Great wine starts with

the environment
Prof. VIVEK DABRAL

By-

- ROHIT KUMAR
- RISHABH BHARAT KAGRECHA
- SUDHANSHU KUMAR
- ARPIT GOEL
Introduction :

Sula Vineyards (or "Sula") is a winery and vineyard located in the Nashik region of western
India, 180 km northeast of Mumbai. It was founded by Rajeev Samant in 1999. After the launch
of its first wines in 2000, Sula expanded from its original 30 acre family estate in Nashik to
approximately 1800 acres across Nashik and the state of Maharashtra. Sula introduced grape
varietals such as Chenin blanc, Sauvignon blanc, Riesling and Zinfandel to India and as of 2013,
they held a market share of almost 70% in the Indian wine Industry

History :

Sula Vineyards was founded by Mr. Rajeev Samant. After quitting his corporate job, Samant
established Sula upon his return to India. Sula was named after Samant's mother – 'Sulabha'.
Samant steadily grew the company over the next few years by introducing newer grape
varieties and expanding the company's offerings. The Nashik region has been called "India’s
Nappa Valley."
Product Portfolio:

Over the last sixteen years, Sula has established itself as a pioneer and leader in the Indian wine
industry, with milestones across its winemaking, tourism and business ventures. Since the sale
of its first bottle of wine in 1999, Sula has made a mark in the Indian wine industry by capturing
65% of the wine market and establishing itself as a pioneer and innovator par excellence.
Sula has wide range of products from different types of wine to spirits from dominating the
Indian market to collaborating with world top class wine making companies. Sula has been
brilliant in all its sectors with 25 patented wine in its name. Not only this wine includes red and
white wine but sparkling and newly established rose collection which is been tremendous hit
overseas especially in UK market.

Global Market :

In Global Wine Production Italy, France, and Spain are the top wine producing countries
worldwide, by a significant margin. In 2019, Italy’s wine production amounted to nearly 47.5
million hectoliters. In 2019, the total volume of wine produced was estimated to be around 260
million hectoliters worldwide. Although global wine production has seen a net increase over the
last two decades, the surface area covered by vineyards has decreased during that time period.
As for Sula which is totally Indian based is able to hold its name high only because of its quality
and innovation. Not only Sula has taste but continuous innovation which helped producing
more than 20+ patented products under their brand.
Above is the worldwide wine consumption chart of year 2019.

Among this top 10 nations Sula is been distributed in China, UK and Australia. This shows
there’s still wide array of market that is still vacant for us to be established. Even though 70% of
Indian market is already captured by Sula but the scope of expansion is still huge in foreign
market.
 Sula Vineyards

Internal Environment study

Core Competency:
Making Distinctive wine of world class quality.

The Value Chain:

Corporate Level:

SWOT Analysis

Strengths:

It is expected that the Indian wine industry is continuously growing and it is considered as
the fastest growing market of wine, therefore being in the wine industry is a strong point for
the company. The Experience of management and the skills of consultants like Kerry are an
asset to the company. These components have played a major role in growth of the
company. The availability of raw materials and good relations with local farmers will give the
company a competitive advantage in the international market. IN the past, the company
used its marketing strategy to attract customers, which allowed the company to grow at
stable rate. The company has shown prospects to become a leading wine manufacturing
company globally. The company has resources and intention to become world leader;
therefore it has high chances of achieving this position.
Weaknesses:

The lack of capital can limit the company from achieving its growth strategy while the debt
funds from banks might be too costly for the company. IN order to grow globally, the
company requires large amount of fixed assets which will result in lower turnover on assets.
This might require large investment at lower rate of returns.

The company needs to develop strong controls over inventory as the inventory is highly
perishable and require very high care for management. The company lacks a distribution
network as compared to other global companies, which can result in the average price of
the company becoming more costly for consumers.

Opportunities:

The market in which the company operates has shown high potential and the overall market
is growing, therefore the company has opportunities to avail cash easily. The government
policies promote companies to expand globally; therefore the company has the opportunity
to avail subsidies from government for going global.

The Indian climate is very suitable for growing grapes which is a core component of wine.
This will allow the farmers to reduce costs and sell it at lower price to the company.
Moreover, this will allow the company to buy raw materials at lower costs. The living
standard of people is improving, as wine is usually consumed in high standard societies,
therefore consumption is expected to increase which will increase demand for wine in the
future.

Threats:

The most dangerous threat for the company is the threat of new entrants and competition
due to established players. Companies like Diageo and Constellation Brands have a
reputable brand in the industry globally; therefore their entry into Indian markets will
largely hamper the demand of Sula. Furthermore, new entrants can easily enter the market
as wine licenses can be easily obtained in India.

Although the weather is perfect in India for growing grapes in the country however, the
weather in India is not reliable and it has become unsuitable for crops very quickly.
Government policies and attitudes regarding production and distribution of wine are
different in each state of India; therefore it will be difficult to develop a general policy of
distribution across the country.

Viable alternatives:

Sula should focus on making white wine only for a short period of time, nearly about 3-5
years and move to newer cities India.

• White wine has faster turnover

• Vast opportunities in other major cities in India
• Would allow Sula to get more market share
• Eventually reduce competition

To expand from debt financing from fellow board members and expand capacity.

• Sula can now focus on red wines as well as the white wines
• Sula would now have to give up more equity and still enjoy the ownership and
Maintain control
• Overall increase in capacity can improve the cash flow and can help in loan
repayment in the future.
 Great wine starts with the environment

EXTERNAL ANALYSIS

TARGET COUNTRY – PHILIPPINES

ECONOMY

1. Most dynamic economy of the east Asia region.

2. GDP growth rate has gone down but has remained relatively high 5.9% (IMF figures)
3. According to IMF the drop in the GDP during the COVID-19 will only be about 0.6%.
4. According to IMF the expected growth rate in 2021 will be around 7.6
5. The public deficit is also quite low 1.6% of GDP.
6. Public debt is also reasonable at 39.3% which is expected to get reduced in the
following year.
7. The employment rate is at an all-time low in 2019 at about 5.1%
8. Employment by sector: agriculture 25%
Industry 18.4 %
Service 56.7%
9. Ranking on economic freedom index: score- 63.8/100
World ranking- 70
Regional ranking- 15
10. Business environment ranking: score - 6.28/10
World ranking- 53/82

POLITICAL

Structure and stability of government:

The foreign economic policy direction of the Philippines has not deviated from its previous
trajectory. Trade with the Philippines’ traditional economic partners remains robust, despite
the Duterte’s declaration of a ‘foreign policy pivot’. The United States, the European Union
and Japan remain the main economic partners of the Philippines.
The European Union, Japan and ASEAN remain the top sources of foreign direct investment
(FDI) from 2016 to 2018. FDI from the European Union reached US$42.9 million; FDI from
ASEAN — mainly Singapore — reached US$37.08 million and from Japan US$25.4 million.
FDI from the United States tapered during that period at US$14 million.
Negotiations for the Philippines–EU Free Trade Agreement were revived, showing a
willingness to strengthen ties with the European Union.
Duterte has admitted that he is not well versed in economic issues and that he would leave
economic matters to the experts.

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 Great wine starts with the environment

The Philippine government is committed towards providing financial and infrastructural

support to the business that have been affected.

LEGAL

"Sec. 139. Wines. — On wines there shall be collected per liter of volume capacity the
following taxes.

"(a) Sparkling wines regardless of proof, Twenty-six pesos; chan robles virtual law library
"(b) Still wines containing fourteen percent (14%) of alcohol by volume or less, Three pesos;
and
"(c) Still wines containing more than fourteen percent (14%) of alcohol by volume, Eight
pesos.

"Fortified wines containing more than twenty-five percent (25%) of alcohol by volume shall
be taxed as distilled spirits. Fortified wines shall mean natural wines to which distilled spirits
are added to increase their alcoholic strength."
"Sec. 40. Fermented liquor. — There shall be levied, assessed and collected an ad valorem
tax equivalent to fifty percent (50%) upon the effectivity of this Act and sixty per cent (60%)
six (6) months thereafter of the brewer's wholesale price, excluding the ad valorem tax
imposed under this Title IV, on beer, lager beer, ale, porter and other fermented liquors
except tuba, basi, tapuy and similar domestic fermented liquors, but in no case shall the
sum total of the ad valorem tax and value-added tax be less than P1.00 per regular 320 ml.
bottle."

Another important factor that is involved is the provision to sell the wine i.e. it requires FDA
Authorization, FDA authorization comes in 2 steps
- License to operate
- Certificate of product registration

THE SAMPLE DOCUMENTS FRO THE LISCENCE TO OPERATE AND CERTIFICATE OF

REGISTRATION ARE SHOWN BELOW

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 Great wine starts with the environment

Sudhanshu Kumar ERP ID: 0201PGM058

 Great wine starts with the environment

TECHNOLOGY

The Philippines has made rapid progress over the years in terms of technology and
innovation. Its IT spending is projected to reach US$8.1 billion by 2023 (ITA, 2019). The
demand for tech products, services, and automation across sectors is on the rise. A growing
middle class and young population and their love for tech products and services have been
the key drivers behind this growing demand.

The use of smartphones and social media has permeated every socio income class in the
Philippines. Educational organizations have blended traditional learning methods with
technologies to increase the digital literacy of the average Filipino. In fact, the country has a
very tech-savvy work force that has made the operations of multinational companies easier
in the country. However, many analysts argue that the government should invest more on
advanced science, technology, engineering, and mathematics (STEM) education.

One of the major ways the Technology helps our business is that, The Philippine
government allows for the sales of liquor through online e retail platform, and with the kind
of technological penetration Philippines already has, it will be very easy for us to reach all
those people opening up the market to us.

Examples of Liquor E-tailers:

1. Lazada.com

2. Booseshop.com

3. Drizly.com

4. Liquor.ph

There are many more such examples, which just goes to show accessible the Philippine
market is.

Sudhanshu Kumar ERP ID: 0201PGM058

 Great wine starts with the environment

ENVIRONMENTAL

Now, there are both positive and negative sides to the environmental factors involved in
operating in the Philippines:

POSITIVE: 1. More than 7640 beautiful beaches

2. Beautiful Water parks

3. World class malls

4. Crowded Mega-cities with robust infrastructure

These factors are a huge stimulus for the “Travel and Tourism” Industry as well as the
“Hospitality industry which are two of the industries that drive in huge business for us.

Another advantage of operating in Philippines is that we can create a platform for us to

expose our product range to the International audience which is one of the prime factors for
further expansion of the business.

NEGATIVE: 1. Philippines is prone to earthquakes

2. The country is prone to typhoons

3. The country has Volcanic eruptions

4. Air and Water pollution

5. Costal erosion

On the other hand, Philippines is uniquely placed geographically, which make it prone to to
various kinds of environmental threats like earthquakes and typhoons, just for a reference
about 20 typhoons hit Philippines every year. Philippines looses about $6.4 Billion every
year to such disasters.

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 Great wine starts with the environment

SOCIAL

Various factors regarding the Philippine’s people at large are:

The annual global average alcohol consumption is 6.4 liters per person older than 15 (in
2016), which has continuously increased. To account for the differences in alcohol content
of different alcoholic drinks (e.g. beer, wine, spirits), this is reported in liters of pure alcohol
per year.

6.4 Liters In terms of bottles of wine:

Wines contain about 12% pure alcohol per volume, so 1 Liter will have about 0.12 Liters of
pure alcohol, and since the annual global average was 6.4 Liters that would give us 53
bottles of wine per person older than 15, and if we divide it by the time factor, we would get
around 1 liter of wine per week.

This is a geographical representation of the Asia region on the basis of alcohol consumption

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 Great wine starts with the environment

DIRECT MARKET INDICATIVES FOR PHILLIPINES:

AVERAGE VOLUME PER CAPITA

This chart represents the average volume of wine per person, as it can inferred from the
graph, the demand for Wine has remained relatively stable, admittedly the demand for
Wine is not as large as for beer but it is already a niche product and these figures are a
testament to the stability of the Wine market, and its consumer base.

OUT OF HOME REVENUE

Now this chart reflects on the figures related to out of home Wine consumption, OUT-OF-
HOME consumption refers to the consumption that happens in the hotels, bars and all such

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 Great wine starts with the environment

location where it is served. Once again, this chart is an indicative of the stability of the
market with reference to Wine demand.

AVERAGE REVENUE PER CAPITA

Average revenue per user measures the amount of money that a company can expect to
generate from an individual customer. So this is one of the most important charts for the
company aspiring to expand, and reflecting on the charts we can see the price of Wine has
seen relative and progressive growth and is predicted to grow through 2023.

REVENUE GENERATED BY INDUSTRY

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 Great wine starts with the environment

This chart shows how much money the wine industry has churned out in the following
years, and the predicted growth for the segment is substantial and very promising for
prospective expansion.

PRICE PER UNIT

Price per unit represents the Average bottle price that is being sold, and it reflects that the
prices per bottle is consistently ratcheting up, and is predicted to increase in the following
years which is again a testament to the potential in the Wine market of Philippine.

THE IMPORT COMPETETION

The Philippine wine market is a majority export driven industry, due to the factors like
natural environment instability, Philippines is not ideal for vineyards, that’s not to say that
there are no indigenous vineyards, but their share is extremely limited. So how to study the
market share and how to determine the big players?

The answer to that lies in the import figures issued by the Philippine government, to
understand we must club all the vineyards from a certain country together and then look at
the stats.

Below are the 15 countries that accounted for the highest dollar value worth of wine
imported into the Philippines during 2018.

United States: US$13 million (35.4% of Philippines’ wine imports)

Australia: $6.1 million (16.6%)

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 Great wine starts with the environment

Spain: $4.4 million (11.9%)

France: $3.3 million (9%)

Chile: $2.9 million (8%)

Singapore: $1.8 million (5%)

Italy: $1.7 million (4.6%)

South Africa: $1.5 million (4.2%)

Argentina: $433,000 (1.2%)

New Zealand: $390,000 (1.1%)

United Kingdom: $222,000 (0.6%)

Belgium: $171,000 (0.5%)

Germany: $160,000 (0.4%)

China: $120,000 (0.33%)

Switzerland: $117,000 (0.32%)

Denmark: $93,000 (0.25%)

Portugal: $83,000 (0.23%)

Latvia: $52,000 (0.14%)

South Korea: $32,000 (0.09%)

Brazil: $17,000 (0.05%)

By value, the listed 15 countries shipped 99.1% of all wine imports purchased by the
Philippines during 2018.

Among the above wine exporters to the Philippines, the fastest-growing suppliers since
2014 were: South Africa (up 213.8%), China (up 122.2%), United States (up 88.3%), Chile (up
77.4%) then France (up 70.3%).

SO, THE PRIME COMPETETION IS THE US AND AUSTRALIA.

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 Great wine starts with the environment

SOME OF THE TOP BRANDS IN PHILIPPINES:

E & J Gallo Winery

Bel Mondo Italia Corp

Distileria Limtuaco

Franzia Wines

To finish off this External Environment Analysis the best way would be to use a S.W.O.T.
analysis tool inn order to under the potential comparatively with the weaknesses and
threats.

SWOT

INTERNAL STRENGTH INTERNAL WEAKNESS

1. Capable of producing relatively high 1. Relatively low experience in the

quality of wine with low production industry.
costs. 2. Lack of relatively large-scale
2. Novelty advantage production
3. Production cost advantage 3. Vineyards only in India, to cater to
4. Highly skilled vineyard experts external markets land expansion will
involved in the process be required.
5. Contract farming model adoption
along with pre owned land and pre-
established processing plants and
ageing facility.

EXTERNAL OPPORTUNITY EXTERNAL THREAT

1. Philippine market has a lot of 1. Relative export deficit due to lower

potential, because of the emerging export scale of Sula
middle class and increasing interest 2. Brand value and image of pre-
2. Catering to young population at a existing brands
relatively lower price. 3. Tightening regulation both on FDA
3. Market and customer base standards and minimum age laws in
expansion. Philippines.

Sudhanshu Kumar ERP ID: 0201PGM058

 Great wine starts with the environment

Inferences from the SWOT Analysis

1. Sula has been working in India for quiet some time and as developed quiet an
understanding of the country and has developed a lot of assets through the process
of developing and now has the capability of producing wines at a relatively lower
prices, owing to the contract farming model and the availability of cheap labor in
India.
2. Sula also has a Novelty advantage, Sula is the only widely accepted and successful
wine producer from India which is a rarity in itself and is ideal for the people who
want to experiment and try new things new flavor, which acts to the benefit of the
brand and the vines themselves.
3. If we talk about the Philippines market it possesses a lot of characters that are ideal
for expansion like:
a. The emerging middle class
b. Highly import driven economy
c. Increasing per-capita income
d. Alcohol consumption figures
e. E-tailing licenses
f. Travel and tourism industry presence
g. Hospitality industry presence
h. Younger population willing to experiment
4. Despite the fact that Sula has been in the Wine business since 1999, still in terms of
the Wine industry it is relatively a very low time, and other firms form countries like
France and Italy have experience up to a century like Staffelter Hof – Germany or
Château de Goulaine – France. Hence it is a weakness that only time will improve.
5. In its current state Sula is operating with a capacity of 3000 acres of land, which will
need to be expanded by a huge margin if Sula plans to expand to other countries,
with the last expansion to china Sula recognized the need to expand on the home
territory, and is continuously expanding as we speak.
6. Sula because of the nature if the firm it is mostly an indigenous firm which means it
does not have a lot of brand presence and recognition internationally, which might
get in the way of its expansion but once again it is a factor that can be easily offset
by the fact that the pricing and quality of the Wine along with the return on
investment for the customer is really good, but the direct import competition from
USA and other player will be an issue, along with that all the FDA regulation have
been tightened even more to maintain liquor standards which translates in to added
expense.

Sudhanshu Kumar ERP ID: 0201PGM058

MODE OF ENTRY - EXPORT

Country Selected- Philippines

Justification

1. Market Potential
Alcohol has historically, and continues to, hold an important role in social engagement and
bonding for many. Social drinking or moderate alcohol consumption for many is pleasurable.

Alcohol
consumption
across the
Country
The annual
average
alcohol
consumption
is 6.6 liters
per person
older than
15. To
account for
the
differences
in alcohol
content of
different
alcoholic
drinks (e.g.
beer, wine, spirits), this is reported in liters of pure alcohol per year.

2. Market Security ( Tax as a revenue)

The ad valorem tax on distilled spirits is 22 percent of the net retail price, and the specific tax
is P42.00 per proof liter.

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 The government has a high source of income from Liquor Imports hence the government has
an interest in supporting the import of liquor from different nations.

3. Demographic Advantage
On the basis of external environment analysis we have already observed that there’s a large
amount of liquor consumption in the country.

Like India Philippines is one of the fastest developing economies, which has a potential youth
as an advantage, observing there consumption behavior and the import charts it’s quite
evident that the population of the country is open to experimenting w.r.t WINE.

With the persistent increase in the Per capita income people are spending more toward the
liquor consumption which can be easily inferred looking by the revenue generated by the
industry as a whole.

4. Geographical Advantage

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 With growing rate of Tourism Travel in Philippines there has also been growth in Hospitality.
Since these two industries are one of the primary demand drivers of liquor consumption, so it would
be a great market opportunity to capitalize on.
5. HOFSTEDE’S MODEL

0 Measurement Scale
100

LOW POWER DISTANCE ^ HIGH POWER DISTANCE

COLLECTIVISTIC ^ INDIVIDUALISTIC

FEMININE ^ MASCULINE

LOW UNCERTAINITY AVOIDANCE ^ HIGH UNCERTAINITY AVOIDANCE

SHORT TERM ORIENTATION ^ LONG TERM ORIENTATION

RESTRAINT ^ INDULGENCE

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 6. SULA Customer Base Expansion
SULA operates in India where the consumption of wine is relatively low when compared to
Philippines. Sula has separate strategies for its expansion in India but if was to expand to a
country it must have a bigger customer base than India so that the expansion exercise
becomes feasible.
7. CAGE Analysis
CULTURAL DIFF. Administrative Diff. Geographical diff. Economic Diff.
Bilateral High Difference Colonial ties Physical Difference 40% GDP per capita in
Measure language 4622KM Philippines
Culture highly India signed FTA in High difference in High natural&
influence by each goods with bloc. climate. Financial resources in
other INDIA.
Philippines- Christian Lack of common
Majority Currency
India-FEDRAL Republic
Philippines- Republic
No Political hostility
India- Common Law
Based
Philippines-MIXED

Unilateral Highly traditional Both have relatively India-32Lakh SQKM India 3.2Trillion
Measure Open Economy Philippines- 3lakh Philippines 357 Billion
SQKM
No insularity
High Spiritualism

(A) Cultural Difference

There is a high difference between India and Philippines Language. India has Hindi as a
official language while official language of Philippines is Filipino.

Both the countries have highly cultural influences from each other. Also Philippines forms
Christianity as its major religion.

The countries are Highly traditional.

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 (B) Administrative Difference
Both the countries had prior colonial ties.
India has Federal Republic government while Philippines have Republic government.
India has a common law structure while Philippines have Mixed Law structure.
Both the countries have relatively Open economy.
(C) Geographical Difference
India has difference in climatic situation due to area size i.e is 32 Lakh SQKM , while
Philippines has 3 Lakh SQKM of area. Philippines is more prone to Natural disasters.
(D) Economical Difference
Indian Economy went to 3.2 Trillion USD while Philippines have 357Billion USD economy.
Also India has more natural resources then Philippines.

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