Forman Corporation is one of the largest American companies in the wind and spirits industry, Fetzer Vineyards is their largest winemaker. Revenue and gross profit for the beverage segment of Brown-Forman were up 11% and 14%, respectively, in fiscal 2004.
However, the growth was driven by the premium spirits brands, and the gross profit from the company’s wine brands declined due to a drop in volume for both Fetzer and Bolla wines. There are many symptoms for why this decline has occurred. Health consciousness is a rising trend among Americans of all ages and the latest crazes are the low-carbohydrate diets. Recently, Fetzer has introduced into the market two new low-carbohydrate wines, a chardonnay and a merlot.
Their premium spirits brands have not been affected by the new diets because bourbon, whiskey, rum, gin, and vodka all contain no carbohydrates. However, most mixers used to accompany these spirits usually contain a significant amount of carbohydrates. Introducing these new wines could offer a new choice, but not a substitute, for many dieters and at the same time give Brown-Forman the lead in this new market. In 2003, Brown-Forman announced that they were going to begin using organically grown grapes to make their wine. Fetzer Vineyards plans to have nearly all the grapes used in its four major labels grown organically by the end of 2010. According to Marc Jonna, buyer for the Whole Foods Market, “demand for organic wine is small, but a move by a major player like Fetzer could change that.
” Women already perceive wine as a healthier alternative to other alcoholic beverages. This health conscious image will allow Brown-Forman to direct their marketing efforts in response to this cultural trend and penetrate the market by providing information through advertising about their new wine ingredients. Another symptom of the decrease in wine sales is due to the lack of awareness among consumers about the types of wine available. In a restaurant setting consumers often shy away from ordering wine because they may feel uneducated about the types of wine offered or uncertain about which wine would best compliment their entree.
Restaurants have attempted to address this problem by educating their servers and providing progressive wine lists, but if a person doesn’t understand the difference between a blush wine and a full-bodied wine or if they feel it is a hassle to ask questions the end result is the same, no wine has been sold. A further symptom is distribution-the lack of presence in bars or at least the presence of quality wine. Even those people who drink wine on a regular basis do not order wine when they are at a pub or bar. The reasons behind this are very well founded. Bars usually only carry two types of wine, a chardonnay and a merlot and these two choices are usually only changed annually. Customers expect that there is not a great selection of wine in a bar and usually just opt for a beer or a mixed drink.
With the amount that people spend drinking socially, Fetzer is missing a huge market segment. Some women will settle for an inexpensive wine at the bar, but if they had other alternatives of wine they would drink wine more often. DefinedFetzer is facing three significant problems. One problem is that Fetzer lacks adequate distribution. Fetzer is distributed enough to maintain sales, higher growth potential.
Fetzer is not meeting the value expectations of their customers with their current wine pricing. This problem stems from consumers who are aware of the grape glut in California, and who are expecting high-quality wine at a historically lower price. As consumer continue to learn more about the grape glut their expectation are increasing. Finally, the most significant problem associated with Fetzer is that they are not allocating their resources effectively. Fetzer’s problems with value and distribution may be affected by a lack of awareness. This leads to lack of awareness, which may be a result of the availability of funds.
ScopeThe problems associated with Fetzer are not concentrated to a local or specific region. Problems stem almost everywhere Fetzer is sold, nationwide. There are two aspects of Fetzer’s business that their current problems .
