Beverage Business Executive Summary
The location of the proposed premium winery will be in New York in the region of the Finger Lakes. The production per year will start at about 1,800 cases in the initial year and reach 10,000 cases in the fifth year. The winery business will major in the production of several Vinifera varieties which include Cabernet Franc, Pinot Noir, and Riesling. Most of the wine will be sold in the local market at the initial stages. However, as the business grows more distribution channels will be opened to ensure the business reaches a wider market both in the national and international levels. The distribution channels that will assist in reaching a wide range of customers will include wine shops and restaurants (Ionesc & Steger 2008).
The winery's premium will produce high quality wine products. This forms the basis of the success of the winery business since customers prefer quality products and services. Market research indicates that the targeted consumers use higher quality and expensive wines for drinking purposes. The winery business will capitalize on this trend of consumption to yield success. There are few businesses within this region in the winery that focus on Vinifera varietals and, thus, engaging in this business will offer a differentiating factor for the rest of the business in the local market. Business Description Mission Statement
The business mission will to be the largest producer of Vinifera wines of the highest quality in New York and expand internationally.
Business Description
The location of the proposed winery business will be in New York. There is the existence of several other wineries that are successful in this region. The focus of most of the winery businesses in this region is on winemaking using native varieties. The wines produced by the firms have become popular within the local consumption market. The projection of the market is that there will be increasing demand for the Vinifera wines that are of high quality. The products produced by this business will undoubtedly sell since the market is not fully exploited. Research indicates that the more the consumers become sophisticated about wine the more they tend to gravitate towards Vinifera wines.
The business will major in the production of Pinot Noir, Riesling, and Cabernet Franc from vineyards in the entire region of the Finger Lakes. The production will start at around 2,000 cases and will increase to around 10,000 in the fifth year. The setting up of the winery business is a Limited Liability Company. The Limited Liability Company offers protection to the business owners in regard to being personally liable for the liabilities of the business. Plan of Operation
Wine production depends on the availability of grapes. The company has to look for a place to get grapes as they are the vital inputs for the production of wine. The business, therefore, has to purchase grapes from the vineyards found within the regions of the Finger Lakes. The transportation of the grapes will be through the use of flatbed trailers as it has been the case within the industry of wine. The cost of harvesting as well as transportation is met by the grape growers.
Sales and Marketing
In the initial years of operation, most of the sales will occur within the tasting room. The business will grow with time and sales will increase serving a wide market. The supplies will start to be made to the wine shops and restaurants. The business being a long-term investment project, the expectation is that the business will start exportation of its products.
With the improved nature of doing business, various marketing strategies will be used to ensure the company gains a competitive advantage. The marketing strategy will involve the use of internet services. The use of social sites like twitter and Facebook will also be effective in marketing the products of the business. Workforce
The business will require employing individuals to effect the various operations. The business will start with five employees as it will be capital intensive. However, as the business expands more employees will be brought on board. The business also offers indirect employment as it creates a market for grape farmers as well as offer products to businesses that deal in the sale of beverages. The business expects to create employment to over 1000 opportunities within a period of four years. The initial employees will receive a wage of $100 each which will increase as the business expands. The initial investment is high due to the acquiring of the premises of the business and the purchase of equipment.
Industry Analysis Consumption Trend
The analysis on the industry indicates that the existing consumption trend is favorable as far as the domestic wine market is concerned. The case is even better for the businesses producing ultra premium wines. Since the year 1993, the per capita on the consumption of wine has been increasing. In the last few years, the sales in the retail wine have been increasing by 8.2% each year. This is an opportunity for investors in this sector since there is surety of the market due to the positive performance trend. Demographic Trends
Experts in the sector of wine production portend that the positive performance in the market of premium wine is due to the baby boomers aging. This group of baby boomers is getting into the drinking age and hence creates an expansive market. A survey conducted in the United States indicates that the majority of the aged people above 50 years consume a lot of wine compared to citizens within the age bracket of 21-29 years. This demographic trend is favorable for the performance of the wine business as it allows expansive market (Dittmer 2003). Competitor Analysis
Fragmentation of the wine industry is high and has high competition. A winery's premium that is small may expect some competition from domestic, local, and international producers. The competition that is likely to be faced by the business comes from the small businesses operating in the same business within the region. These small businesses will be the direct competitors of this business. The growth in the market has encouraged the wine producers to improve their quality to take advantage of the larger profit margins hence doubling their growth rates. New firms dealing in the production of wines are entering the market resulting to increased competition (Lundberg 1989).
The competitive advantage of the proposed winery is the production of Vinifera wines basing the resources on the top vineyards within its locality. Unlike other producers in Finger Lake, the winery proposed in this study will lay its emphasis on Vinifera varietals. The business identifies itself as the producer of Vinifera wines that are of high quality. Legal Requirements
The federal government highly regulates the market of alcoholic beverages wine being one of them. There is a requirement for application of special license for businesses engaging to invest in this sector. Because of the complexity of the process of achieving the legal requirements there is a necessity of hiring a lawyer. There are several things that require approval prior to the process of production. These include the expected wine labels, storage facilities, and production facilities. The business has to incur payment of federal exercise taxes for sales made. The exercise tax in New York is cheaper due the credit tax given to the farm wineries thus lowering the effective exercise tax to the federal government (Berinstein 2003).
The business is at liberty to operate without infringement of its rights after achieving the legal requirements. The constitution of the United States prohibits the taking of private property without just compensation for the sake of public use. The clause on takings is on the constitution of United States Fifth Amendment. Exportation
Wine shipments out-of-state are complicated as well as highly regulated. The 21st amendment done on the constitution of the United States creates prohibition in regard to the exportation of alcoholic beverages. The amendment stipulates that individual state has the responsibility of determining the regulation on transportation and importation of alcoholic beverages. The establishment that followed by most states is the three tier system of distribution. The three tier system of distribution prohibits the wineries from selling wine directly to foreign consumers.
Any foreign investor is bound by the rules and regulations that exist in the host country. The investor and the host government enter into treaties and consensus as to the regulations and requirements on the part of the state. The extent of observance of these obligations determines to a greater extent the performance of the foreign investment in the host country. The umbrella clauses functionality is in the arbitral jurisprudence. The winery business is set to follow the domestic laws of the countries where we will engage our products. Environmental Regulations
Environment regulations have a significant impact in the winemaking and grape growing process. There is a large amount of waste water that is produced by wineries. There exists regulation regarding the disposal of this water. International; laws on investment regulates investment in a project that will lead to environmental degradation. Marketing Plan Target Market
The target population of the proposed business is the wealthier consumers and the educated baby boomers. These customers possess high wine education, regularly entertain friends and business associates, and enjoy dining out. Various groups of businesses also form part of the target market for the proposed business. Wholesale distributors are effective in ensuring distribution to wine shops and restaurants situated within the nation. These will be a substantial group of customers for sales outside the tasting room.
Packaging
Packaging is another crucial aspect in the marketing of the product. The labels are valuable just as the product and needs critical evaluation before settling on the label to use. Labels should be esthetically appealing, inviting, informative, and should reflect the identity of the winery. The proposed business will have to hire a designer to take charge in ensuring this kind of label.
Bottling of the wine will be done on a standard bottle and will use the colors and shapes that have been traditionally used in the European bottles. This is the design that has been generally used by winery companies all over the world. Pinot Noir will be packed in burg undy bottles, Riesling in amber Riesling, and Cabernet Franc in Bordeaux bottles. Pricing
The proposed winery business will adopt a strategy of high quality pricing. Under this strategy, the company will charge higher prices for its products that are high quality. The prestige pricing will be an indication of the quality of the product that is being sold. Prices in the region of Finger Lakes are extremely low compared to the prices prevailing in other regions that grow grapes. Traditionally, wineries in Finger Lake have produced wines that are lowly priced from French American hybrids and native varieties. Most of the local consumers are used to wines that are sweet, fruity, and lighter. In this regard, most of the local consumers may not have the will to pay prices that are high to Vinifera wines that seem complex. The reliance on sales in the tasting room gives a cap on the prices that producers from Finger Lake may charge. However, research indicates that preferences and tastes by consumers will shift to complex wines from the lighter wines. Finger Lake producers may have an opportunity of increasing prices when the preferences changes. Some wineries in Finger Lake have of late started to produce Vinifera wines that are of higher quality although the prices charged are lower compared to other regions. The prices charged by the competitors should act as a guide in the setting future prices once the producers have acquired knowledge on production of quality products. The aspect of having higher prices in the future forms the basis of adopting high pricing strategy. Promotion
Producers may make use of a combination of promotional practices. These may include advertising, sales promotion, personal selling, direct marketing and public relations. The proposed promotion goal of the winery will make use of differentiation as well as other promotional activities that will assist in improving the premium positioning status of the winery. The promotional activities will target both the middle men and the end consumers. Distribution
The channel that is preferred initially is the direct sales to consumers. The direct sales favor the performance of the business as it allows the winery to collect their retail prices for the wines they sell. The kind of direct sales that is most common in the region of Finger Lakes is the tasting room sales. The initial market for the business will be the tasting room hence the channel of direct sales will be much efficient.
The second channel of marketing involves selling directly to in-house distributors. This distribution channel allows the business to sell their products to wine shops, restaurants, and the liquor stores. The advantage of using this channel of distribution is that the business will acquire higher margins.
The third channel of marketing involves selling products to the distributors. Distributors may be effective in making supplies to the retailers, thus, making the role of distribution easier for the business. Due to the projected nature of growth of the business, all the three channels of distribution will come to be used. However, in the initial stages of operating the business the first distribution channel will be efficient. The other channels will be used later as the business becomes more stable and continues to grow.
Financial plan
Total over four years $ 300,000
The company expects to generate revenue from the investment made. The revenue generated indicates an increasing trend as the business grows. This is an indication of the expanding market as the business grows (Hahn & Doganaksoy 2008). The projected revenues are as indicated below.
Projected Revenues
Revenue Year 1 Year 2 Year 3 Year 4 Year 5
Direct Sales to Customers $37,222 $293,954 $574,781 $808,787 $ 943,024
Direct Sales to Retailers $ 0 $ 0 $ 0 $ 59,311 $ 77,799
Sales to Distributors $ 0 $ 0 $ 0 $ 0 $ 58,939
Total Revenue from Wine Sales $37,222 $293,954 $574,781 $868,098 $1,079,763
References
Berinstein, P. 2003. Business statistics on the web: Find them fast-at little or no cost. Medford, NJ: CyberAge Books.
Dittmer, P. 2003. Principles of food, beverage, and labor cost controls. New York: J. Wiley.
Hahn, G. J., & Doganaksoy, N. 2008. The role of statistics in business and industry. Hoboken, N.J: Wiley.
Ionescu-Somers, A., & Steger, U. 2008. Business logic for sustainability: A food and beverage industry perspective. Basingstoke [England: Palgrave Macmillan.
Lundberg, D. E. 1989. The hotel and restaurant business. New York: Van Nostrand Reinhold.
