Sandlands Vineyards Case Solution

The typical expense and profit of a premium winery (exhibit 7) show that it can break even in a little less than two years. Exhibit 6b of the case shows the growth of wineries in the premium category. The decline in the number of wineries producing wines belonging to the value segment and its percentage of the total number of wineries in the US shows that this category is dominated by mass producers. In the luxury segment (> $50 per bottle), the increase has been greater than 41%, which shows the increasing competition in the luxury wines segment. It can also be inferred that this increase in the number of wineries producing luxury wines is a reflection of growth in sales of the premium wine industry.

According to Passalacqua, the rise of social media was one of the factors that helped him market and distributed his wine in ways that could not have been done ten years before. This shows that social media, the influence of wine critiques (word-of-mouth advertising), and applications such as VineSpring have increased marketing opportunities for premium wines.

Distributing through wholesalers was a way to simplify the distribution process. However, it means lower profit margins. Those selling directly to the customers through tasting rooms and wine lists had higher profits. However, much time and investment were required to sell to customers directly.

While the premium wine industry is an attractive opportunity, it requires a mix of marketing and distribution strategies. Greater profit margins per bottle, the high-frequency drinkers considered the price to be the most important factor in purchasing wine, and they accounted for 80% of the total consumers and purchasers of wine. Image seekers engaged newcomers, and enthusiasts comprised of those who wanted to explore new tastes and could be target audiences of the premium wine industry. 

Concluding, the premium wine segment is an attractive opportunity for small vineyard owners because of the profit margins. However, it requires marketing and differentiation strategies from production to distribution due to the immense competition and the growing number of wineries.