Caso montgras.

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Last but not least, MontGras can only target 10 states to export its wine to the US. That is a new threat because its scale of entry cannot be as large as we would like.

SECONDARY PROBLEMS

MontGras is also facing other short and medium-term problems for the development of its business.

First, one of these difficulties is strongly related to the image of Chilean wines abroad and can be analyzed on a medium-term perspective. On the first hand, foreign customers don’t see this product in a particular manner whereas the quality of Chilean grapes is really higher than many other according to Middleton. That’s why the association Viñas de Chile wants to start a campaign promoting the Chilean wines all over the world through the motto “Wines of Chile”. Nevertheless, Middleton, as a member of Chilevid, is worrying about the risk of standardization of the Chilean wines. Then, the other issue related to Chilean wine image is that customers do not perceive it as a premium product enough. For instance, Californian people prefer to buy a Californian wine than a Chilean one even if the former is worse.

Another medium-term secondary problem that bothers MontGras’ CEO is the current grappe oversupply in the world. Indeed, this has two risk for MontGras: a higher competition within wine producers and the possible decrease of selling prices. Both of them could generate a loss of its market shares because the wine industry is more and more fragmented and the price elasticity of wine demand is negative.

Afterwards, a further problem, in the short-term this time, is related to the UK market because Middleton is facing a great dilemma since he received an offer from Tesbury which seems to be a very good opportunity. On the first hand, the company does not need it because this is MontGras’ main export market and the business there works well thanks to one sustainable relationship with a local distribution partner and the success of its “Reserva” wines. On the other hand, the promotional offer from Tesbury is very interesting because it could help the company to increase significantly its sales in the UK. Indeed, we saw hereinabove that 80% of the wine producer’s sales “are made on promotion”. However, if MontGras accepts this opportunity, its current relationship with the distributor could be threatened and broken.

After this issue analysis, we can now describe and plan a short and long-term course of action which will be supposed to solve the main difficulties that MontGras is facing.

COURSE OF ACTIONS

Main Problem:

The first thing we should do to achieve the entrance to USA market is to decide about which distribution offer is better. According to this, the Cabo offer is in the same strategic guideline that the company already have. A quality strategy. Also the characteristics of Cabo are in more agreement with the requirements of the US market. For instance Cabo has a portfolio of 50 brands, and the largest is an Italian import. Also a 70% of the sales of Cabo come from Italian imports. This is important because in US market the country is one of the top reasons for buying wine, and Italy has a good country wine brand.

Another issue is the fact that an Australian study, one of the biggest sellers of the new world wine market, says that globalization will make company alliances and joint ventures common, and that volume of sales will decrease by 2025 (Montgras Case, “Wines titles web page”, 2001) and, in opposite, the consumers will tend to buy higher quality wines.

In addition, because of business sustainability and Chilean industry, they shouldn’t compete in lower prices because there is going to be more and more competition in this level due to the grapes oversupply. Also the recession is going to affect and make prices go lower than the lower prices. However the quality wines are less affected by this two factors.

Also Cabo has a Chilean client in the lower-price sector aiming at $5.99–$6.99, so already has experience in this strategy. Finally it could be said that MontGras get a good score in the magazine Wine Spectator so the prices from $7.99 to $14.99 that Cabo recommends are justified.

According to all this, MontGras should hire Cabo and follow its guidelines, of course in the long term. For instance, create a position of “Brand Champion” and a product mix of 60% Reservas and 40% Varietals. In this sense MontGras should also make Ninquén the flagship for the line.

However this is not the entire strategy, because US market is a very, very difficult market to enter so to continue with the same business strategy to improve the Chilean image around the world, and with the aim of enter to American market, we think that the US wine consumer loyalty to buy local wines is too strong to think about competing with they. Therefore we will propose to Cabo to enter more quickly and obtain consumer acceptance in easy way, the create a deal ideally with a recognized wine American brand (or Italian brand for his prestige and contacts of Cabo) that support us and give the permission of use his brand in our bottles of wine. The role of Cabo in this strategy is important because Cabo Company must provide us the contact of some brands in his portfolio, to then negotiate with their brands.

Furthermore, in response to the problem of how to get through the 3 levels (4 in this case) of the US wine industry, MontGras will hire Cabo so they as an importer firm will take care of this matter as all importer firms do. In concrete terms they will see where to sell and how, however MontGras should have a key importance in the decision making also.

The important question here is the why. If we use an American or Italian brand in our bottle, but with a clear specification of the origin is a Chilean Winery (that under the brand), the effect that will be in the short-term the demand of the wine it will increased because the bottle will seem like American or Italian wine, and that’s give more attractive to the bottle. But in a long-term, the consumer noted that the place of origin it is from winery of Chile, which will improve the quality perception of Chilean wines, due to remember that quality Montgras wines is highlighted. This strategy will improve the Chilean wine image, but will not be permanent because our goal is to position our brand in the American market. So after two or three years, we will sell our bottle with our brand hoping for a better reception of the American consumer. On the other hand, the strategic partner who will share with us their brand, they need to have interest