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Wine Industry Analysis Paper

1041 Words5 Pages

Trinchero, Constellation Brands, Jackson Family Wines, Treasury Wine Estates, E&J Gallo, and Chateau Ste. Michelle are some of America's largest wine conglomerates, selling a combined total of over 60% of the wine stocked at supermarkets. These companies buy small wineries around the world and mass-produce the products previously sold by the small wineries without making noticeable changes to the bottling or labeling of the product. Many people purchase these mass-produced wines and never know it, as the branding remains unchanged (Brands Owned by Big Corporate Wineries, n.d.). Economies of scale seem to exist in the winery industry. Most wine is crafted as an industrial agricultural product. It is made at large wineries in giant stainless-steel tanks that each hold several thousands of gallons of wine. These economies of scale help to make wine inexpensive and allow those who can barrel wine in large quantities to become big players in the wine market (McIntyre, 2017). Large wineries can achieve similar efficiencies in other production aspects and achieve lower per-unit costs in production. This enables them to charge more competitive retail prices per bottle (Stivaros, 2017). COLAS for Wineries …show more content…

The industry is extremely reliant on large machinery and capital investments to produce wine in bulk. Wineries must pay for machines to crush, ferment, filter, store, bottle, and monitor wine. As shown in the graph to the left, the level of capital intensity for wineries is high. In 2017, IBISWorld estimated that the industry will spend $0.44 for every dollar that is spent on labor. There is some level of fluctuation in the capital intensity of the industry which is based on each company's willingness to grow their own grapes. Some wineries purchase grapes from external farmers while others grow grapes internally. Planting and harvesting grapes is a very labor dependent process, as grapes are extremely delicate (Stivaros,

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