MBA 523: International Marketing

SUMMARY REPORT

The Market Situational Analysis of Canada’s Inniskillin Ice Wine in

Vietnam

Section: S20N70
Team: B (Vietnam)

Members: Ziyuan Nie

Sanjay Kaithavalappil Ajayakumar
Alisha Chopra

This report is submitted in partial fulfillment of the requirements of

the course International Marketing MBA 523, Spring 2020

Faculty of Management
Vancouver Island University
Nanaimo, BC, Canada

(February 5, 2020)
 TABLE OF CONTENTS
Page
1. Introduction 1

2. Current Market Situational Analysis of Ice Wine Market in Vietnam 2

2.1 Market Size Potential and Opportunity 2
2.2 Target Buyers and Their Characteristics of Inniskillin Ice Wine 3
2.2.1 Demographic Characteristics 3
2.2.2 Psychographic Characteristics 3
2.3 Level of Competition 3

3. Critical Market Environmental Forces Affecting Inniskillin Ice Wine in Vietnam 4

3.1 Domestic Preference of Beer over Wine in Vietnam 4
3.2 Wine Market Dominated by a Few Domestic Producers 4
3.3 Limited Advertisement for Alcohol in Vietnam 4
3.4 Presence of Counterfeit Wines in the Market 5
3.5 Limited Knowledge of Ice Wines 5

4. Recommendations to Cope with Market Environmental Forces in Vietnam 5

5. Conclusion 6

References
 1

SUMMARY REPORT
The Market Situational Analysis of Canada’s Inniskillin Ice Wine
in Vietnam

1. Introduction

According to Telfer and Hashimoto (2000), Jones and Hirasawa (2005), Pickering and Inglis
(2012) and Ierfino-Blachford (2019), the Inniskillin winery was established in 1975 in Niagara
on the lake area by Karl J. Kaiser and Donald J.P Ziraldo. It was in 1984 when Inniskillin started
selling ice wine, an alcoholic dessert beverage. The key to Ice wine production is to pick, press
and extract frozen grapes when the first deep frost between December and February. It is valued
because of its sweetness, intensity of aroma, rarity, and purity. The Inniskillin ice wine won
many awards and gradually gain fame with purchasers and worldwide consideration. Ice wine
became critical for generating large revenues and helped in initiating international trade for
Canadian wines (Pigeau, Bozza, Kaiser, & Inglis, 2007). In Vietnam, wine is regarded as one
of the fastest-growing purchaser markets in the emerging economy. Dalat wine is the most
famous brand among the local wine brands in Vietnam (Le, L Nguyen and V Nguyen, 2013).
Based on the Canadian Ice Wine Exports report, an average of 521 Liters amounting to 80,000
CAD has been exported to Vietnam (Canadian Vintners Association, 2018).

The purpose of this report is to analyze the influence of how the relevant market environmental
forces that are uncontrollable to the company can critically influence Inniskillin Ice Wine in the
Vietnam market.

This report is organized into 5 sections: Section 2 provides an overview of the current market
situation of the wine market in Vietnam and its characteristics. In Section 3, the impacts of
external uncontrollable forces on Inniskillin Ice Wine in Vietnam such as the domestic
preferences of beer over wine in Vietnam are analyzed and presented. Some discussions and
recommendations for the company to cope with these external uncontrollable forces in Vietnam
are provided in Section 4 of this work. Finally, the major conclusive findings in this study are
summarized in Section 5.
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2. Current Market Situational Analysis of Ice Wine Market in Vietnam

2.1 Market Size Potential and Opportunity

According to Euromonitor International (2019), most of the Vietnamese consumers choose beer
over wine due to its affordable price and befits Vietnamese cuisine. Wine is a smaller category
compared to beer. Wine market volume is estimated to be 45 million liters annually.

The recent trends have shown an increase in the influence of western culture in Vietnam through
exposure to globalized media and communications (Tam, Doran, Hill and Dune, 2012; Lincoln,
2016; Jordan, Graham and Vinch, 2013). Consumers seek brands with credibility and quality
at a reasonable price (Lee and Nguyen, 2017).

Le et al. (2013) observed that wine is considered one of the fastest-growing consumer markets
in Vietnam. The revenue from Wine sales has shown growth in the past five years with a total
of 488 Million USD in 2018 (Euromonitor International, 2019). The average year to year total
volume growth of Wine sales in Vietnam is 4.8% (Euromonitor International, 2019).

The domestic wine brands dominate the industry with competition from wine brands imported
mainly from France, Chile, USA, Italy, and Australia. The French wine is the favorite among
imported wines followed by Chilean wine and Italian wine (Euromonitor International, 2019).

Ice wine is not popular among the Vietnamese population due to its high price and limited
availability. Canada exports ice wine to Vietnam but the volume of export is on an average of
521 liters per year with only 57 liters exported in 2018 (Canadian Vintners Association, 2018).

The wine market in Vietnam can be segmented based on the country of origin. There are two
broad classifications based on country of origin namely domestic wines and imported wines.
Domestic wines are produced and marketed in Vietnam whereas imported wines are produced
elsewhere and exported to Vietnam. Inniskillin Ice Wine will be categorized under the imported
wines category.
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2.2 Target Buyers and Their Characteristics of Inniskillin Ice Wine

2.2.1 Demographic Characteristics

The target buyers for Inniskillin Ice Wine based on demographics would be the high-income
population of the country who are in the age group of 25 to 40 and resides in cosmopolitan
centers or affluent urban cities like Ho Chi Minh and Hanoi. They mostly have a high level of
education and are entrepreneurs or businessmen.

2.2.2 Psychographic Characteristics

Based on psychographic characteristics, the target buyers would be people in Vietnam who
prefer a Canadian sweet wine as dessert and who are mostly influenced by the western culture.
People who have an interest in the provenance of wine and display connoisseur for wines and
like to socialize in gatherings and parties would also make the target buyers. The other group
includes people who are image seekers and values wine to be of a status symbol and enthusiasts
who like to entertain at home with their friends.

2.3 Level of Competition

The wine industry in Vietnam is fragmented and the domestic manufacturers dominate the
market with a commendable presence of foreign rivals as well. The industry is highly influenced
by western superiority wherein people have a belief that imported products, especially from
western countries, are superior over the domestic goods.

Within the fiercely competitive market environment, two large domestic corporations namely
Thang Long Liquor JSC and LamDong Foodstuffs JSC enjoy over 30% of the total market
share (combined). Thang Long tops the list with 20.3% of the total volume sales (Euromonitor
International, 2019).

Thang Long’s strength is its high-quality product at affordable prices which makes it the leader
in the western superiority influenced market. Thang Long uses fermented products from
tropical fruits like strawberries, plums, and coconuts to produce wine which is its unique selling
point of wines. The major selling brand from Thang Long is the Vang Thang Long red wine.
 4

LamDong has inherited the French winemaking know-how and brought it into Vietnam in the
19th century. Its wine brand, Dalat, is the best-selling wine in Vietnam. They produce wine in
the country with a local grape named ‘Cardinal’. LamDong markets its wines as world standard
wine with a touch of beauty from Dalat, one of the most beautiful cities in Vietnam.

The best-selling imported wine is JP Chenet of French origin. It enjoys a share of 2.6% among
the notable selling wine brands in Vietnam.

3. Critical Market Environmental Forces Affecting Inniskillin Ice Wine in Vietnam

This section details various external uncontrollable market environments that would affect the
marketing mix elements of Inniskillin Ice Wine in Vietnam.

3.1. Domestic Preference of Beer over Wine in Vietnam

People in Vietnam favor beer over wine due to its easy availability in the market and
comparatively lower price. The beer consumption in Vietnam is over 4.5 billion liters per year
compared to wine consumption of 45 million liters.

3.2 Wine Market Dominated by a Few Domestic Producers

The Vietnamese wine market is fragmented and is dominated by domestic producers. The
distribution network in Vietnam is weak for imported wines. There are very limited distributors
of imported wines present in Vietnam so it will be difficult for Inniskillin to establish a base
and make its product reach all potential buyers.

3.3 Limited Advertisement for Alcohol in Vietnam

The Vietnamese government currently bans advertising on wine and spirits with alcohol content
of higher than 15% and very limited advertising for those less than 15% alcohol content.
Inniskillin would face difficulty in advertising their products with these limitations. It is also
observed that the distributors of imported wines do not spend on advertisements to boost sales.
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3.4 Presence of Counterfeit Wines in the Market

The Vietnamese market has seen a recent surge in counterfeit wines in the market. The
counterfeit wines are difficult to identify as the bottle, label and almost all the features are
identical to the authentic product. Inniskillin would face difficulty in controlling the flow of
fake ice wines in the market. Also, fake foreign wine made it difficult to collect statistical data
on import foreign wine sales.

3.5 Limited Knowledge of Ice Wines

Ice wine is relatively new to the market and not so popular in Vietnam. The basic knowledge
of ice wine is limited among the people. Consumers prefer to purchase wine from supermarkets
as opposed to wine shops as there is less pressure to have a superior knowledge about wine.
The local sales staff will also not be fully equipped to provide necessary information to the
consumers and advise them on various benefits and distinguished features of ice wine.

4. Recommendations to Cope with Market Environmental Forces in Vietnam

Product

Design and packaging of the product is an important factor as the Vietnamese pay attention to
these attributes, Colors such as red and yellow are good to use on packaging since red
symbolizes celebration and yellow depicts wealth and prosperity. The packaging should have
information in the Vietnamese language as people seldom speak English. The government
regulations make it compulsory for the product label to specify details like quantity, ethanol
contents, expiration dates, and warnings. Introducing Inniskillin holograms, which are difficult
to imitate, on the packaging to maintain the authenticity and to distinguish the product from
counterfeits.

Price

Since the target customers of Inniskillin is the high-income group of the society, the
psychological pricing strategy should be adopted. Higher-priced products is perceived to have
higher quality and a feel of luxury. Inniskillin can explore discount programs at regular intervals
to attract upper-middle-class income groups as well to increase their customer base.
 6

Promotion

Inniskillin can be introduced and promoted to people by organizing wine events or in special
events like fairs, festivals, cultural and industrial events. To attract consumers and make the
beer consumers to think differently, public wine events can be organized, which would create
awareness among people, attract attention, and build brand value.

Inniskillin ice wine can also be promoted with advertisements like in-store tasting of wine at
supermarkets or attending retailers wine clubs to present their wines as this reduces the risk for
the consumer by trying before they buy.

Being a new destination for tourists, Vietnam has seen opening of high-end restaurants, hotels,
and resorts. Inniskillin can target these luxury hotels to sell their ice wine as most of the high-
income group will be dining here.

Distribution

Vietnamese have limited infrastructure and distribution channels, although these are improving
steadily. It is important to choose a local agent who has in-depth market knowledge to directly
distribute and market the ice wine to the local market. They should also nurture new local
distributers with experience and market knowledge of the country.

Inniskillin can also explore a joint venture with the specialists in distribution and marketing to
advertise and sell ice wine. Working with a local expert or business partner will help save time
and money and help in boosting sales.

5. Conclusion

The study analyzes the wine market in Vietnam and the various uncontrollable external factors
affecting Inniskillin ice wine in Vietnam. The wine industry in Vietnam, even though a
miniature industry in comparison with other alcoholic beverages like beer, is a fast-growing
consumer market in Vietnam. The industry is dominated by local players with two of the local
brands holding over 30% of the total market share. The market was segmented based on the
country of origin of wine and Inniskillin would fit into the imported wines segment. The most
focused target buyers were the high-income population of Vietnam. Various factors affecting
 7

Inniskillin in Vietnam were discussed. The preference of people on beer over wine and the
fragmented market with domestic domination resulting in a limited number of distributors were
found to be the critical factors. Limitations for advertising, presence of counterfeit wines and
lack of knowledge in wine were also found to be uncontrollable factors. The recommendations
to overcome these factors were discussed. It was recommended to introduce promotional
strategies to make people aware of the brand and its advantages. It was also recommended to
set up trade relations with domestic producers and to nurture new distributors who can penetrate
the market with their knowledge and customer base.

Word Count: 1989

References

Canadian Vintners Association (2018), Canadian Icewine Exports 2014-2018, Exports of

Canadian ice wine, Canada: Ottawa.

Euromonitor International (2019), Wine in Vietnam.

Ierfino-Blachford, L. (2019), Starting Small: How Icewine Diffused in the Mature Canadian
Wine Field, Canadian Journal of Administrative Science.

Jones, G. and Hirasawa, J. (2005), Inniskillin and the Globalization of Icewine, Harvard
Business School, pp. 805-129.

Jordan, L. P., Graham, E., and Vinh, N. D. (2013), Alcohol use among very early adolescents
in Vietnam: what difference does parental migration make, Asian and Pacific Migration
Journal, 22(3), pp. 401-419.

Le, N., Nguyen, H., and Nguyen, T. (2013), National identity and the perceived values of
foreign products with local brands the case of local wine in Vietnam, Asia Pacific Journal of
Marketing and Logistics, 25(5), pp. 765-783.

Lee, J., and Nguyen, M. J. (2017), Product attributes and preference for foreign brands among
Vietnamese consumers, Journal of Retailing and Consumer Services, 35, pp. 76-83.

Lincoln, M. (2016), Alcohol and drinking cultures in Vietnam: a review, Drug and Alcohol
Dependence, 159, pp. 1-8.

Pigeau, G. M., Bozza, E., Kaiser, K., and Inglis, D. L. (2007), Concentration effect of Riesling
Icewine juice on yeast performance and wine acidity, Journal of applied microbiology, 103(5),
pp.1691-1698.

Ripmeester, M., Mackintosh, G.P., and Fullerton, C. (2013), The World of Niagara Wine.
Wilfrid Laurier University Press, USA: Ontario.

Tam, N.M., Doran, C.M., Hill, P.S. and Dunne, M.P. (2012), Alcohol reform in Vietnam,
Applied Health Economics and Health Policy, 10(5), pp. 285-287.
Teller, D. J., and Hashimoto, A. (2000). Niagara Icewine Tourism: Japanese Souvenir
Purchases at Inniskillin Winery, Tourism and Hospitality Research, 2(4), pp. 343–356.