Casehero Sandlands Solutions PDF

05/12/2020 Sandlands Vineyards
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Sandlands Vineyards
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Executive Summary
To fulfill his life-long dream and make the next step in his corporate strategy,
Passalacqua should buy the winery and quit his job at Turley. It will provide the
opportunity to leverage his competitive advantage of producing wine and allowing
for vertical integration, to reach sustainable profitability and an NPV of USD
250.000 in 5 years.
1. While the premium wine segment bears attractive growth, the

focus on factors such as brand positioning and DTC sales is
critical.
1.1 While continually increasing demand for wine indicates an attractive market,
growth occurs in the premium segment.
1.2 New technologies enable wineries to sell wine directly to consumers, facilitating
market entry, and providing higher margins.
1.3 In the premium segment, the relevant customers that buy rather expensive wine
lay emphasis on the brand in their purchase decision.
1.4 A Five-Forces analysis indicates a medium competitive level within the premium
wine industry and the importance of standing out in terms of brand and product
offering, be well-connected within the supply chain, and using new technologies in
the sales process.
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2. Sandlands should leverage its competitive advantage relating

to its production of wine, including know-how and business
relationships, to strengthen its market position further and
enhance profit margins.
2.1 A SWOT analysis shows that Sandlands could optimize its business to leverage
unused potential in terms of unserved demand and undervalued prices.
2.2 Sandlands should deal with the challenge of reaching sustainable profits by
focusing on scale and price increase.
3. Based on a financial analysis, corporate strategy, and personal

vision, Passalacqua should buy the winery.
3.1 Considering three different scenarios, Passalacqua should invest in the Eastside
Meat building, reaching an NPV of USD 250.000.
3.2 Based on a sensitivity analysis, Sandlands should focus on increasing the sales
price and volumes to guarantee the investment’s success.
3.3 Sandlands should integrate vertically, while keep buying some grapes externally
and target an 80/20 proportion for DTC and DTD sales.
3.4 To succeed in a growth strategy, Sandlands should build on its strong reputation
and further strengthen its brand and client relationships.
3.5 Considering Sandland’s history, Passalacqua should buy the winery to make the
next step in his corporate strategy and life dream.
1. Based on an industry analysis, the premium wine segment bears

attractive growth prospects for Sandlands, and promising factors
for future success include brand positioning and direct-to-
consumer sales with the help of technologies.
1.1 While steadily increasing demand for wine indicates an attractive market, most
growth occurs in the premium segment.
1.2 New technology enables wineries to increasingly sell wine to consumers and
retailers, facilitating market entry and bearing potential for increases in profit
margins.
1.3 In the premium segment, the relevant customers that buy rather expensive wine
lay emphasis on the brand in their purchase decision.
1.4 A Five-Forces analysis indicates a medium competitive level within the premium
wine industry and the importance of brand and product offering, be well-connected
within the supply chain, and to use new technologies in the sales process.
1.1 While steadily increasing demand for wine indicates an attractive

market, most growth occurs in the premium segment.
A continuously growing consumption, represented by an increase in wine

consumption of 50% between 2000 and 2017, suggests the market
attractiveness.
Whereas growth rates in the value segment have been slightly declining
recently, off-premise and distribution sales indicate growth in the premium
segment.
A trend towards a “premiumization” can be observed during recent years,
marking a rising gap between the attractiveness of the value and premium
segment within the wine industry.
1.2 New technology enables wineries to increasingly sell wine to

consumers and retailers, facilitating market entry and bearing
potential for increases in profit margins.
While selling to a distributor reduces selling expenses but results in lower

prices, selling direct-to-consumers through tasting rooms, wine clubs, or wine
lists generates higher margins but requires more sales and marketing costs.
Distributors depend on volume to make money so that small accounts from
unknown wineries have limited appeal.
For smaller wineries, it is increasingly harder to find marketing support of
larger distributors, which have more and more clout on them
With the help of the internet and new evolving technology such as social media,
e-commerce, and apps like VineSpring, direct-to-consumer sales are
increasingly attractive for smaller wineries
1.3 In the premium segment, the three most relevant customer groups
that buy rather expensive wine lay emphasis on the brand in their
purchase decision.
Purchases of frequent drinkers represent 80% (= USD 48 bn) of the total

market size of USD 60 bn.
The primary purchase drivers for frequent drinkers are price and brand, while
there is no correlation with quality.
Based on their purchase behavior, the consumer types image seekers engaged
newcomers, and enthusiasts seem most relevant for the premium segment,
catering for respectively 26%, 14%, and 15% of the industry’s profits.
While these three groups buy more expensive wines, a brand is an essential
driver for their purchase decisions.
1.4 A Five-Forces analysis indicates a medium competitive level

within the premium wine industry and the importance of standing out
in terms of brand and product offering, be well-connected within the
supply chain, and using new technologies in the sales process.
Implication
The industry faces a medium-high threat of entrants. Whereas the premium

wine market attracts entrants with high growth rates, entry barriers include
capital and time investment, know-how, and relationship to distributors.
Customer power is high due to the low switching costs. Distributors have more
significant clout, especially on smaller wineries due to greater consolidation.
The advance of technologies and e-commerce/internet increased customers
buying options.
In conclusion, the premium wine industry faces a medium competitive
environment, which forces wineries to be on top of technological innovation
and stand out in terms of branded products.
2. Based on business analysis, Sandlands should focus on

leveraging its competitive advantage relating to its production of
wine, including know-how and business relationships, to

strengthen its market position further and enhance profit margins.
2.1 A SWOT analysis shows that Sandlands could optimize its business to leverage
unused potential in terms of unserved demand and undervalued prices.
2.2 Sandlands should deal with the challenge of reaching sustainable profits by
focusing on scale and price increases.
2.1 A SWOT analysis shows that Sandlands could optimize its business
to leverage unused potential in terms of unserved demand and
undervalued prices.
Implication
Sandland’s strengths relate to its wines/product, reputation, know-how, and

business relationships.
Its weaknesses encompass its limits in production and time, its economic
challenges with higher growing costs and less yield of old wine grapes, and
difficulties in scaling its production.

The main opportunities lie in the growth of the premium wine segment and new
possibilities in the distribution, e.g., DTC, enabled by new technology.
The main threats include a potentially decreasing demand in old wines in the
future, the dependency on a good harvest, and the threat of (environmental)
regulations.
In conclusion, Sandland’s strengths fit the industry’s opportunities, indicating a
competitive advantage. However, to leverage this advantage, it must find ways
to deal with its limits in production and time, and optimize the pricing strategy.
2.2 Sandlands should deal with the challenge of reaching sustainable

profits by focusing on scale and price increases.
The variability in profit margins is rather broad, leading to the result that 80%
of wineries broke even or lost money.
Thus, small wineries lose money on average.
Larger wineries with for-profit motives and sufficient scale are generally more
profitable due to a higher percentage of profit margins (scissors effect).
Considering the cost structure and profitability, a typical winery producing
2000 cases reaches an operating margin of approximately only 2.6%.
3. Based on a financial analysis, corporate strategy, and personal

vision, Passalacqua should buy the winery.
3.1 Considering three different scenarios, Passalacqua should invest in the Eastside
Meat building, reaching an NPV of $250.000.
3.2 Based on a sensitivity analysis, Sandlands should focus on increasing the sales
price and volume to guarantee the investment’s success.
3.3 Sandlands should integrate vertically, while keep buying some grapes and target
an 80/20-relation for DTC and DTD sales.
3.4 To succeed in a growth strategy, Sandlands should build on its strong reputation
and further strengthen its brand and client relationships
3.5 Considering Sandland’s history of gradual growth, Passalacqua should buy the
winery to make the next step in his corporate strategy and personal vision.
3.1 Based on an investment examination considering 3 different

scenarios and four critical variables, Passalacqua should invest in the
Eastside Meat building, reaching an NPV of USD 250.000.
3.2 Based on a sensitivity analysis, Sandlands should focus on

increasing the sales price and volume to guarantee the investment’s
success.
3.3 Passalacqua should leverage his competitive advantage of

producing wine by vertically integrating, while keep buying some of
his grapes externally and targeting an 80/20-proportion for sales to
consumers and distributors.
Passalacqua should buy the Eastside Meat building to leverage its competitive
advantage by vertically integrating within the value chain.
For the sourcing, Passalacqua should do both use grapes from his vineyard and
buy grapes externally based on his established connections. In the long-run, i.e.,
five years, he can think about purchasing another vineyard to avoid a too high
dependency.
The production is the central element of his competitive advantage. To leverage
it, he should focus on wine production with the new Eastside Mean Building as
a winery to sell more cases at higher prices.
In terms of distribution, he should increase his direct-to-consumer sales to 80%

to boost margins, while keep selling 20% to distributors for marketing
purposes, contributing to his overall growth in volumes.
3.4 To succeed in the growth strategy with the new winery, Sandlands
should focus on the key variables of sales growth and price by
building on its excellent customer reviews and strengthening its
unique brand experience and client relationships
Sandlands Vineyard should leverage the closeness of its vineyard and new
winery to establish a perceived center and heart of its business, rooted in the
region.
This way, Sandlands can strengthen and further expand its excellent customer
review, contributing to growth in sales and justifying higher prices.
Enhancing its brand positioning will allow Sandlands to deal with high
customer power due to low switching costs, establishing a more loyal customer
base.
3.5 Considering Sandland’s history of gradual growth in know-how,

Passalacqua should buy the winery to make the next step in his
corporate strategy and personal vision.
Passalacqua has accumulated valuable know-how, an excellent reputation, and

a vast network within the industry.
The purchase of the Eastside Meat building provides the possibility to expand
and focus on Sandlands when quitting his current job.
The analysis indicates that building on the Sandland’s and Passalacqua’s
strengths, make the purchase worthwhile with an appropriate strategy
concerning distribution and branding.
The winery purchase enables Sandlands to integrate vertically to increase
supply and price control, allowing it to leverage its competitive advantage
through reinforcing its already secure brand positioning and enhance sales
volumes and prices and profits.
Second solution
Please scroll down to the bottom of this post to download the additional Excel
spreadsheet!
Executive Summary
What business opportunities, including but not limited to the

purchase of the Eastside Meats building, should the Passalacquas
pursue in the next five years to maximize their income, while
fulfilling personal goals?
The Passalacqua’s should invest financial and personal resources in scaling their
successful winery business and purchase the Eastside Meats building
1. The Passalacqua’s should pursue a growth strategy for Sandlands’ successful

business model
Premium wine production is an unattractive industry to operate in for most

small winemakers ...
... but Mr. Passalacqua succeeds by leveraging his unique skill set to
differentiate Sandlands from other premium producers
To sustain their competitive advantage, the Passalacquas should invest financial
and personal resources in scaling the business model
2. To grow the business, the Passalacquas should acquire the Eastside Meats
building
Acquiring the building is the integration opportunity with the highest strategic
fit
Buying the building is the best prioritization of the family’s limited resources
and shows strong returns
Acquiring the building is compatible with his personal interests
3. To successfully implement the growth strategy, further steps should be taken to

strengthen the business model
Pricing should be increased over time to grow revenues

Existing and new direct distribution channels should be leveraged to increase
margins
IoT technologies should be used to improve the actual and perceived quality of
the product
1. The Passalacqua’s should pursue a growth strategy for

Sandlands’ successful business model
Premium wine production is an unattractive industry to operate in for most

small winemakers
... but Mr. Passalacqua succeeds by leveraging his unique skill set to
differentiate Sandlands from other premium producers.
To sustain their competitive advantage, the Passalacquas should invest financial
and personal resources in scaling the business model.
Premium wine production is an unattractive industry to operate in for

most small winemakers.
US premium wine producers suffer from an adverse micro-economic situation...

(Porter’s Five Forces)...
....and macro-trends that make a future attractiveness of the industry

unlikely (PESTLE-Framework)
Political: Taxes on alcohol and adverse political climate
Economic: Growing labor and land costs in California
Social: Cultural predominance of beer in the US
Technological: Ability of larger wineries to automate production
Legal: Increasingly strict regulations on farming
Environmental: Sensitivity to climate change and natural hazards
...but Mr. Passalacqua succeeds by leveraging his unique skill set to

differentiate Sandlands from other premium producers
Technical know-how of production process

Knowledge about old vines
Talent to compose wines with balanced characteristics
To sustain their competitive advantage, the Passalacquas should

invest financial and personal resources in scaling the business model
2. To grow the business, the Passalacquas should acquire the

Eastside Meats building
Acquiring the building is the integration opportunity with the highest strategic
fit
Acquiring the building is the best prioritization of the family’s limited resources
and shows strong returns
Acquiring the building is compatible with his interests
Acquiring the building is the integration opportunity with the highest

strategic fit
Acquiring the building is the best prioritization of the family’s limited

resources and shows strong returns
Acquiring the building is compatible with his interests
Implications
Generates cash to cover the family’s needs
Analysis
The family can afford one major investment without seeking outside equity
financing
Cash flows turn positive in 2019 and can be used to finance their children’s
college education
Implications
Mitigates risk
Analysis
Ownership of their operating building effectively diversifies their personal

portfolio
A downturn in the wine business can be equaled out by an increase in real
estate value
Implications
Fulfills Mr. Passalacqua’s dream
Analysis
Mr. Passalacqua has long dreamed of owning the entire value chain of wine
production
He can turn his hobby into his main business
Successful winemakers often become self-employed, and the relationship to
Turley is unlikely to suffer
3. To successfully implement the growth strategy, further steps

should be taken to strengthen the business model

Existing and new direct distribution channels should be leveraged to increase
margins
IoT technologies should be used to improve the actual and perceived quality of
the product
The current pricing does not reflect product value
Sandlands captures only a small fraction of its value created

This is supported by data from secondary markets, where even the minimum
price was 50% higher than the current price point of Sandlands wines
The considerable mismatch between supply and demand for Sandlands wines,
leading to scarcity effects
Prices should be increased by 30% to $34 per bottle until 2019
Would result in high incremental profits (e.g., $ 119k in 2019)1

A decrease in the number of bottles sold is unlikely:
Demand is currently nowhere near satisfied
Pricing would still be below secondary market prices
With Mrs. Passalacqua in charge, wines can be marketed appropriately
Existing and new direct distribution channels should be leveraged to

increase margins
IoT technologies should be used to improve the actual and perceived

quality of the product
A premium business model requires strong differentiation through state-of-the-art

production and marketing processes.
Internet of Things (IoT) innovations can be leveraged to enhance wine quality,

operational efficiency, and wine experiences.
Appendix
Exhibit 1
Control need criteria for process integration
Exhibit 2
Base case NPV after price increase
Exhibit 3
Base case NPV after modification of distribution mix
Additional File:
Excel Spreadsheet. Download here.
Third Solution
Issues:
The seller of the building may not want to sell Tegan the facility due to its
history and not being up for sale.
There is a lack of capital to buy an actual vineyard if one came up for sale due to
higher prices.
40% of legal-aged US alcohol consumers drank wine.
Two-thirds of these wine consumers drank wine less than once per week.
For frequent wine drinkers, the price and brand was essential for them.
There is a large amount of competition in the market.
Expert wine drinkers can determine the price of wine based on taste; normal
consumers can’t.
It is mainly taxed on both state and federal levels if produced.
Whether or not to buy grapes, buy or lease vineyards, or buy premade bottles of
wine and put Tegan’s label on it.
They would have to deal with pests and diseases vineyards.
Higher costs to prevent phylloxera from destroying grapes.
The process to control phylloxera changes the taste of the product.
Zoning and environmental laws by the government made it difficult to create
and purchase vineyards.
Equipment and workers to create wine are costly.
The top three wine producers accounted for 60% of all wine produced in the
United States.
These larger firms produced in the value segment as well as upper-end
bottles in the wine market.
The growth of new entry winemakers was seen in selling at the premium
segment of wine.
Small wine companies tend to lose money.
Larger wineries were generally more profitable, and 80% of wineries broke even
or lost money.
Premium wines have to be stored at a controlled temperature.
If Tegan sells his product to a distributor, he will reduce costs but lower profits.
Smaller wine companies had a hard time finding large distributors.
Some believe old-vine vineyards produce a better tasting wine, while some
argue they can’t taste the difference.
Old vine vineyards produce lower profits.
Tegan has an agreement to only produce low amounts of his wine with his
current employer.
He is unable to produce for all of consumers needs based off of limitations
agreement.
Selling 25% of products to distributors, Tegan sells at a 50% discount rate to
consumers, using it as a way of marketing.
This may result in a consumer expecting similar prices when looking up his
product and finding out other products of his are more expensive.
Lack of time to fully operate with other full-time jobs.
There is no strategy for the company.
Internal Analysis/ SWOT
Strengths:
Positive reviews in the magazine

High product design and quality
Brand loyalty
Social media/ online presence
Relationship with suppliers
Differentiation in taste
Creation of apps to help market product
High percentage of customers receiving wines directly, eliminating added costs
Recognition of brand from influencers
Mostly organic product
Tegan has a lot of knowledge and experience in the wine industry
Weaknesses:
Lack of capital to invest in more vineyards

Lack of resources and time to produce a high amount of cases
No real strategy
Product could be sold for more than its selling at now
Limitation on production
Old-vines have lower yield in regards to revenues as well as produce a smaller
amount of grapes
Opportunities:
Purchase building to create and sell more wine

Make the building more of a tourism wine-tasting hangout place to reduce
distribution costs
Sell the product for a higher price to increase margins
Market the old-vines vineyard for consumers to see the product is more
authentic than the competition
Fully commit to selling in the premium segment of the market, reducing
competition from larger brands in the value sector
Committing to a strategy
Threats:
Competition from companies as well as distributors such as Amazon and Costco

The regulation from the government such as tax
Insects infesting old-vine grapes and costs of production drastically increasing
An increase in demand will put a lot of pressure on the company to produce
larger amounts of wine
Customers lack of understanding in wine may make them overlook Tegan’s
product such as not knowing what a premium taste is like
VRIO Analysis
Dynamics of Competition in Industry
The two key segments in the wine industry are value and premium. The value
segment consists of trying to create a tasty wine for a low price while maintaining
low production margins. Companies will add water and other sugars to sustain a
taste the consumer likes while not caring about to overall quality of the wine.
Premium wine is sold for a higher price while considering more questions about the
grapes and fermentation aspect to achieve an excellent quality wine. These premium
wines are not super luxurious and affordable as salaries continue to grow. Premium
wines vary in price, starting above $10.00 per bottle, so they are very affordable.
Sandlands Vineyards price range puts them in a group of 23% of the wine market.
While the value segment of the wine controls around 80% of the market, it only
accounts for 60% of revenues. Sandlands Vineyards sell their product from $24.00
to $28.00 per bottle. What makes them different is there usage in different grapes as
well as the knowledge and hard work they put behind making their product.
Sandlands Vineyards is in the same grouping of small wineries that are around 80%
of the market, so there is a lot of competition between smaller companies. There are
approximately 100,000 wineries in the United States. The three largest firms control
around 60% of total wine production and focus primarily on the value segment of
the market due to these companies being able to produce at much lower costs.
Many of these smaller wineries mainly lose or break-even per year. Some of
Sandlands Vineyards’ competition includes celebrities who are okay with losing
money because they love wine that much. Using distributors to help sell smaller
wine companies products decreases earnings dramatically because these distributors
have so much control.
Advantages for Sandlands Vineyards
Advantages of Sandlands Vineyards include the positive influence of critics in blogs

and magazines. Also, using the facility at Turley to produce wine and not have to pay
a lot for expenses is vital for Tegan, who is trying to save capital from expanding.
Sandlands Vineyards has incredibly secure connections and trust with its growers,
and the quality of grapes that are being grown is of exceptional quality. Tegan also
has an advantage in the knowledge and experience he has in the industry.
Source of Problems
Sandlands Vineyards is dealing with some significant problems moving forward.

Their scale of economies will not be able to match the demand for their product.
Also, Tegan being the chief worker of Sandlands Vineyards and needing to continue
to work full time is an issue to expand without having to hire someone with the same
skills and knowledge as him. Sandlands Vineyards also uses techniques the public
lacks awareness of. The winery needs to become more efficient.
Alternative Strategies
A few great strategies come to mind for Sandlands Vineyards. The first alternative is
to wait until a vineyard is available to buy and save up the funds needed in the next
couple of years. Pros with this include low risk, for now, having money saved if the
economy is negatively hit, still being allowed to produce at Turley’s and possibly
increase the price a tad to make more earnings, and continue to keep costs low.
Cons of saving up and waiting for a vineyard include not meeting the demand for the
product, losing potential revenue, possibly losing loyalty in the brand due to lack of
wine produced, and the ability to find an old-vine vineyard that Tegan like for a price
he can afford.
The second is to buy the building right away to expand the business. Converting the
building into a winery will help production increase as well as keep up with the
demand of the product, without having to raise the price. This will also help increase
profits with the help of a possible part-time employee to allow Tegan to continue to
work full-time, maintaining its already low cost for equipment expenses.
The pros of this new strategy include being able to produce for new demand, keeping
costs down. At the same time, if Tegan is ready to hire someone knowledgeable to
help him run the winery, expansion of the brand, and increase in production. Cons
include the time required to raise a high-quality product, trying to run a winery
while working a full-time job, and a lack of guaranteed revenue to support his
family.
Solution
Sandlands Vineyards should choose option the second strategy. Tegan will need to
continue to work as he prioritizes his family’s financial future first. Sandlands
Vineyards is one of the more unique wines on the market due to it being so
affordable for a premium wine. The wine is also made with such care and uses old-
vine vineyard grapes for a critical differentiation in taste compared to the
competition.
Sandlands Vineyards needs to take advantage of the demand and expand now to
capitalize on its brand recognition noted through wine critics. Tegan needs to
continue to work as it is not guaranteed that he will make profits based on similar
competition. Still, his product has caught the eyes of many influencers in California.
Although saving money is good, there is an apparent demand for Sandlands

Vineyards wines now, and the company needs to capitalize on it while costs are still
low. The company is also growing traction, and the brand is becoming more known.
Having a winery now will help with marketing as well as the application the
company is using to improve, knowing that if Sandlands Vineyards waits years to
make a move is unsettling, knowing that there is so much competition and the
company can’t produce for the demand as of right now. The building they will
acquire will hopefully go up in value as well. The connection Tegan has with
suppliers will keep raw material costs low.
It is hard to understand all of Sandlands Vineyards’ financial statements as they are

not in the case, so I looked at similar businesses to determine how the company
should finance this purchase. By having the investment at $600,000.00, companies
still saw some profitability. Sandlands Vineyards would have lower operating costs,
such as equipment due to Tegan using his full-time job equipment. To purchase the
building, he will need to take out a loan from the bank and forecast financial
statements and balances.
Counter-action from Competitors
Competitors may try to find a location near the new Sandlands Vineyards winery to
cause more competition. If it’s an immense competition, they might use tactics like
lowering prices to drive Sandlands Vineyards out of business due to their profit
margins being superior. Sandlands Vineyards can defend themselves from
competitors by marketing strategies, including talking about how their product is
organic, as well as giving detail to consumers about old-vine grapes being better
quality.
Conclusion
Sandlands Vineyards couldn’t have done this right away because Tegan had to build
the brand and get traction before investing right away with no demand to back it up.
Also, the lack of capital would make it difficult to have two properties right away
without financially crushing his family. Tegan is very conservative when it comes to
investing and wants to make sure his family will be okay before investing. Sandlands
Vineyards has a high demand in a competitive market and differentiates itself by the
quality of wine they produce.
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05/12/2020 Sandlands Vineyards

Search case study...

1. While the premium wine segment bears attractive growth, the

2. Sandlands should leverage its competitive advantage relating

3. Based on a financial analysis, corporate strategy, and personal

1. Based on an industry analysis, the premium wine segment bears

1.1 While steadily increasing demand for wine indicates an attractive

A continuously growing consumption, represented by an increase in wine

1.2 New technology enables wineries to increasingly sell wine to

While selling to a distributor reduces selling expenses but results in lower

Purchases of frequent drinkers represent 80% (= USD 48 bn) of the total

1.4 A Five-Forces analysis indicates a medium competitive level

The industry faces a medium-high threat of entrants. Whereas the premium

2. Based on business analysis, Sandlands should focus on

wine, including know-how and business relationships, to

Sandland’s strengths relate to its wines/product, reputation, know-how, and

difficulties in scaling its production.

2.2 Sandlands should deal with the challenge of reaching sustainable

3. Based on a financial analysis, corporate strategy, and personal

3.1 Based on an investment examination considering 3 different

3.2 Based on a sensitivity analysis, Sandlands should focus on

3.3 Passalacqua should leverage his competitive advantage of

In terms of distribution, he should increase his direct-to-consumer sales to 80%

3.5 Considering Sandland’s history of gradual growth in know-how,

Passalacqua has accumulated valuable know-how, an excellent reputation, and

What business opportunities, including but not limited to the

1. The Passalacqua’s should pursue a growth strategy for Sandlands’ successful

Premium wine production is an unattractive industry to operate in for most

3. To successfully implement the growth strategy, further steps should be taken to

Pricing should be increased over time to grow revenues

1. The Passalacqua’s should pursue a growth strategy for

Premium wine production is an unattractive industry to operate in for most

Premium wine production is an unattractive industry to operate in for

US premium wine producers suffer from an adverse micro-economic situation...

....and macro-trends that make a future attractiveness of the industry

Political: Taxes on alcohol and adverse political climate

Economic: Growing labor and land costs in California

Social: Cultural predominance of beer in the US

Technological: Ability of larger wineries to automate production

Legal: Increasingly strict regulations on farming

Environmental: Sensitivity to climate change and natural hazards

...but Mr. Passalacqua succeeds by leveraging his unique skill set to

Technical know-how of production process

To sustain their competitive advantage, the Passalacquas should

2. To grow the business, the Passalacquas should acquire the

Acquiring the building is the integration opportunity with the highest

Acquiring the building is the best prioritization of the family’s limited

Acquiring the building is compatible with his interests

Generates cash to cover the family’s needs

Ownership of their operating building effectively diversifies their personal

Fulfills Mr. Passalacqua’s dream

3. To successfully implement the growth strategy, further steps

Pricing should be increased over time to grow revenues

Pricing should be increased over time to grow revenues

The current pricing does not reflect product value

Sandlands captures only a small fraction of its value created

Prices should be increased by 30% to $34 per bottle until 2019

Would result in high incremental profits (e.g., $ 119k in 2019)1

Existing and new direct distribution channels should be leveraged to