Andrew Peller Going International

Timothy Baxter, Stephanie Beshay, Sean Bussiere, Zach Mora, and Saul Rouzes
INTB 412 – Managing International
November 23, 2015
Dr. Michael Roberts
Contents
Introduction
Company Overview
Industry Overview
Value Chain
R&D
Production
Distribution
Marketing & Sales
Marketing Entry & Expansion
Recommendations
Conclusion
References
Appendices
Introduction

The purpose of this report is to explore a possible internationalization strategy for

Andrew Peller Ltd. (Peller Ltd.). Through the extensive market research that has been conducted

we believe that there is great potential for Peller Ltd. to expand globally. Wine is a product that

is consumed in most regions; leading to a continuous integration into their respective cultures.

Rather than create a new product we will simply take PellerLtd. 's existing product, and expand

the market.

Company Overview

Peller Ltd. is a Canadian based company, currently headquartered in Ontario, that

produces and markets wine. Although Peller Ltd. is currently only selling within Canada, we

believe that there is a viable opportunity for them to expand internationally. Peller Ltd. had

recorded revenues of approximately $315.7 million in the year 2015. Seeing as the company is

currently operating over 100 retail locations in Ontario alone there is a great deal of room for

global growth (Andrew Peller Limited., 2015, p.2). After selling 100% of its ownership in the

Granville Island brewing company they are able use the capital earned to expand on their key

strengths, and focus their core competency in order to help them internationalize their brand.

Industry Overview

The industry as a whole is considered highly fragmented, with the major market

shareholder holding less than 3% of the total market; leaving a great deal of room for merger and

acquisition deals. The wine industry had once been dominated by what is referred to as the “Old

World” countries; however, there is a great deal of proof that the “New World” wine companies
have been extremely successful. Although the New World wine market had been dominated by

the U.S and Australia, there is evidence to show that the Canadian Industry will flourish: “The

performance of the market is forecast to accelerate, with an anticipated CAGR of 6% for the

five-year period 2014 - 2019, which is expected to drive the market to a value of $9,827.3m by

the end of 2019” (Industry Analysis, 2015, p.7).

Peller Ltd. has become a frontrunner in the Canadian wine industry gaining recognition.

“There are few wineries (e.g. Inniskillin and Andrew Peller) that have reached a considerable

size and foster development as they set quality standards, raise the notoriety of the region and

attract new wineries to the area” (Doloreux & E. Lord-Tarte, p.1068). Peller Ltd. holds 11.7% of

the Canadian Wine industry; holding the second largest share (Industry Analysis, 2015, p.12);

with its largest competitor being the Constellation brand. The Constellation brand has become

internationally known in countries such as the U.S, Italy and New Zealand. There is a great deal

of growth that can be attained in the Ice Wine industry: “The total volume of Ice Wine produced

in Canada is greater than the total amount produced by all the other countries combined”

(WineBC, market analysis, 2012).

Value Chain

R&D

Current research and development efforts for Peller ltd. are aggregated with some of their

production facilities in Ontario. At this time, we see no advantages to disaggregating. R&D will

remain in Ontario in order to maintain full control.

Production

Production facilities will remain in Canada. The goal of our expansion is to market more

Ice Wine. Peller Ltd. should look at expanding their current capacity to produce Ice Wine. This

means sourcing more grapes from Canada’s Niagara region and B.C, where the climate is

favourable for producing Ice Wine.

Distribution

Currently, Peller Ltd. distributes only in Canada. However, their wholly owned

subsidiary, World Vintners Inc. already exports wine kits and accessories to over 600

independent retailers across Canada, the US, the UK, New Zealand, Australia, and China. We

suggest that Peller Ltd. add their Ice Wine, using their subsidiaries supply chain and established

distribution network.

Marketing & Sales

Peller Inc. should look to position themselves in the marketplace as a producer of high

quality, premium Ice Wine. A high level of differentiation, with large margins is appropriate. We

want to market Canadian Ice Wine as a luxury good, only available in select locations. Our Ice

Wine will be sold in the smaller ½ litre bottles for $85 - 120CND a bottle range. We want

consumers to perceive Canadian Ice Wine as a premium product, targeting middle class

consumers who appreciate fine wines. The goal is to build the image of Canadian Ice Wine as an

exotic good.
Marketing Entry & Expansion

Peller Ltd. will focus on using its existing distribution channels through their wholly

owned subsidiary World Vintners Inc. Through the already existing channels Peller Ltd. will be

able to introduce Ice Wine as a premium option for a market that is fairly saturated with other

Wine companies. Peller Inc. will be able to benefit from the pioneering costs that Constellation

brand has already incurred. After introducing Ice Wine into the market we will then use the

brand recognition that will be attained and (bring) the premium Peller wines to the existing

Vintner channels. Peller Ltd. will of course have to follow exporting rules and regulations

Peller Ltd. will use a direct mode of entry by first, where we will deal directly with

vendors and distributors abroad. This will allow us to have more control over our product and a

direct relationship with our buyers and sellers, thus cutting out intermediaries. To achieve this we

will aim to be locally responsive in all countries by adhering to local customs and traditions of

doing business. We will not opt for any contracting, licensing or franchising of the Peller Ltd.

name abroad as the name represents our vineyards and quality of wine only.

Recommendations

In order to realize internationalization efforts to their greatest potential, we recommend

Peller Ltd. exploit its wealth of knowledge of foreign markets acquired through its recent

purchase of World Vintners. Their experience with internationalizing and franchising may prove

to be invaluable to Peller Ltd.’s own global expansion efforts. Similarly, we recommend that the

product mix be focused on ice wines in order to maintain tighter control. This will also maintain

existing consumer associations of Canadian wine makers and the production of ice wines. We
recommend to focus a high amount of resources in the GuangZhou region of China as it has the

highest level of disposable income per capita in the country as well as a high level of luxury

accommodation options and a current recognition of Canadian ice wine quality (Silvia, 2015).

Conclusion

The global wine market is heavily competitive and saturated, but is still experiencing

growth. With market value forecasted to have reached $346,974 million by 2019 (an increase of

23.4% since 2014) there is room for Peller Ltd. to extend their reach into new international

markets. Based on Canada’s leading advantage in ice wine, we feel that Peller should establish

themselves as an international distributor of premium Canadian ice wine. Using their subsidiary

supply chain and distribution network that is owned by Peller, they will be able to alleviate much

of the difficulty of global ice wine distribution.

References

http://www.hkchcc.org/wine.htm
http://www.winebc.org/files/Information/Non-BCWI%20Reports/MarketAnalysisReport-A
GlobalExportMarketOverviewforBritishColumbiasWineIndustry.pdf
http://www.slideshare.net/msilvatrade/exporting-icewine-into-china
Appendices