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NWE CONSULTING Consultants: Javier, Colin, Will, Cary, Kene.

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Presentation on theme: "NWE CONSULTING Consultants: Javier, Colin, Will, Cary, Kene."— Presentation transcript:

1 NWE CONSULTING Consultants: Javier, Colin, Will, Cary, Kene

2 NWE CONSULTING RECOMMENDATION Proceed with the planned acquisition of Goundrey Wines PTY. Ltd. Expand production of Icewine brand, Inniskillin RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

3 NWE CONSULTING SITUATION RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION Donald Triggs, CEO of Vincor, believes that in order to be a major player Vincor must expand internationally Focused on New World Regions Possible acquisition of Goundrey Wines in Australia Is it a good idea?

4 NWE CONSULTING EXTERNAL ENVIRONMENT High Rivalry High Buyer Power Low Supplier Power Multiple Substitutes Medium Threat of New Entrants RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

5 NWE CONSULTING EXTERNAL ENVIRONMENT High Rivalry Fragmented market Medium Threat of New Entrants High barriers to entry domestically Low barriers to entry internationally High Threat of Substitutes Beer and spirits RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

6 NWE CONSULTING EXTERNAL ENVIRONMENT  Low Supplier Power  Wholly owned companies  Independent product development  High Buyer Power  Low to no switching costs for customers  U.S Mandatory three-tier distribution RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

7 NWE CONSULTING SITUATION- GOUNDREY WINES Acquisition Target: Goundrey Wines Located in 350km south of Perth Reputation for quality Largest Winery in Western Australia Region responsible for 25% of Australian super premium production Super Premium segment responsible for 85% of Goundrey sales Domestic consumption of Goundrey brands grew 26% High bargaining power over distributor Established sales force Product Product differentiation by grape type and region Established Super Premium Brands Goundrey Fox River Price $15-$30 per bottle Place On-Premise (44% of sales) Private Retail Distributor Premium Restaurants Promotion Key Events Direct marketing RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

8 NWE CONSULTING WINE MARKET US Wine Industry US Wine Market - $10 Billion Imports represent 25% share of market Wine imports grew 18% in 2001 UK Wine Market - $3.7 Billion Little domestic wine production Responsible for 19% of total global wine imports Australia number one wine exporter to UK RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

9 NWE CONSULTING VALUE CHAIN ANALYSIS Consolidation of major firmsConsolidation of major firms RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION Focus on Marketing and distribution Emphasis on profitability of premium market

10 NWE CONSULTING VALUE CHAIN ANALYSIS - SYNERGIES Access to Australian as well as United Kingdom market Established Distribution Channels Strategically important grape appellation RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

11 NWE CONSULTING FINANCIAL ANALYSIS Sales (m)Purchase Price (m)PP/Sales (x) Berringer80026003.25 R.H Phillips2556.72.27 Goundrey20.964.53.08 Vincor’s Financial Strengths Growing EBITDA Margins (18.7%) Low D/E Ratio Strong Revenue Growth 2002 Equity Issue Valuation Vincor’s Avg. Capital Employed vs. ROCE Vincor’s Revenue and EBITDA Margins CAGR: 17.7% RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION Vincor’s Financial Weaknesses Decreasing ROCE Working Capital Management Decreasing Inventory Turnover Ratio

12 NWE CONSULTING PROBABILITY low moderate high insignificantseveremoderate IMPACT INVESTMENT RISKS Economic Risk: Foreign exchange rates and changing material costs Regulatory Risk: Import/Export Regulations Operational Risk: Weather Operational Risk Cannibalizing Own Sales RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

13 NWE CONSULTING RECOMMENDATION Proceed with the planned acquisition of Goundrey Wines PTY. Ltd. Expand production for immediate export to North America Leverage existing sales forces for cross selling Create team to build international sales Expand production of Icewine brand, Inniskillin Focus on international branding RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

14 NWE CONSULTING CONTINGENCIES Alternative Strategies Focus on Expansion Within North America Low barriers to entry for foreign competitors Small margins In conflict with Vincor’s stated strategy Enter into a strategic alliance with an Australian firm Leaves Vincor with lower margins Removes possibility of growing sales of international lines Acquire Substitute products Beer is highly concentrated and fiercely competitive Vincor’s expertise would not be transferrable 1. 2. 3. RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

15 NWE CONSULTING IMPLEMENTATION 1.Purchase Goundrey Wines PTY. Ltd. Use funds from 2002 equity issue, borrow the difference required Implement plan to expand production capacity Immediately6-12 Months2-3 Years RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

16 NWE CONSULTING IMPLEMENTATION 2.Begin Exporting Goundrey brands to the North American Market Focus on Synergies between international operating groups Leverage current sales forces in the US and Canada to achieve rapid penetration of the Goundrey brands in NA 3.Increase Production and Sales of Inniskillin Increase international marketing budget and sales force Use Goundrey’s sales team to push Icewine in Australia Immediately6-12 Months2-3 Years RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

17 NWE CONSULTING IMPLEMENTATION 4.Build sales force to export Goundrey brands to the UK and Japan Take advantage of Australia’s position as UK’s number one exporter Leverage current sales forces in the US and Canada to achieve rapid penetration of the Goundrey brands in NA 5.Merge international sales teams to reduce costs and effectively market all current brands and future acquisitions Immediately6-12 Months2-3 Years RECOMMENDATIONEXTERNAL ANALYSISSITUATION WINE MARKET ANALYSIS VALUE CHAIN ANALYSIS FINANCIAL ANALYSISINVESTMENT RISKSRECOMMENDATIONCONTINGENCIESIMPLEMENTATION

18 NWE CONSULTING QUESTIONS?


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