Vina San Pedro Harvard Case Solution & Analysis

Viña San Pedro

  1. Was production capacity adequate to keep up with projected increases in sales? Are there any major production bottlenecks which would require additional investment?

Vina San Pedro (VSP) had been in the Bonifacio Correa family since 1701. They had planted the first wines with French Stock in 1865; the wine yard stayed in the family work till 1941 and had reveled in the notoriety of being one of the finest in the nation. As the time passed, there was an increase in demand but with the new holders of the wine yard was scarcely gainful despite the fact that they had extended it to 1150 hectares that made it the biggest single wine yard in the nation. Further, it has essentially made through by creating economical wines for the residential business sector.

In 1994, CCU expanded its operations both in the worldwide and residential markets. In October, it obtained a 48.4% enthusiasm towards Viña San Pedro and throughout the initial couple of years of CCU control, administration concentrated on decreasing expenses, expanding circulation along with expanding the nature of VSP wines as previously the winery had created a great name for itself but was not showing the desired results due to lack of direction and resources. However, CCU had plenty of resources and direction and was willing to turn around VSP. By 1995, obligation had decreased by Ch$7.8 billion and resources of Ch$864 million had been into extended limit for maturing wines. In addition, resources of Ch$178 million had been into the plantation of new vineyards for delivering premium red wines. As a consequence of these included ventures, CCU's aggregate possession position expanded to 51.2%. Since, new manors took a few years to get profitable and higher quality wine obliged time to age; therefore, conveyance of produced wine from it vineyards stayed level at about 11 million liters and was practically only given to fares. The equalization of 24 million liters was sold locally and was made from grapes bought from autonomous cultivators.

CCU had accepted an obligation regarding the circulation of VSP wines in everything except the most remote zones of Chile and quintupled the amount of clients to 30,000. Residential deals expanded by 29% somewhere around 1995 and 1996, despite the fact that a 5.5% ascent in the normal cost for an instance of wine sold had helped this build. In 1996, following three years of misfortunes, VSP at last gloated a benefit of Ch$305 million. To continue this growth and maturity of the wine yard, CCU hired Matias Elton in 1997 as the new President. Throughout Elton's first year, an alternate Ch$17.7 billion was contributed to further build limit. New hectares of vineyards were gained and planted, stockpiling limit expanded to 36.3 million liters, and packaging limit extended from 22,600 to 25,100 jugs for every hour. Throughout the year, VSP's aggregate generation developed to in excess of 44 million liters of wine; 45% of the of wine of this total was from it’s vineyards. Moreover, resources of Ch$8.2 billion were put into vineyards (planting spoke to Ch$4.5 million for every hectare), along with Ch$3.0 billion in vinification limit, Ch$819 million in maturing limit, and Ch$5.6 billion in packaging limit. Elton likewise redesigned the organization so each one capacity had clear reporting obligations and regarding Wilfred Leigh, the fare supervisor, he straightforwardly showed up to him as opposed to the individual in charge of residential deals.

With all the above investment, VSP had become one of the market leaders of the domestic market holding in excess of 10% of the domestic market but in case VSP focused on the international market then there came a short fall of grapes produced. Therefore, in order to match the demand of the domestic market, VSP wants to stay visible in both markets and hold greater market share. CCU would need to invest into increasing the wine yards for greater production of grapes so as to meet the demand of both domestic and international market.

 

  1. What advantages does VSP have in the domestic market and in the international market?

VSP is known to be one of the finest in the nation as it is the biggest single wine yard in the nation and after the investment it is known to have the greatest variety of wines at lower cost. There are three market leaders in the domestic market holding a total of 52% of the market; out of which VSP holds 11%. VSP is well known in the domestic market and it knows what kind of products, packing, marketing and taste is preferred; which makes it a dominant force along that Chilean market does not focus on quality of the wine as they are more focused on the price therefore; they prefer cardboard packed cheap wine that is readily made and sold rather than high priced old wines with great taste in glass bottles......................................

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Vina San Pedro (VSP) is the third largest vineyards in Chile and has recently expanded its capabilities. The new president is considering how quickly press the foreign and domestic markets, where the efforts should be directed, and how to balance the potential in the context of uncertainty, market volatility and the vagaries of foreign exchange. At the same time, it should position the growth in the context of the new return on capital employed targets. "Hide
on U. Srinivasa Rangan, Steven Allen, David Wylie Source: Babson College 26 pages. Publication Date: March 13, 2000. Prod. #: BAB017-PDF-ENG

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