1. −INTRODUCTION We are going to introduce a Spanish wine into Northern Ireland market, thus we have made a research process. Consumers in the UK spent an estimated £7.24bn on wines in 1999, representing a 27.9% share of the overall expenditure on alcoholic drinks. Beer remains the largest drinks market, but wine has overtaken spirits and liqueurs. wines are almost entirely imported into the UK. Unlike the other drinks, wines are almost entirely imported into the UK. Fortified wines and their market is declining steadily in favour of other, lighter drinks. Supermarkets and their own−label products dominate the retailing of wines, and have been responsible for wine becoming a standard `take−home' drink in the UK. However, wine commands high prices and profit margins in the on−trade, public houses (pubs) and restaurants, where the dining out trend is helping growth. Major retailers source their own wines, so that importing is fragmented across many distributors, reflecting the fragmentation of wine−making in Europe. Branding is inhibited by own labels, and by consumers' preference for choosing by country of origin or by grape variety. 2. −MARKETING RESEARCH 2.1. Market Definition • MARKET SECTORS Still Light Wines The still light wine (SLW) sector is the largest category in the UK wine market. A basic classification for light wines is whether they are white, red or rosé wines. Sparkling Wines This sector includes Champagne, and almost all sparkling wines being white. Fortified Wines Fortified wines can be classed under three main categories sherry, port and vermouth Table 1 provides a simplified, introductory breakdown of the UK wine market. Table 1: The UK Market for Wines of Fresh Grape by Market Sector (£m at rsp and %), 1999 £m

%

Still light wines Sparkling wines

80.8 13.1

5,850 950

1

Total light wines

6,800

93.9

Fortified wines

440

6.1

Total market rsp retail selling price

7,240

100.0

The term fortified applies to wines with an alcohol content (alcohol by volume ABV) of between 13% and 23%. Products with a stronger alcoholic content are taxed as spirits. Light wines usually have an ABV of 11% to 13%. • MARKET POSITION Wines in the Drinks Market Wines account for a steadily growing share of the UK drinks market, reaching an 18% market share in 1999. Beer is the largest sector, enjoying a market share of 50.6% of the alcohol market, and 40% of the total drinks market, which includes non−alcoholic beverages. Table 2: The UK Drinks Market by Market Sector (£bn at rsp and %), 1999 £bn Beer Wines Spirits and liqueurs Cider Other alcohol Total alcohol Soft drinks Hot beverages

%

16.0 7.2 6.1 1.2 1.1 31.6 6.8 1.6

Total market

40.0 18.0 15.3 3.0 2.8 79.1 17.0 4.0

40.0

100.0

rsp retail selling price Source:Target Group Index The habit of drinking wine with meals is relatively new one in the UK, and SLW do not complete with others drinks. Wine is distinguished in the drinks market through the majority of products being imported, whereas beers, and spirits are produced within the UK. Comparative Drinks Volumes Per capita consumption of wines in 1997 was 21 litres, an increase from 15.7 litres in 1990. Over that same period, beer consumption fell from 140 litres to 128 litres, and spirits were down from 2.1 litres to 1.7 litres. Consumer Attitudes to Drinks Table 3: Preferred Place for Drinking All Drinks (% of adults), 1999 At Home

Public House/ Club/Restaurant

Neither/Would Not Drink It 2

White wine Red wine Whisky Gin Lager Cider Vodka Alcopops Stout Bitter or ale

48 39 25 18 17 15 14 8 8 6

26 19 15 16 40 22 28 21 19 35

24 42 59 65 43 63 58 70 72 59

Note `Don't knows' came to 1% in some categories, giving totals of 99% Source:The Gallup Organization White wine is the most popular alcoholic drink at home, and both white and red wine are well ahead of the spirits and beers for home drinking. For drinking in pubs, clubs or restaurants, lager has the highest score, at 40%. • MARKET TRENDS Growth of the 'Take−Home' Market The 'take−home' market for alcohol is dominated by wine, with most beer and spirits still being consumed in pubs and clubs. Influence of Fashion The UK drinks market is prone to changes of fashion. Examples of the many fashionable drinks are ciders, alcopops and pre−mix cocktails. Varietals and Brands wines are increasingly chosen by their grape varietal (e.g. cabernet sauvignon and merlot) Supplier Fragmentation wine shares are still fragmented across many countries, regions, producers and distributors. but the market is basically open to experimentation, and the barriers to entry remain low. 2.2.− MARKET SIZE. The market for all wines has an estimated value of £7.24bn for 1999 equivalent to 18% of consumer spending on all drinks (including non−alcoholic drinks) in the UK. Growth has become more difficult to achieve in a market reaching saturation point, but wine's share of the total expenditure on alcohol continues to increase. Although Table 4 gives an overview of the total wine market, the distinction between light and fortified wines has been maintained to demonstrate the composite nature of the market. Fortified wines continue to decline in value, while light wines expanded by 36.3% between1995 and 1999. Table 4: The UK Market for Wines by Value at Current Prices 3

(£m at rsp), 1995−1999 % Change Light wines 4,990 5,450 5,800 6,350 6,800 36.3 % change year−on−year − 9.2 6.4 9.5 7.1 Fortified wines 485 470 460 450 440 −9.3 % change year−on−year − −3.1 −2.1 −2.2 −2.2 Total 5,475 5,920 6,260 6,800 7,240 32.2 % change year−on−year − 8.1 5.7 8.6 6.5 Source: Office for National Statistics The growth of the SLW market was inspired originally by off−trade expansion especially sales through large supermarkets. Volumes sold through the off−trade continue to increase faster than on−trade sales. The average price paid per litre for wine indicates the importance of the on−trade market. In 1999, a litre of SLW cost the consumer an average of £7.75. The average bottle price, at 70 centilitres (cl), worked out at £5.42. However, this is a composite figure, reflecting the mixture of 'take−home' and on−trade prices, the latter being far higher. It estimates that the average litre of 'take−home' SLW was priced at £4.75 in 1999, or £3.32 per 70cl bottle. In the on−trade, the average price was £19 per litre, or around £13 per bottle. This on−trade does not mean that many bottles were sold at this price; rather, it is biased towards sales of wine by the glass in public houses (pubs) as well as bottle sales in restaurants. BY MARKET SECTOR Our wine belongs to still light wine (SLW) class. The principal SLW market characteristics: a basic division of the light wines market is between white, red and rosé wines. The white and rosé categories include most of the sweet or medium−sweet wines. These once characterised UK consumption of wine as a drink mainly for women, as many disliked the drier tastes of other alcoholic drinks. The adoption of more sophisticated tastes has meant a long−term trend towards red wines, although the share of red has levelled off in recent years as the sweeter wines, such as Liebfraumilch, have given way to the more sophisticated modern wines. THE IMPORTANCE OF THE WINE ORIGIN. 4

As the UK wines market is comprised almost entirely of imports from a large number of countries, the analysis of the imports statistics is ,suitable as part of the general market segmentation. We can compare the most important SLW imports by origin in table 7. Table 5: The Principal Origins of Still Light Wine Imports by Volume (%), 1992, 1996 and 1999 1992 1996 1999 France 39 32 35 Italy 10 12 12 Australia 5 10 10 Spain 5 7 10 Germany 26 13 9 South Africa 1 5 6 US 2 4 5 Bulgaria 4 5 4 Chile 1 4 3 Portugal 2 2 2 New Zealand 1 1 1 Other Eastern Europe 3 4 2 Other countries 1 1 1 Total 100 100 100 Source: Overseas Trade Statistics The traditional, large−volume suppliers France, Italy, Germany and Spain lost market share as New World producers gained in importance from the mid−1980s. Competition for shelf−space was intense, however, so that only small volume shares of the total imports market could be gained, and was led by Australia, which now has a 10% share of the UK market for SLWs. 2.3.− INDUSTRY CONCENTRATION A variety of factors contribute to the fragmented nature of the wine market, both in the UK and world−wide. This fragmentation is in contrast to the extreme concentration, which occurs in some other drinks markets the powerful international brewers, the category dominance of brands like Gordon's Gin and Smirnoff Vodka, and the global marketing of Coca−Cola are examples of this.

5

In the main Western European countries which produce wine (France, Italy and Spain), the production of wine is very strictly regulated. There are regulations concerning bottling and labelling, as well as production, which dictate the types of grapes and processes that may be used in order to qualify for a `denomination' label. This regionalism system of regulation has tended to prevent the development of large corporate suppliers with globally marketed brands The Western European exporters to the UK had been challenged in the 1980s by the New World wines from Australia, New Zealand and the US, and the 1990s introduced competition from Eastern Europe, due partly to post−Communist deregulation, from post−apartheid South Africa and from Chile. All wine−growing countries compete in the UK market because it is the largest wine−consuming country without a significant, indigenous wine industry of its own. In the on−trade, competition is also fragmented because legislation forbids the national brewers from dominating the licensed trade through `tied houses'. This legislation known as `The Beer Orders' led to the creation of many important independent chains of public houses the `pubcos' in the 1990s. 2.4.− Brands BRAND LEADERS BY SECTOR Still Light Wines Until the late 1990s, branded wines had only limited success in the UK market, whereas heavily advertised brands dominate in all other drinks markets. Wine is the most sophisticated of beverages, and regular drinkers get to know their favourite countries and regions of origin, grape varietals and styles of wine, as well as experimenting with new origins and styles, all of which are determined by the location of the vineyard and the production process rather than overt branding. The main obstacle for branding still light wines (SLW), however, is the fact that as regular purchases they have become associated with the supermarkets from which they are bought. Own label wines from Tesco and Sainsbury and other multiples have achieved high penetration. Drinker Profiles by Brand Most of the modern wines are bought fairly evenly by men and women, whereas the traditional imports are biased towards women .Women are more likely to be drinkers than men, partly because they are more likely to do the supermarket shopping for wine, or to recognise the own−label brands. 2.5.− COMPETITOR ANALYSIS 2.5.1 THE MARKET PLACE The UK market was once dominated by two types of supplier: Agent for vineyards, co−operatives, estates and regions of the main wine−producing countries of Western Europe. But the consumer's growing preferences for choice more wide variety of sources, has changed the original structure, and made it more fragmented than ever. 2.5.1.1 LIGHT WINES AND SPARKLING WINES 6

The country of origin structure is the most important factor in the wine supply to the UK, and each country has its own set of producers, exporters and agents for UK representation. The ACNielsen audit of the off−trade reveals that no single category of still light wine (SLW) has more than 10% of the market. The leading categories include: • White wines and red wines from Australia • Vins de pays (France), both red and whites • Liebfraumilch and Tafelwein Hock (Germany) • South Africa white • Bulgarian red • Bordeaux red • Soave white wine (Italy) There are three important national table wine categories, from France, Italy and Spain. 2.5.1.2 FORTIFIED WINES They also mainly originate from specific regions of Europe, most of them from Spain and Portugal (sherries, ports). It includes vermouth, dominated by imports from Italy(Bacardi−Martini,Cinzano,etc) 1. Diageo PLC It has a complex background, but is the undisputed leader in world spirit production, as well as distributing wines. Was created in 1997, with the merger between Grand Metropolitan and Guinness. In the drinks sector other than beer, is represented by United Distillers and Vinters (UDV), and in wines, it is include the following wines: Le Piat D'or, Blossom Hill (California), Taittinger Champagne and croft sherry and port range. Financial Results at 30th June: £11.8bn. 2. Allied Domecq (Holdings)PLC A.D has a long history as one of the UK's largest companies involved in the drinks industry. The spirit and wine division operates globally, but is powerful in Europe, US, Spain and South America. Financial Results at 31st August: £4.31bn. 3. Matthew Clark PLC Was originally a medium sized drinks distributor and specially drinks producer. It has Stowell's of Chelsea (boxed wines), the Grants of St James's, Black Tower German wine, Paul Masson wine range from California, and British wines. Financial results at 28th February 1999: £453.4m

7

4. Bacardi−Martini Ltd. Was formed in 1992 through the merger of Bacardi and Martini Rossi. It is specialised in spirit and vermouths, but has malt whisky (Glenfiddich), campar bitters and De Kuyper brandies and liqueurs. Wines represented include Mateus Rose. Financial result at 31st March 1999: £131.1m. 5. Seagram UK Ltd It is part of one of the world's five largest wines and spirits firms, specially in USA, Canada and Europe. In wines, Seagram UK has Montana (New Zealand), Wolf Bass (Australia) and Goldener Oktober (Germany). Financial results at 30th June 1998: £148.7m. Advertising and Promotion Table 6: Main Media Advertising Expenditure on Wines by Category (£000), Years Ending September 1998 and 1999

Champagne Other wines Vermouth Sherry Port

1998

1999

% Change 1998−1999

1,919 9,079 2,525 2,290 600

2,836 17,295 1,281 1,538 813

47.8 90.5 −49.3 −32.8 35.5

23,763

44.8

Total 16,413 Source:ACNielsen Media International

Advertising for wines in the media is restricted by the absence of many strong brands and the strength of own−label products. It tends to be spread across many brands and generic campaigns for regions and countries. Usually, they do it using quality press, including heritage, origin and appellation information and description of ideal uses. Table 7: Main Media Expenditure on Branded and Regional Wines (£000), Years Ending September 1998 and 1999 1998 Branded Still Light Wine Ernest & Julio Gallo 2,010 Hardy's − Le Piat D'Or 500 Garnet Point − Lambrini 1,206 Domaine Boyar − Jacob's Creek 217 Rothschild 221

1999 4,931 1,236 857 855 777 578 464 458

Generic Still Light Wine 8

Bordeaux French vins de pays

1,505 387

1,186 971

Champagne and Sparkling Wine Moët & Chandon Champagne Freixenet Louis Roederer

896 394 −

1,490 1,452 428

805 2,054 239

1,271 949 635

Fortified Wines Spanish sherry (generic) Martini Graham's Port Source:ACNielsen Media International

2.6.− Strengths, Weaknesses, Opportunities and Threats Strengths The demand for the world's fine wines is a permanent feature of the wine market. Foreign travel is increasing and exposing British consumers to new wines and wine regions. Similar wines which maintain the downward pressure on prices. Weaknesses The diversity of choice prevents loyalty from being built up. It is very difficult to protect innovations in wine The diversity of product and the low barriers to enter the market means that inferior products still find their way to the shelves, damaging the industry's overall reputation. Young drinkers in the UK are prone to follow the latest fashion, and traditional wines are not seen as a modern drink. Opportunities Barriers to entry are very low, with consumers prepared to buy on price, and experiment with new names in wine. The promise of deregulation of the alcohol licensing laws will extend opportunities in the on−trade. Dining out is forecast to keep growing as a leisure pastime for many years to come. 2.7.−Buying Behaviour CONSUMER PENETRATION Demographic differences show that women are more likely than men to be wine drinkers. The peak age for drinking is 45 to 54, although even the over 65s have a fairly high penetration rate, at 62.4%. Social status makes a considerable difference, with light wine involving 81.4% of the ABs, but only 46.3% of the Es. 9

Table 8: Wine Drinkers by Sex, Age and Social Grade (% of all adults), 1999 Table Wine Sherry

Port

Vermouth

All adults Men Women

66.2 63.7 68.4

28.1 24.2 31.7

19.8 22.4 17.4

12.7 7.9 17.1

Age 18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65+

50.8 65.9 71.0 72.2 69.8 62.4

7.2 13.2 22.2 30.6 39.9 48.9

6.8 17.3 23.2 25.5 22.7 19.1

10.3 9.1 12.1 15.7 14.9 13.9

Social Grade AB C1 C2 D E

81.4 73.7 62.7 53.8 46.3

41.3 28.9 22.6 20.0 25.1

34.8 22.2 15.3 10.8 9.4

17.3 13.0 10.8 10.4 10.4

Note `table wine' in TGI definitions is equivalent to light wine in this report Source:Target Group Index, © BMRB International Ltd, 1999 The profile of boxed wine drinkers is mature, with over 50% of boxed wine buyers aged between 35 and 55. HOME CONSUMPTION Target group index(TGI) assesses the number of 'take−home' wine buyers. Adult penetration has peaked, and fell from 67% in 1995 to 61.2% by 1999. Table 9: Home Drinkers of Wine by Sex, Age and Social Grade (% of all adults), 1995, 1997 and 1999 1995 1997

1999

All adults Men Women

67.1 66.3 67.8

63.1 61.6 64.4

61.2 59.9 62.3

Age 18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65+

55.2 74.4 76.2 73.9 64.8 54.6

48.7 66.2 72.3 70.5 63.8 52.9

47.9 65.0 67.8 67.6 61.9 52.4

Social Grade

10

AB 82.6 80.0 C1 75.1 70.5 C2 65.3 59.0 D 52.7 50.3 E 43.8 40.9 Source:Target Group Index, © BMRB International Ltd, 1995, 1997 and 1999

78.8 68.6 57.5 47.8 39.5

The decline in 'take−home' wine buying appears to have been sharpest among the younger age groups, and especially among the sub−AB socio−economic groups. One implication of these findings is that only 5% of the population drink wine only outside the home. 2.8.− Market Growth A DECADE OF GROWTH The following graph demonstrates the growth of the UK wine market between 1995 and 2004.

Figure 1: The Total UK Wine Market by Value at Current Prices (£m at rsp), 1995−2004 The UK wine market has shown considerable growth during the second half of the 1990s, and this looks set to continue early into the 21st century. The total market growth between 1995 and 2004 is forecast at 56.7%. 3.−SEGMENTATION PROCESS:

3.1.Market Segmentation: −Age: −18 to 24 −25 to 34 −35 to 44 −45 to 54 11

−55 to 64 −65+ Peak age for drinking is 45 to 54,even over 60's −Source: Table 8, page 10 −Gender: −Male −Female Women are more likely to be drinkers than men are. −Incomes: −AB − Highest incomes −C1 − Medium incomes −C2 − Medium incomes −D − low incomes −E − lowest incomes −Preferred place for drinking: −Home −Public House/club/restaurant −Source: Table 3. Page 3. Consumer attitudes to drinks. −Kind of wines: −Still light wines: −White −Red −Rose −Sparkling wines −Champagne −All sparkling wine being white

12

−Fortified −Sherry −Port −Vermouth −Source: Table1, Page 1 −Geographic: −Population −From: −10000 to 100000 −100000 to 300000 −300000+ −Place Tourist places Industrial places Commercial places Villages 3.2.TARGET SEGMENTS −Age: We are going to cover people who drink wine from 25 to 65+, because, as we can see in table 18,they are the most important quality wine consumers. −Gender: We cannot make any gender distinction, according to table 8 and 9 their percentage of consume is similar. −Incomes: We would like to sell our wine to people whose social grade is AB, C1 and c2 inclusive. The reason for this choice is that they spend more money in wine. Ref.: table 8, Page 10. −Preferred place for drinking:

13

Home consume, public houses, in clubs and restaurants is very important for us, because we have to try to sell it in all the places. −Types of wines: We are going to cover SLW segment because our product is red wine. 3.3.MARKETING POSITIONING Our positioning strategy will be based upon: • Offering a wine from the Ribera del Duero region, characterised by its high quality, with wine−quality guarantee. A reserve quality wine, which will satisfy the taste and demands of a continually knowledgeable, consumes. • Our wine marketing experience will prove an advantage over our competitors, in such a demanding market as that of Spain. We shall be a pioneer of this wine in NI. • Government assistants will help promote the wine from Ribera del Duero region as a wine of high quality. POSITIONING MAP High quality x x Low price High price £ 7.75 £13 − a : Our wine. − b : Others wines. − : : Consumer Cluster Low quality 4.−MARKETING MIX 1.PRODUCT Our wine derives from one of the most productive wine region of Spain. We produce wine focusing on the production of crianzas and reservas. The grape used is tempranillo and cavernet. Both are highly thought of by Irish consumers. With this wine we may compete directly with the most important wine brands in NI. The wine is offered in bottles of 700ml. With a label showing the region of origin, the type of grape used and the brand. 2.PROMOTION 14

Our promotion policy will comprise two important initiatives: 1.Promoting Ribera del Duero as producer, financed by Consejo Regulador de la Ribera del Duero. This move intends to raise awareness of this origin region to the Irish market. 2.Lounch of our wine will take place in one of the most important hotels in Belfast. Invited will be politicians, business leaders, wholesalers, hoteliers, where we publicise the nature of our wine and a wine−tasting session. 3.Wholesalers induction course, taking place in our cellar in Spain, to acquired necessary knowledge in order to facilitate the sale of our wine. 3.PRICES Our low production costs will allow us to introduce the wine in the Irish market with a competition price range. Thus, we can offer useful discounts for sales increases to our wholesalers, in turn encouraging sales increases but not so as to devalue the product, since this would compromise the reputation of our wine. These discounts could assist the wholesalers, in promoting the product to the most important customers buyers, for example, providing free samples or organising tasting sessions for the most prominent restaurants in the area. 4. DISTRIBUTION Our distribution policy will be based in the following flow−chart: We have chosen this distribution channel owing to the fact that this is our first venture into the international market, we consider that an agent with market background can satisfy better our distribution requirements.5.SOURCES • THE GALLUP ORGANIZATION. • OFFICE FOR NATIONAL STATISTICS. • OVERSEAS TRADE STATISTICS. • ACNIELSEN MEDIA INTERNATIONAL. • TARGET GROUP INDEX©BMRB INTERNATIONAL LTD, 1999. 6.NOTES • Ribera del Duero: It is a specific area of our Spanish wine production. • Tempranillo: Kind of grape. • Cavernet: Kind of grape. • Crianza: It is a wine that has an elaboration process of twelve months. • Reserva: It is a wine that has an elaboration process of thirty−six months. • Consejo Regulador de la Ribera del Duero: Regulator council of Ribera del Duero. 1

15

Manufacturer Wholesaler Retailer Consumer a b

16