Market Strategy Analysis on Montgras
Hung-Chang Huang 1467751 Case Questions: MontGras 1. (a) To what extent can MontGras control its own market position, as opposed to being dominated by the country-of-origin effect, and be perceived as a “Chilean Wine”? MontGras, the export-focused winery that was founded in 1992, unlike many other Chilean wineries, actually possessed a considerable control on its own market position in the late 1990s and early 2000s.
Although the overall consumer perception towards Chilean wine products indicated that they need to put more efforts to build a solid image globally and that their major advantage is the low price, the situation might not necessarily hurt MontGras’ current market position if and only if the management the link between the decision to adopt the quality strategy, rather than volume strategy, and the fact that Chilean wine lacked a proper image.
By pursuing quality-oriented strategy, MontGras is able to further cultivate its brand awareness as a result of the success of the ultra-premiums(Ninquen line) and the super-premiums(Reserva line), and to eliminate the inefficient cost spent on the joint effort with Chilevid aimed at building a stronger image for the entire Chilean wine industry.
Consequently, the problem of country-of-origin effect was, in fact, not significant enough that hampered MontGras’ marketing position as long as the company is fully understand what the appropriate marketing strategy is and adopt it with regard to different market ecologies of MontGras’ export destinations. (b) What implications does this have for marketing strategy? With the worldwide overproduction of vintages, competitions of wines in all segments were predicted more intense, especially in the basic segment, which traditionally accounted for nearly half of the market share of many countries, and 55% of MontGras’ total product in 2001.
This indicates that already saturated basic segment, with the smallest gross profit margin for all the players within the segment, would become a less and less lucrative red ocean. On the other hand, with the recognition that the country-of-origin effect does not incur severe damage to the company as anticipated, MontGras is able to reallocate its advertising expense through emphasizing on the brand, or on the product lines instead of building a stronger image of country-of-origin that would consume a huge portion of its dvertising expense, but unsure of whether consumers in UK or US would buy their effort. Hence, both the two aforementioned factors might serve as a juncture for MontGras to reassess its business strategy, which could be broken into producing part and marketing part, in order to keep the profitable business for long. 2. Evaluate the US and UK options separately. For each country, which option would you recommend and why? In MontGras’ major export market, UK, the company has already gained a substantial success that it ranked one of the 10 most Chilean wine exporters in terms of the value of products.
In this picture, its partner distributor in UK had played an important role in MontGras’ UK penetration since 1996. Considering UK market feature, partner with leading supermarket chains such Tesbury is a comparatively feasible way to expand MontGras’ market share because these chain systems control more than 60% of all wine sales. However, partner with Tesbury is not free from side effects. First, at initial collaboration phase, MontGras enjoyed a short term victory without paying the cost of promotion.
But in the future, is it able to reap without paying, or would Tesbury ask for more contribution from MontGras after it become too subservient to the large retail system? Second, partner with Tesbury could well create a supplanting effect that threatens its old partner distributor. Thus, my recommendation for MontGras in UK would be to diversify its distributor partnerships as a way to prevent over dependency, which would somehow cast uncertainty for MontGras’ positioning strategy in the long term.
Also, in order to pave the way for future expansion in premium segment, MontGras should keep records of the new marketing plan for Ninquen wines that if the targeting sales of 5,000 cases can cover the proposed GBP 20,000 and generate profit. In the highly fragmented US wine market, with regulatory three-tier distribution system, MontGras had to tackle business with importers, which are usually state-licensed wholesalers too. In addition, by the four prescribed criteria in choosing a countable partner importer, MontGras should be able to prevent the failures from unsuccessful previous partnerships.
The first candidate of its partner distributor, World Wine Importers, a larger player that operated 200 brands with a 60-staff sales force, proposed to promote the Reserva line in a volume-oriented strategy with a price range of $8-$11; Cabo Imports, another candidate that operated 50 brands and a sales force of 35, offered a distinct proposal for MontGras that it intend to raise consumers’ perception towards MontGras’ quality and pric range also to broaden the return for both parties through setting a price range $8-$15, and it also intend to release the Ninquen line as a flagship product targeted a $25 retail price.
Although the partnership with World Wine Importers seems more lucrative to MontGras in terms of the sales generated by large amount basis, however, simply adopt the results from simple additive questions is obviously not sagacious enough for Mr. Middleton. In general, Cabo Importers would offer a great stage for Reserva(60% of the total), and the newly released Ninquen as well. Thus, accepting Cabo Importers’ offer would be advantageous for MontGras’ market position in US market.