Sula Vineyards Harvard Case Solution & Analysis

Q1. As compared to Sonoma, California, what adaptations did Sula need to make to allow the growth of grapes for fine wine in India?

The Indian Territory is considered as the best place for the growth and production of fine quality of grapes as compared to the Californian region. The vital role in the growth and production of the grapes is played by the peculiarities of the environment. Also when there is the summer season in India, water is the most important of all the commodities. Sula Vineyards had the benefit of the most favourable location for the production of vine in India. The quality of irrigation was also good in that area and this was also one of the contributing factors for the success of the company. The management of the company needs to assess and keep track of all the climatic changes that are occurring and control all the important factors so that the company keeps performing successfully in this industry.

Q2. What varieties of grapes were selected and why?  How did these complement the local Indian Cuisine?

As the growth in this industry was very rapid, therefore, the company wanted to grow at its current rates of 20% to 25%. However, one of the main problems faced by the company was the selection of grapes. The variety of the grapes that was chosen was for the local Indian Cuisine which were Chenin Blanc from France and Sauvignon Blanc, which is one of the classic grape, also from the region of France. However, the main issue lied in the fact that neither of these grape types were ever produced in India before. However, the decision of Rajeev was strong and he combined the production with the marketing efforts of the company, because he expected and was confident that both of these varieties of the grapes would grow well in India also and the taste of the wine would be tasty also according to the Indian cuisine. This decision proved to be successful as the company was concerned and committed to improve the quality standards of wine.

Q3. How did the price of wine grapes at retail compare to table wines?

If the company went forward to plant wines and to bear the fruits in commercial quantities, then the company would have to wait before it could get those commercial quantities. Therefore, Rajeev decided to contract out the growing process of the grapes to the local farmers in the region. This would surely benefit the company by providing it with a steady supply of grapes. This would also help the economy to grow and lend a stimulus to it. This was the most important reason behind the differences in prices of table wines and retail wines. The table wine farmers were offered $ 0.3 per kg; however, the grapes were being retailed for $ 0.70 per kg. This shows a significant difference between the prices.

Q4. Describe the types of supplies that were imported.

There were a number of supplies that were imported to India. These were: Economy wines, Premium wines, Sparkling wines and others. The highest cost was incurred on the import of the Premium wines. This was because the demand for this wine was very high in India. The reason for this was the high quality of Premium wines and the range of fine flavors that were offered for this wine.

Q5. Domestic production was expected to grow at 20-25% CAGR.  What was fueling the growth in imported wines?

Increase in the demand of fine and its consumption due to its fine quality and a range of flavors was the reason for the domestic production growth at a CAGR of 20% to 25%. As a result of this high demand and the rapid growth in this industry, many investors had invested in this industry heavily. The wine industry is a capital intensive industry and a lot of capital and labor was required by the management of the company to invest in certain projects so that the company expands. The investments made by the individuals will be then used for this purpose.

Q6. What valuation did GEM India Advisors invest at? What are the equity value and enterprise value of the company equivalent to in terms of multiples of revenue and EBITDA based on the financial statements at the end of 2005?

Refer to the appendices for the calculations.

Q7. What was the price per share of the GEM India Advisors' investment, assuming it carried the same par value as the stock issued in 2003?

The price per share of GEM India Advisors’ investment is $ 53.03 per share. Refer to the appendices for calculation..................................

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