontGras
• $14.99 • Best quality for super-premium wines
• best low-end quality out of all Chilean wines • Package black paperboard box from recycled material
DeGras DeGras
• $50.00 and above • Best and highest quality of imported Chilean wine
• The box will be lined with white velvet.
• On the inside cover will be the MontGras wax seal,
which signifies the authenticity of the wine.
• MontGras certification, history, and values included.
Promotion Place
MontGras MontGras
• Wine tasting at markets and wineries • wine shops exclusively
• Advertisements in magazines and TVs DeGras
DeGras • cigar shops
• Newspapers (WSJ, NYTimes, etc) • 4-star restaurants
• Professional sports suites
• country clubs
• Sponsorships from country clubs
• Business class airlines • 1st class plane cabinets
• Partnership with Del Rey chocolates and Bolivar

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Current Position Finances Strategy Marketing Competition Risks

 4 P’s for UK Wines
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Price Product
MontGras MontGras
• $14.99 • Best quality for super-premium wines
• best quality out of all Chilean wines • Package in black paperboard box
DeGras DeGras
• $50.00 and above • Best and highest quality of imported Chilean wine
• The box will be lined with white velvet.
• On the inside cover will be the MontGras wax seal,
which signifies the authenticity of the wine.
Promotion Place
MontGras MontGras
• 15% discount during “Wines of South America” • supermarkets
• Advertisements in magazines and TVs DeGras
DeGras • cigar shops
• Newspapers (London Times, etc) • specialty stores, such as delicatessens and gift shops
• Professional sports suites • 1st class plane cabinets
• Sponsorships from country clubs
• Business class airlines
• Partnership with Del Rey chocolates and Bolivar

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Current Position Finances Strategy Marketing Competition Risks

 Wines with Incentives
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MontGras Basic MontGras Icon: DeGras

• Give customers a • Customers are not sensitive to
taste of luxury price
• Customers will • An integral luxury product that
receive a birthday complements a lavish lifestyle
Access to the MontGras Icon Society.
discount – an
VIP access to events (concerts,
incentive for sporting events, fashion shows)
customers to treat and hotel packages
themselves to a Luxury birthday gifts
new bottle of wine
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Current Position Finances Strategy Marketing Competition Risks

 Marketing Budget
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MontGras DeGras Totals

Magazines $100,000 $125,000 $230,000
Newspapers - $150,000 $150,000
Billboards $25,000 $30,000 $50,000
Internet $20,000 $45,000 $65,000
Radio $5,000 - $5,000
Partnership with Bolivar $200,000 - $200,000
Partnership with Del Rey - $750,000 $750,000
Packaging 100,000 200,000 $300,000
Totals $450,000 $1,600,000 $2,050,000

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Current Position Finances Strategy Marketing Competition Risks

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MontGras is fighting a battle on
two fronts

Foreign Local
Competition MONTGRAS Competition

New World Large

Entrants Chilean
wineries

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Current Position Finances Strategy Marketing Competition Risks

 Risks and Contingencies
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1. Distribution channel fails (Stores go out of business, contract gets

cancelled)
Contingency: Diversify distribution channels

2. Demand preferences change

Contingency:
1. Monitor customer preferences with marketing research
2. Shift production and marketing to another MontGras
product.

3. Competition catches up with our marketing

Contingency:
1. Capture market share in the beginning
2. Monitor competitors’ performance and innovate
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Current Position Finances Strategy Marketing Competition Risks

“Volume & Value”

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Questions?