To fulfill his life-long dream and make the next step in his corporate strategy, Passalacqua, a successful, young, Californian winemaker who specializes in making "old vine" wine, must decide whether to buy a building and develop Sandlands Vineyards at a cost of up to $500,000. Considering his limited resources, would this be the right investment for him?
Benjamin C. Esty; Greg Saldutte
Harvard Business Review (718438-PDF-ENG)
February 08, 2018
Case questions answered:
Case study question answered in the first solution:
- Should Passalacqua buy the Eastside Meat building for 500,000 and develop it into Sandlands Vineyards?
Case study questions answered in the second solution:
- 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?
- Is making premium wines an attractive industry? Is it likely to get more or less attractive in the future?
- Does Sandland Vineyards have a competitive advantage in this industry? What elements in its business model determine its competitive advantage or disadvantage? Is its competitive advantage sustainable, or is its disadvantage reversible?
- What should the Passalacquas do: buy the Eastside Meats building and develop it into a winery, buy another old vine vineyard, or do something else?
Case study questions answered in the third solution:
- What are the issues in the case?
- What are the solutions to the issues?
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Sandlands Vineyards Case Answers
This case solution includes an Excel file with calculations.
Executive Summary – Sandlands Vineyards
To fulfill his life-long dream and make the next step in his corporate strategy, Passalacqua should buy the Sandlands Vineyards winery and quit his job at Turley. It will provide the opportunity to leverage his competitive advantage of producing wine and allow 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 who buy rather expensive wine lay emphasis on the brand in 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, being well-connected within the supply chain, and using new technologies in the sales process.
2. Sandlands Vineyards 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 increases.
3. Based on 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 continuing to buy 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.
Detailed Answers:
1. Based on industry analysis, the premium wine segment bears attractive growth prospects for Sandlands Vineyards, 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 who buy rather expensive wine lay emphasis on the brand in their purchase decisions.
1.4 A Five-Forces analysis indicates a medium competitive level within the premium wine industry and the importance of brand and product offering, being well-connected within the supply chain, and using 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 toward “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…
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Best decision to get my homework done faster!
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MBA student, Boston
Best decision to get my homework done faster!