You must have javascript enabled to view this website. Please change your browser preferences to enable javascript, and reload this page.
Creston Vineyards 1 (784.0K)
VIDEO CASE 15–1 Creston Vineyards
Larry Rosenbloom’s customers include individuals, retail stores, restaurants, and hotels. Because of the many types and large numbers of customers, distribution is as important as production at Creston Vineyards. As Larry explains, “We need distributors in our business . . . as most other [businesses] do, to get the product to the end user, to the consumer.”
THE COMPANY
In 1980, Stephanie and Larry Rosenbloom purchased an abandoned ranch and started Creston Vineyards. Because it takes several years for vines to grow and produce grapes, Creston did not sell its first wine until 1982. Today, the 220-hectare ranch has 70 hectares of planted vineyards and produces over 55 000 cases of eight varieties of wines. The production facilities include a 1650-square-metre winery and 15 square metres of laboratory and office space. Since 1982 Creston wines have won over 500 awards in wine-tasting events and competitions.
THE INDUSTRY AND DISTRIBUTION CHANNELS
The wine industry is undergoing several very interesting changes. First, sales have increased in recent years after a general decline since 1984. The decline was attributed to changing consumer demographics, shifting buying habits, and concerns about the economy. At least some of the recent interest in wine is related to the press reports suggesting the possible health benefits of red wine.
A second change is the significant increase in the price of wine due to a low supply of good international wines and changing exchange rates, and an infestation of vine-eating insects (phylloxera). Finally, many wine producers are trying to change the image of wine from a beverage only for special occasions and gourmet foods to a beverage for any occasion.
The industry also faces several distribution challenges. The large number of wine producers and the variety of consumers requires a sophisticated system of distribution channels. By combining different types of intermediaries, the industry is able to meet the requirements of many customers. In addition, because the sale of wine is regulated, the use of multiple distribution channels facilitates the sale of wine in many locations.
One of the most common channels of distribution involves a distributor buying wine directly from the vineyard and reselling it to retail stores and restaurants within a geographic area. Some distributors, however, may not need quantities large enough to warrant purchasing directly from the vineyard. They usually purchase several brands at the same time from a warehouse. A broker may facilitate sales by providing information to distributors, training the distributor’s salesforce, and even assisting in sales calls to retailers. John Drady, 1 of 12 brokers for Creston Vineyards, explains: “It’s very important that we translate our knowledge and our selling skills to the distributor’s salespeople so they can, in turn, go out and [sell] more readily on their own.”
Other channels are also used by Creston. For example, in some markets Creston can sell directly to some large retailers. Another channel of distribution is through wine clubs that provide club members with information about wines and an average of six wines per year.
The popularity of wine clubs has been increasing and they now account for 15 percent of Creston’s sales. The newest type of distribution channel is through online services. Creston now has a site on the World Wide Web (www.wines.com) that provides information about its wines and allows orders to be shipped directly to consumers. Customers will also find greetings from Alex Trebek, the Canadian-born game-show host, who is the owner of Creston Vineyards.
THE ISSUES
In an industry with thousands of products and hundreds of producers, Creston is relatively new and small. Selecting and managing its distribution channels to best meet the needs of many constituents is a key task. Providing marketing assistance, product information, and appropriate assortment, transportation, storage, and credit are just a few of the functions the warehouse, brokers, distributors, and retailers may provide as the product moves from the vineyard to the end user.
Creston also faces a situation where new, and possibly more efficient, channels are becoming available. Direct sales, wine clubs, and online services have generated substantial sales for Creston. Other channels, or new variations of existing channels, may also be available in the future. Overall, Creston must continue to utilize distribution channels to provide value to customers ranging from large retailers to hotels and restaurants to individuals.
