Henkell is a Hungarian wine making company that wants to export its products to The Netherlands. In previous years they have exported wine to the UK and Germany. These exports were done without previous planning or conducting marketing research. In this plan, Henkell will correct previous methods of marketing analysis and will find all the pertinent information about the Dutch wine market and the European Agricultural policy to better enhance its sales.
The Netherlands, although perceived as being prone to the wine market, has faced a slightly decreasing demand in wine over the last few years due to high sales of French, Italian and Spanish wines. Nevertheless, most Dutch people are beginning to drink more and more wine instead of beer. The major problem for Henkell is that the Dutch don’t like the strong Hungarian flavor. Henkell must adapt the flavor, which will cost the company money which has not been budgeted for. The advantage of Henkell is that the company can produce much cheaper wines than their competitors. The company must gain a market share with their low producing prices, which will allow them to sell quality wine at a very low price. With the money earned on the Dutch market, the company can expand their marketing and sales team and focus heavily on advertising their wines.
Another subject in the plan is the agricultural policy of the European Union. This policy takes care for the EU wine makers. These wine makers are protected by regulations and procedures such as the import bans. The EU can also impose barriers on products from outside the EU.
Within some years Hungary will become a member of the EU and the problems of the barriers will be resolved. Henkell must then cope with EU’s regulations about healthy and quality norms. The company must improve their machines and that will cost money. The advantage for Henkell will be that the EU will support the company financially. The EU will also support Hungary, so that the economy of the country will substantially improve.
The major problem for the company is that they don’t have enough money to advertise and to improve their wines and machines. This problem can be solved when the company cooperates with a Dutch company. This Dutch company can support the company financially. The companies can also exchange knowledge about wine making. They can also exchange information about their home wine markets.
When Henkell can’t find a suitable partner, then they must use agents, who know the market also very well.
The Dutch market can be a good market for Henkell, but they must investigate the market first. They will also need a joint venture with a Dutch company to get money and information about the Dutch wine market and European marketing policy’s.
Plan of approach
Problem definition and goals
Henkell is a Hungarian wine making company. The company exists since 1959. The Hungarian wine market is declining the last years. This is caused by the free market policy. It is very difficult for a country to become a free economy from a plan economy. There are many Hungarian companies who couldn’t deal with this and these companies are bankrupt now. The only reason Henkell isn’t bankrupt yet, is because of the great marketing decisions the managing director has made. But they need a stable currency to invest and they also need a market that is still growing. These markets are only available in the west of Europe. Henkell doesn’t know anything about the Dutch wine markets. So these markets must be examined.
The goals of the plan are:
- Is the Dutch wine market still growing?
- What is the wine consumption and distribution in the EU and especially for The Netherlands
- What kind of flavor do the wine drinkers like?
- What about the EU restrictions?
- SWOT-analysis for Henkell.
- Which entry strategy Henkell must use?
- What about the marketing policy?
- Sales contract.
This report will give Henkell good information about the Dutch wine market.
The strategies and recommendation concerning the exportation of wine to The Netherlands could be very useful.
Cultural Analysis- The Consumption and retailing of wine in Europe
All kind off people drinks wine: from young adults up to the elderly and from the upper class to the lower class. People nowadays drink wine because they find it social or just because they like to drink wine at dinner or at social events. A small part is drinking wine because it is part of an exuberant way of living.
A lot of people are drinking wine because wine has got many varieties and different brands and that is why wine drinking can be a new experience over and over again. Off course the must people drink wine because the simply enjoy it. Most of the wine is drunk at home or by family or friends. Another important place where people drink wine is in a restaurant or bar.
In The Netherlands the wine consumption increased from 17.4 liters per person in 1997 to 18.8 liters per person in 2000. People who are between the age of 25 and 64 years drink wine the most. In The Netherlands the “baby boom” (50+) generation is the most important group of wine consumption. This group wants quality and follows trends.
The largest part of wine drinkers is women. The segment of the elderly people who drink wine is increasing, as the other segments are stable or even decrease. The growing of the wine drinkers in the oldest segment can be declared easy. Older people are getting a bigger part of the total population, so the amount of wine drinkers in this segment will also increase.
Table 1: Wine Consumption In the Netherlands
The amount of consumption of wine will increase in the next years. This is caused by the supermarkets and beverage stores. They sell every year more varieties and brands of wine from all over the world. You can get wine from all over the world such as the France, Spain, Germany, Italy, USA, South Africa, Chile and Hungary.
The popularity of “new” wine countries is increasing regarding to traditional wine countries as France, Germany and Spain. “New” wine countries are among others: USA, Australia, and maybe Hungary in the next years.
Market share per country in the Netherlands in 1999
EU Country Market share
- French: 46%
- Spain: 13%
- Germany: 8%
- Italy: 7%
- Portugal: 4%
- Others: 5%
Third Country (not EU member) Market share
- USA: 6%
- South-Africa: 5%
- Chilli: 2%
- Australia: 1.50%
- Hungary: 0.50%
- Others: 2%
The European and Dutch wine policy
The European Union policy has a duty to protect and stimulate the internal market. Why are they doing this? They are doing this to imposing barriers on products that are produced outside the EU. The reason they are doing this is because it is often a lot cheaper to produce the products from countries outside the EU. So when they imposing barriers it is more difficult for a company as Henkell to introduce their wines on the European market. A main goal of market protection is to make sure that the farmers will have a normal income.
Within the EU policy there is another goal, to have free trade in the Union. This goal is a great advantage for the companies in the EU since they don’t have to pay tariffs when they want to sell products in another country. So the competition in EU becomes equal, because everybody must pay the same tariffs on his products. Also a big advantage is the free transportation of goods within the EU, the transports don’t have to wait at the borders and they don’t need all kind of permissions any more when they want tot reach a country. By this goal they save a lot of money and time.
The European Union is also compensating the producers of agricultural products when their income is to low. Earlier the Union took care over the prices, but now they are focused on compensating the income of the farmers. The regulation of the wine markets is also an aim of the European Union. They are hoping the wine market becomes competitive and healthy when they don’t support the prices anymore. After a while the bad companies will go bankrupt or they will be taken over by other producers. After a while only healthy and good companies are left over and these must become competitive with foreign producers.
Hungary and the EU
In 1991 the Hungarian government has signed an agreement with the declaration that they want to become a member of the European Union. In 2004 the Hungary and the EU will become a trade free zone. This is a great opportunity for all the companies in Hungary who want to export to other countries. Then they can import their wine without huge trade tariffs and other barriers. When there aren’t any barriers anymore, then the price of the wine will be lower and then they will be more competitive. The transport will also be cheaper because they don’t have to wait at the borders anymore. The Hungarian wine farmers will also be supported with money from the EU. So that they can modernize their farm and machines and when their income is low, then they will be supported by the EU. So it is easier for the Hungarian wine farmers and exporters to survive when Hungary becomes a member of the EU.
There are also some disadvantages for the wine farmers when Hungary becomes a member of the EU. They will have to meet the healthy and quality standard, which are restricted in the EU. The companies will be controlled on this. The companies will have to adapt their machines, buildings, bottles and labels. Not every company will have enough money to do this.
Another big disadvantage is that the Hungarian market will be opened for foreign competitors such as the French and Spain wine farmers. The taste of theirs wines is often better and they can advertise more, because they have more money to spend.
Dutch wine policy
About the regulation of the Dutch wine market isn’t much to say. The regulation of the wine market is equal to the European policy, because The Netherlands is a member of the European Union.
There are several restrictions where all Dutch wine traders have to deal with.
If Henkell wants to open an office in The Netherlands and import and sell the wine them self, they have to know the following restrictions.
Which authorities are important for the import of wine from third countries to the Netherlands?
Chamber of commerce
For the registration at the trade register. Dutch commodity board for wine
For registration at the register for Dutch wine traders.
To receive an excise permission.
Charge from the commodity board for wine
For the finance of the activities of the commodity board there is a charge on wine that is put on the Dutch market.
Excise and import duty
Wine is an excise product, which means that you will have to pay for the wine that has been put on the market. Because Hungarian is a third country import duty also have to be paid.
Here are excise and import duty prices:
Wine from third countries with an alcohol percentage less than 13%.
Excise: approx 48.85 English pounds per hectoliter
Import duty: approx 13.10 if the import is less than or 2 hectoliter.
Approximately 9.90 if the import is more than 2 hectoliter.
Permits and documents
The importer of the wine must have an excise permit before the wine is ordered. If not, he has to apply for a permit at the customs house.
If you want to import wine from third countries an import certificate is required.
For the certificate you must apply at the commodity board for wine. A certificate is only required if the batch of wine is more than 30 hectoliter.
Report on the Central Bureau of Statistics.
Every importer of wine must keep accounts of the imported wine, bottling or the sale of wine.
SWOT Analysis on Henkell
Here, the strengths and the weaknesses of the Henkell company itself are analyzed. The opportunities and threats where the company has no influence at are also analyzed. At the end of the analysis there are given some recommendations and advises for improving the export policy of the Henkell company.
- The company can produce cheaper then companies in the rest of Europe. The wages and machine cost are relative low. The costs of other raw materials are also lower.
- They have recently invested in their winemaking facilities, so that they can make a wine that meets the standards of other winemaking countries such as France, South Africa and Spain.
- They are producing wine since 1959, so they have a lot of experience in the making of wine.
- The company has got his own vineyards. There is some influence on the grapes they use. Red or white grapes. This is import because white wine is drunk the most in The Netherlands.
- They are trying to make wine that meets the flavor that people from West Europe like. People in West Europe don’t like the strong wines from East Europe.
- The have a good director, who has helped the company surviving when the wine market in Hungary and Russia collapsed at the end of the eighties.
- The next problem is the lack of money that can be invested in the company or in advertising campaigns. Foreign competitors don’t have this problem and they can invest in advertising and the quality of their wines.
- It will be a big problem when the director leaves the company. Henkell is dependent from one single person and that’s not good
- The company has not enough experience with the European way of selling products.
- They don’t know how to handle with advertisements and price actions.
- There is no export plan.
- The language spoken in The Netherlands can be a problem. When the people of the company don’t speak English of Dutch beside the Hungarian language. Then it will be major problem to communicate with companies who want to sell the Hungarian wines.
- They have no reputation on the West European wine market, so they have to prove that they make good wines.
- When Hungary joins the European Union the possibilities to export wines and other products will be much simpler, because they don’t have to deal with regulations and import barriers. Other members of the EU can’t impose barriers on the Henkell wines anymore. When there aren’t barriers anymore it will be possible to sell the wines for a lower price and the wines will be more competitive. It will also be possible to sell the wines in all the countries of the EU without problems at the border of these countries.
- The will also support the Hungarian government. Hungary will receive money to improve the infrastructure and their economy. When the economy improves the income that the people have to spend will increase. he people on their home market will also be able to buy more wine.
- The EU will also support the company with money. They will give the company money to modernize their buildings and machines.
- People in West Europe are trying more and more flavors of wines from all over the world, because there are more and more brands of wines in the supermarkets. The number of people who drink wine is still increasing.
- There are problems with the exchange of the Hungarian value. Companies in Europe don’t want to accept the Hungarian currency, because this currency is devaluating more and more.
- They company can also expect problems with foreign companies producing wines. All these companies are already having a share of the wine market. Henkell must try to get a share of the market. They can do this with their low price. Competitive wines are Bordeaux, Languedoc and the Dutch House wines. Wines from countries outside the EU such as South African wines are also an increasing problem.
- Problems with European taxes for wines from outside the EU, this problem will be solved when Hungary joins the EU.
- When Hungary joins the European Union, then the Henkell company will have to deal with European regulations. They will have to adapt their wine quality and healthy norms to European standards. This might cost a lot of money and this money isn’t available for Henkell. Maybe will the European Union support the company when they want to improve their standards?
- The company can get problems with the image of products of East Europe. Most of the people think that these products are having the same quality as 10 years ago under the communism. It is important for Henkell to prove that the company has a good wine quality.
We think that the best way for Henkell to enter the Dutch wine market is to cooperate with a Dutch trading agent. Agents know the market very well . They know companies who could be very interested in Henkell wine. They know the Dutch language and they know the regulations of the EU as well as regulations of the Dutch government. Because agents know the Dutch market Henkell itself won’t have to contact Dutch wine traders. That is positive because Henkell does not know the Dutch wine market very well.
If Henkell sells their wine to a trading agent they won’t have to spend a lot of money for a market research, because that is the work of the trading agent. If Henkell sells their wine to a trading agent they won’t have to worry about the promotion of their products.
Another advantage to cooperate with a trading agent is that the trading agent knows how to introduce the wine on the Dutch market.
There is only one contact person and one purchaser and that is a big advantage. Henkell had to contact several companies and retailers to sell their wine if they wanted to introduce the wine on the Dutch market themselves. If the cooperate with an agent they only have to find one trading agent who is interested in their wine and that saves a lot of money and time.
If Henkell sells their products to one trading agent then their work is done.
The trading agent has to sell our wine to different Dutch wholesalers or maybe even retailers.
Because there is only one purchaser its possible to sell a lot of products at once and to deliver the products at one address. The disadvantage of cooperating with a trading agent is that Henkell wont get a view on the Dutch wine market.. If the wine turns in to the a big success in The Netherlands and Henkell wants to sell their wine themselves or even want to open a establishment in Holland that is maybe not possible because they have a contract with the trading agent.
Because of that it is very important that Henkell comes to agreement with the trading agent about the contract both parties will sign to cooperate with each other. A disadvantage of cooperating with a trading agent is that you don’t have any view what is happening with the products once you have sold them to the agent.
Another disadvantage is that agents are very expensive.
Even tough a trading agent is very expensive we still think that is the best way to get our wine on the Dutch Market. That is simply because Henkell has no experience with the Dutch wine market and it would cost a lot of money and time to get a good view on that market.
If it turns out that the Dutch consumers are not interested in the wine Henkell can pull back from the market more easily because it only had one purchaser of the wine, namely the trading agent.
The marketing mix
This chapter describes the marketing mix. Henkell must decide where the wine is sold, which wine they must sell and what the image off the wine must be. Other important things of the marketing mix are the promotion activities and the price of the product.
The most important thing for Henkell is to get a piece of the market share on the Dutch wine market. Henkell makes white en red wine. The wine is bottled in simple bottles.
The bottleling of the wine is done in Hungary. It could be from great importance that appearance of the bottle is from a high quality. That is possible if Henkell for example labels the bottles with three different labels. That way the wine is more likely to be noticed by the Dutch wine consumers.
The EU has strict labeling demands regarding to wine from third countries (such as Hungary).
The EU makes a difference between wine with a geographic indication and wine without that indication. Both demands are very important for Henkell.
The price is very important. That is because it puts the wine in a certain segment.
The Henkell wine will cost around 4 Euro (consumer price).
This is a model of an export price build up for the Henkell red and white wine:
As you can see the wine will cost around 400 Euros that is not very expensive for a quality wine such as the Henkell wine. The next schedule shows us a survey about the Dutch consumer profiles. The Henkell wine belongs in the premium Quality/Price-range because the consumer price is about 400 Euros. This price-range is growing and the basic price-range is stagnant.
We think that we can come with this price on the Dutch market, because 65% of the Dutch wine consumers buy their wine in a supermarket. We expect that we get a share of the market with this price.
The best place to promote the wine is in the store. You can do this by price actions. These actions must be hold in corporation with owners of the stores that they get interested and want to sell more of the Henkell wine. Other promotion actions are for example to invite reporters to write something about Henkell and being present at fairs. When the company has earned the first money, then it is possible to advertise in newspapers, at the Internet or in magazines.
The wine should be sold in supermarkets and in beverages stores. The people must see the bottles immediately. This is possible by putting the wine at the head of the helves or in the middle of the footpaths. Special actions must attract the buyers.
Article 1 Wine
The product that Henkell will sell to DC-products will be wine. The wine must be bottled and the bottles must contain labels that meet the European restrictions. Henkell must sell red and white wine.
Article 2 Quantity
DC-products must buy at least 15.000 bottles of white wine and 30.000 bottles of red wine each year. When DC-products don’t buy this quantity, then they must pay Henkell the money that Henkell should have received for the total amount of 15.000 bottles.
Article 3 Price
The price of the red wine will be 2 to10 Euro’s bottle and the price for the white wine will be approximately 1 to 90 Euros per bottle. When DC-products buys more then 40.000 bottles of red wine then the price pro bottle will be reduced to approximately 1,90 Euros per bottle. The price of white wine will be reduced to â‚¬ 1,70 when DC-products buys more then 22.500 bottles of white wine.
Article 4 Quality
The quality of the wine must be of medium class. The flavor of the wine must meet the flavor that the European wine drinkers prefer. So the wines cannot be too strong of taste. The wine must be made under the healthy constructions from the EU and The Netherlands. Henkell must adept the machines that don’t meet these restrictions.
Article 5 Supply conditions
Henkell must supply DC-products of wine when they ask for this. When Henkell can’t supply the wine in time, then they have to pay a fine. Henkell must also take care for the transport. Damage to the bottles that exists during the transport must be paid by Henkell and they have to replace the broken bottles also.
Article 6 Guarantee
Henkell is responsible for the wine from producing till the consumers drinks the wine. Henkell must replace inferior bottles and bottles broken during the transport of the wine. Henkell must also pay fines laid up by the EU when the wine or the production doesn’t meet the EU restrictions.
Article 7 Jurisdiction
The jurisdiction that both parties use is the EU jurisdiction. The EU jurisdiction will be used for problems in The Netherlands. Problems in Hungary will be solved with the Hungarian jurisdiction. The EU jurisdiction will be used for all the problems in both countries when Hungary joins the EU.
The Dutch wine market is still growing especially since more young people are drinking wine instead of beer. Most of the Dutch wine drinkers prefer red wine, so Henkell can best sell red wine. The Hungarian white wine of Henkell will also sell good in The Netherlands because of the unique flavor. The combination of red wine that sells well and the less selling white wine with a better taste is ideal. There are some competitors from countries like France and Spain. Beer producing companies can become competitors too.
Henkell must also cope with the agricultural policy of the EU. They protect countries inside the EU by imposing barriers on products from outside the EU. In some years Hungary will also join the EU. The problem of the barriers is then solved, but then they must cope with restrictions from the EU. The advantage of the EU is that they can support the company financial.
Marketing Policy/ Market Entry
The Dutch market can be entered the best when they sell to a Dutch importer. Henkell just sells his products to the importer. He sells the products to the Dutch customers. This way Henkell uses the knowledge of the importer by letting him choose where to sell their wine.
The importer that we chose is DC-products. This company imports Hungarian products and has the knowledge of pricing and distribution within The Netherlands.
The bottles are luxurious. There are three labels on and are sent in a nice box. This way they can attract the eye of the customers. The price of the wine also indicates that is a wine of class and taste.
When the company prepares itself better for exporting their wine, then it will be possible to gain a market share in The Netherlands. The combination of selling the good selling red wine and the tasty white wine makes the Dutch market a good market to export to. The company we chose for Henkell to export to is a large company with a lot of knowledge of the Dutch market. This market is still increasing so there are enough of opportunities for Henkell to gain a great market share. Another problem is the foreign currency. But this problem will resolve when Hungary joins the EU and also uses the Euro.