Romanian Wines in the U.S.

Market
Marketing Strategy
Otilia Flandro

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Outline
Study Purpose

Recommendations

Industry

Findings

Romanian Wines

Research Method

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Introduction
Recession and competition from import wines decreased local demand
EXPORT

Increase in interest to export to foreign markets

Second largest wine consuming country (volume)

Open to foreign wines regardless of country of origin

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Introduction
The challenge: finding and creating demand for the product Marketing is a crucial complement to successfully entering the US market

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Objectives
Determine what are the drivers for wine sales in the US retail and distribution Define Romanias image in the US

Determine the US consumers perception about Romanian wines

Determine purchase intent and price point for Romanian wines Define distribution barriers and opportunities for Romanian wines in the US Make recommendations

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Outline
Study Purpose

Recommendations

Industry

Findings

Romanian Wines

Research Method

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Wine industry
Extremely competitive

External threat: beer, liqueur

Surviving in this industry is tough

Relatively low barriers of entry

Small vineyards

Multinational companies

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Climate
The wine belt is the stretch of land around the globe between 35th and 51th parallel of north and south latitude where the climate is favorable for growing wine grapes.

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Old World vs. New World

Within the wine belt, the industry distinguishes between two major regions: N O Old World New World

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New classification
The Old World-New World division does not include emerging wine producing countries such as China and India and does not account for particularities of Eastern European countries. Old-Old
O

Old-New

New-Old

New-New

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Lead producers
The competitive landscape is dominated by Italy and France who have been battling for the top position in wine production. Romania fell below the 12th position in 2010

Source: OIV 2011

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Production vs. consumption

Germany and United States consume more than they produce Significant consumption-production gaps in China and Russia growing middle and upper-class is increasing demand for wine

Source: OIV 2011

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Lead exporters
The top three producers are also the top exporters Australia surpasses USA, Argentina, and China in export Moldova, Romanias neighbor is a Top 12 exporter

Production

Export

Source: OIV 2011

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Outline
Study Purpose

Recommendations

Industry

Findings

Romanian Wines

Research Method

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Romanian wines
Pre-Communism Romanian wines served and appreciated at the royal courts of Europe 19471989

Post-Communism
Major set back and overinflated perception of the quality

Communism Quality of the wines produced was sacrificed over high yields

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Post-Communist Romania
Efforts to revitalize wine industry:

Ceased because of the threat of competing with US wines

Directed to vine replanting; no marketing and business development tools

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Current situation
Sweet wines High domestic consumption

Global economic crisis

Domestic entrenchment
Bad country reputation Lagging business practices

Export

Decreasing internal demand

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Export opportunities

Export

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Outline
Study Purpose

Recommendations

Industry

Findings

Romanian Wines

Research Method

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Research method
Research

Qualitative
Interviews
United States 2011 Romania 2010 - 4 experts in retail - 2 distributors - 7 producers - 4 industry experts

Quantitative

Survey
- Web survey
- 81 respondents

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Outline
Study Purpose

Recommendations

Industry

Findings

Romanian Wines

Research Method

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Drivers for sales in the US

Grape variety
Taste/Quality Factors considered when making a wine purchase*
94% 91% 84%

81%
62% 59% 44% 39% 29%

Price

Other factors:

*based on survey results

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Price
Average shelf price: $10

$50-$60*

Recession

$10-$20*
*Boutique price

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Good wine:
speaks for the place where its fromit speaks for terroir, tradition, weather A good wine stays with you, its memorable Our customer is more important than our idea of good wine

A good wine is dry, full body, slightly fruity

Source: Interviews and survey

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Grape variety

Why is it important?

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Tools to sell a wine

Story Word of mouth

Tastings

Writers/Bloggers In-store expert advice In-store newsletter

Shelf talkers

Naming

Packaging

Shelf placement

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Perceptions about Romania

Beautiful mountains, pastoral setting, lively folk music, friendly people, medieval castles, gypsies Very poor country, Old world charm 3rd world country, former communist block country Gymnasts

Castles, Transylvania, Dracula Gypsy, untouched countryside, embroidery, folk art, lambs wool, pork products, castles

Source: Survey

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Perception about Romanian wines

7 6

5 Quality Germany 4 1 2 3 China

Moldova

France Italy USA Spain Chile Australia Argentina 6 7

India 3

Greece

South Africa 5
New Zealand

Hungary

Romania

The size of the bubbles represents availability. Widely available wines have a larger bubble.

1 Price

Source: Survey

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Perception clusters
7 6

5 Quality

France

Germany
4 Greece South Africa 5
New Zealand

Italy USA

3
China

Moldova

India 3

Spain
Chile

Hungary Romania Australia

Argentina

New-New World Old-New World New-Old World Old-Old World

1 Price

Source: Survey

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Expectations about style of wines

What are your expectations of Romanian wine in terms of style? 47% 45%
29% 29%
20% 18% 8% Earthy Full bodied Fruity Dry Light bodied Sweet Oakey

Chardonnay, Zinfandel type Would taste like other countries More like a German wine

Source: Survey

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Purchase intent
If available, how likely are you to buy Romanian wine?
29% 20% 13% 20% 13% Curiosity Openness to trying new things A price low enough to permit experimentation Previous experience with Romanian wine, mostly based on travel to Romania A recommendation

4%

3% Lack of information about Romanian wines Bias about the region Low quality of Romanian wines available on the US market through ethnic distributors

Source: Survey

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Purchase by location
Frequency of purchase by location (once a month or more often)
68%

The restaurant segment looks more promising for the Romanian wines compared to wine retail stores Boutique retailers who are focusing on a limited, unusual selection of wines are intrigued by the obscurity of Romanian wines Only 17% of the consumers purchase wines once a month or more often at boutique wine shops

41% 26%

25%
17% 9% 2%

Source: Survey

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Price point
Consumers are willing to pay less for a bottle of Romanian wines
45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

Price consumers are willing to pay for a bottle of Romanian wine

Price consumeers cosidered to be reasonable for a standard bottle of wine

under $5 to $8 to $11 to $16 to above $5 $7 $10 $15 $20 $20

Source: Survey

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Opportunities
One grape variety

Hipsters

Domestic grape

Curiosity

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Barriers
Reasons: Effect on: Result:

Economies of scale

Price Quality
Price Quality Relationships

Importers

Monopoly Shipping conditions Consistent supply

Distribution

Focus on the ethnic Price Quality consumer

Lack Abuse from of Communist forms cooperation of cooperatives

Relationships

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Outline
Study Purpose

Recommendations

Industry

Findings

Romanian Wines

Research Method

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Recommendations for Romanian producers

Focus on cultivating domestic grapes

Work with reliable distributors who are willing to invest in promoting Romanian wines on the US market

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Recommendations for export associations

Collaborate with other countries on building a favorable image in the US

Open collaboration between small vintners in order to reduce trans-Atlantic transportation costs

Collaborate with consulates and other official economic development bodies representing Romania in the United States

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Recommendations for distributors and marketers

Focus on one grape

Focus on restaurant and bar outlets

Vertically integrate import and distribution in order to assure quality and quantity

Introduce wines at shelf prices under ten dollars to allow experimentation

Inform the consumer