Group Assignment of Principles of Marketing

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GROUP ASSIGNMENT OF PRINCIPLES OF MARKETING

Australian luxury product in India: JACOBS CREEK WINE

SUBMITTED TO: Mr. Jagandeep Singh

SUBMITTED BY: Apoorv Sharma, Arvinder Pal Singh,

Bushra S.P. Singh, Chandni Behal,

Gaganish Mittal and Gunpreet Kaur

MBA Telecommunications & IT

UNIVERSITY INSTITUTE OF APPLIED MANAGEMENT SCIENCES, PUNJAB UNIVERSITY, CHANDIGARH


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ABOUT THE PRODUCT

Jacob's Creek is a winebrand that is exported to over 60 countries. It is owned and producedby Orlando Wines in the small township of Rowland Flat in the Barossa Valley. In 1847Johann Gramp, the founder of Orlando Wines, planted some of the first grape vines in the

Barossa Valley along the banks of Jacob's Creek. Over a century later, in 1976, a 1973vintage Shiraz Cabernet Malbec became the first wine to be released under the Jacob's Creeklabel.

Jacobs Creek offers the following range of wines to its customers in India:

Classic Chardonnay

Classic Shiraz Cabernet

Classic Cabernet Sauvignon

Sparkling Chardonnay Pinot Noir

Reserve Adelaide Hills Chardonnay

Reserve Coonawarra Cabernet Sauvignon

Reserve Barossa Shiraz

The above listed wines can also be classified as follows:

1. Red Wines: Red wine is made from red grapes that contain anthocyanin and tannins intheir skin. Lighter red wines can be delicate, soft and fruity and are bottled earlier for

freshness. More full-bodied reds can be dark, rich and complex while showing intense

integrated tannins.

Reserve Barossa Shiraz, Reserve Coonawarra Cabernet Sauvignon, Classic Cabernet

Sauvignon and Classic Shiraz Cabernet are Red wines.

2. White Wines: There are diverse and interesting white wines made from whitewine grapes or traditionally red wine grapes without time on skins preventingcolour influence, such as Pinot Noir for sparkling. Across white wines there aresignificant differences across grape type, region and their climatic conditions and

the winemaking process.
http://en.wikipedia.org/wiki/Winehttp://en.wikipedia.org/wiki/Rowland_Flat,_South_Australiahttp://en.wikipedia.org/wiki/Barossa_Valleyhttp://en.wikipedia.org/wiki/Grapehttp://en.wikipedia.org/wiki/Jacobs_Creek_(Australia)http://en.wikipedia.org/wiki/Shiraz_(grape)http://www.jacobscreek.in/Wines/Varieties/Red/Pinot-Noirhttp://www.jacobscreek.in/Wines/Sparklinghttp://www.jacobscreek.in/Wines/Sparklinghttp://www.jacobscreek.in/Wines/Varieties/Red/Pinot-Noirhttp://en.wikipedia.org/wiki/Shiraz_(grape)http://en.wikipedia.org/wiki/Jacobs_Creek_(Australia)http://en.wikipedia.org/wiki/Grapehttp://en.wikipedia.org/wiki/Barossa_Valleyhttp://en.wikipedia.org/wiki/Rowland_Flat,_South_Australiahttp://en.wikipedia.org/wiki/Wine


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Classic Chardonnay, Sparkling Chardonnay Pinot Noir and Reserve Adelaide

Hills Chardonnay are White wines.

THE NEED THAT THE PRODUCT ADDRESSES IN INDIA

The tastes and preferences of the Indian population err towards still wines, and morespecifically, table wines. Though a market exists for champagne and sparkling wines, thesevarieties sell at a much lesser rate than the still wines. In general, slightly sweet wines and thevarietals of Sauvignon Blanc and Chenin Blanc are fairly popular and also pair well withtypical Indian dishes. Similarly, rose and blush have been projected as good fits for the Indianmarket; however, the majority of sales have stayed on traditional still red and white wines. Inregards to presentation, wine producers have two different demographics in the Indian marketupon which to focus: the upper class and the general consumer. While the upper class prefersthe classic presentation, i.e. real cork, full bottle size, and dry red and white wines, thegrowing consumer class in India gravitates towards approachable wine packaging, i.e. screwcaps, half bottle sizes, and sweet wines.

BASIS OF SEGMENTATION

Potential Market

There has been much debate about the precise number of potential consumers in Indias winemarket. Major factors that hinder wine consumption are poverty, age restrictions and specificstate alcohol prohibition.

Market Segmentation and Evaluation Population Breakdown

It is important to note that the majority of Indias population is rural. Most of Indias poor

reside outside of developed areas. Large, densely populated cities; however, account for mostof Indias middle and upper classes and therefore for the majority of wine consumption in

India.


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Age Segmentation

The median age in India is about 25 years old, this demonstrates the fact that half of theIndian population is not yet old enough to drink, and one quarter of the population is under 10years old. In the coming years, 10 percent of the current population comes of legal drinkingage, bringing with them new views of wine which could influence them away from hardliquors. The strength of India is in its youth who are familiarizing themselves with the world

beyond their borders.


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Gender Segmentation

Indian women are beginning to prefer wine as a more socially acceptable form of drinking forfemales. It is seen as more feminine to consume wine as opposed to the hard liquor that menare more traditionally seen consuming. Wine has a softer tone and connotation which is seenas more acceptable to consume in view of the public. However, the wine industry must alsoconsider the male demographic when marketing their products. Men, and not women,typically shop for liquor because restrictions prohibit the sale of alcohol in supermarkets orother convenience locations. Because males purchase the majority of alcohol products, it is

prudent to focus on both men and women as the target demographic.

Other DemographicsIncome and Education

Income

The gross national income (GNI) for India has risen to $800 per capita as recorded in 2006.This number, however, is greatly skewed because of the outliers in both extreme wealth and

poverty.

Education

The education levels in India correlate with estimates for potential consumers. Those 24million who have attained college level degrees make up the majority of potential wineconsumers. The remaining 160 million or so who have finished secondary school completethe bulk of the rising middle class of India.


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TARGET MARKET

Major Importers in the Indian Market: There are about 80 importers operating in theIndianwine market. Of these Brindco (New Delhi) and Sonarys (Mumbai) are the biggest.

Wine Consumption (Per Capita): The wine consumption per capita stands at 9ml per head.

Major Wine Consuming Markets: Indias main wine consuming market lies in the cities ofMumbai, Delhi, Bangalore and the state of Goa. Other cities like Calcutta, Pune andHyderabad are also catching up. Nearly 2 million people in India consume wine, with about10% of this figure opting for wine as their preferred choice.

Growing urbanization, combined with India's large population, has resulted in numerouscities of a noticeable size, with 27 cities possessing a population of more than one million(USDA, 2008). The most affluent consumer segments in India, clustered in seven cities,account for over 80% of India's most affluent households (USDA, 2008). These cities areMumbai, Delhi, Chennai, Kolkata, Hyderabad, Ahmedabad and Bangalore, and are also thelocations for a large portion of India's emerging middle class (Datamonitor, 2009).

Maharashtra is the largest region for wine-consumption in India, with the greatest proportionof national wine sales. The Nashik region in Maharashtra is particularly popular and agrowing area for wine tourism. Numerous vineyard and winery tours, as well as wine resortsare present (Euromonitor, 2009). However, Mumbai, the capital city of Maharashtra, has the

greatest wine activity in India. Delhi is the second largest region for wine activity, alsoexperiencing significant growth in the wine market. The majority of wine consumptioncomes from embassies and hotels, as bottled-in-origin (BIO) wines can only be sold to hotels,

bars and clubs (Seth Associates). Bangalore represents the fastest growing and third largestwine market in India, consuming approximately 31,000 cases a year, compared with 100,000cases in Mumbai and 54,000 cases in Delhi. An increasing population of international visitorsis also helping to fuel wine market growth in Bangalore (Srivatsa, 2007). The greatest wineconsumption is centred in India's main cities. In 2007, four cities accounted for 80% ofIndia's total wine consumption: Mumbai with wine consumption accounting for 39% of thecountry's total, Delhi (23%), Bangalore (9%), and the tourist-centred Goa (9%) (Seth, 2007).In 2005-2006, only four cities in India accounted for 90% of the sales of BIO wines and 66%of bottled-in-India (BII)/Made-in-India (MII) wines. For BIO wines, these cities are Delhi (in


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part because of the large number of embassies), Mumbai, Bangalore, and Goa (Krishna,2007). (While Goa is a state, it was likely compared to the other major cities due to its smallmarket size and population.)

MAJOR COMPETITORS

Sula

Chateau Indage

Nilaya wines launched by Diageo India

Pernod

Zinzi White

4 Ps

Pricing

Low pricing and other promotions have been significant factors in fuelling sales. Futuregrowth may be somewhat diminished if rising costs are passed on to consumers. Consumer

price inflation has also been placing upward pressure on prices, and is expected to average6.2% in 2009; a slight decrease from 7.7% in 2008 (AAFC, 2009). Despite these possibilities,the unit price of wine is actually forecast to decrease as competition increases (Euromonitor,2009).

Product Varieties

In 2008, the greatest growth occurred in both the still red and white wines. Still light grapewine continues to be the fastest growing type of wine in the Indian market and is expected toremain the growth leader. Volume sales are projected to increase 254.3% and value sales260.9% from 2008 to 2013. The success of still light grape wine among the Indianmarketplace can be partly attributed to the marketing of the product as a drink for regular,every-day consumption; resulting from food pairing promotions combined with an economy-

price and easy availability. Still light grape wine is widely accessible in the marketplace andcan be found at all price-points at off-trade or on-trade channels.

Although sparkling wine is projected to continue growth of around 150%, it has yet to gainsignificant awareness among consumers, has fewer brands, and is often regarded as a "specialoccasion" wine. Non-champagne sparkling wines have had success in the market, as a resultof the increasing presence of domestic brands that are more economically-priced. Fortifiedwine and vermouth are predicted to be the slowest growing category, but still with growth ofover 100%, ranking close behind sparkling wine. (Euromonitor, 2009).

Promotion

Wine has been gaining an increasing presence in India's social culture, with considerablegrowth in wine bars, wine shops and wine tourism. The increasing presence of wine-related

organizations will also aid in creating higher visibility of wine within the mass-consumermarket, the development of higher quality wines and the integration of wine into consumer


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palates and lifestyles (Euromonitor, 2009). With regards to other types of liquor, wineconsumption is still low, comprising only 0.14% of total liquor consumption compared to

beer which represents 52.6% of consumption and distilled spirits 47.3% (The Hindu BusinessLine, 2009). However, evolving attitudes regarding the distinctiveness of wine compared toother types of liquor is creating unique perceptions among consumers.

Place

India's already immense and evolving consumer population presents a number ofopportunities for a burgeoning wine market. Although 80% of India's more than 1.1 billion

population follows Hinduism, with alcohol strictly forbidden in Orthodox Hindu society, thewestern culture has begun to influence and alter the perception of alcohol consumption tovarying degrees (Johnsen, 2002). These cultural factors have shaped demographic trends, asthe average wine consumer in India is typically a young, urban professional who has aninternational orientation (Guinand and Marti, 2007). Growing consumer demand has helpedfuel huge growth in this nascent wine industry in the last few years.

MARKETING ENVIRONMENT & ITS IMPACT ON THE PRODUCT

Demographics

Emerging from a population of more than 1.1 billion, India's expanding middle class is one ofthe fastest growing in the world and predicted to reach 583 million in 2025. This evolution

presents a promising consumer market for wine (IFE India, 2007). Combine this with the fact

that India's demographically "young" population, ranging from the 20-49 age segment,continues to grow, is resulting in an increasingly large proportion of the population being ofthe eligible drinking age. From 2005 to 2015, the number of people added to the alcoholdrinking age population will be 95 million, providing for a larger consumer market for adult

beverages (Datamonitor, 2006 and Krishna, 2007). Along with this, rising disposable incomeand consumerism in India have aided consumer wine growth in the country (Reuters, 2008).The food and drink market is one of the fastest growing segments of India's retail industry.With the increasing disposable incomes, this bodes well for consumer splurges on food and

beverage delicacies, such as wine. As consumer affluence grows and a higher quality of lifeis sought, more consumer emphasis is expected to be placed on the sensory experience offood and drink, particularly for products such as wine. Consumers are thus expected to be

more willing to pay premium prices for quality goods and products (USDA, 2008).

Consumption

India is one of the fastest growing markets for alcoholic drinks in the world, with a CAGR ofmore than 9% during 2009-2013, and wine is the fastest growing within the alcoholic drinkssegment. However, similarly to the growth of the wine market, part of what makes for thissubstantial growth is a low per capita consumption rate (IFDE INDIA, 2009).

While current wine consumption is relatively low (estimates range from 4.6 ml to 9.0 ml percapita), and there are only approximately 1.5 million wine consumers, this is significant

growth from what consumption in India was a decade ago (Reuters, 2008 and Tiwari, 2009).When compared to per capita wine consumption in countries such as France (60-70 litres)


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and the U.S. (20-30 litres), the low consumption but also the growth possibilities of theIndian market are further evident (The Hindu Business Line, 2009). India's consumption isalso low compared with China's 400 ml per capita consumption. Estimates of the number ofwine buyers in the Indian marketplace were 700,000 in 2007, with the possibility ofincreasing to 20 or 30 million buyers in upcoming years (Guinand and Marti, 2007). In 2008,

India ranked 77th worldwide for wine consumption. India is also part of Asia's wine marketwhich is expected to account for a growing share of the world's wine consumption: 4.8% by2011 (Menon, 2008).

Preferences and Perceptions

In India, religion plays a large role in consumer eating habits, with wine being no exception.The history of wine in India has had a dichotomous relationship culturally. While it has long

been present; used for past religious festivals, it was also considered to be a forbidden, taboodrink for the greater society. However, with wide availability of affordable wines, wineconsumption is beginning to spread across the mass-population, leading to new wine

consumers in the marketplace (Euromonitor, 2009). Increasing the perception of wine as aseparate type of drink from other spirits is also aiding in making it a more socially accepted

beverage, particularly for the segment of young professional women looking for somethingdifferent from the fortified liquors consumed by previous generations (Seth, 2007, andGuinand and Marti, 2007). This separate perception from other spirits such as beer, whiskeyand gin, which are thought of as representing the traditional British Empire, has gained winethe status of being a fashionable and modern drink among younger consumers (Guinand andMarti, 2007). While there has been increasing growth in consumption, India is still seen as anuntapped' market where the majority of consumers do not consume wine regularly, and thusthere is the potential of a growing market. The majority of wine consumption currentlyremains with corporate executives and international travelers; however consumption isincreasing throughout the domestic consumer market (Ceretto, 2009).

National versus State Regulations

The Constitution of India gives the Central Government the power to collect excise duties ona number of products. However, the liquor industry (specifically, alcohol liquor for humanconsumption, which includes wine) is regulated on a state-level by the State Governments,with each state maintaining their own separate system for taxation. The states are eachresponsible for the rules and regulations regarding the manufacturing, possession,transporting, purchase and sale of intoxicating liquor. Thus, it is the state governments that

levy excise duties and determine the rates on wine and spirits (Dubey, 2008). As a result, theregulations for intoxicating liquor in India vary throughout the 28 states and seven unionterritories in the country.

Regulatory Environment

Generally, the Indian market is becoming increasingly accessible to imports, with food anddrink imports rising 25% annually (IFDE India, 2009). However, with regards to wine, themarket remains somewhat guarded. Wine in India falls under the category of alcoholic

beverages; however, the Food and Safety Standards Act of 2006 also includes alcoholicbeverages under the definition of "food". This categorization shows a significant shift in the

government's approach to the wine sector, and could help to simplify the industry (Dubey,


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2008). This could greatly ease market access for both the domestic industry and foreign winein the country.

Import Policies

Currently, imported wines to India face assessment charges and basic customs duties. Whileassessment charges are only 1% for imported wines, basic customs duties are a significant150% (Gryphon Brands Inc.). In the past, there have been complaints regarding wine import

policies. The European Union formally complained to the World Trade Organization (WTO)regarding taxes and restrictions placed on European wine and spirits by the statesMaharashtra, Goa, and Tamil Nadu (Sommelier India, 2009). Complaints to the WTO havealso arisen from America. Due to the Government of India's commitment to the WTO, therehas been a gradual reduction in wine duties and taxes in the past few years, including adiscontinuation of an Additional Customs Duty (ACD). This discontinuation appears to be a

positive step for the import market; as the duty had been adding more than 150% to theoriginal customs duty for import. However, with the discontinuation of the ACD, the

original/basics customs duty was increased from 100% to 150%, which is the WTO boundrate (Arora, 2008). It was estimated that these changes would result in a 30% decrease in the

pricing of inexpensive imported wines, but no noticeable decrease in the pricing for morepremium/expensive imported wines (USDA, 2007). Despite such changes, current importduties, taxes, and value added tax (VAT) for wine continue to result in imported wine costingnearly four to six times more than their actual value. However, this cost does represent adecrease from what used to be eight to ten times more than the product value before thereduction in taxes.

Challenges

Variable regulation and infrastructure systems continue to pose significant market accesschallenges for Australian exporters. These include: high tariffs, an unclear tax system, breachof contracts, incomplete infrastructure and distribution, and state variation.

Local Wine Importers & Distributors

In the past, the growth of the import market for wine has been hindered by strict and complex

laws limiting the number of importers. In recent years, these laws have evolved and thenumber of importers has grown from approximately 30 importers several years ago, toapproximately 90 importers; the majority of whom are based in either Delhi or Mumbai.Although new importers continue to enter the market, high bonded warehouse costs can

prove challenging for smaller importers. In a move to open the Indian market to liquor,Indian wine and spirits importers recently formed an association, currently named the L1F1Licensees Association (Indian Wine Academy, 2009).

Documents

Group Assignment of Principles of Marketing