Case 1: Israeli Wines in China – Reaching for New Heights

Case Analysis

Submitted To: Dr. Sandip Solanki

Submitted By:

Adarsh Khandelwal 19020241032

Manav Bhardwaj 19020241033
Juhi Kaushal 19020241037
Tenzin Dolma 19020241039
Vivek Mangal 19020241040
 Chinese Beverage Industry
Strengths:

- High-risk high reward sector

- Due to solid macroeconomic fundamentals, substantial potential for growth
- Well-developed physical facilities
- Low-risk climate for operations
- Among the fastest growing segments of the beverage industry
- WTO accession-the phasing out of market barriers and trade restrictions
- International partnerships: rapid growth of local players who have developed financial
experience and operational skills.
- Market saturation that has not yet been achieved

Weaknesses:

- Actions of the protectionist government

- Scares of wellbeing
- Improved protocols on food safety
- Scares about food safety and subsequent rising costs
- Migratory investors to lower-cost economies like Vietnam
- Counterfeiting-unnoticeable distinctions
- Lack of consistency in quality
- Absence of product range
SWOT:
Strengths:

- Diverse range of items in the premium segment

- State of the art machinery and micro-winery R&D team
- Major presence in both domestic and export wine markets
- Packing and packaging materials of high quality, typically imported to have a refined
look

Weakness:

- Not much likeness to Chinese society

- For other rivals in the same market, the price per bottle is higher than the average due
to customs duties.
- High prices of manufactured packaging materials and packaging materials with an added
tax burden

Opportunities:

- Low risk high reward industry for high risk

- Due to solid macroeconomic fundamentals, substantial potential for growth
- Well-developed physical facilities
- Low-risk climate for operations
- Among the fastest growing segments of the beverage industry

Threats:

- Public consumption looked at conformity and prestige while questions regarding private
consumption were relaxed during transactions.
- Marketing campaigns of no use, listening more to friends and family
- Non-brand-loyal wine customers
- Lacked a tradition of wine-drinking
- Low average bottle price
- The laws of custom and import is complicated
- Highly fragmented market, very strong brands
- Check for premium items to please friends and colleagues - Label-conscious society
- Just a young, westernized clientele
- Reasonable prices have been increasingly anticipated for premium wines
- Seasonal market
CAGE
Cultural

 China is influenced deeply by Confucianism. Confucianism places a heavy emphasis on

the importance of respect for rulers, family, and social harmony.
 According to the ancients, wine is holy, and Chinese drinking art is venerable which has
a set of customs and styles for ancient drinking activities
 Wine culture is highly developed in China.
 When drinking, people not only take an interest in persons drinking together, drinking
time, and drinking place but also mix poetry, painting, customs, and games together to
turn to drink for enjoying physical pleasure into advanced spirit pleasure.
 Wine seen as a status symbol amongst the emerging middle class (now enjoying higher
income)
 Wine vessel classification:
 Wine containers mainly have Zun, You, Ping, and so on.

 Wine-warming vessels mainly have Jue(薛) Jue (角),7m, and so on.

 The main drinking vessels are Gong, Gu, Bei, and so on.

 When Chinese people propose a toast, they all urge others to drink more to do the
honors. The more guests drink, the happier the Host becomes because he feels being
respected. If the guests do not drink, the host will feel losing face.

Administrative and Political aspects:

 China’s legal system relies on civil law—the German version—with its emphasis on
principles that are absolute.
 China is a socialist state under the people’s democratic dictatorship led by the working
class, where as Israel operates under a parliamentary system as democratic republic
with universal suffrage.
 China have administrative control over 22 provinces, where as Israel is divided into 6
main administrative districts.


Geographic

 There is considerable room to grow for China’s beverage industry, given the large
population of China.
 China has stout economic fundamentals and a finely-honed infrastructure which
resulted in a low risk operating environment.
Economic

 Since 2010, China’s economy has known a huge growth due to its export’s skills, low
cost but skilled labor and the political situation.

 Transitioning from highly planned to market-oriented economy.

 World’s largest exporter as of 2010 - highly globalized.

 Second largest economy behind the United States.

 Per capita income below world average.

 Average consumer disposable income is growing.

PESTEL

Political
1. Today there are only 5 existing communist states in the world are in China, Cuba, Laos
and Vietnam. These communist states often do not claim to have achieved socialism or
communism in their countries but to be building and working toward the establishment
of socialism in their countries. Belonging to this ideology they keep exercising Civil Law.
2. No formal relations with Israel until 1992.
3. Reduction in tariffs after 20 JVs in 2009 between China, Latin America and old world
countries (including Israel).
4. Complicated customs and import rules.
5. Steadily improving cross-cultural learning.

Economic
1. Formerly a highly planned economy they were moving towards market-oriented
economy.
2. World’s largest exporter as of 2010 - highly globalized.
3. After United States they were the second largest economy
4. Per capita income below world average.
5. Growing average consumer disposable income therefore lot of potential.
6. Rising labour costs and sustained inflationary pressures.

Social
1. Very high growth potential in the beverage industry.
2. A larger section of the population was uneducated.
3. Westernized customers drink wine at weddings, birthdays, farewells, etc.
4. High end professionals drink wine at important ceremonies.
5. No clear brand loyalties identified.
6. Overall preference for French wine - 339 million dollars’ worth imported in 2010.

Technological
1. Strong near-term macroeconomic outlook.
2. Well-developed physical infrastructure.
3. Low-risk operating environment.
4. Israel was China’s technology partner in the fields of agriculture, solar, IT,
communication and construction.
Environmental
1. Current wineries count over - 300
2. Seasonality and poor soil quality generated low to mid- level quality Chinese wine
3. Temperature variation was high throughout and parts of China has water scarcity.
4. Domestic wine accounts for 1.5 per cent of China’s alcohol consumption.
5. The few popular household brands of Chinese wine control a large market share.

Legal
1. Recently acceded to the WTO.
2. Gradual removal of market barriers and trade restrictions.
3. Abundant partnerships between local and multinational firms.
4. Trade embargo with USA.
5. Lack of transparency in corporate governance as compared to western standards
making it risky for foreign companies to enter.
6. Easier for counterfeits to enter the market.
Marketing Plan
Targeting:
Golan Height considered two categories of customers:
 Gen X: Brand Conscious trying to be impressive towards the society and seek premium
experience.
 Gen Y: Individuals influenced by the western culture and experimental towards new
world wines.
Shelf placement at the retail outlets and liquor stores.

Segmentation:
The company segmented their target base under following creiterias:
Demographic:
1. Age between 25-50
2. Income: Mid to high income segment
3. Geographic: Urban and Semi-Urban areas
Behavioural
1. Young and Westernized Chinese
2. People who like to experiment with alcoholic beverages.
3. Based on drinking patterns (High-Mid-Low)
Psychographic
1. People who are Brand Conscious
2. People seeking high status by impressing their friends and colleagues.

Positioning
1. Wine is made only with the premium grapes grown in Katzrin which has a unique
volcanic soil and cool climate.
2. Golan Heights own 15 vineyards in Israel spanning from the sea of Galilee to Mount
Hermon. They form nearly 38% of Israel’s total wine exports.
3. Most updated and advanced equipment and uses advanced technology assisted by a
network of Meteorological stations.
4. Best quality of barrels are selected for maturation and premium packaging standards
are enforced.
5. Best global winemakers ensuring quality and uniqueness.
Distribution, Sales Tactics, and Sales Channels
As part of their distribution and sales channel, Golan Heights could take the following into
consideration:
1. They should reconsider their distributorship model and move in a JV with one of
the leading local companies as the domestic companies occupied the low and
mid-end of the segment.
2. A JV with Golan would be a win-win for both parties and help in diversifying the
portfolio.
3. This will also solve the distribution issue Golan is currently facing since the local
wine sales network can be used for distribution in multiple provinces.
4. Chinese also favoured the older businesses compared to the new ones, thus
Golan can leverage the reputation of local companies for the sales of their
premium wines.

To gain a bigger market share, if not considering a JV with any domestic key player,
Golan Heights should adapt the following distribution models which have a balanced
mix of exclusivity and non-exclusivity.

Also, increasing sales incentives and distributor’s margin can encourage sales. This might
lead to an increase in overall price for the end user but as the wine caters to the mid to
high level income segment, this won’t affect these segments much as they are less price
sensitive. Also, a trained salesforce could be deployed to educate the users around wine
and convert them in a way such that they become loyal customers.

Brand Promotion
1. The communications should be such that they educate the customers and clearly
state the value proposition. Also, originality and geographical indexed
information can be communicated to differentiate the brand from counterfeit
wines.

2. Multiple influencers for both Gen X and Gen Y.

3. Objective - Market Penetration

Short Term Goal - Establish the brand
Introducing the product and drawing maximum attention

Long Term Goal - Brand Positioning and Brand Switch

 Generate a unique image in the customer's mind so they can relate with the
product as a premium or Go-to wine
Convince people to switch from the existing brand to our product

Marketing Activity
For Stage 1 : Informative Communication (For Gen X)
Traditional ATLand Integrated Communication
1. TVC, Print, Radio through a brand ambassador.
2. Major Festivals: China mid-autumn festival and Chinese Lunar new year
3. They could conduct and participate in wine shows and festivals to promote their
product.

For Stage 2 : Persuasive Communication (For Gen Y)

BTL and Unconventional Interactions
1. Digital (Social media and Influencers) – Campaign
2. Guerilla (Product Sampling and Wine tasting)

Strategic Decision
1. A JV with one of the leading local players.
2. Premium pricing and exquisite wine selection range.
3. Positioning purple as our brand colour since it is associated with Luxury in China
4. Festive Bundles and Packaging with in-packaging gifts like glasses and playing
cards (For e.g. Cadbury celebration packs in India)
5. Penetrating through introducing new SKUs like Wine in a Can concept.
What cultural differences are important to consider? What product adaptations, if any, are
necessary for Golan Wines? 

Golan Heights Wines should take into consideration the Chinese are price conscious as
they favour products which saves their cost. The other factor that they have to take into
consideration is the fact that Chinese consumers are not loyal towards any particular brand and
their purchasing decision is influenced by friends and family. In the Chinese market, it is very
important to maintain a good relationship with the distributors since they are of utmost
importance when it comes to building brands. 

The company can outperform the competition in ingredients quality by developing research
and development and bring quality to the entire wine process. By improving the product
quality, Golan Heights Wines can tackle the issue of counterfeit in the Chinese market. Since,
gifting was an important trigger of Chinese consumers, the products should have a prestigious
image so that they can be used as a gift for friends, families and business associates.