Wine Industry M&a

The wine industry is one that is very unique and different from the standard food/beverage industry. Specifically, the wine industry relies heavily on the weather and the various businesses utilize the weather data in order to forecast and calculate their production quantity as well as the quality of their crops. The grapes life cycle is extremely sensitive to changes in temperature and is therefore, very cyclical. For example, “grapes grown on east-facing slopes exposed to gentle morning sunlight produce more complex wines than those from grapes with a western orientation and exposure to the hot afternoon sun. In addition, a large diurnal cycle (changes between day and night temperatures) helps to develop the compounds within the grapes that produce richer flavors, while cool nights are critical for the acid level.” (Institute 1) The balance of fine wine is extremely fragile and changes in rainfall and temperature can have a huge effect on the wine produced. With the ease of getting into the wine industry, getting in itself is not very capital intensive and really only requires growing grapes and some equipment. Many people actually make their own wine, which makes it very easy to enter the market.

Over the years, the wine industry has greatly evolved. Beginning in 1995, there was an increasing trend towards exports due to the change in the strategic priority of wine producing country, placing exporting as a method of growth. However, looking at the data from the United States, the US is the fourth largest producer of wine in the world, but only accounts for approximately 4.2% of the total wine export market. One of the main reasons for this gap is the low level of strategic importance US wineries are placing on exporting. The US companies only want to export the excess capacity due to the increased price of exporting and the various tariffs and government regulations. Therefore, foreign competition is really not a major concern for domestic companies. They have...