PESTLE Analysis on Wine Industry

PESTLE analysis on wine industry

Constellation Brands, E&J Gallo Winery, and Wine Group are amongst the three top producers of Wine in the United States. The success of the three organization have been acquired from the recent acquisitions, as well as, their capability of changing with the consumers needs the three major issues which the wine industry is currently being faced with entail upholds the standards of advertising, the corporate buyouts threat as well as, the increasing wine market.

Industry description:

Wine differs through what types of grapes are used and the flavoring added. The flavor usually comes from the barrel type used in the process of making wine. There exist three major wine classifications white, Red, and Blush. The white wines are made from the light colored grapes, and are usually lighter in taste compared to the blush and red wines. Red wines are usually produced with grapes that are darker, and their stems are used in the process of crushing.

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In the contemporary society, the industry categorizes wine into 6 divergent categories:

Wines

Percentage of united states production

Table wines

84 percent

Sparkling wine

6 percent

Special natural

5percent

Dessert wine

4 percent

Vermouth

1 percent

Specialty

1 percent

The Table wines are amongst the most popular, as well as, fast growing wine type in the united state. The table wines entail seven to 14 percent of alcohol consumed buy volume and are customary consumed with food (poor &standard, 2009). U.S is the 4th largest wine producer globally, averaging about 465, 4oo gallons yearly, with the nation at the top being France, Italy, and Spain.

Wine is usually produced in each of the state in the United States.

Competitions in the wine industry are high and the trend is steady. To take part in anything beyond regional niche markets, wine industries spend million building their brands. Through promotion and advertising, they are able to reach their consumers, communicate brand associations, and induce buying. Since there are so many brands selling to do just that, organization must make substantial allocation of those cost or risk having their brands being drowned d out. Hence, larger firms have a competitive advantage in that they can use the sale revenue from well recognized products for the purpose of promoting the emerging brands.

Quality and prices are tied together in a way that numerous similar products are usually priced at a certain range. This intensifies the competition in the area, providing major players at another advantage since they face decreasing cost per each additional unit produced and since they can input at cheap and bulk prices

Pestle Analyses:

Political and legal factors:

The level of regulation in the wine industry is very high. The wine industry is heavily regulated. It is amongst one of the most complicated industries with respect to interstate commerce due to the verity that individual states restrict the sale and shipment of the alcoholic beverages across the state lines. Regulation usually favors trade primarily through networks of approved retailers and wholesalers.

They are two types of regulatory environment in the United States wine industry: open and control. In open, industries are slowed to sell wine directly to independent distributors. In contrast, control states have a monopoly regarding the warehousing or retailing of their own products. In the United States 18 states control the channel of distribution, half of the states also have monopoly regarding the retailing of the alcoholic beverages. Moreover, Wine is an alcoholic beverage that is controlled by the ATFD (alcohol, Tobacco ad Firearms division) of the IRS. As a result, it subjected to very high taxes.

Economic impacts

The wine industry is a major contributor to the economy of the nation generating approximately more than $ 100 billion in revenue on a yearly basis. Over 1.2 million people are employed in the production, distribution and the sale of the products.

Duties and taxes on alcohol are a significant revenue source or the state and federal governments, so they shall remain a fact of life for the wine producers. Their effect is to increase significantly the final produce price which usually creates a drag on demand. This drive is anticipated to slowly decrease over the next years.

Social and Cultural Impacts

Wine knowledge and drinking is considered to be a part of the educated and wealthy members of the community. Wine is an alcoholic product, but the producers of wine try continually to advertise wine as a part of the day to day dining, to be enjoyed by the part of the populace that can afford the life finer things. Standards and Poor show that the number of consumers who are buying premium wine ought to increase as a result of the increase in consumers over the age of 55 who have a tendency of consuming wine, and more so the premium. However, this increase is very small generating about one percent in the sales. Wine is not marketed specifically to the younger generation, or advertised in a means which emphasizes the effect that the alcohol shall have if consumed in its excess. There are voluntary standards which wine Industries have published for the purpose of facilitating this sort of market. The emphasis on wine drinking for the sophisticated and the mature has a established a common stereotype that wine is correlated with a higher living standard, since it is used to enhance a person enjoyment of a meal.

Technological Impacts

Recent advancement in technology permits the producer of wine to control the process of wine making than ever before. They make use of stainless steel containers, as well, as careful temperature control during the process of fermentation and as a result have revolutionalized the process of making the e white wine. Quality control in the time of harvest, as well as, juicing has improved considerably, with innovation like night harvesting to aver high grape temperatures, as well as, field crushing to separate the juice from grapes more quickly.

Improved techniques has been availed for the sulfur dioxide fermentation, for sugar levels monitoring, for wine stabilizing, as well as, for controlling the fermentation of malic-lacic(which is a secondary process through which malic acid in the new wine is usually converted to lactic acid). Numerous chromatographic techniques have been availed for the purpose of determining, in the very last detail, the composition of wines and grapes, although they are yet to replace the hum tasting, as well as, the sensory assessment. The increase technological use has enabled the makers of wine to deliver product that have a more consistent quality.

References:

Standard and Poor's Industry Survey. Alcoholic Beverages & Tobacco, November 12, 2009

Constellation Brand Inc - http://www.cbrands.com/ E. & J. Gallo Winery - http://www.gallo.com/ The Wine Group - http://thewinegroup.org/