The Brazilian Wine Industry

An analysis of industry and strategies for growth Renata G. Spers James T. C. Wright Cristina F. Varela Marcelo M. Almeida Miguel Antonio C. Belli Simone Katz FIA BUSINESS SCHOOL SO PAULO
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Wine production starts in 1551 (related with the history of the country) 1970s: industry modernization 1980s: campaigns are launched to increase consumption / quantity of researches on grape varieties (Embrapa) 1990s: higher quality wines started being produced with more intensity and adaptation of fine grapes to the climate of the Serra Gacha 2000s: focus on quality wines, affirmation of products regional identity, diversification of production
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The evolution of Brazilian wine industry impose questions about the competitiveness and value chain The purpose of this paper is to analyze the competitiveness of the wine industry in Brazil, aiming to indentify growth opportunities in the industry

Five forces of Porter: current competitors, new competitors, substitution, bargaining power of buyers and suppliers (and government) Value network assessment: complementors and cooperative relationship with them Value chain and relationship links Clusters (wineries in Rio Grande do Sul)

Exploratory research Qualitative research techniques: documents and interviews Six stages:
1. 2. 3. 4. 5. 6.

Definition of the focus and research question Documental analysis Design of instruments and protocol for interviews Data collection Data analysis Main conclusions

Huge potential (per capita consumption of wine, 2008)

Country Per capita consumption (liters) 57,44 50,06 44,32 43,77 41,16 36,22 35,01 Country Per capita consumption (liters) 32,92 32,75 26,8 16,11 9,68 1,81 1,08

France Italy Portugal Slovenia Croatia Switzerland Hungary

Spain Greece Argentina Chile USA Brazil China

Source: Wine Institute (2008)

Source: Embrapa Grape and Wine (2008)

Recent studies confirm this finding: Brazilian consumer follows an encouraging trend of consuming more wine every year Despite the evolution in the quality of fine wines, cultural colonialism is still a strong influence on consumer behavior
The customer at the point of sale tends to prefer low price imported products, which are believed to have higher quality

Strong competition in sales of products and in the acquisition of the raw material High level of rivalry, constant threat from new entrants and substitutes (beer and cultural aspects ), strong power of suppliers Although customer recognizes the quality of Brazilian products, they still lacks a culture of accepting the national wine as a quality product beer drinking culture Brazilian consumers do not perceive significant differences between imported and domestic low prices red wines (so they prefer imported)
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Government not directly one of the five forces, although it greatly affects the sector:
insufficient regulation of legal imports inadequate quality inspection of products high tax burden on local production regulatory support: tax reduction, the Production Program, creation of the Vale dos Vinhedos

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Input supplier links: fertilizers, pesticides, machinery and equipment, plastic, glass, wood, cardboard, and producers of seedlings and wires Intermediate and final components: producers and importers of grapes and wine, through the networks of wholesalers, retailers and final consumers Between these two extremes we have the marketing and raw material distribution channels, processing and manufacturing units and then again the distribution of products up to wholesale and retail markets
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Conclusion: wineries represent the most dynamic link of this process, because it is the one that adds most value Due to the foreign competition the industry has had to modernize by adopting new production technologies, concerning specially the market of fine wines (since the production of ordinary wines still lacks such a process)

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World class wineries specialized in higher value added products Wineries faces deficiencies in competitive factors, such as the low quality level of raw materials and the inappropriate use of marketing resources thus final consumer sense that the products demonstrate a low quality/price ratio (except for sparkling wine, and especially red wines)

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Despite of the quality evolution of Brazilian fine wines, the consumer tends to choose imported products, which are believed to be higher quality and better image for social occasions:
It is essential to develop marketing strategies to establish a market position that is clear and distinct from competitors, from the end consumers perspective The efficient use of segmentation strategies may become a decisive competitive factor Point of sale differentiation study of consumer behavior related to the purchase and consumption of wine is the key to develop effective marketing strategies
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Prof. Renata Giovinazzo Spers renatag@fia.com.br FIA BUSINESS SCHOOL www.fia.com.br/profuturo FUTURE STUDIES RESEARCH JOURNAL http://revistafuture.org/

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