HBS Strategy Case #718-438
Posted: 13 Mar 2018 Last revised: 13 Aug 2019
Date Written: March 8, 2018
Approximately 80% of the 9,000 wineries in the US breakeven or lose money. An even greater percentage lose money on an economic basis (i.e., after a charge for the capital employed). Tegan Passalacqua, a Californian winemaker who specializes in making “old vine” wine (i.e., wine from grape vines that are at least 60 and up to 100+ years old), appears to have defied these odds. By day, he is the head winemaker at Turley Wine Cellars, a leading Zinfandel producer. In his spare time, however, he makes premium wines under the Sandlands label using Turley's facilities and "forgotten” grape varieties such as Carignane, Mataro, and Chenin Blanc. The objective is to understand what makes the industry so challenging, why Passalacqua has succeeded to date, and whether his success will persist into the future. The case is set in December 2017, as Passalacqua and his wife were deciding whether to buy a building and develop a winery for the Sandlands wines at a cost of up to $500,000. Because they already owned an old vine vineyard (the Kirschenmann Vineyard in Lodi, CA) and have limited financial resources and time, they must decide whether to make this investment or to save their resources for another investment such as a second old-vine vineyard.
This comprehensive case is designed to illustrate concepts of market segmentation, market attractiveness, and competitive advantage. In addition to analyzing the current situation, students must assess how the market is likely to evolve (more or less attractive in the future) and whether the advantage is sustainable (or his disadvantage is reversible). The case is appropriate for courses on competitive strategy, corporate strategy (scope/vertical integration decisions), and entrepreneurship.
Keywords: Wine, winery, vineyard, market attractiveness, competitive advantage, entrepreneurship, capital investment, vertical integration, performance analysis, industry structure, market segmentation, Porter's 5 Forces, United States
JEL Classification: M13, L11, L25, L66
Suggested Citation: Suggested Citation