2016 AusPremium Wines Business Scenario ( amended 2019)
AusPremium wines was established in 1998 and has been successful in establishing its brand reputation through success in wine show competitions and wine critic endorsements.
In 2014 a new investor purchased 40% ownership in AusPremium and is financing an expansion of the business with an increase in production of Pinot Grigio and Grenache. The long term business objective is to double existing production capacity from 10,000 to 20,000 cases.
AusPremium has focussed on the Australian domestic market, selling 10,000 cases per year at an average wholesale price of $120 per case.
As AusPremium will be exporting for the first time they have to consider the risks of export including the exchange rate risk to their export sales margins.
AusPremium’s challenge in growing the business is to identify which market or markets to target for increased sales and sufficient margins, and what business capabilities and resources will be required to be successful in entering the selected market or markets.
The following specific information is provided about AusPremium.
Sales volume 10,000 (9 litre) cases annual sales in 2019
Business objectives Maintain the Auspremium brand reputation
Maintain strong margins (profitability)
Grow sales to 20,000 cases per year by 2024
Risk AusPremium Wines has historically had a low tolerance for risk, although the new investor understands that it is necessary to accept more risk in order to expand the business into export markets.
Brand Established 1998, Halliday 5 star winery
Region McLaren Vale, South Australia
Wine range Pinot Grigio, Shiraz, Cabernet Sauvignon, Grenache
Markets (annual sales, cases) Australia 10,000 cases in 2019. No export markets.
Route to market AusPremium has relied on its specialised distribution agent in the domestic market, together with some sales from the winery cellar door.
Auspremium has not established a wine club and it does not have a direct sales facility from its own website.
For export markets, AusPremium is expecting to appoint agents in the relevant market who will be responsible for all marketing and promotion of the brand.
Wine availability
in each year (cases) 2019 10,000; 2020 12,000; 2021 15,000; 2022 18,000 2023 20,000 2024 22,000
Planned production increase is subject to achieving sales growth.
Domestic market price
(average wholesale/case) $120
Export price point $85 per case FOB for Pinot Grigio, Shiraz, Grenache
$100 per case FOB for Cabernet Sauvignon
Business capabilities The new investor is committed to expanding into new markets. Since the business is small it does not employ skilled marketing staff or staff with exporting experience.
The winemaker joint owner (60%), has been the person representing and marketing the AusPremium brand within Australia. Due to winemaking and management commitments the winemaker can only travel overseas for a maximum of 2 weeks per year.
The investor is Japanese and has considerable experience in importing food from Australia to Japan and therefore has some business contacts in Japan, however none of these contacts have any knowledge or involvement with wine.
A Japanese wine business student who is related to the investor has been offered a 12 month internship opportunity with AusPremium and this student is highly experienced in digital marketing and social media.
Marketing budget The business has allocated $25,000 as the annual marketing budget to invest in entering and developing new export markets.
Travel costs Annual trip costs for each market are estimated to be: USA $20,000; Canada $15,000; (USA and Canada combined trip $25,000); Japan $10,000; South Korea $8,000; (Japan and South Korea combined trip $13,000); China $10,000; Singapore $5,000.
Margins (profitability) AusPremium Wines has achieved over the last 3 years a Gross Margin of 40% including the WET Rebate revenue for existing sales. The new investor’s financial planning is based on achieving average gross margins of more than 30% from the expansion into export markets.
Paul van der Lee
5.8.16, revised 2019
