Group Activity: Competitive Analysis and Opportunities in the Marketplace of Coconut
Wine using Porter’s 5 Forces of Analysis
Location: New York, U.S.A
The global wine industry has been rapidly growing, over 300 billion USD at the end of
2017 according to Apnews. The Asia Pacific markets are trying to catch up with market leader
which is North America where New York city is located. Moreover, according to Apnews it is
expected that the industry will keep on posting significant growth as the demand for wine
continues to grow. Coconut wine originated from a different country and was imported to the
United States. It is actually called Tuba or Lambanog in the Philippines, a fermented beverage
that is alcoholic and created from sap of various species of Palm tree.
Using Porter’s Five Forces:
a.) Threat of New Entrants
The threat of new entrants for coconut wine is moderate, although the wine industry is
easy to penetrate because the industry capital in equipment and initial investment in land
requirements are low. The access to distribution channels can be a challenge for lower brands
but the wine market is very accessible for brands that are known in the industry.
b.) Threat of Substitute Product/Services
The threat of substitutes for Coconut wine is high because other alternative beverage
products are available in retail stores in New York. The buyers or consumers are more likely to
swap wine beverages for another alcoholic beverage or non-alcoholic beverage if the cost of
coconut is high. Product substitutes for coconut wine such as beer, gin, whisky, ale, spirits, coke
and juice shows a risk to the industry. These substitutes come in variety, different sizes, and the
cost is either similar or cheaper than the average price of coconut wine.
c.) Bargaining Power of Buyers
The consumption of alcoholic beverages there in the United States is very in demand
and at large. Being said, not only did it become a necessity, they had also already made it a part
of their culture. Statistically, the top three alcoholic beverages consumed there in the US are
Whiskey, Rum, and Vodka. By putting up Coconut Wine in the market conversation, it would be
very hard to compete with the marketplace given the fact that there are already a lot of existing
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products that are already established and have brand equity. Plus, alternative products are
easier to acquire. Since bargaining power of buyers is also high, people would prefer products
which they are already familiar with.
d.) Bargaining Power of Suppliers
In the United States, alcohol is almost part of their daily lives. They drink alcoholic
beverages if there are celebrations, parties and even during ordinary days.
Since there are a lot of brands of alcoholic beverages that are being sold in the market in
the United States, specifically in New York City the bargaining power of suppliers of Coconut
wine would be low. They cannot dictate their price since they will enter into a market which
already has a lot of existing products. Aside from that is Coconut wine is not yet well known, and
they don't have a strong brand name in the United States. So customers will tend to buy or
purchase alcoholic drinks that are well-known and are familiar to them. Therefore, for us, the
bargaining power of suppliers is low.
e.) Rivalry among Existing Competitors
The rivalry among existing competitors is high, New York is the third largest wineproducing state in the country after California and Washington according the New York Upstate.
New York has over 2000 wineries existing and a high number of competitors suggest that the
price competition is very high with substantial consolidation of known brands. Big companies
such as Constellation and Gallos are buying smaller wineries to push small manufacturers off
the charts. These large producers have over a hundred wine brands in their brand portfolios.
f.) Conclusion
Based on our analysis, we do not recommend putting up a coconut wine business in
New York, USA. The porter’s five forces analysis showed that it would not be ideal to establish
the business because even though the new entrants in the industry is moderate only, other
factors in our analysis have indicated negative for entering the wine industry. Moreover, the
issue in the wine industry is the consolidation of buyers and distribution.
References:
America's most popular liquor brands. (2015, April 23). Retrieved September 21, 2020, from
https://edition.cnn.com/2015/04/23/living/gallery/top-liquor-brands/index.html
https://sites.google.com/site/lucasmichaelbeiswenger/Home/projects/porters-five-forces
https://studybay.com/blog/five-forces-analysis-of-us-wines-industry/
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http://issaasphil.org/wp-content/uploads/2020/02/J-Issaas-v16n2-Dcember-2010-FullJournal.pdf#page=42
https://www.newyorkupstate.com/wine-tours/2020/01/how-big-is-new-yorks-wine-businessinside-the-numbers.html
https://www.researchandmarkets.com/reports/4756796/global-wine-industry-porters-five-forces
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