Trading up in wine consumption



 


I.             Introduction

The Asian market has been slowly but surely embracing what was initially noted as highly western products. From fast food chains to carbonated beverages, the Asian consumer has become aware and made the consumption of such products an everyday affair. Articles have also noted that the consumers in the Asian region are gradually taking on wine consumption. (2007) However, the demand for the product is still within the level that could barely make the wine selling industry a viable business area. In the article of  (2007) indicated that European countries still dominate the top exporting countries for wine in 2005. These include Italy, France and Spain as among the top three exporters. His article also maintained that the Europeans (Luxemburg, France and Italy) still are on the top of the wine consuming charts in the world with the United States at a very close second place. A far third is the Asian market with over six percent taking on the global wine market. In the website of  (2006) it claimed that Asian countries like China and Japan are among the most mature markets for wine. Other Asian countries like Korea, Taiwan, India, and some Southeast Asian states are also seen as a viable market as they are described “fast growing” in terms of wine consumption. As seen in this discussion, Asia is slowly, but surely, acquiring the taste of wine. However, there is still an existing preconception that drinking wine is still elitist and even snobby by some, particularly based on the price of the merchandise. (2007) This limits the possible expansion of the market and increase in the consumers of wine in Asia. Wine sellers in this are thus tends to adjust its price points. The following discussions will be looking into the possibility of encouraging consumers to trade up into wine consumption.


II.           Factors Determining Low Prices

The existing conditions regarding the wine industry in Asia indicate a low turnout in the demand for the related products in the market. There are certain factors that have been seen to trigger these relative low prices among wine products. For instance, wine drinking practices in Asia tend to differ from every region. For instance, it has been said that demand for wine products in China has been high making it among the more mature markets for the global wine market. (2007) This is because studies have revealed that there is an existing culture in the region regarding the drinking of alcohol. (1998) This claim is further seen in the study of  (2001, 261) as they have established the existence of a culture of leisure drinking and possibly heavy drinking in the country. Thus, the infusion of alcoholism and wine consumption in the region tends to highlight the potential for international wine distributors on China. This is the same with Japan as wine consumption has been considered as one of the more ceremonies parts of their culture. (1998) The same study also pointed out that the drinking culture in the said country starts from adolescence to the old age. This means basically that wine consumption could be found within the lifetime of an average Japanese person.


Seeing the trend in the Asian market particularly with the context of the wine market, it appears that the pricing strategy of the distributors tend to be significantly affected. According to the study of  (2005) there are several pricing strategies that companies could employ to suit their particular environment. These includes cost-based pricing, competition-based pricing, and demand-based pricing. Cost-based pricing tends to be a result of an analysis of the overhead and direct costs of the operations. Competition-based pricing is a result of changes made in the price of competitor products while demand-based pricing tends to be based on the perception of the consumers on the value of the product.


In the case of the Asian market, the pricing seen in the wine market tends to be based on the demand-based pricing. This means that the demand for the product is relatively low, apparent with the low price of the products, because of the perception of the consumers regarding the drinking of wine. It appears that the low price of the merchandise is among the initiatives of wine distributors to encourage the market to trade up with wine products, particularly imported wine. The current price points of the wine products in the market are a result of an endless series of price skimming. Not only do these companies tend to face the difficulty of a limited range in the market, it also has to contend with the existing brands that are locally made. Even wine and alcoholic products tend to be subjected to price discrimination among the consumers. This makes the distributors constantly engage in yield management which essentially triggers more price skimming. At some point, one must recognise that distribution of products doesn’t solely rely on the demand of the market. For some industries, in order to survive, they themselves make the demand for their product. For the wine industry, they could take on initiatives to encourage the market to trade up.  


III.         Benefits of Trading Up

Based on the discussions on the reasons for having a considerably low price points in the wine market, it appears that distributors have to make the demand for their product by encouraging the consumers. One way of doing this is by showing the benefits of trading up to their product from their usual locally made beverages and spirits. In the context of function, the wine distributors could claim that their product will be serves as another alternative in the consumers’ huge line of alternatives in terms of alcohol and spirits. This could be applicable for countries with a developed culture for wine drinking like Japan and China. Moreover, companies could also claim the health benefits of wine consumption as intimated in early studies like heart disease prevention in countries where drinking is still regarded less. In any case, companies could introduce these products in any market as an opportunity to experience a new way of enjoying beverages in comparison to the local brands available in the market. Other means of encouraging the consumers to trade-up is by presenting exclusivity and chic nature of the product, people are able to satisfy their innate sense of status seeking personalities. Appealing to the vanities of the target market is always a great tool in establishing a greater demand for the product.  


 


IV.        Initiatives to Encouraging Trading Up

In order to induce the demand for wine products and encourage trading up on the part of the wine-drinking public, the distributors should consider different methods ranging from the cultural factors to the marketing factors relevant in the environment. For instance, countries like China and Japan has already been established as countries with alcohol-consuming cultures. Wine distributors could address this fact and use it to their advantage. Companies could similarly use the model made by  (1980,  2002) regarding the classification and cultural dimensions of particular markets. In using this type of tool, then the companies could determine the course of action on which the marketing technique could be based on. This brings on the first initiative on which the trading up is encouraged to the consumers.


Proper marketing should be one of the top priorities of the wine distributors. This means that they should reach out to their target market and make the public know that their product exists. A great way of doing just that is by using mass media. It is basically a very powerful tool as it provides information to people. As indicated in the study of  (2004) properly using mass media could sway the public belief. This denotes somehow that the cues that companies could provide the public through television, radio, and print could mould what the public thinks of their product and as a result, possibly create the much needed surge of demand from the market.       


Again, anything as powerful as mass media could still be regarded as a double-edged sword. Since wine is still considered as a “sin product” they have to be willing to bequeath a considerable amount of money to advertise the product. Though it has yet to get the notoriety of another sin product, tobacco, it does share relatively the same set of criticisms. Nevertheless, studies have pointed out that even with great disrepute and unsavoury reputation in society, these types of products have been documented to amass some level of keenness on the market. (2000)


Factors like the affect, accessibility, price, and quality tend to encourage the consumers to trade up. For instance, the factor influencing the affect of the consumers tends to highlight the emotional and psychological elements of the consumers. As seen in the model of Maslow (1986, 2004), consumers tend to react positively in luxury items, as wine, when these items engage to them emotionally. This is particularly true when their intent in buying items is covered by status-seeking objectives. (1990) Basically, these objectives are discussed by  (2004) as those that allow the consumers to satisfy their sense of vanity, display their social status, and extent of luxury.


Another element that the company could employ is the availability of the product. Basically, this means that the company have to imply that the product, despite being accessible in the market, provide as sense of exclusivity for those who purchase it. They companies distributing the product could create an image of slight selectiveness to establish what has been noted as the “cool factor” in marketing. This has been seen in the marketing of luxury vehicles like Ducati and Benz. (2005; 2002) In these companies, purchasers of the product were given privileges to join a club exclusively for those who have also purchased a motor bike or a luxury sedan.


Coming back to the principle of demand-based pricing, companies could not deny that the price of the product tends to be shrouded by the perception of the public regarding wines as elitist or snobbish. Numerous studies indicate that the regard of the customers relating to the correlation of price and quality tends to vary from culture to culture. (1998) This indicates that the consumer normally have different views on whether a products is actually worth its price. Nonetheless, with intensive research, companies could use this type of knowledge as a means of determining the price point at which they could introduce in the public.


V.          Conclusion and Personal Commentary

The discussions above have provided a clear image of the wine industry and consumption in the Asian market. It has been established that the wine market in the global scale is indeed a viable business since there is already an inherent demand from western countries. However, expanding to the East would be very difficult and laborious. Nevertheless, that feat is far from being impossible. Given the proper system and appropriate courses of action, the wine industry in the said region will be able to penetrate its local markets. Increasing the demand for wine consumption requires the close monitoring and observation on the part of the businesspeople handling the industry.


With the proper marketing and regard with the environment, companies will be able to control their losses and even foresee the changes on demand through the behaviour of the consumers. In this regard, the business people that operate in this section would not be limited to changing the price points of their products. The possibility of encouraging the consumers to trade up and maximising the factors that could be addressed bestows the wine industry the necessary tools to keep the companies from leaving the market. Essentially, such endeavours will be able to take on adjustments on the level of demand in the market. This means that there is a considerable advantage seen in the changes in the demand of consumers than changing the price points of products. The experience of the wine industry manifests that even if the product is set in a range within the means of the public, the level of demand will not change unless companies take on initiatives to improve their situation of a particular market.   


 


 



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