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					Case Analysis: Willamette Valley Vineyards




            Jorgen Gilbertson
             Linzie Reynolds
              Tiffany King
            Josh Habersetzer
               Huanlan Lei

              Business 499

                 5/14/09
                                                                                      Willamette Valley Vineyards 2


CHAPTER                                                                                                                       PAGE
Executive Summary ........................................................................................................ 3
PEST Analysis ................................................................................................................ 3
Five Forces ...................................................................................................................... 6
Key Success Factors ..................................................................................................... 11
Beverage Industry Value Chain .................................................................................... 13
Financial Forecasts........................................................................................................ 15
Willamette Valley Vineyards ........................................................................................ 22
     Resources .......................................................................................................... 25
     Capabilities ....................................................................................................... 25
     Value Chain ...................................................................................................... 27
     Core Competencies ........................................................................................... 29
Jones Soda..................................................................................................................... 31
     Resources .......................................................................................................... 31
     Capabilities ....................................................................................................... 32
     Value Chain ...................................................................................................... 33
     Core Competencies ........................................................................................... 34
Constellation Brands ..................................................................................................... 35
     Resources .......................................................................................................... 35
     Capabilities ....................................................................................................... 38
     Value Chain ...................................................................................................... 39
     Core Competencies ........................................................................................... 42
Redhook Brewery ......................................................................................................... 43
     Resources .......................................................................................................... 43
     Capabilities ....................................................................................................... 45
     Value Chain ...................................................................................................... 47
     Core Competencies ........................................................................................... 48
Coca-Cola ..................................................................................................................... 49
     Resources .......................................................................................................... 49
     Capabilities ....................................................................................................... 52
     Value Chain ...................................................................................................... 54
     Core Competencies ........................................................................................... 56
Strategic Recommendation and Implementation .......................................................... 58
     Strategy 1: Improving Distribution ................................................................... 58
     Strategy 2: Company Merger ............................................................................ 60
     Strategy 3: Brand Revitalization ....................................................................... 61
Timeline ........................................................................................................................ 65
Conclusion .................................................................................................................... 66
References ..................................................................................................................... 67
                                                             Willamette Valley Vineyards 3


EXECUTIVE SUMMARY
Case Analysis: Willamette Valley Vineyards
        It has been said, the easiest way to make a small fortune is to invest a large
fortune into a winery. While this is comical, it is true for many start up wineries. The
industry is saturated, and winemaking is by no means a new process. It is becoming
increasingly difficult to not only develop wines that differentiate enough to stand out, but
taste and keep well. Even though Willamette Valley Vineyards has withstood the trial of
time, we will examine Willamette Valley Vineyards using the PEST and the Porter‟s five
forces of competition model, key success factors, industry value chain, and financials.
Additionally, we will compare Willamette Valley Vineyards to its competitors using each
company‟s resources and capabilities, value chain analysis, and core competencies.
Upon completing the various analyses, we believe that implementing a three separate
recommendations that increase Willamette Valley Vineyard‟s ability to create higher
demand for their product. As it will be shown, Willamette Valley Vineyards has recently
expanded, and their production potential has gone up as much as 50% in the last 2 years.
Because Willamette Valley Vineyards now has the ability to increase production, they
now need to focus on stimulating demand in the market. Our recommendations are,
improving distribution, developing a company merger, and revitalizing the current brand
image. If these recommendations are followed, we believe Willamette Valley Vineyards
will continue expand and grow in current, national, and even international markets.

Background
        Willamette Valley Vineyards was founded by Jim Bernau in 1983, and is
headquartered in Turner, Oregon. They currently offer eight different wines, and went
public on September 19th, 1994. They offered an opening price of $5.00 and closed that
day at $5.75. Their last trade as of today (5/14/2009) was $3.34. There are 94 full time
employees, and had $16.048 million in revenue during 2008.




PEST ANALYSIS
Political and Legal Segment
         The wine industry produces one of the few products which the government has
had a past of heavy involvement concerning its distribution. As of today, the wine
industry must work with the three tier system established by the government after the
prohibition act. Its purpose was to control the distribution of wine and keep the
Prohibition Act being reinstated.
         The three tier system was created to mandate that the manufacturer of the
alcoholic beverages must sell to only wholesalers, and in turn wholesalers can only sell to
retailers. Each state which the producers are located have set up their own specific
details, that way, the state can more easily track the distribution chain of the product. This
system of checks and balances eliminates the economic incentive for illegal
manufacturing, diversion and distribution of alcoholic beverages. Also, consumers
                                                            Willamette Valley Vineyards 4


benefit from the healthy competition and facilitation of a wide selection of brands in the
marketplace.
        In Oregon specifically, the three tier system is also joined with the “tied house”
laws. The three tier system regulates the distribution of the product from the
manufacturing to the wholesaler and the retailer. The tied house laws prohibit
manufacturers from having any financial or ownership interest in a retail establishment.
This benefits the market and the consumer by creating a more competitive market which
in turn lowers the price for the consumer. The wine industry in Oregon must also work
with the Oregon Liquor Control Commission as they enforce the liquor laws and
licensing.

Economic
        The wine industry is typically a very lucrative industry no matter what the current
economic treads seem to be doing. Historically we have been shown that the alcohol
industry does not typically suffer when tough economic times come about. People seem
to always be willing to purchase alcohol during tough times, one reason given for this is
that people are trying to drink away and forget the current financial problems that they
may be facing. This does not mean that the wine industry does not take any hits during
tough economic times, but it can be said that they are able to remain more constant.
        Because the alcohol industry is mostly recession-proof doesn‟t mean that
adjustments don‟t need to be made. During more difficult financial crises, individual
buyers no longer choose to purchase the more expensive wines; instead they choose to
purchase the cheaper types of wine. Surprisingly they still spend the same amount of
money on wine as they did before the recession. According to the executive director of
the Washington Wine Commission Robin Pollard “rather than buying a $60 bottle, they‟ll
buy three $20 bottles.” This is a good thing for the wine industry because it allows
wineries to at least maintain the same level of sales that they had been making in the past.
What really causes problems for the wineries is the level of sales seen by restaurants.
        When in a recession, one of the first things people begin to cut back on is going
out for dinner and order expensive meals. This typically means that instead of ordering a
glass or bottle of wine, people choose to drink water or soda. It is this area in which
wineries will begin to feel the pinch and are forced to make changes in their production.
One way to combat this is to make their individual purchases more lucrative. Wineries
are doing this by switching to different corking systems.
        These companies are now choosing to use screw tops which are a little cheaper to
produce. Besides this, other wineries are switching to a mirco-granule cork, which is
nothing more than a cork made from recycled corks. This saves five cents a cork which
really adds up when you are bottling thousands of bottles a day.
        During the 2008 year the US wine industry generated $27.1 billion in total
revenues. This represents a total annual growth of 3.4% from 2004 to 2008. Despite this
past growth, we are no longer experiencing the same economic conditions that we had
during those years. Currently it is predicted that the US wine industry is anticipating a
deceleration within the next five years due to the recession that we are in. The industry is
predicting that the annual growth will decelerate to 2.9%. Wineries within the state of
Washington might experience a slight decrease like the entire US industry is predicting
                                                             Willamette Valley Vineyards 5


but most Washington wineries are saying that they will come out of the recession just
fine.

Sociocultural Segment
         The Social segment of the PEST analysis is used to scan an environment by
focusing on the target market‟s culture, diversity, age, class structure, religion, attitudes,
and interests. Within the wine industry, a unique type of culture is bred. The age range of
this target market can only begin at the legal drinking age. The culture often depends on
where the wine was produced. There is the “French wine culture,” the “Chinese wine
culture,” the “local wine culture,” etc. Within each culture, there are various qualities that
the wine industry can offer at different offer. For example, the local wine culture may
choose to offer a low quality and low cost product to the target market age group of 21-
25 when budgets are tight yet the culture is still desirable. The local wine culture may
also choose to offer a high quality and high cost product to the target market age group of
40-50 where a more particular pallet is found. Whatever the target market the wine
industry chooses the culture influences the relationship building the wine industry has
with its consumers.
         The class structure also is important to the wine industry‟s scan of the
environment. The purchasing power can influence the amount the wine industry can
saturate each market. A market with a low purchasing power may see the product the
wine industry produces as a luxury item that is frivolous to buy when more important
products such as food and clothing are needed. A market with a high purchasing power
seeks the luxury items and does not consider them as frivolous but more of a necessity.
         The wine industry bears a controversial burden concerning the cultures of the
target markets. Sometimes for religious reason, alcoholic beverages are banned outright
or their consumption is limited. The wine industry may also not be popular in
competition with its other beverage competitors such as the hard liqueur industry or the
beer industry. The importance of scanning the culture of each market can help identify an
opportunity or threat for the wine industry.

Technological
        The art of making wine is something that as not changed since its conception
thousands of years ago. The ways in which it is done has changed though, since new
technologies have come forward, the process of wine making has continually become
more automated.
        The first piece of technology that is used when producing wine is the gathering of
the grapes. For centuries the harvesting was all done by hand. Hundreds of employees
would walk among the grape vines and cut the grapes off the vine. Many wineries still
practice this type of harvesting. They suggest that doing this part by hand adds to the
quality of the wine. Other wineries have switched to an automated harvesting of the
grapes. Instead of picking them by hand a machine is driven through the vineyard and
cutting and collecting the grapes. This automated process allows for faster harvesting,
and doesn‟t require as many people to be involved in the harvest.
        Once the grape vines have been picked, they are placed into large vats in which
they are crushed under hydraulic pressure. This process is much improved when
compared to the way it had been done in the past. Many years ago when such machinery
                                                           Willamette Valley Vineyards 6


was not available, the grapes were crushed by large stones. While the large stones were
seemingly effective, when compared to the equipment used today, the stone process left a
lot of juice in the grapes that our modern machinery can now extract. With the incredible
force that hydraulics are able to create, wineries are able to maximize the amount of juice
they are getting out of the grapes.
         After the grapes have been crushed and the juice is collected, the juice is then
moved into large fermentation tanks. Here yeast is mixed into the juice to create wine.
This is where all sorts of things are done to the wine depending on what type of wine is
being produced. Each winery has their own recipes which makes their wines different
than their competitions. Some wineries choose to add things to the wine to increase or
change the flavor or alcohol content. In short, the fermentation process begins with
heating the wine so that the yeast can ferment, creating alcohol. Much like the previous
process, fermentation can differentiate between wineries. For example when a winery is
producing a red wine, the fermentation process takes place in large oak kegs; this is to
enhance the taste of the wine. White wines are fermented in large stainless steel kegs.
After the wine is left to ferment for a couple days, the wine enters the second part of the
fermentation process.
         The next piece of new technology that the wine comes in contact with is the
pasteurization machine. This machine simply heats the wine up to kill microorganisms
that have formed within the wine. The pasteurization process is not used for all wineries,
but varies depending on each wineries preferences, as well as state and country
regulations.
         Once the wine has been pasteurized it is moved to the bottling facility. This is
one of the biggest technological advancements the wine industry has seen in recent years.
Before this machinery was created, a bottle would have to be filled, corked and labeled
by hand. Today very little is done by hand. Wineries today can bottle thousands of
bottles with this new technology. Wine is pumped through pipes to this facility where
bottles wait on a sort of conveyer belt. Machinery takes empty bottles through one
continuous process that fills the bottle with the correct amount of wine. The bottles are
then moved to the corking machine where they are sealed until consumption by the
consumer. The now filled and corked bottle is moved again to another machine where a
label is placed on the bottle. From here the wine is then moved to the end of the process
where a person packages the wine. At this point the wine can be sold or placed in a cellar
where it can continue to age.




PORTERS FIVE FORCES
1. Threat of New Entrants
                The wine industry is one industry that sees a lot of possible new entries.
Currently Oregon‟s wine market has not been saturated but that does not mean that his
will change in the coming years. For example look at Washington which is a very strong
competitor when it comes to producing wine. Washington alone has 602 licensed
wineries that produce wine for both Washington as well as for its surrounding states. This
is an increase of nearly 300 percent in just a decade. Oregon does not have nearly as
                                                             Willamette Valley Vineyards 7


many wineries but it is still very susceptible to the same things as Washington‟s wine
industry. Washington and Oregon wine country are in a tuff place due to the fact that
wineries are beginning to look at what are considered non-typical locations. This means
that new possible competitors are beginning to move up to Washington and Oregon in
order to get away from the extremely oversaturated market in California. (Richard)
         Low costs are also driving the creation of newer and newer wineries within
Washington and Oregon. Compared to many other industries it is very easy to start a new
winery if you can afford it or get enough investors. The initial costs that are associated
with starting a new winery depend on the amount of wine that you are producing and
selling. On average the initial start costs of a small winery that is only producing 2000
cases only costs $560,893.97 while a much larger winery that would be producing 20,000
cases would cost $2,339,108.87. Now investors are willing to place their money into
wineries because after the initial setup they would begin to see a positive gain within two
years. According to market averages a new winery at the 2000 cases level would begin to
see positive numbers in year 2, the investors would have also made back their initial
investment back within a very short time frame. (Fickle)
         The economy is another aspect that helps to heighten the threat of new wineries;
that is because in tuff economic times the alcohol and wine industries seem to get through
these times untouched. Reasons for this are tied directly to the fact that people are staying
home more often in order to save money. Instead of going out for dinner people are
deciding to stay home, even thought they are staying home for dinner they still want to
feel as if they are out at a nice dinner so they will purchase wine at a store. Now they will
not go out and purchase a $100 dollar bottle of wine for these occasions but they are still
willing to spend $100 on wine. Instead of buying one bottle they will purchase multiple
bottles of wine that will add up to $100. So the fact that even though we are going
through tuff economic times yet the wine industry goes untouched adds to the threat of
possible new entries because the risk of failure during these tuff times is not as high as
other markets. (Gore)

2. Bargaining Power of Suppliers
        The increase and decrease of a products‟ price and profit ratio starts with the
supply of the raw materials used to create such product. A supplier of raw materials, or
as we refer to it, the supplier, has the ability to change the price and quality of a
companies product outside the control of the company itself. The suppliers have the
ultimate control in exerting power over the firms that use their product as a raw material,
and controlling the competition in a market.
        The supplier group is most powerful the when there are a few large companies
that work in a more concentrated market. If the substitute raw materials are not
satisfactory to what the producer needs, then the supplier gains more control. The
credibility and of a suppliers goods also gives the firm control because like in the peanut
scare, consumers shy away from raw materials that may not be of the quality they expect.
The inability to switch suppliers or raw materials at all or at a low cost, gives the supplier
firm some of the most power they can ask for.
        Wineries are fortunate in some regards because they are their own suppliers of
most of the raw goods that they use to produce their wine. The only outside raw
materials that is needed to the production of wine is the glass for the bottle, cork for the
                                                              Willamette Valley Vineyards 8


corks, sugar, acid, nutrients and yeast. The raw materials in wine that the wineries
produce are the grapes and the clay used as part of the filtration process. Wine is one of
the few beverages out there that does not require water to be added to it. Water is one of
the most expensive and variable raw materials that can be used. Some of these variables
can be where the water is sourced from, how it is filtered, the process in which it is
filtered, and packaging. With wine being such a sensitive product, it has fewer variables
like water negatively affecting it.
         The raw material supplier that has the most ability to change the cost and value of
a wine is the cork. Cork is grown in Mediterranean forests in Spain and Portugal. It
takes a tree 25 years to be mature enough for harvesting. The process of treatment for
each cork is long and extensive. There are many points throughout the process that are
expensive and time consuming. These processes require highly trained employees. The
limitation of not being able to quickly produce corks changes the available supply and
price as the demand increases. Willamette Valley Vineyards does not use the alternative
corking options, metal twist caps or plastic corks, because they strive to maintain as green
a product as possible. They support a cork recycling program with local grocery stores
which allows for a more sustainable use of the raw material. This partnership with the
grocery stores frees them to be less reliant on the cork producers for new corks.
         The other raw materials used for wine production are common enough raw
materials that an individual supplier does not has as much clout in controlling the price of
the end product. Granted, when there are sugar embargos, or an increase in taxation of
sugar, the ability to produce the wine and the end cost will be significantly affected.
Glass that is used the production of wine bottles are predominately recycled, and glass
bottles do not come in different varying grades of quality. The only factor that changes is
the color of the glass and how well it reflects and stores light, which can change the
fermentation and quality of the wine. The acids used in wine making are citric, malic and
tartaric in crystalline form that is added before the first round of fermentation of the wine.
Because these are chemicals that are used in so many other products that we consume, the
market for the product is too saturated for the supplier to be able to gain any pricing
control.
         The wine making industry is fortunate to produce a product that is not easily
controlled by outside suppliers. They have the most control possible in growing,
harvesting, and controlling the quality of their wine grapes. There are always unforeseen
risks in growing a product, such as weather changes, water quality changes, and soil, but
the wine making industry has the ability to not be completely controlled by their raw
material suppliers. This is a luxury which many other industries do not enjoy.

3. Bargaining Power of Buyers
        The bargaining powers of buyers have the ability to drastically influence the
production and profitability of a firm‟s product. A buyer or buyer group controls the
demand of a product with their purchasing power. Buyers seek the lowest possible cost
while simultaneously searching for the quality and service that they desire. On the
flipside, firms strive to sell their product at the highest possible price to gain the largest
profitability. To achieve the lowest cost, buyers will sacrifice quality of the product, the
service or the quantity.
                                                             Willamette Valley Vineyards 9


        A buyer or buyer group has the most control over a firm when they purchase the
majority of the industries goods or services. This means that a producer is forced to
succumb to the desires of the buyers and thus force the lower cost demands on their raw
material producers. The buyers create leverage to price control when the sale of one
product line is the majority of the annual profits for a firm.
        When substitute products are available at little to no cost to the buyer, a firm is in
a weakened position. The last main way a buyer gains control is if the industries market
is so saturated or standardized that a buyer has the ability to become a seller. The wine
making industry is quickly becoming a highly saturated industry, especially in
Washington State. The advantages for the buyer are that they have greater choice in their
wine selection. Buyers are able to pick where a product from a certain origin, they can
select from the various the qualities of wine, are able to pick a price point they are willing
to spend, find the type of blend of grapes they prefer, and many other factors.
        The $10-$40 wine segment is focused towards less educated and less willing to
become educated buyers. This gives the buyers an advantage that will be hard to
overcome other then to stay price competitive. The market is over saturated with
substitutes too, which increases a buyer‟s power to control the profitability of the
product. A buyer has the option of not only many other wineries but other beverage
options such as beer, liquor, soda, juice and water. The cost to a buyer to switch to a
substitute beverage is nothing, so there is no financial repercussion for changing their
product selection.

4. Threat of Substitute Products
        Since our bodies require hydration for sustenance, drinking is a vital and
necessary part of life. The market for liquid consumption is very large. Wine represents a
very small percentage of the drinks available to a consumer every day. In short, wineries
are not only competing with each other, but must combat every other substitute. This
industry includes water, soda, liquor, beer, shakes, malts, milk, and others. The major
substitutes of Willamette Valley Vineyards can be broken into two main groups,
alcoholic beverages, and non-alcoholic beverages.
        Inside the market for alcoholic beverages there are many subcategories, but for
simplicities sake, beer and hard liquor will be grouped as two alcoholic beverage
substitutes. Just like wine, beer and liquor have been produced for thousands of years.
Today, there are local beer breweries such as Red Hook and Pyramid, as well as national
brewers such as Budweiser. Willamette Valley Vineyards also competes with foreign
beer and liquor brands like Skyy vodka and Heineken beer. That being said, other
alcoholic drinks have a difficult time taking the place of wine as the alcohol of choice on
tables across America. Wine is considered special because it is consumed by both the
“cultured” high class, as well as impoverished chronic alcoholics. Even though the price
of wine is often as high as or higher than other alcoholic drinks, wine still has a unique
place in the market.
        Willamette Valley Vineyards also has to fight the price battle when it comes to
possible substitutes. Willamette Valley Vineyards offers 8 different wines. Two of these
wines are for wine club members only so are not sold in stores. The remaining 6 wines
can be found in retail stores and range in price from $12 to $40. (Willamette Valley
Vineyards) Willamette Valley Vineyards faces a problem with their price point when you
                                                            Willamette Valley Vineyards 10


compare these prices to that in retail stores such as Trader Joes. Trader Joes offers
hundreds of different wines from many different regions. Of these hundreds of wines that
are offered many of them are priced for under $10, this creates a problem for Willamette
Valley Vineyards since they do not offer a single wine at this price point. By not
competing at this lower price point they are unable to capture people who are only
willing to purchase at this price point and there for customers will be more likely to
purchase from their competitors.
        The second category (non-alcoholic beverages) makes up the majority of wine
substitutes. Because one shouldn‟t be in a constant state of drunkenness, substitutes such
as soda, juice, water, sports drinks and coffee allow us to nourish the body, and stay
sober. There are endless brands and types in each non-alcoholic beverage group: Jones
soda, Arrowhead water, Dole juices, and Starbucks coffee represent a few of these
substitutes. When people start to focus on the health issues, beverages like juice, water
and sports drinks become the real threat to the wine industry. Many health conscious
people may switch to non-alcoholic beverages for their nutritional benefits.
        According to a survey the decision to purchase a substitute to wine can be
determined by some ones age. This survey looked at the category of alcoholic beverages
because of the vast number of non-alcoholic substitutes that exist. The survey found that
in the consumer between the ages of 18 to 29 prefer to drink beer, of the drinks that they
consume in a week 43.20% were beer while 18.50% were liquor and 38.70% were wine.
Consumers between the ages of 30 to 44 had a slight tendency to drink wine over beer
and liquor, but only by a slight margin with 45.20% of drinks being beer. The age group
that drinks the most wine is that in the 45 and older demographic. 56.25% of drinks
consumed in a week were wine. As a person gets older and become more financially
sound they switch their drinking tendencies more towards more expensive yet more
sophisticated drinks such as wine and liquor.(Krzystowczyk, Zajac, and Menko)

5. Rivalry Among Competing Firms
         As stated earlier, the current wine industry is subject to a possible over-saturation
of products. Because of this, rivalry among competing firms is very high. Not only are
there a lot of wineries creating their own specific wines, but Willamette Valley Wineries
falls into the most heavily saturated price point (the $12-$20 per bottle range).
         Due to the fact that most wineries do not want to be just another wine bottle on
the shelf of the local grocer, many wineries have taken steps to differentiate themselves
from the competitors. With this differentiation, these wineries hope to hold a competitive
advantage over their competitors. Not only will this help with marketing by standing out,
but if their product is differentiated enough, then these wineries will be able to put more
pressure on their buyers and demand higher prices for their differentiated wines.
         Differentiation is especially important in a saturated market. Realizing this, wine
makers implement steps to make their wines stand out from competitors. Not only do
they strive to offer wines that taste delicious, but they like their customers to feel good
about buying their wine. With the recent “Global Warming” scare, some companies
sought to seize the opportunity to show that their company offered a product that not only
tastes great but leaves little to no trace on the environment.
         Some of Willamette Valley Vineyards strongest competitors are Constellation
Brands (which owns Columbia Crest), Hogue Cellars, Dunham Cellars, and Five Star
                                                          Willamette Valley Vineyards 11


Cellars to name a few. All of these wineries offer pinots, chardonnays, and rieslings; but
very few people can taste the difference between the same type of wines from different
wineries. Willamette hopes to capture a large market share through differentiating
themselves, and they hope this will set them apart from their competition.




KEY SUCCESS FACTORS
Having brand fans (expanding and reinforcing market)
         New brand gain popularity and has brand fans among the consumers as soon as
possible is an important success factor in a market. The consumers of wine are usually
stable; they not only have loyalty to wine which mean the consumers won‟t easily switch
to other beverage, but also loyal to the wine brand which they familiar with so that the
new entrances are hard to get consumers from local brands. In the beverage market,
expanding and reinforcing brand is highly competitive work. The consumers are scarce
resource in the market; to maximum gain the loyal consumers is the key success factor
for a company, that‟s why all companies‟ activities should serve for their consumer.

1. Improving the quality of product constantly. The quality of wine is the foundation of
   consumers‟ loyalty to a brand. Don‟t expect consumers would purchase the inferior
   quality goods. Consumers‟ loyalty to a brand equals to consumers‟ loyalty to a
   brand‟s quality. Thus no matter a brand wants to expand or reinforce market, the
   quality is the most important factor. Here is the list that determine the style and
   quality of a wine:
    i.       The Vineyard Location. The best location is the one that has the maximum to
             the sun. The soil is also instrumental. It may be surprising that usually the
             finest wines come from the poorest soil. In these circumstances, the vines
             have to fight for survival and so develop greater strength, which in turn
             added complexity to the wines. If the skins are thicker, there is more
             likelihood of red wines having good color and all styles having greater depth
             of flavors.
    ii.      The climate. A mix of high altitude, no rain, hot sunny days and cool nights
             makes it perfect for growing vines. Most wines are made in continental or
             Mediterranean climates, but this is not a rule. In other terms, the best white
             wines come from cooler climates, and the best reds from hotter climates.
    iii.     Grape Varieties. The same kind of grapes varies from one country to
             another. The reason is that, over the years, different clones have been
             developed and growers need to find the most suitable clone for their soil and
             microclimate.
    iv.      Material supplier. All the material suppliers are from different backgrounds,
             education and philosophy, they have their own situation. Wine company
             must control any risk from these material which may influence the quality of
             product.
                                                          Willamette Valley Vineyards 12


2. After-sale services. A brand fans‟ value is the consumers will constantly purchase the
   same product, and they will recommend it to their friends. However, keeping
   consumer and dealer constantly purchase the same product is not easy. It needs a
   perfect service and feed back system. Many beverage makers don‟t even want to
   manage the distribution, they just want to produce and produce. So how to establish a
   effectively and efficiently after sale service system, and making consumer know it
   even praise it. It‟s another important factor to expand and reinforce market.
3. Distribution and sale channel. Except the traditional channel, the new distribution and
   sales channels are worth to focus on. Such as internet sales and TV sales. Distribution
   is actually a very important success factor for a company, but many companies are
   not willing to get involve in it. Coca cola made a big success because of its
   distribution strategy. Industry should establish an excellent distribution channel.

Advertisement is the carrier of a brand to imply these success factors. Improving quality
and perfecting after sale services will help a brand expand and reinforce in a market, but
its must let consumers know it first. What makes a consumer be your brand fan, what
makes a consumer switch to your brand from another brand, what makes a beer consumer
switch to your wine brand, what makes your old consumer continual to be you brand fan,
so company must let consumer know why their brand is superior to others.

Inside key success factors
        As mention before, all industrial activities should serve for the consumer and
market, but these activities will increase the cost of a company. So the next key success
factor is the internal cost management, how to control the cost when the company are
expanding and reinforcing market.

   1. Decreasing inventory and increasing products turn over rate. Overstocked product
      will put a company in a embarrass situation. The wine maker needs to estimate
      the sales and calculate the inventory rate based on the market situation. Although
      product turn over rate is determined by the market sales, company can still control
      the cost which caused by the inventory.
   2. Lowering operational costs. For example, Willamette has almost the same sales in
      2008 compare to 2007, but the operational income had a significant decrease. This
      is the major reason for Willamette that the net profit dropped 40% in 2008. The
      industrial can seek help from professional consulting firm control the cost.
                                                          Willamette Valley Vineyards 13


Beverage Industry Value Chain
Inbound Logistics
        For the beverage industry, inbound logistics includes purchasing and transporting
raw materials to produce different kinds of beverages, such as coffee beans, grapes,
wheat, milk, sugar and spices. Most of these materials are stored in warehouses, and then
these materials will be used to produce beverages in manufacturing. Other materials that
are used to produce beverages include the bottling, or canning process. Inbound logistics
are also responsible to detect all these materials, control inventory and return purchase.
Different beverage companies have different inbound logistics. They might have different
materials and packaging, but the process is similar.

Operations
       Even though the beverage industry differentiates from company to company
based on taste, look and market, all of the companies have similar operations converting
the inputs into the finished beverage. This process takes the raw ingredients and mixes
them in many different orders. For example, beer uses water, yeast, barley and hops to
make the end product. Once the ingredients are mixed, alcoholic beverages pass through
a fermentation process making them alcoholic. Once the beverage is ready for
consumption, the beverage is bottled. The bottle then gets labeled and passes through to
packaging that prepares the bottled and labeled beverage to be shipped. Also throughout
the process are numerous and varying quality control efforts to ensure that the beverage
not only passes FDA requirements, but so that consumers will enjoy the product and
coming back for more.

Outbound logistics
        Outbound logistics starts with the final product being properly stored. With in the
beverage industry this will vary depending on just what type of beverage that is being
produced. First we will look at the wine and alcohol industry. For companies that are
producing alcoholic beverages the storage process is a part of the production process for
the company. For example wineries will often store their wine for long periods of time;
white wines are typically stored for 6 months while red wines are often stored for a full
year. These numbers can change depending on the winery, often the higher quality wines
will be aged for multiple years. Other company‟s alcohol producers that produce spirits
will also store their drinks for longer periods of time. Companies that are producing
beverages like soda store their products for only about 5 or 6 days. After the products
have been stored for the correct amount of time which is all up to the company it is then
available for purchase by companies.
        Ways in which final products are transported to stores and ways in which things
are paid for vary depending on the company. Most companies today use computers and
networks to help make these processes more streamed lined. Companies today will
typically forecast their sales ahead of time. By doing this a company will be able to pre-
order the amount of a certain beverage they will need to handle a specific time period.
Now for the beverages to get their on time this is left up to the producer of the beverage,
if the company is large enough they may have their own fleet of trucks or other type of
                                                            Willamette Valley Vineyards 14


transportation that delivers the beverages to the correct location at the correct time. From
that point it is up to the buyer to decide when the beverages go on sale.
        The ways payments are made are also streamlined. Today payments are done
electronically. The timing of the payments is again completely left up to the companies
that are working the transaction. Companies may decide to wait and get full payment
when the beverages have made it to the buyer‟s stores or warehouses, other companies
may decide to get partial payment before the products are shipped and collect the rest
once they have gotten to their final location. Whatever the terms are the payments are
done through electronic banking systems so that a good system of checks and debts can
be managed and maintained.

Procurement
        Being able to get a hold of certain resources for your beverage is a very important
part of the value chain for companies in this industry. Some resources are very easy to
come by and have many different suppliers. When a company runs into a situation like
this they are able to be a little more aggressive with their suppliers. They have more
power in negotiating the prices of the resources and when and how they are transported to
the buyer‟s warehouse. Some resources may be hard to come buy for example certain
types of resources that are used in alcoholic beverages. Some companies believe to make
their drinks taste a certain way they need to get certain resources from certain places. In
situations like this it is the supplier that has more of the power since there are not as many
substitutes for the company to look at. When companies are faced with a situation like
this your relationship with the supplier is very important. You are more likely to do as
they wish so that you can get a hold of your resources that will make your product stand
out from all the other possible substitutes that are on the market.

Technological Development
        Technology is improving the production process, distributions, services, and
marketing and sales to satisfy the customer and internal workers. Beverage companies are
constantly improving their products developing new drinks, adding new flavors,
improving distribution, and improving advertising. Technological development also helps
companies improve the effectiveness and efficiency in the process of production, and
assisting with marketing development.

Human Resource Management
       In many beverage companies, a company‟s human capital may be their most vital.
HR management is in charge of finding new and vital talent to carry on the beverage
making. In many beverage companies, making the beverage requires great skill and
technique that can only be learned through advanced education. HR management is in
charge of finding and recruiting this talent. They are also in charge of setting competitive
compensation to hold on to their talent and human resource capital. Once new hires are
working within the company, much training takes place. Despite industry norms, all
companies have individual cultures, trade secrets, and products. HR management must
prepare their human capital to be aware of company policy, and help develop, innovate,
and produce quality product.
                                                           Willamette Valley Vineyards 15


Firm Infrastructure
        The Firm Infrastructure is made up of the financing, accounting, and strategy
departments. In the beverage industry, those departments all contribute to the
improvement in the company by realizing their strengths, weaknesses, opportunities, and
threats. The departments contribute to the beverage industry specifically by realizing the
target market of the company, strategies to gain loyalty from the target market, and
retaining the target market. This is important in the beverage industry because substitutes
are most easily found in this market. The firm infrastructure also helps find core
competencies that can be implemented in the company to help retain their target market.




FINANCIAL FORCASTS
Key Statistics Comparison   Willamette    Redhook      Constellation   Coca-Cola     Jones Soda
Profitability
ROA                               0.04        -0.23           -0.06          0.14           -0.63
ROE                               0.05        -0.42           -0.22          0.28           -0.78
Profit Margin                     0.04        -0.42           -0.16          0.18           -0.42
NOPAT (in thousands)              $709    ($33,278)      ($613,300)    $5,807,000       ($15,235)
Liquidity
Current Ratio                      4.23         0.97            1.86          0.94            4.98
Quick Ratio                        0.61         0.63            0.59          0.77            3.70
Acid Test                          0.58         0.49            0.44          0.62            3.45
Cash Ratio                         0.12      0.0004             0.01          0.36            2.64
Leverage
Debt/Assets                        0.30         0.46            0.72          0.49             0.2
Debt/Equity                        0.42         0.86            0.62          0.98            0.25
Long term D/E                      0.22          0.5            2.01          0.34            0.02
Interest Coverage                  11.9        -37.9           -0.29         17.98             N/A
Activity
Inventory Turnover                 0.78       10.27              1.2          4.91            4.51
Inventory Period                    470          36             307             74              81
Asset Turnover                     0.79        0.54             0.27          0.79            1.48
Asset Period                       462          676            1352           463             246

Profitability Ratios
        The profitability ratios used were chosen because they give a better understanding
of the health of the company. Later in the paper, Willamette‟s competition will be
analyzed to give a better prospective of their core competencies. By using their key
ratios now, we can get a better prospective of Willamette‟s health as a company and their
strengths and weaknesses in the public market.
                                                            Willamette Valley Vineyards 16


        The return on assets (ROA) for Willamette is at 4%, or in other words,
Willamette‟s net income is converted into profit (through net assets) at 4%. Comparing to
Willamette‟s competition, such as Constellation Brands that is in the wine industry
specifically, Willamette is better at investing its net income and using it to invest in assets
to generate funds. Of course, Constellation Brands net income currently in the red, and is
considered a much larger company. The only company that is making a healthy profit
compared to Willamette is Coca-Cola, who joins Willamette in the beverage industry.
Coca-Cola has much better brand recognition, distribution channel, and lower production
costs than Willamette. Once Willamette achieves the brand recognition hoped for, much
more can be invested in inventory.
        The return on equity (ROE) for Willamette is at 5%. This ratio is used greatly by
investors to analyze how well the company uses the funds invested by shareholders.
Across the board, except for Coca-Cola of course, Willamette is doing much better than
the other companies. The shareholders decide what the company‟s value is. Therefore,
Willamette‟s net worth is much greater than Constellation Brands, Redhook, and Jones
Soda. This supports the prospect of a partnership for Willamette in the future. The more
value Willamette adds to itself, the more likely another entity will be enticed to join a
friendly partnership.
        Willamette Valley Vineyard‟s profit margin is at 4%, meaning for every dollar
earning, 4% or .04 cents is earned as profit. One sale of their most inexpensive wine, the
Riesling, which goes for $12, 96% of the $12 covers expenses, costs, and taxes. The
remaining 4%, or $0.48 is profit. In 2007, the profit margin was 10%, or $1.20 profit for
their most inexpensive wine. Because of the economic conditions, there is hope for
improvement. Once again compared to Willamette‟s competition, the company is not
doing horribly. Many of the companies‟ expenses are greatly exceeding their revenues
and therefore will be taking a big loss in 2008.

Liquidity Ratios
         The current ratio is current assets divided by current liabilities. It is the broadest
and most forgiving liquidity ratio. For every dollar of current debt (to be paid off by the
end of current year) there is $4.23 of current assets to pay off in the occurrence of
liquidation. In the general public market, this is very good. It is normal to see companies
maximizing their debt so that they can invest more in assets causing a 1:1 ratio.
Surprisingly, Jones Soda is keeping up with Willamette Valley Vineyards with a 4.98
current ratio. The rest of the competition‟s current assets are just about on par with their
debt.
         The quick ratio is used to compare the same current liabilities but the current
assets used are without inventory. This ratio is much more conservative than the current
ratio because in the occurrence for the need to quickly liquidate a company, the inventory
is not easily sold. Especially for a company such as Willamette where for a point in time,
most of their inventory is “work in process” (WIP) during fermentation is most likely
unsuitable for any buyers. Willamette has only $0.61 worth of current assets minus
inventory for every dollar of current liabilities. Some of the inventory that is not “WIP” is
already finished product that isn‟t being sold rapidly enough. An article by PR Newswire
states, “inventory shrinkage of purchased wines and glassware for resale through Bacchus
Fine Wines, outages of three Pinot Noir products due to high demand in '07 and reduced
                                                            Willamette Valley Vineyards 17


sales of Willamette Valley Vineyards wines. Management has made staffing and process
changes to minimize shrinkage, increase the production of Pinot Noir products and
improve the sales of winery produced wines.” By selling off their remaining inventory of
the other three wines produced by Willamette (the Pinot Gris, Chardonnay, and Riesling)
for more cash on hand, they can improve their quick ratio greatly.
         The acid test is even more critical of the company‟s liquidity. By taking into
account only cash on hand, Accounts Receivable, and Short-Term Investments and
comparing them to current liabilities. Willamette Valley Vineyards has shown to have
resources that pay only a little over half of their debts. Compared to companies such as
Redhook, Constellation Brands, and Coca-Cola, it looks as though they aren‟t expecting
the need to quickly liquidate. Jones Soda is being extremely conservative in keeping low
debts and cash easily available.
         The cash test is easily the most brutal of all the liquidity ratios. It compares cash
on hand and marketable securities to current assets. By doing so, we can see that Jones
Soda can still easily pay for it‟s debts, this may be a strategy in foreseeing that they are
not thriving as of lately. Redhook has literally no cash on hand, and Willamette has very
little. This ratio may only be relevant as of now, where economic conditions are
unhealthy and a company is looking to scrape by at the end of the year. Lucky for
Willamette, in all other aspects, they are doing very well and will most likely make it
through to see many profitable years.

Leverage Ratios
        The debt/assets ratio is .3 for Willamette Valley Vineyards. That is, every dollar
of debt has financed $0.30 of assets. This ratio takes into account all assets, such as
property and equipment, and all short-term and long-term debt. This means over half of
the assets are funded by equity contributions. This is a healthy ratio because the
company‟s assets are not reliant on their debt. Constellation Brands is heavily reliant on
debt to fund their assets though.
        The debt/equity ratio is at .42, this lower ratio indicates that the assets are funded
by equity more than debt, as shown with the debt/asset ratio. Jones Soda is the only other
ratio that comes to the same conclusion, the rest of the competition uses more debt than
equity to fund their assets. The Long-term debt/equity ratio demonstrates that at .22,
Willamette uses mort short-term debt than long-term debt to fund assets. Yet, most of
Willamette‟s assets are still funded by equity.
        The Interest Coverage Ratio illustrates that Earnings before Interest and Taxes
covers the Interest Expense at Willamette Valley Vineyards. Willamette has an Interest
Coverage Ratio can easily cover its interest expense at 11.9 times.

Activity Ratios
        The Inventory Turnover Ratio is the comparison between Cost of Goods Sold
(COGs) and the average inventory for the company. Once a product is sold, the cost of it
is taken from inventory and added to Cost of Goods Sold. Willamette‟s Inventory
Turnover is .78 and comparing this to Constellation Brands, another company in the wine
industry as noted earlier, which has an Inventory Turnover of 1.2, Willamette has the
lower ratio. This is because of low sales and backlogged inventory. Again, once the old
                                                          Willamette Valley Vineyards 18


inventory is sold and economic conditions improve, Willamette Valley Vineyards will be
more of a formidable competitor.
         The Asset Turnover Ratio is a less “intense” look at Willamette‟s profitable than
the Inventory turnover. The asset turnover ratio reasons how well a company invests all
of it‟s assets including marketable securities and short-term investments. Willamette‟s
Asset Turnover Ratio .79 which is almost on par to its Inventory Turnover Ratio.
                                                                    Willamette Valley Vineyards 19



  Willamette Valley Vineyard
  2008 Balance Sheet (in the thousands)
                                                                              December 31, December 31,
                                                                                 2008         2007
                                    ASSETS
  Current assets:
  Cash and cash equivalents                                                   $      350,361 $    1,083,405
  Accounts receivable, net (Note 2)                                                1,204,881      1,804,168
  Inventories (Note 3)                                                            10,604,204      7,976,432
  Prepaid expenses and other current assets                                           68,834         91,981
  Current portion of notes receivable                                                 62,415         62,415
  Deferred income taxes                                                               81,700              -

  Total current assets                                                            12,372,395     11,018,401

  Vineyard development costs, net                                                  1,693,769      1,690,055
  Property and equipment, net (Note 4)                                             6,069,408      4,200,155
  Debt issuance costs                                                                 29,581         21,106
  Notes receivable                                                                   165,491        187,585
  Other assets                                                                         4,456         65,893

  Total Assets                                                                $ 20,335,100 $ 17,183,195

                LIABILITIES AND SHAREHOLDERS' EQUITY
  Current liabilities:
  Line of credit (Note 5)                                                     $            - $           -
  Current portion of long-term debt (Note 6)                                         354,536       284,786
  Accounts payable                                                                 1,111,499       564,494
  Accrued expenses                                                                   510,768       420,825
  Income taxes payable                                                               350,870        76,516
  Deferred Income Taxes (Note 9)                                                           -         1,000
  Grape payables                                                                     594,734       508,545

  Total current liabilities                                                        2,922,407      1,856,166

  Long-term debt (Note 6)                                                          2,178,246        946,372
  Deferred rent liability                                                            217,742        223,936
  Deferred gain (Note 11)                                                            345,930        378,025
  Deferred income taxes (Note 9)                                                     355,207        262,000
  Total liabilities                                                                6,019,532      3,666,499

  Commitments and contingencies (Note 11)                                                  -              -

 Shareholders' equity (Notes 7 and 8):
Common stock, no par value - 10,000,000 shares authorized, 4,851,327 issued
 and outstanding at December 31, 2008                                            8,515,667    8,425,389
 Retained earnings                                                               5,799,901    5,091,307
 Total shareholders' equity                                                     14,315,568   13,516,696
                                                                              $ 20,335,100 $ 17,183,195
                                                                Willamette Valley Vineyards 20



Willamette Valley Vineyards, Inc.
Statements of Operations
For the Years Ended December 31, 2008 and 2007
                                                                2008              2007

Net revenues                                            $ 16,048,238 $            16,710,927
Cost of goods sold                                         8,229,877               8,430,802

Gross margin                                                    7,818,361          8,280,125

 Selling, general and administrative expenses                   6,455,203          5,554,062
Income from operations                                          1,363,158          2,726,063

Other income (expenses):
Interest income                                                   36,746              79,814
Interest expense                                                (116,383)           (107,768)
Other expense                                                    (20,386)             22,722
                                                                (100,023)             (5,232)

Income before income taxes                                      1,263,135          2,720,831

Income tax provision (Note 9)                                    554,541           1,034,170

Net income                                              $        708,594 $         1,686,661

   Basic net income per common share                    $              0.15 $              0.35

Diluted net income per common share                     $              0.14 $              0.34


Statements of Shareholders' Equity
For the Years Ended December 31, 2008 and 2007
                                                Common stock                    Retained
                                                   Shares         Dollars       earnings          Total

Balances at December 31, 2006                       4,793,027 $7,935,829 $3,404,646 $11,340,475

Stock based compensation expense                       1,850           45,108              -       45,108

Common stock issued and options exercised             41,025       444,452                 -      444,452

Net income                                                  -          - 1,686,661    1,686,661
Balances at December 31, 2007                       4,835,902 $8,425,389 $5,091,307 $13,516,696

Stock based compensation expense                       1,425           56,230              -       56,230

Common stock issued and options exercised             14,000           34,048              -       34,048

Net income                                                  -               -    708,594          708,594

Balances at December 31, 2008                       4,851,327 $8,515,667 $5,799,901 $14,315,568
                                                                    Willamette Valley Vineyards 21


Willamette Valley Vineyards, Inc.
Statements of Cash Flows
For the Years Ended December 31, 2008 and 2007
                                                                              2008          2007
Cash flows from operating activities:
Net income                                                                $     708,594 $   1,686,661
Reconciliation of net income to net cash (used for) provided by operating
activities:
Depreciation and amortization                                                   620,180       576,515
Stock based compensation expense                                                 56,230        45,108
Deferred income taxes                                                            10,507       128,000
Bad debt expense                                                                  7,606         8,333
Deferred rent liability                                                          (6,194)       32,985
Deferred gain                                                                   (32,095)      (32,094)
Changes in assets and liabilities:
Accounts receivable                                                              599,287      (202,807)
Inventories                                                                   (2,627,775)   (1,224,503)
Prepaid expenses and other current assets                                         10,818        15,762
Other assets                                                                      61,437        (8,226)
Accounts payable                                                                 537,512      (381,247)
Accrued expenses                                                                  89,944        27,873
Income taxes receivable/payable                                                  274,355      (229,092)
Grape payables                                                                    86,188        26,955

Net cash provided by operating activities                                       396,594       470,223

Cash flows from investing activities:
Additions to property and equipment                                           (2,465,976)    (863,623)
Vineyard development expenditures                                                (21,428)     (72,268)
Loans to grape producer                                                           22,094     (250,000)

Net cash provided by (used for) investing activities                          (2,465,310)   (1,185,891)

Cash flows from financing activities:
Proceeds from and stock options exercised                                        27,250       156,480
Increases in Line of credit                                                           -             -
borrowings of long-term debt                                                  1,568,748             -
Payments on long-term debt                                                     (267,124)     (257,850)
Excess tax benefit on stock option exercises                                      6,798       287,973

Net cash used for financing activities                                        1,335,672       186,603

Net (decrease) increase in cash and cash equivalents                           (733,044)     (529,065)

Cash and cash equivalents:
Beginning of year                                                             1,083,405     1,612,470

End of year                                                              $      350,361 $   1,083,405
                                                           Willamette Valley Vineyards 22


WILLAMETTE VALLEY VINEYARDS
Summary
        This paper is based on the 2007 annual report along with relevant information that
is current. This is because the 2008 annual report has not yet been released. Yet, by
ignoring the current nature of the economy, relevant information pulled from the 2008
quarterly statements will be used to help assess Willamette Valley Vineyards efficiently
and effectively.

Resources
Tangible
        Willamette Valley Vineyard‟s tangible resources are broken down into their
financial resources, physical resources, and technological resources. The financial
resources include Willamette‟s borrowing capacity and its ability to generate internal
funds. When looking at a company‟s borrowing capacity, looking at their current
liquidity ratio would be a good first step. Below is a diagram of Willamette‟s current
ratio, quick ratio, acid-test ratio, and debt to capital ratio.
             Liquidity Ratios:   Willamette Valley Vineyards    Constellation Brands
             Current Ratio                               4.23                    1.86
             Quick Ratio                                 0.61                    0.59
             Acid Test                                   0.58                    0.44
             Cash Ratio                                  0.12                    0.01
             Debt-to-Capital                             0.42                    0.62

         The current ratio in the diagram is quite high compared to its quick ratio. That is
because over 70% of Willamette Valley Vineyard‟s current assets are made up of
inventory. Willamette‟s inventory is made up of WIP (works in progress) and therefore
isn‟t as easily liquidated than most inventories therefore if liquidation had to occur
immediately the quick ratio would become more relevant. The Constellation Brand‟s
ratios have been included to only strengthen the understanding of Willamette‟s ratios.
Constellation Brands does reside in the same industry and therefore becomes relevant.
         Judging that Willamette has no outstanding debts, using the current ratio would be
more appropriate rather than the quick ratio to judge the borrowing capacity of the
company. The current ratio for 2007 is 4.23:1, or there is $4.23 dollars worth of current
assets for every 1.00 dollar worth of current liabilities. Because the current ratio is so
high, Willamette‟s borrowing capacity is strengthened. If Willamette were to be more
conservative in their borrowing, they would use the quick ratio or even the acid-test ratio
to evaluate their borrowing capacity. Willamette would not want to go below a ratio of
1:1, especially during this time with the economic conditions as they currently are, being
in a tremendous amount of debt and not being able to pay back such debt more often
means bankruptcy rather than a bailout for the company.
The debt-to-capital ratio compares Willamette‟s debt to their total capital. The lower the
ratio is the greater the financial strength of the company. Willamette has shown to be a
strong company. Their debts are manageable and they have plenty of assets and
                                                           Willamette Valley Vineyards 23


stockholders equity. Comparing Willamette to Central European, Willamette has a more
conservative way of handling their borrowing capacity.
         Although the 2008 annual report has not been released yet, the quarterly reports
show a decrease in cash by over 70% as of the third quarter. Because the annual report
has not been released yet, the reasoning for this enormous cash drop has not been
revealed yet. Reasoning aside, this causes Willamette‟s borrowing power to drop
drastically.
         Currently Willamette Valley Vineyards is also contracted with one of its
Willamette Valley Vineyard grape growers to plant 90 acres total of their wine grapes.
They will be held accountable to buy all grapes producing valuing up to $1,500,000
unless the grapes produced are not within Willamette‟s quality specifications. This could
also prove to be another hindrance and would weaken Willamette‟s borrowing capacity.
If the grapes produced are valued up to or over $1,500,000, Willamette will be held liable
for the cost. Although, the likelihood of such an occurrence of said debt is unlikely.
         The firm‟s ability to generate internal funds can either branch from liquidating
assets for cash on hand, or issuing more shares of stock. Unless the assets are necessary
(but why own them in the first place?) funds can be generated internal by selling them. If
Willamette wanted to generate money without taking out a loan, they could sell
unnecessary equipment, property, or inventory. Another way Willamette could generate
more funds is by issuing more stocks. This may cause a decrease in the market value of
the company, but it can still produce cash in hand.
         Willamette Valley Vineyards physical resources include their location,
accessibility, sophistication, and Willamette‟s access to raw materials. Willamette‟s
location is also one of their core competencies, which will be discussed later. The
location of the vineyard is one of their selling points and what makes them stand out and
unique among the other historical vineyards. The “stars” and the “cash cows” of the
company are the Pinot Noir and the Pinot Gris. The stars are the fine estate wines, or
referred to as “ultra premium”, that sell for $35-50 per bottle. This wine is organic and
made with the utmost care. Willamette is prideful of the fact that their finest wines are
under $50. The “cash cows” of the company include the $30 and below wines, they are
still premium wines and are the best selling in the company. Other vineyards located in
Washington, California, France, Burgundy, and so on, cannot support the fragility of the
Pinot Noir grape. The skin of the grape is too thin to bear the harsh weather of the said
regions.
         The accessibility of the company also depends on their distribution channel. How
well they reach their target market affect how accessible they are. Before focusing on
their distribution channel, however, defining their target market is another crucial
component of detailing the accessibility of the company. Willamette Valley Vineyards
has narrowed their scope of their target market to being mainly made up of “baby
boomers” and the “millennials” (ages 21-30).
         Currently, the Willamette Valley Vineyard label can be found in their tasting
room, online, select restaurants, distributers and wine brokers. The tasting room offers
tours and sells wine from their vineyard to locals and tourist passing by. This affects
about 14% of their profits in distribution. They have the ability to build relationships with
potential loyal buyers. They can be seen from the local highway that is often used by
tourists.
                                                           Willamette Valley Vineyards 24


         By selling to online through Bacchus fine wines, they build up about 14% of their
revenues. By being just a “click” away, they become a fiercer competitor. Willamette can
easily reach anyone in the world. As we turn from a tangible to a digital shopping center,
those who are saturating the shopping center online have more of a competitive strategy
than those who don‟t.
         Willamette also distributes to local restaurants and markets that have the
knowledge and the ability to market their wine properly. Also, to better their distribution
their wine, one the Willamette Valley Vineyard webpage, a consumer can request for
their favorite wine to be offered at their favorite supermarket. This benefits Willamette
greatly because not only do they have a better idea of where their product is demanded,
but they also prevent lost potential sells to a substitute or competitor.
         Producing fine wines not only takes the finest grapes, the perfect temperatures,
and impeccable soil but it takes the ability to turn the grapes in the premium wines
Willamette boasts about. The process of harvesting, juicing, fermenting, and bottles
Willamette Valley Vineyards wines all takes a great deal of sophistication in the
technology used. Even the best winemakers can only do so much. Starting from the
beginning of how a wine is made, first a vineyard chooses its grape considering the
climate it will have to face and the soil it will be planted in. Willamette chose the Pinot
Noir, Pinot Gris, Chardonnay, Riesling, Blush, and Syrah to name a few. A lot of thought
went into the Pinot Noir grapevine that was recently exchanged from the Napa Valley
grape to the Burgundy grape. It was felt that this grapevine was more acclimated to the
cool weathers than the Napa Valley grapevine and would therefore thrive in the Oregon
climate. After planting the grapevine, next would be the caring for the growth of the
grape. Oregon weather can be unpredictable causing the grapes to be at risk at all times.
The workers at Willamette must keep the grapes above a certain temperate, which may
end up with them having to use heaters throughout the vineyard. Too much rain can also
cause rot among the grapes and the vines themselves. By properly irrigating the land, rot
can be reduced and the quality of the grapes unharmed. The next step for Willamette is
the actually harvesting of the grapes, depending on the weather, the skillful workers of
Willamette must decide when the perfect time is to harvest. When harvesting the grapes,
starting too soon or waiting too long can completely ruin a harvest. This puts a lot of
pressure on the vineyards to pick the perfect for harvesting. After the harvest and the
juicing (a step that is self explanatory), Willamette Valley Vineyards next takes part in
the most important step of the operation cycle of wine. The fermentation process is the
time when having skillful winemakers is critical. The winemakers must know the
quantity of ingredients to added, the time needed to ferment, the time to filtering out the
yeast, and all the intricacies in-between. The bottling and the distribution channel are the
last steps. By properly bottling their products safely, efficiently, and attractively
Willamette and distribution their products more effectively and then make more profit.
         Willamette‟s access to raw materials is also one of their core competencies which
will be discussed later. Willamette is also their own supplier to their largest supply of raw
materials. Of course they buy grapes from other vineyards also, but most of their raw
materials come from their own land which they own or lease. The grapes that are bought
from other companies help lower the risk of a bad season in Oregon. If the weather ruins
the crop one year, they aren‟t as financially invested as they would be if they actually
owned all the grapes produced. By contracting with another company on the terms that if
                                                           Willamette Valley Vineyards 25


their harvest isn‟t within the standards set forth before the deal was made, Willamette is
not obligated to buy any of the harvest. Other raw materials, such as bottles, labels,
ingredients, and corks are not the key to the success of Willamette, but still are
supporting factors to success. By reusing bottles, Willamette cuts costs and promotes its
image of being “green.” Willamette only uses corks that are harvested from rather than
cut down. Therefore, the cork tree may continue to grow and companies that using cork
in their products do not take as much of a “toll” on the environment. This is another core
competency for the company. By reaching an “eco-friendly” target market they‟ve not
only increased their products but they‟ve also taken the steps to establish themselves as
one of the green companies that will then be used for other companies to “mirror.”
         The last of Willamette‟s tangible resources is the technological resources, such as,
trademarks, patents, copyrights, and trade secrets. Willamette owns rights to the
trademark “Willamette Valley Vineyards” label, “Griffin Creek” label, and the “Tualitin
Estate” label. The brewing of the wine is also a trade secret. By keeping their recipe
undisclosed from competitors, Willamette has created another core competency.

Intangible
         The intangible resources owned by Willamette Valley Vineyards and their
greatest core competencies are their human resources. The master winemaker‟s
knowledge is a skill which in part takes years to perfect and the rest just comes naturally
to the employee. This knowledge is passed down through the employee‟s to retain its
value in the company. “The success of a corporation lies more in its intellectual and
system capabilities than in its physical assets.” (pg 78 “Strategic Management,” Ireland)
The company may have plenty of tangible assets, but the knowledge and skills of their
employees cannot be matched by any machine.
        Their reputation as a “new” company, comparing to Napa Valley and France,
that‟s exploring a region that is untapped in the wine industry. Going to any supermarket
with a good sized wine section, and normally a whole portion of that section is just for
Oregon Pinot Noirs and Pinot Gris. Willamette offers their customers premium wines that
their competitor‟s offer, just at affordable prices. By building this relationship with their
customers, they‟re promising themselves loyalty. Same deal goes with the contracts they
have with their grape suppliers, by offering a reasonable price and promising to buy
whole lots, Willamette builds relationships with their suppliers that can only benefit them
in the future.

Capabilities
       The capabilities of Willamette Valley Vineyards can be broken into seven
sections. The seven sections are distribution, human resources, management information
systems, marketing, management, manufacturing, and research and development. An
analysis of these individual sections will give a good idea of Willamette Valley
Vineyard‟s capabilities.

Distribution
         Willamette Valley Vineyard‟s market strategy for distribution is to sell their wine
through several outlets such as direct sales at the winery, sales directly and indirectly to
their stockholders, self-distribution to local restaurants and retail outlets located in
                                                          Willamette Valley Vineyards 26


Oregon, directly through mailing lists, and through distributors and wine brokers. They
are planning growth through increasing production volume to help distribute to other
regions which Willamette hopes will build brand recognition and sales.

Human Resources
         Human resources includes the process of hiring, training, and retaining their most
valuable employees. It also includes knowing who the most valuable employees are.
From a general perspective, the most valuable employees include the winemakers,
operation managers, and the board of directors. All of those employees add value to the
company and therefore, Willamette must be creative in their human resources department
to retain these employees. Willamette offers extra benefits that are not commonly found
in all industries. Willamette offers the basics such as dental, medical, vision, and
prescription coverage. They also offer a 401K with a 4% match. Willamette allows sick
days, vacation days, and holidays, but what makes them unique is that they offer
discounted wine purchases and up to 50 gallons of biodiesel fuel per month.

Management Information Systems
        Willamette Valley Vineyards plants several kinds of grapevines. Depending on
the popularity of each wine from the previous years, Willamette applies that knowledge
to the quantity of acres planted with each type of grapevine. For example, the most
popular wine sold through Willamette would be the Pinot Noir, the “runner up” wine
would be the Pinot Gris, and the next top sellers would be their Riesling. Those two
grapevines are planted on the greatest amount of acreage. The Pinot Noir is planted on
300 acres, Pinot Gris is planted on 122, and the Riesling is plant on 95 acres.

Marketing
        Willamette relies heavily on their distribution channel and wine critics to
advertise for them. Through their distribution channel, Willamette markets through local
restaurants, relying on the staff to be knowledgeable about their product that is offered.
They also market through supermarkets, once again relying on the staff and the marketing
strategies of the stores to market their brand. Locals and tourists can stop by for a tour,
tasting and go home with a few bottles. And at www.willamettevalleyvineyards.com and
other online wine resources, a customer can be shipped their favorite wine with just a few
clicks.
        Wine critics such as the Wine Enthusiast, the Wine Spectator, etc are the greatest
resource of advertisement for many wineries. For example, recently the Estate Pinot Noir
was rated 89 points by the Wine Enthusiast in April 2007 and 90 point in August 2007 by
Wine & Spirits. It also received a gold medal from the Critics Challenge. Willamette
Valley Vineyards may make some of their profits from the casual passerby, but loyal
customers relationships are often built through the customer‟s knowledge of the brand
and is influence by the wine magazines sold.

Management
       For Willamette Valley Vineyards future, their goal is growth. The company is
only 26 years old, and therefore compared to the older vineyards, growth is the only thing
they can do. Willamette hopes to produce almost 300,000 gallons in the future and start
                                                          Willamette Valley Vineyards 27


using the Tualitin winery, which has yet to be used since the purchase. By producing
more wine, the management at Willamette hopes to expand their brand name recognition
further than just in Oregon and surrounding states.

Manufacturing
        The design of the Willamette Valley Vineyards product is producing premium,
super premium, and ultra premium wines. In other words, buying their lowest quality of
wine is still buying a premium wine. Willamette does this buying using the best
grapevines, harvesting the best grapes, and using the best employees and technology to
produce the wine. They do not rush the process just for the sake of production like many
lower quality wines, Willamette has created an art in making wine where quality is “key”,
the quality of their wines and selling them at affordable prices is what keeps Willamette‟s
image positive.

Research and Development
        At Willamette, diligence to bettering their wine is a constant process. Through
research and development, Willamette has recently implemented the use of a trellis
design called the Geneva Double Curtain in their Estate Vineyard. This trellis doubles
the number of canes upon which grape clusters grow. The design of this trellis also
allows additional sun exposure and air circulation. Research and development have
indicated that this design should improve grape quality and quantity. Eventually,
Willamette hopes to use this technology throughout all their vineyards to increase their
efficiency in producing quality grapes in the quantities demanded of them.

Company Value Chain: Primary activities
Inbound Logistics
        In the industry value chain, the inbound supplies for the beverage industry are
similar to Willamette because the raw materials include the basics to make the drinks and
bottle the drinks. The difference between the two is the type of materials used,
Willamette uses specialty juiced grapes, yeast, spices, and lots and lots of time. The
bottling process it different also, Willamette uses glass bottles and specialty corks. Only
in the wine business in the beverage industry are corks used in sealing the finished
product. This is because the cork helps aerate the wine, although twist tops are becoming
the newest technology used in for bottling wines.

Operations
        As mentioned before, the operation of creating the end product mixes the
ingredients together and then waiting for the perfect time to filter and bottle. In the
beverage industry, companies such as Jones Soda and Constellation do not need to wait
for their products to ferment. This works against Willamette from a competitive strategic
view, but also, the fermentation process builds uniqueness in the wine. The wine‟s unique
feature compared to the soda industry is that it‟s an alcoholic beverage.

Outbound Logistics
                                                           Willamette Valley Vineyards 28


         The distribution channel of Willamette consists of, as I mentioned before, direct
sales, self-distribution to restaurants through Bacchus Fine Wines, selling to distributors
and wine brokers, and selling to tourist on the vineyard grounds. This process is almost
identical to the beverage industry besides the fact that legally, Willamette is not allowed
to sell directly to the customer from their vineyard.

Sales and Marketing
        As mentioned before, the sales and marketing makes their product available
through their distribution channel. Where they are lacking in this segment, is that the
Willamette Valley Vineyard brand cannot be found in supermarkets and restaurants
worldwide. Willamette hopes to reach that point in the future though. When picking up a
bottle at the supermarket, the owner of the company, Jim Bernau, has written a letter to
the potential customer talking about the company, the quality of their wine, and what
Willamette is doing to become an eco-friendly company. Also, the technical facts are
fount on the label, concerning the grapevine used, the soil type, when the grapes were
harvested, the fermentation process, and the peak drinkability. By doing this “extra,” the
company has reached out to the customer and explained who they are and what they‟re
selling. This improves the appealing factor in buying the product. Already Willamette has
begun building a relationship with their customer.

Service
        Many of the services offered by Willamette corresponds with their marketing
strategy. All the information issued on the label of the wine product also improves the
wine‟s value in the eyes of the customer. Also, because Willamette is trying to make a
difference in the environment, the environmentally conscious consumers (which are
growing every day) value the product even more. Willamette Valley Vineyards offers a
recycling program for their bottles and corks. They‟ve empowered their customers to
help do their part and make a difference in the environment.
        Also, Willamette offers events at their vineyard that “Willamette wine
enthusiasts” can attend and have a good time while getting to know their favorite wine
even more. Willamette has also broadened their services to customers by hosting catered
events such as weddings, corporate events, and other celebrations.

Company Value Chain: Supporting Activities
Procurement
        Once again, Willamette has shortened their operating cycle by owning their
largest resource needed for the production of the Willamette Valley Vineyard wines. By
owning their vineyard, Willamette cuts a huge cost which also reflects on the price of the
wine. Other items such as bottles, corks, labeling supplies, and ingredients are all just as
important and require strong relationships with their suppliers to cut down costs.

Technological Development
       By constantly improving the process of the inbound logistics, operations,
outbound logistics, sales and marketing, and service, Willamette can fulfill its goal of
growth. With the use of technology, inbound logistics can be improved with the help of
                                                          Willamette Valley Vineyards 29


using the trellis mentioned earlier. Operations can be improved by using the latest
equipment and employees that are highly educated and experienced in using the
technology. Outbound logistics is improved with the use of digital shopping and the
empowering of the customer to request that the product be distributed to a certain region.
Sales and marketing can be improved with the use of technology through the use of their
website and informing the customer about Willamette. Finally, the service segment can
be improved through technology by improving communication with suppliers and their
customers.

Human Resource Management
         At Willamette the board of directors, the operation managers, and the winemakers
are all the most important and influential employees in the company. They are all well
educated and experienced. The employees all improve the primary activities of the value
chain because they are the ones that support Willamette‟s daily activities. Willamette
Valley Vineyards can continue their success by retaining these employees and replacing
those that are lost with employees that are equally as talented.

Firm Infrastructure
        The firm infrastructure at Willamette helps realize its strengths, weaknesses,
opportunities, and threats. They input the data from sales, the target market, expenses,
and daily activities to find where they can improve upon. Currently, Willamette has
deemed their strengths dependent upon their ability to: (1) growing and purchasing
premium vine grapes; (2) using the grapes to create premium, super premium, and ultra
premium wine; (3) achieving brand recognition, first in Oregon and then nationally and
internationally; and (4) effectively distributing and selling its products nationally.

Core Competencies
Location
Valuable                                      The location of the company is somewhat
                                              valuable because the wine industry is
                                              difficult to enter because of costs of land
                                              and finding a location with good weather
                                              and soil. Yet, it isn‟t inconceivable because
                                              there are thousands of vineyards
                                              worldwide.
Rare                                          The location of the company is rare
                                              because only in Oregon can the best Pinot
                                              Noir and Pinot Gris grapes can be produced
                                              at lows costs to the company.
Costly to imitate                             Owning and caring for any kind of
                                              vineyard is costly because there are high
                                              property taxes in the state of Oregon.
                                              Energy, water, tending to insect problems,
                                              and fertilizing the land is all costly.
Organized to exploit resources                Because the resources are currently being
                                             Willamette Valley Vineyards 30


                                 exploited, the location is currently
                                 organized.

Raw Materials
Valuable                         The raw materials produced by the
                                 company are valuable because, as said in
                                 the location VRIO, grapes are difficult and
                                 costly to grow, therefore, not everyone can
                                 grow them.
Rare                             The raw materials produced by the
                                 company are rare because many wineries
                                 buy the grapes from vineyard, because
                                 Willamette Valley Vineyards is both a
                                 vineyard and a winery.
Costly to imitate                The raw materials produced by the
                                 company are costly, also, the cashflow is
                                 also difficult to fund. When the grapevines
                                 are first planted, it takes a few years for an
                                 acceptable batch of wine grapes to be
                                 produced that can be used for the creating
                                 of wine. Therefore, the outflow of cash is
                                 much higher than the inflow for the first
                                 years of a company‟s life.
Organized to exploit resources   Currently Willamette is exploiting almost
                                 all of its resources, yet because they are
                                 trying to grow as a company to produce
                                 more grapes, there are some younger
                                 grapevines that haven‟t reached maturity to
                                 start producing wine grapes.

Knowledge/Skills of Employees
Valuable                         The knowledge and skills of the employees
                                 at Willamette is valuable because many
                                 new companies cannot imitate the
                                 experience of many of the employees.
Rare                             The knowledge and skills of the employees
                                 at Willamette are rare because each
                                 employee is unique in their knowledge and
                                 skills, and therefore cannot be imitated.
Costly to imitate                The knowledge and skills of the employees
                                 may be costly to imitate, depending on
                                 what the competition is willing to pay and
                                 what amount the employee is willing to be
                                 paid to leave Willamette.
Organized to exploit resources   The knowledge and skills of the employees
                                 is currently being exploited constantly
                                                          Willamette Valley Vineyards 31


                                              when producing the wine. The only
                                              problem Willamette will have is controlling
                                              the influence competition may have on
                                              their employees, or the affect disgruntled
                                              employees may have on the Willamette
                                              Valley Vineyard product.




JONES SODA
Resources
         Tangible resources are very important to a company; these are actual resources
that can be seen as quantified. Examples of things that are considered to be tangible
resources are production equipment, manufacturing facilities, and distribution centers. All
of these resources are crucial to making their products, without anyone of these resources
you will run into problems. These resources also typically cost the company a lot of
money for land to build on as well as machinery that is used in the production process. A
variety of different types of machinery are used in the process to make Jones Soda, such
as bottlers, labelers, carnation machinery, and refrigeration machinery. All of these
machines are needed in order to make the Jones Soda product. Manufacturing facilities
that are also a huge resource for Jones Soda, Jones Soda has multiple manufacturing
centers that produce their products. They do this because of the large variety of flavors
that Jones Soda produces and so that they can easier fulfill the orders that come in for
their products.
         Intangible resources are also a very import thing for any company to have. Jones
soda excels in this aspect with a couple of their resources. Things that fall under the
category of intangible resources are employee knowledge, organizational routines,
scientific capabilities, innovation, brand name, and reputation. Jones Soda‟s strongest
intangible resources include things like their brand name. Jones Soda is a local company
that is based out of the northwest region of North America; because of this the company
is known very well among local people and is trusted as a high quality beverage
manufacture. Jones Soda is also well known for its innovation. Jones Soda is the only
beverage company to produce its product with 100% pure cane sugar, along with its
ingredients Jones Soda is also considered innovative in the flavors that they offer. Jones
Soda offers the following flavors of soda with both pure cane sugar as well as sugar free;
Orange Cola, Red Apple, Cherry, Crushed Melon, Green Apple, Cream, Root Beer, Blue
Bubble Gum, Fufu Berry, M.F. Grape, Berry Lemonade, Strawberry Lime, Lemon Lime,
Pure Cane Cola, and Orange and Cream. Many of these flavors are flavors that most
companies would not try because of the risk of failure. Jones Soda is also an innovator
when it comes to the design aspect of its bottles. Jones Soda is now offering a new
feature that allows customers to upload their own personal pictures to be printed on their
favorite flavor of soda and those bottles will be shipped to their house. Allowing
customers to personalize their own bottle is something no other beverage company has
tried before.
                                                          Willamette Valley Vineyards 32


Capabilities
         Jones Soda is a large company that was to get its product all over the country.
Jones Soda sells its product in almost every retail store from large companies like K-Mart
to the smallest road side gas station. In order to get their products to all these thousands
of locations takes a very good distribution system. A company that has to deliver this
much product must take advantage of the technology that is available. Jones Soda would
be forced to use a computer system that tells local warehouses what stores need product
and what type of product they would need. By having a system like this they can limit the
amount of human interference that will cause problems and rely on an accurate and
consistent computer system. Once the exact product is located it will be placed on a truck
and driven to the exact store when they are ready for a refill on product.
         Human recourses is another part of a company that is very important to have. By
having a good working environment for your employees the company gains a lot of
things from the satisfaction of a good environment. Some of the benefits that are
associated with a good work environment are improved productivity and better retention
rates. If you can make it more desirable for your employees to stay at your company
rather then leave then that is good. Another thing that you can put into place is a reward
system that is given to employees that excel at their jobs or meet certain requirements
that are work related.
         Jones Soda also has a huge advantage when looking at their current place in the
market. Jones Soda has positioned its in the new age/alternative beverage market. This a
very good industry to be located in since it is among one of the fastest growing markets
in the beverage industry. Since their beverages are dramatically different from large
beverage producers such as Coca-Cola and Pepsi by positioning them selves in a different
market they do not have to consider them a direct competitor in their target market. The
new age/alternative beverage industry is also very large financially. In the 2003 world
beverage survey the new age/alternative beverage market grossed over $14.8 billion in
total sales. As well as being positioned in a very fast growing market Jones Soda is also
positioned very well in the Carbonated Soft Drink Industry (CSD). Again in the 2003
world beverage survey the CSD industry grossed $45.7 billion in total sales. Jones Soda
has positioned them elves in a very strong industry and they have managed to find a
strong following in one of the fastest growing markets within that industry the new
age/alternative beverage market. One way that they can take advantage of this good
positioning is looking at strengthening their market share in current markets that have not
been fully saturated, as well as current markets that are witnessing current shifts in
customer buying habits.
         One of the biggest opportunities that Jones Soda currently has is to take advantage
of future sales within Canada. During the 2004 year 11% of Jones Sodas total sales came
from sales within Canada. This is a good start but there is still a lot of room to grow. One
of the things that aids this ability to grow their sales within in Canada is the fact that
Canadians have grown their per capita consumption of soft drinks to 109.89 liters a year.
That puts soft drinks above coffee, tea, water, and alcoholic drinks. Though the amount
of soda that has been consumed by Canadians is a great thing now the most recent
forecasts show that the consumption will go down, this is due to the current trend of
becoming more health conscious. This is a good thing for Jones Soda which already has a
strong and thriving organic line that offers great sodas that are much healthier than their
                                                           Willamette Valley Vineyards 33


competitors. In order to take advantage of this opportunity Jones Soda would need to
strongly advertise their healthier sodas before competing beverage companies are able to
produce new healthier drinks. By taking advantage of this lag time in which other
companies need to develop their new healthier beverages Jones Soda has the ability to
dramatically increase its market share within Canada.
        As well as strongly increasing their marketing in Canada Jones Soda has become
very well at finding ways to advertise their products to all sorts of other demographics
threw new and interesting ways. Jones Soda does a variety of things to advertise their
products one of the things that they have done is work with professional sports teams so
that they can advertise that they are the official drink of a certain team. When I log on to
their web page in Washington State at the bottom of the page it says that Jones Pure Cane
Sugar is the official soda of the Seahawks. This is some good product placement cause by
partnering with the Seahawks they are able to partner with other local teams as well as
advertise and sell their products at Seahawk games. A new form of advertising Jones
Soda is implementing, is one involving creating your own Jones Soda bottle. By going
Jones Soda‟s homepage you are able to upload a picture to your favorite flavor or soda
and have that image printed on the bottles label. This is a great gift people can give to one
another and since they get to create their own bottle which is a great way to create a life
time customer who will continue to come back for these experiences.
        One of the core competencies that Jones Soda has is the fact that it is considered a
local all natural drink. This is beneficial to them because resent trends in America have
shown that people are no longer going to big brands as much as the smaller ones and
people are starting to look for the drinks that have more natural flavors and ingredients in
them. These are things that add to their core competencies. Another core competency that
Jones Soda has is their interactive web site where people can design their own bottles. No
other beverage company offers something like this, so this is a new experience people
can have that may introduce them to a new beverage.

Company Value Chain
        Services that Jones Soda has in place consist of contact information that any
customer can take advantage of. All a person needs to do is go to the Jones Soda home
page and you can access a contact page where you can ask questions about the company
or give feedback about various products. The company also has a section where you can
ask about how to become a vendor or distributor for Jones Soda.
        As mentioned earlier marketing is a huge aspect of Jones Soda instead of using
mainstream TV ads Jones Soda uses different marketing channels. For example
partnerships with professional sport teams, buy doing this you can gain a lot of press for
your company buy making yourself visible at these sporting events. Jones Soda is also
trying to create a one on one relationship that is very personal with their customers by
offering customers the ability to create your own bottle feature, which is brand new to
this industry.
        Jones Soda handles their outbound logistics much as most companies in this
industry do. They produce their drinks much the same way as other beverage companies
in the same industry do. They also employ the same types of technology to create their
final product. Just as Jones Soda follows the norm regarding outbound logistics the same
goes for the operations of the company. Once again the process to creating the beverage
                                                          Willamette Valley Vineyards 34


is very similar to what other companies do. The only difference that may be involved is
the times that the product spends at each stage of production. For example the storing
stage will only take place fore a week at the most while alcohol companies will store their
beverages for months or even years.
        The real difference for Jones Soda comes in their inbound logistics. One of the
things that make Jones Soda so unique when compared to other companies is the fact that
they use pure cane sugar in their beverages. Pure cane sugar is typically grown in tropical
places such as South America. This adds some time delay and other problems when
trying to get raw resources in and out of the United States. Jones Soda feels that it is
worth the extra effort because it gives their beverage a different and better taste and
makes them unique to the market. The only other place that Jones Soda differentiates its
self from its competitors is with its labels. As mentioned before Jones Soda offers its
customers the ability to design and create their own unique labels with their own pictures
on the label. This changes the labeling process a little. By doing this they need to be able
to change the label that is being printed on a certain bottle when ever they need. Yes for
the mainstream customer changing the label is not an issue so Jones Soda does have
typical labeler. But they must also have another labeler that can produce any design they
need and must be able to change what kind of labels they are placing on the bottle at any
time.

Core Competencies
        Jones Soda has many core competencies that differentiate them from their
competition. The actual product that Jones soda is not valuable in what the actual
product offers but there are aspects of what they offer that are considered to be very
valuable. One of those things is the design your own bottle feature, this can be considered
valuable because it has the ability to make a personal relationship between the company
and the customer. This is something all companies try for. Jones Soda is rare for having
such a vast amount of flavors that you are able to get. Jones Soda offers a huge selection
of flavors of drinks that most other beverage makes do not offer so if the customer is
looking for a rare flavored beverage the chances that Jones Soda makes that flavor and no
other company does. Because there are so many flavors offered by Jones Soda, they are
highly differentiated, and it helps their company gain market share because they offer
what no other company does, and it creates value because customers know they can
always get something a little different when buying Jones Soda. A company that tries
this may end up very successful like Jones Soda has but the risk is that they may not be
able to produce flavors just as good as Jones Soda so they would be out all that research
and development. Jones Soda also must be very organized because they have so much
going on within their company. First they always are continually working on research and
development of new flavors of soda. This needs to be organized so that they know what
flavors they have tried and which ones have potential and which ones do not have
potential. They must also be organized because of the fact that they do not continually
print the same labels for their drinks. Because of the design your own label feature they
have to make a variety of labels meaning the printing process is much more difficult so
that the correct label gets onto the correct flavor of drink.
                                                            Willamette Valley Vineyards 35


CONSTELLATION BRANDS
Company overview: Constellation Brands
           Canandaigua Industries Company (later renamed Constellation Brands) is an
American based company with headquarters in Victor, New York. The business was
started in 1945, and the focus of the business was wine making and distributing. Three
years after opening for business, Canandaigua Industries Company made their first
acquisitions. Mother Vineyard and Onslow Wine Companies were purchased which
started the diverse and broad company that is now known as Constellation Brands.
           Constellation Brands went public in 1973, and was comprised of almost ten
different wine companies. Constellation Brands continued to acquire and create new
brands, and in 1993, Constellation brands bought several breweries. One of the breweries
was Corona, which is now the largest imported beer. Now Constellation Brands owns
250 companies in the wine, beer and spirits industries, and sells its products in about 150
countries.


Resources
          Constellation Brands is very diverse, but all their companies deal in the
alcoholic beverage market. So even though their company represents hundreds of brands,
with thousands of individual products, they all share common similarities. All the
resources that make this possible can be broken into two main groups, tangible resources,
and intangible resources.

Tangible Resources
          Tangible resources differentiate from intangible resources by their ability be
quantified. An investigation of a companies tangible resources will reveal how much
physical product the company makes, how much the company is worth (in terms of
physical and technological assets), and show how the company is standing in financial
terms. There are many types of tangible resources, and they can all be broken down into
four groups; financial resources, organizational resources, physical resources, and
technological resources.

Financial Resources
          To understand Constellation Brands‟ financial resources, an analysis of the
firm‟s borrowing capacity, and the firm‟s ability to generate internal funds must be done.
To analyze Constellations Brands‟ borrowing capacity, their assets need to be weighed
against their liabilities. The two ratios for this analysis are the quick ratio and the current
ratio.
          The current ratio is weighing all current assets against the current liabilities.
With current assets of $3,199,000,000 and current liabilities of 1,718,300,000, the current
ratio comes to a total of 1.86. This means that for every $1.86 in current assets (this
includes cash, receivables, etc…) there is $1.00 of current liabilities (such as accounts
payable, short term debt, etc…). 1.86:1 is a good enough ratio, and does not put a large
strain on the company because it is worth much more then they owe. However, in a crisis
                                                                Willamette Valley Vineyards 36


situation where assets need to be immediately liquidated, the quick ratio (otherwise
known as the acid test or liquid ratio) serves a more useful purpose.
           In most industries, the quick ratio only includes cash, market securities, and
accounts receivable. In an emergency event, Constellation Brands could muster
$1,019,500,000. Using our current liabilities number again, that would put the quick
ratio at 0.59:1. For a quick ratio, that is very bad. However, the quick ratio can be used
differently for each industry, and because Constellation Brands has so much work-in-
progress (unfinished goods in inventory), the current ratio may be a better indicator for
the beverage industry. Much of wine and alcoholic beverage making comprises of timely
ageing, so even though the product is completed, it needs time to be ready to sold. That
being said, it can be sold relatively easily compared to many other industries (like the
bridge building business for instance). With $2,179,500,000 caught up in inventory (68%
of total current assets), it is easy to see why the current ratio and quick ratio are so
different.
           Even though Constellation Brands‟ is growing heavily, it is important to know
how the company can be evaluated, and how quickly and easily it can pay of its debts.
Looking at past years, part of Constellation Brands‟ strategy is acquiring new businesses,
and diversifying their company into all parts of alcoholic beverages. The company‟s
ratio of total assets to total liabilities is usually a little above 1.5:1, but that ratio is now at
about 1.39:1. So it appears as if Constellation Brands is either growing a little bit too
quickly, or the economic downturn is decreasing the worth of their total assets.
           Along with examining Constellation Brands ability to pay back liabilities, the
financial resources analysis is incomplete without an examination of the firm‟s ability to
generate internal funds. There are generally only three ways to do this. First,
Constellation Brands could liquidate some of it‟s assets that it no longer deems useful or
necessary. Second, Constellation Brands could issue more stock. However this usually
drives the price of each share down when more stocks are issued. Or lastly, Constellation
Brands could improve the speed of production while negotiating for longer intervals
between receiving raw materials, and actually paying for them. This concept is similar to
how Costco generates and funds expansions. Often times the product is sold long before
they have to pay for it. In this way, they are getting a short term loan for zero interest.

Organizational Resources
          The next tangible resource to be examined is Constellation Brands
organizational resources. Because Constellation Brands is a publicly traded company,
they are required to hire outside accounting. Since the Sarbanes Oxley Act, all public
companies must follow suit. Despite being very costly, it is necessary to give all
companies an equal and level playing field. Another organizational resource of
Constellation Brands is their information system. One of the most difficult things for
companies when merging is finding a common information system to share and exchange
information freely. This greatly increases the company‟s mobility and efficiency.

Physical Resources
          For Constellation Brands, its physical resources represent the largest portion of
assets. Physical resources encompass everything from property plant and equipment to
access to raw materials. Between property, plant, equipment, and inventory, there is over
                                                          Willamette Valley Vineyards 37


$5 billion in worth. As stated in their history earlier, Constellation Brands beverages are
sold in over 150 countries. In fact, the only continent that Constellation Brands does not
sell or market its products is Antarctica. With about 60 production facilities worldwide,
this represents a large portion of Constellation Brands investments and physical assets.
The inventory of wine and spirits is also considered a large physical asset because both of
these products require to be aged more times then not. This not only greatly increases
their work-in-progress, but large storage facilities are required to hold such great
quantities of product.

Technological Resources
          The last tangible resource to be discussed is Constellation Brands technological
resources. To Constellation Brands, it is important to keep their unique beverages
constant and exclusive to their brand. In order to keep other companies from copying
their many styles, types and brands of beverages, total understanding of the law must be
mastered in each other countries they operate in. Constellation Brands often times
acquires a new company for their great reputation, brand image, and available product
line. In order to keep other companies from stealing these resources, patents, trademarks,
copy rights, and trade secrets are filed. For instance, Emu Wine Company, Corona,
Goundrey, Speyburn Single Malt Scotch, Schenley Superior, SVEDKA Vodka and Black
Velvet Reserve Canadian Whisky are just a few of the trademarked company names that
Constellation Brands owns. Along with these trademarks, each company has recipes for
each of their types of beverages made. Many times these processes in which the
beverages are made are copy righted, and even if you could have the specific equipment
required to make the types of alcohol, Constellation Brands trade secrets would prevent
an outside brand from reproducing their specific drinks. These are known as the
companies technological resources.

Intangible Resources
          The second main group of resources are intangible resources. Unlike tangible
resources, these resources can not be quantified. Furthermore, intangible resources can
be broken down into three groups, human resources, innovation resources, and
reputational resources.

Human Resources
         Because Constellation Brands is in the business of acquisitions, it would be
impossible for them to function without a very good human resources division. Before
an acquisition takes place, prices need to be set, and projections made, but most
importantly, the company being acquired needs to be able to mold with Constellation
Brands‟ company culture. So, human resources must shape the company culture of
Constellation Brands, and make positive matches between possible acquisitions.
         Along with these tasks, human resources are the knowledge that comes from
each employee. Often times, trade secrets of small companies are only in the brains of
the owners and workers. Though this information can not be quantified, it is essential to
the businesses success. This also goes hand in hand with the raw talent, skill, and
education that each employee attains. It is common knowledge that wine making is a
                                                          Willamette Valley Vineyards 38


difficult task, and the employees, and winemakers make this possible for Constellation
Brands to continue to bring new and exciting products to the marketplace.

Innovation Resources
           This leads into the next intangible resource, innovation resources. These
include ideas, scientific capabilities, and the capacity to innovate. When an employee or
brewer is hired, it is unknown how much profit he or she will bring the company. These
employees‟ ideas, scientific capabilities and capacity to innovate are unknown until they
actually take place. For example, when Sun Country Cooler was created by Constellation
Brands in 1984 and over one million cases sold in 6 months, it was the ideas and
scientific capabilities that allowed this to be such a success. And after the employee
impacts the company, it is nearly impossible to know just how much a single employee
hurt or benefited the company. In the business of creating alcoholic beverages, it is never
a trade that will be done by robots or machines. It is skill passed down through
generations, and that is why innovation resources are so important to Constellation
Brands.

Reputational Resources
         The final group of intangible resources is Constellation Brands reputational
resources. Like stated earlier, Constellation Brands often times acquires existing
businesses to buy their trade secrets and brand image. Many times consumers don‟t
know that an ownership change has taken place, but a large brand like Constellation
Brands has the ability to market globally with a company that would have otherwise only
been able to market and sell in the immediate community.


Capabilities
Distribution
           Distribution is described as the effective use of logistics management
techniques. Though Constellation Brands for the most part has many distributors who
they ship the final product through the regular sources until it reaches the store or
restaurants, they are also innovating a new system. According to lycos.com,
Constellation Brands now has the ability to ship wine directly to the customer without the
usual markup from the intermediary satellite warehouses. This also cuts down on
shipping and storage costs.
           Though the direct method from manufacturer to customer is ideal in terms of
minimizing costs, it is unrealistic if the business wants to succeed. This is a great
addition to the formal distribution, but most of Constellation Brands wines, beers and
spirits travel to satellite distribution facilities and then to third middle men (such as
restaurants, liquor and grocery stores).

Management Information Systems
          Because Constellation Brands is just the tip of the iceberg when it comes to
recognition of the company as a whole, a vast and complicated information system is not
only required, but quite necessary. When an acquisition is made, Constellation Brands
                                                            Willamette Valley Vineyards 39


plugs into the new company with their information system. With a common system
between all Constellation Brands subsidiaries, they can more effectively and efficiently
manage inventory levels, response time between orders, and better data interpretation.

Marketing and Sales
          Until recently, much of the marketing done for any Constellation Brands
company was supposed to be individually budgeted. For example, Corona was in charge
of their own marketing, and Barton Gin and Vodka was in charge of their own marketing.
However, there has been a recent shift. Constellation Brands is now putting a new
“Constellation Brands” logo on all of their products. This is to promote cohesion
amongst the many companies, and also provide their customers with many other quality
products they can associate with their favorite alcoholic drink.

Management
           Perhaps one of the greatest challenges for the managers at Constellation Brands
is getting the different companies to associate and share openly. Since they all fly under
the same flag, one would assume that this is already the case. However, the heavy
majority of the Constellation Brands companies were at one point rivals. This requires a
great deal of collaboration between the managers and the Human Resources department.
           Another difficult task for managers of Constellation Brands is deciding on
which companies to create or acquire. Since Constellation Brands has always been in the
business of acquiring businesses, and it is vital to their growth, they must always be
looking for the good deals, but more importantly, avoiding the bad deals or dead
companies.


Value Chain Analysis
         The value chain analysis consists of analyzing a company from two separate
functions. Companies have primary activities, and support activities.

Primary Activities
          Primary activities are the steps required to physically acquire, make, sale,
distribute, and support after the sale. Primary activities are broken into five activities,
inbound logistics, operations, outbound logistics, sales and marketing, and service.

Inbound Logistics
          Because Constellation Brands has so many companies with so many different
products, there aren‟t a lot of similarities between all of the products. All of the products
begin with a type of liquid, raw ingredients, containers, and labels. Apart from those
similarities, all the brands have differences. Constellation Brands is comprised of three
subsections. These subsections are beers, wines, and spirits. Within these subsections,
there are more similarities.
          All beers require barley, water, hops and yeast. However some beers have
additional ingredients. For example, Constellation Brands Tsingtao Lager has Asian
spices for a cultural experience, while Corona Extra Light contains small amounts of fruit
and honey.
                                                           Willamette Valley Vineyards 40


          Wines all share the raw materials of bottles, corks, and grapes. But just like
beer, there are different ingredients in different types of wines. In Marcus James
Cabernet Sauvignon, there are berries, tobacco, cocoa, vanilla, pepper and spices. In
contrast, Paul Thomas winery out of Woodinville, Washington does not have a
comparable wine.
          Constellation Brands also makes several spirits like brandy, Canadian whisky,
gin, scotch, vodka, and whiskey blends. These all differ, as vodka needs grain, and
potatoes, while whiskeys need oak barrels and fermented grain mash.

Operations
         Within all Constellation Brands operations are a few similar tasks. Since all the
beverages they make are alcoholic (save for St. Pauli Non-Alcoholic beer), all of these
beverages require processes in which they ferment and become alcoholic. There is also a
mixing, bottling, labeling, packaging, and shipping process that is similar between all of
the companies.

Outbound Logistics
          Outbound logistics consists of collecting, storing and physically distributing the
finished product. Like mentioned earlier, Constellation Brands is implementing a new
system that allows for direct ordering and shipping from the manufacturer. However,
most of the storage and distribution is through large food and restaurants. Constellation
has means of contracting with large grocers that a small independent brewery does not
have the opportunity to pursue. Global distribution is also a very large part of
Constellation Brands.

Sales and Marketing
          With Constellation Brands being such a large and widespread company, it
greatly increases the opportunity for a company that is acquired. For example, with
distribution points, and satellite warehouses all over the globe, it is much easier for a
subsidiary in the Constellation Brands group to become global then a smaller company.
With such great resources all over the globe, marketing is also easier. One of the major
concerns of marketing is understanding the culture that you will be marketing and selling
your product in. Since Constellation Brands has Marketing Executives and Directors all
over the globe, it helps create brand and product awareness on a much larger scale.

Service
          Service can be very difficult for the large Constellation Brands. Not only do
they have many different campaign slogans and products, but they are spread all over the
world. For instance, one of Constellation Brands companies could provide wine for
religious communion, while the 2007 model for St. Pauli Girl has posed for Playboy.
Even though these are two opposite ends of the spectrum from the church purchasing the
wine, the service department needs to answer all questions that may be asked of them
about their large company.

Support Activities
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          Support activities of the value chain model are meant to provide the assistance
for the primary activities to take place. There are four categories of support activities,
firm infrastructure, human resource management, technological development, and
procurement.

Firm Infrastructure
          Firm infrastructure is meant to aid, plan, advise and support all the activities for
the company. Since this is such a large company, and they are publicly traded,
Constellation Brands is required to keep detailed records for accounting purposes. The
accountants from each company are in charge of keeping these detailed records and
passing them to Constellation Brands accountants for further compilation. Firm
infrastructure activities are often times the processes that are the life-blood of the
company. Specifically for Constellation Brands, this requires a great deal of cohesion
and cooperation. Since the company is so large, it takes a great number of people to run
each company, and there are groups of companies with management, and these group
managers answer to the board of directors and ceo/cfo types. This large size, and
massive firm infrastructure is perhaps the largest downside of Constellation Brands.
They are very good at it, but it is very costly.

Human Resource Management
          The human resource management is in charge of creating cohesion between
companies under the Constellation Brand, hiring, firing, training, developing and fairly
and competitively compensating employees for their work. At Constellation Brands,
many of the positions in the company require higher education. Winemakers, brew
masters, and those in charge of making hard liquors often have received specialized and
advanced education. It is human resource management‟s job to hire those who are
qualified, train those who want to learn, and fire those who can‟t bring productivity.

Technological Development
          Technological development takes many forms at Constellation Brands. There
have been several mentioned forms of this such as the manufacturer to customer
shipping, as well as the advanced information systems. Technological development is
meant to aid a company through making processes more effective and efficient. Because
the “green” movement is upon us, and companies world wide are attempting to lessen the
impact they have on the environment, Constellation Brands is also taking steps to reduce
their environmental impact through the use of technology. This also goes hand in hand
with marketing and sales.

Procurement
          Procurement is the activities needed to take place to purchase raw goods,
buildings, and all other parts associated with the product process. Many times, the
companies that Constellation Brands acquired already had good relationships with their
distributors and suppliers, but these suppliers could not supply the amount needed once
the company grew under the Constellation Brands company. Since Constellation Brands
is so large with distribution and companies all over the globe, they also have vast supplier
lines.
                                                          Willamette Valley Vineyards 42




Core Competencies
           The core competencies of Constellation Brands are advantages consist of four
categories that make them competitive, and give them an advantage over their
competition. There are four requirements that need to be fulfilled in order for that
advantage to be considered a core competency. The four requirements are valuable
capabilities, rare capabilities, costly-to-imitate capabilities, and nonsubstitutable
capabilities. Constellation Brands consists of three core competencies. These three are
their vast information system, globalization, and diversity.
           The first core competency of Constellation Brands is their vast information
system. Upon acquiring a company, this system is used to link all the companies within
the larger Constellation Brands network to aid with business, increase speed, and increase
abilities to reach distributors and suppliers. This system is valuable because it increases
Constellation Brands companies‟ ability to talk amongst each other, and become aware of
shortages or excesses in supply or demand. This information system is rare because
Constellation Brands is the largest distributor of alcohol in the United States. No other
company is as large, and has as many sources for distribution, supply, and buyers. This
rare information system links it all. The information system is costly-to-imitate because
you need the cooperation of all companies and technicians that can understand, build, and
maintain a large custom technology such as this. The information system is
nonsubstitutable because there is no other system or business practice that is faster, more
efficient, or more effective then being able to react to supply, demand, and availability of
customers, suppliers, co-companies, and distributors.
           The second core competency is Constellation Brands globalization. With the
world being linked through business it is important for businesses to be able to reach out
and sell to people that are interested in their product, regardless of how far away that may
be. The globalization of Constellation Brands is valuable because it provides markets for
companies that in no other instance would they have the know-how or ability to become
global and sell their beverage across the world. The globalization of Constellation
Brands is rare because very few companies are as large and widespread as Constellation
brands. It is also costly-to-imitate. Without people in place throughout the world, it
would take time and a great investment to start manufacturing and distributing overseas.
The globalization of Constellation Brands is nonsubstitutable because it has become very
large and owns some of the largest foreign alcoholic beverage brands. Corona is the
largest imported beer, and St. Pauli is the second largest exported German beer.
           The third and final core competency of Constellation Brands is their diversity.
This is valuable because if people recognize the Constellation Brands as quality and
competitively priced, then all their products are competitively priced and they will be
more willing to try all Constellation Brands products. Their diversity is rare because few
companies have the knowledge to purchase all types of companies associated with
alcohol such as wine, beer and spirits. It is very costly-to-imitate, and completely
impossible for almost all companies. Constellation Brands has sales of over
$3,770,000,000 annually, and owns over 250 companies. That is almost impossible to
replicate for any other business, and even if a company had the money, it would take
many years to build up such a large amount of companies. Because of this, Constellation
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Brands is nonsubstitutable. They can not be reproduced without much effort, and their
brands are unique.




REDHOOK BREWERY

Red Hook Brewery
        Red Hook Brewery was first founded in Seattle in May of 1981 by Paul Shipman
and Gordon Bowker. They decided to start their company in the northwest because more
beer is consumed in that region then anywhere else in the nation. They also saw a
growing market and felt that entering when they did would give them the best advantage.
The first pint of Red Hook was poured in 1982, and hasn‟t stopped since. The company
has grown throughout the US as their business grew, yet has stayed true to their original
taste and quality. Recently they have merged with Widmere Brothers Brewing in
Portland, Oregon to create a fantastic partnership of quality and unique flavor.

Resources
        There are many tangible resources that Red Hook utilizes to produce their
boutique quality malt beverages. Tangible resources are the most expensive and most
important resources a company has. Land, machinery, trucks, refrigeration units,
buildings, are all examples of tangible resources that are needed for any production
company. Yet it is also important to look at Red Hook‟s internal resources for ability to
generate new funds and profits. Red hook has two breweries, one located in Washington
and one in New Hampshire. The facilities utilize a high tech state-of-the-art brewing
process that was helped engineered with the help of a German company in 1988. The
process of brewing beer requires a series of mixers, strainers, boiling pots, wort coolers,
pressurized tanks, labelers, bottlers, and a very intense quality control lab. Either one of
their breweries produce their entire line of beers. The locations of the breweries were
strategic in placement because Red hook wanted to guarantee the best water sources and
a central enough location that their largest market segmentation can obtain the freshest
beer possible.
        It is important to look at the financial resources as a tangible aspect of Red Hook
when analyzing their ability to generate more product and profit. Red Hook is required to
purchase all of their raw materials that are needed to produce their product so they have
more liability then other beverage producers. They also have raw materials that have a
short shelf life so any flaw or over looked materials is then a waste. Red Hook also is
incredibly particular about the quality and where the raw materials are produced so they
have a high dependency on the producers of their raw materials. As seen in the chart
below in 2007 they took on more inventory and more debt without having a higher asset
ratio then previous years. This lessened their quick-ratio and is partly why they have an
increased dependency on their relationship/contract with Anheuser-Busch, Inc.
        The below chart is a diagram of Red Hook‟s current ration, quick-ratio, acid-test
ratio, and debt to capital ratio.
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                              Red Hook Brewery                   In Thousands
                             2007      2006           2005

Current Assets         15,005     15,414     11,962
Current Liabilities         9,291      7,104    6,729
Current Ratio                1.62       2.17     1.78

Current Assets         15,005     15,414     11,962
Inventories                 2928       2572      3028
Current Liabilities         9291       7104      6729
Quick Ratio                  0.97       0.98      0.67

Cash                         5527          9435       6436
Accounts                     5508          3204       1996
Receivable
Current Liabilities          9291          7104       6729
Acid-Test Ratio               1.30          1.81       1.33

Debt                           15           465        459
Shareholder's Equity       13,517        11,340      9,726
Debt-to-Capital              0.21          0.28       0.34
Ratio

         The intangible resources of Red Hook are creates the difference in their unique
tasting beer. Intangible resources are the knowledge, training, creativity and people that
make a company unique. The social culture and drive that a firm has is also part of their
intangible resource. Red Hook has a very unique and secretive mix of hops and yeast.
Only the highly trained and experienced brew masters of Red Hook know the true
proportions of these ingredients. Quality control is a huge part of Red Hook‟s process in
maintaining a consistent taste in their beers. They have skilled technicians that are not
only trained on the chemistry aspects of the beer, but have incredibly sensitive and
knowledgeable taste buds that can tell if any of the batches of beer are off in flavor.
         The creativity in flavors that are created for Red Hook are one the factors that
make their beer different then the competition. It also allows them to have more a niche
market and a larger market share then other competitors. Their signature flavor is ESB,
which is rich, flavorful and incredibly distinctive. The idea was to mock the “Extra
Special Bitters” found in British pubs. Their other flavors, Long Hammer IPA, Slim
Chance, Black Hook, Winter Hook, Copper Hook, and Sunrye, all are so distinctive in
their qualities and flavors that alone Red Hook can cover the gamete of desired tastes for
their target market. They also venture out with different seasonal specialty flavors as
they obtain special selections of hops or malt.
                                                            Willamette Valley Vineyards 45


Capabilities
Distribution
         Red Hook has one main focus for distribution and that it to make sure the
customer receives the freshest product possible. Their two locations, one in Washington
and New Hampshire, are strategically located so that their two main target markets are
close by for the freshest delivery. Once their beer is packaged it does have a shelf life,
but a limited one if it is not kept cold or is moved more then necessary. The fermentation
in the beer can be sensitive to drastic changes in temperature, so it is important to ship the
products is specialized cooler vehicles.
         The distribution of their kegs of beer, unlike their bottled beer, is done by private
distribution companies. They contract out the alcohol sales firms who then go around to
individual bars and restaurants selling Red Hooks product. Those individual are the ones
in charge of making sure the kegs of beer is distributed when and where necessary,
saving Red Hook some time and hassle.
         Anheuser-Busch now being a major partner in the Red Hook company has opened
a lot of new distribution channels and capabilities the company did not have before.
They are now able to access more grocery stores and other private vendors for their
bottled beers. It also gives them the ability to be sold on tap where there are exclusive
Anheuser-Busch contracts that would have previously prevented them from having
contact with that vendor.

Human Resources
        There is a certain pride that comes to having a product that no one can copy
exactly, and Red Hook is that way. They have such a classified recipe for their beer that
those few individual brew masters who know it are cherished. The company is also true
to its Northwest based roots, in that it has a very casual work environment that allows
people to have the freedom to work without a lot of the corporate pressures a lot of other
companies force upon their employees. Now that Red Hook has partnered with
Anheuser-Busch, there business model has changed some. The employees now have two
different types of company it is working for and has had to meld those together over the
last few years. Thankfully though the staff at Red Hook all have the same passion for a
fantastic product and are able to keep promoting the original reason they got into beer.
The management of the company is a large factor in having such a great staff, for they
show gratification for their employees and support the freedom they desire to be
productive.

Management Information Systems
        Red Hook had an old operating system that had been out grown as their business
boomed. They needed to implement a Sarbanes-Oxley (SOX) compliance project, and
this required simultaneously upgrading its operating system, its database, and its
enterprise applications that would allow them to fit with their growing market and new
partner ship with Anheuser-Bush. Specifically, Red hook needed to upgrade from Sun
Solaris 2.6 to Sun Solaris 2.10, from Oracle Database 7.3.4 to 9i, and from Oracle
Applications 10.7 to 11.5.10. This rare set of circumstances meant that Red hook could
not follow standard upgrade procedures. To complete this upgrade, Red hook needed to
                                                           Willamette Valley Vineyards 46


partner with a company that had the expertise and the ingenuity necessary to meet these
unique challenges. The prospective partner needed to be able to provide service flexibly
and cost-effectively, as the project had to be completed within a tight budgetary
framework. ITC, a consulting IT/IS company, offered Red hook the senior-level
functional and technical expertise necessary to complete this complex upgrade
successfully. ITC has customized a system that allows Red Hook to now be as
productive and efficient as possible still within the constraints of its other obligations.

Marketing
        The marketing efforts done by Red Hook are stellar. They take interactive beer
education for the customer to an entirely new level. After they partnered with ITC, they
completely re-vamped their website to something that draws in customers just to play on
it and subtlety bombards them with marketing efforts. The company is more then aware
of their brand, image, and target market and very successfully plays on that. There is
something about the beer industry that truly makes a huge impact in the marketing
community and Red Hook stands to show that is truth even for their smaller company.
        Red Hook is wise and plays upon its factory locations very heavily. They are
very involved within the communities is which they are located, providing promotional
efforts and support to lots of local groups. The company is also very involved in doing as
much with large events within their communities to pass the word of their beer. They
create a large variety of promotional products, such as shirts, hats, glasses, and even flip-
flops to sell and give away.
        The company also has some marketing help from their partner. Anheuser-Bush is
a very large and well known marketing focused company. They have passed on some of
their expertise and marketing drive to Red Hook. With that partnership and the help from
their new ITC partnership, Red Hook is way beyond the mark for marketing and it
excelling rapidly.

Management
        The management of this company is one that is kind of all over the board. Red
Hook partnered with Widmere Brothers in Portland, OR last year, and by doing so
created Craft Brewers Alliance, Inc. The two companies are still functioning as their own
yet now have more investors and board members then before. The contract with
Anheuser-Bush also changes management trends some too. They have a limited
partnership with the company yet are still required to meet certain company wide goals
and focuses. Because all of the acquisitions are fairly new, there is a lot of turmoil
occurring in trying to find a new balance between which management styles and goals are
best suited for the company.

Manufacturing
        The main goal of Redhook is to create the best micro-brew possible while keeping
inline with their original intentions. They buy only the highest quality hops, grains,
wheat and barely. They use a very specific system and series of quality testing so that
every time they are able to provide a consistent premium product.

Research and Development
                                                           Willamette Valley Vineyards 47


        Redhook has one to two seasonal beers every year. These beers reflect current
trends and tastes in new types of raw materials yet still stays true to the hoppy taste that
Redhook cherishes so much. The seasonal beers may include a fruit or flavor they can
get fresh that season that pairs well with their current top selling blends. The brew
master in Washington are the creators of the new flavors and are always to come out with
something new and delicious so make a stand in the current markt.

Company Value Chain: Primary activities
Inbound Logistics
        In the industry value chain, the inbound supplies for the beverage industry are
similar to what is required for Redhook to do too. They are in need of not only the best
premium raw materials but a supply that can meet a very high demand. Having a
constituent flavor and taste is something that is very important yet hard to do. With the
connections Redhook has they can be a leader in this area of their competitors.

Operations
       Redhook mixes a secret blend of their raw materials and bottles them on site to
make their product. It is so important to keep the operations flowing evenly to keep up
with their high demand. The operation systems are automated. The people who run
these machines are highly trained and highly valued assets for Redhook.

Outbound Logistics
        The distribution channels for Redhook are a mix of direct sales, grocery store
sales, and the partnership with Anheuser-Busch. This process is similar to that of the
beverage industry. They are fortunate to be able to sell beer right from their factory
giving them an advantage to others in the industry.

Sales and Marketing
         The bulk of the sales and marketing efforts are now in connection with Anheuser-
Busch. The partnership they have created with this company has allowed them to better
enter a saturated market and gives them a great advantage to be working with a company
that is very aware of how and what interests their target market. Anheuser-Busch is a
leader in the beverage industry and gives Redhook an opportunity to really be a leader in
the industry too.

Service
        The service capabilities of Redhook are strong because of their great website and
local area location to their main target markets. They offer consumers a lot of options for
interaction with the company so that they receive the best customer service available.
Also having the support of their partnerships allows them to be better connected to
personal to help work on customer service putting them in the top segment of beer
companies.

Company Value Chain: Supporting Activities
                                                           Willamette Valley Vineyards 48


Procurement
        As mentioned before, Redhook acquires the best raw materials possible and keeps
the brewing process as constituent as possible to provide the best product possible. These
actions take place year round and increase during the holidays to meet the higher demand
for the product during that season.

Technological Development
        Redhook is able to maintain a constant improving of the processes of the inbound
logistics, operations, outbound logistics, sales and marketing, and service because of their
partnership with Anheuser-Busch. This partnership allows Redhook to be the best
company they want to be with as much freedom as they want without having to worry
about not having the top machinery to produce their product.

Human Resource Management
        The team of people who make Redhook what they are today are some of the
biggest assets to the company. The education, training and passion these employees have
are a large part of that what makes this company grow and thrive. The board members
that are also working with Anheuser-Busch allow for the growth of this company and
their ability to stay with the market trends.

Core Competencies

Valuable                                       The value of Redhook is that they are
                                               leaders in the microbrew beer industry.
                                               They were some of first to create a bitter
                                               hoppy beer and since then have been able
                                               to create new trends.
Rare                                           The rarity of Redhook is their secret blend
                                               of ingredients and balance of flavors. They
                                               create a flavor that not any other beer
                                               company is able to imitate.
Costly to imitate                              The cost of running a brewery all day and
                                               year round is expensive because of not only
                                               the overhead but the employee costs.
Organized to exploit resources                 The resources are currently being exploited,
                                               the location is currently organized, and
                                               there is not much room for improvement.
                                                              Willamette Valley Vineyards 49


COCA-COLA
Resources
Tangible resources
 (In millions except par value)

ASSETS
CURRENT ASSETS
 Cash and cash equivalents                                                          $           4,701
 Marketable securities                                                                            278
 Trade accounts receivable, less allowances                                                     3,090
 Inventories                                                                                    2,187
 Prepaid expenses and other assets                                                              1,920
TOTAL CURRENT ASSETS                                                                           12,176

INVESTMENTS
  Equity method investments:
   Coca-Cola Hellenic Bottling Company S.A.                                                     1,487
   Coca-Cola FEMSA, S.A.B. de C.V.                                                                877
   Coca-Cola Amatil Limited                                                                       638
   Coca-Cola Enterprises Inc.                                                                       0
   Other, principally bottling companies and joint ventures                                     2,314
  Other investments, principally bottling companies                                               463
TOTAL INVESTMENTS                                                                               5,779

OTHER ASSETS                                                                                    1,733
PROPERTY, PLANT AND EQUIPMENT — net                                                             8,326
TRADEMARKS WITH INDEFINITE LIVES                                                                6,059
GOODWILL                                                                                        4,029
OTHER INTANGIBLE ASSETS                                                                         2,417

       TOTAL ASSETS                                                                 $          40,519

LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
 Accounts payable and accrued expenses                                              $           6,205
 Loans and notes payable                                                                        6,066
 Current maturities of long-term debt                                                             465
 Accrued income taxes                                                                             252
TOTAL CURRENT LIABILITIES                                                                      12,988

LONG-TERM DEBT                                                                                  2,781
OTHER LIABILITIES                                                                               3,401
DEFERRED INCOME TAXES                                                                             877
SHAREOWNERS' EQUITY
 Common stock, $0.25 par value; Authorized — 5,600 shares                                         880
 Capital surplus                                                                                7,966
                                                            Willamette Valley Vineyards 50

  Reinvested earnings                                                                             38,513
  Accumulated other comprehensive income (loss)                                                   -2,674
  Treasury stock, at cost                                                                        -24,213
 TOTAL SHAREOWNERS' EQUITY                                                                        20,472

       TOTAL LIABILITIES AND SHAREOWNERS' EQUITY                                     $           40,519

        The Coca-Cola Company is the largest distributor, manufacturer, and marketer for
the non-alcoholic syrups and beverage concentrates in the world. Through examining
Coca Cola‟s balance sheet, income statement and cash flow, we can understand the
financial resource situation and organizational resource situation of Coca Cola Company.
        The ratio of the current asset and the current liabilities of Coca-cola have the ratio
of 91 percent higher for the year 2008 vs. 2007. The Coca-Cola Company also has the
earnings per share of 19 percent as compare to the $2.16 for the yea 2006 and to the
$2.57 for the year 2007. This had been caused by the increased of the worldwide sales
and the rise for its earnings in the year 20078 for the company. On the analysis of the
price to earnings ratio, the company has the actual PE Ratio of 19.72 and for the previous
year it was recorded to have of 19. The projected earning growth for the company is 2.66
which mean that it is the above normal value.
        Although Coca Cola Company has a big mount of Loans and notes payable, coca
cola has excellent operating status. In the global crisis, investors can be confident to
invest in Coca Cola. The firm‟s borrowing capacity is still good based on the constantly
increasing sales and profits.
        Coca Cola Company was founded in 1886 by pharmacist John Styth Pemberton in
Atlanta, Georgia, The Coca-Cola Company is the world's leading manufacturer,
marketer, and distributor of non-alcoholic beverage concentrates and syrups, used to
produce nearly 400 brands. The Coca-Cola Company continues to be based in Atlanta
and employs 49,000 people worldwide, with operations in over 200 countries.
Coca-Cola Great Britain (CCGB)
   Coca-Cola Great Britain (CCGB) is responsible for marketing 21 brands (over 100
products) to consumers in Great Britain, developing new brands, extending existing
brands and protecting Coca-Cola trade marks in Great Britain. CCGB employs around
130 people at its headquarters in West London.
Coca-Cola Enterprises Ltd (CCE)
        Coca-Cola Enterprises Ltd (CCE) is the local bottler responsible for the
manufacturing, distributing, sales and trade marketing of the brands of CCGB throughout
England, Scotland and Wales. It employs around 5,000 people at its various sites across
Britain.
The Coca-Cola System
        Together, CCGB and CCE form one 'system' which is referred to as 'The Coca-
Cola System', but is not a single entity from a legal or a management point of view. The
two businesses work together closely and have taken a joint approach to corporate
responsibility in particular, because while some issues are relevant to one business and
some to the other, still more are relevant to both.
Coca Cola Company has a large number of factories in the world (about 160 brands in
202 countries), these different factories are not only producing Cola, but also produce
many other production. Coca Cola company‟s product include juices and nectars; fruit
                                                           Willamette Valley Vineyards 51


drinks and dilutables (including syrups and powdered drinks); coffees and teas; energy
and sports drinks; and various other nonalcoholic beverages. The principal raw materials
used by Coca Cola are nutritive and non-nutritive sweeteners. In the United
States, the principal nutritive sweetener is high fructose corn syrup, a form of sugar,
which is available from numerous domestic sources and is historically subject to
fluctuations in its market price. The principal nutritive sweetener used by Coca Cola
outside the United States is sucrose, another form of sugar, which is also available from
numerous sources and is historically subject to fluctuations in its market price. Coca Cola
generally has not experienced any difficulties in obtaining its requirements for nutritive
sweeteners. The principal non-nutritive sweeteners Coca Cola use in business are
aspartame, acesulfame potassium, saccharin, cyclamate and sucralose. Generally, these
raw materials are readily available from numerous sources. Coca Cola has very good
cooperation with the suppliers.
        Coca Cola Company owns numerous patents, copyrights and trade secrets, as well
as substantial know-how and technology, which Coca Cola collectively refer to
„„technology.‟‟ This technology generally relates to coca cola company‟s products and
the processes for the production; the packages used for products; the design and operation
of various processes and equipment used in coca cola business; and certain quality
assurance software. Some of the technology is licensed to suppliers and other parties.
Coca cola‟s sparkling beverage and other beverage formulae are among the important
trade secrets of Coca Cola Company.
        Coca Cola own numerous trademarks that are very important to the business.
Depending upon the jurisdiction, trademarks are valid as long as they are in use and/or
their registrations are properly maintained. Pursuant to coca cola Bottler‟s Agreements,
they authorize the bottlers to use applicable Company trademarks in connection with their
manufacture, sale and distribution of Company products. In addition, coca cola grant
licenses to third parties from time to time to use certain of their trademarks in conjunction
with certain merchandise and food products.

Intangible resources
        At the end of 2006 and 2005, Coca Cola Company had approximately 12,200 and
10,400 employees, respectively, located in the United States, of which approximately
1,200 and none, the increase in the number of employees in 2006 was primarily due to
the acquisitions and the consolidation of certain bottling operations, mainly in China and
the United States.
        Coca Cola Company thinks a lot of the employee‟s training. The trainings contain
three steps, the first one is basic training. Basic training include the introduction of
company‟s culture, the rules of the company and a personal encouragement course. The
second step is skill and professional training. Coca Cola will teach employees the skill of
work according to company‟s requirement, and help employee do the job better. The
third step of training is management training. According to different working position,
coca cola gives education to different skillful people. There are two types of this
education. One is focus on expanding employee‟s knowledge, in order to change the
structure of human resources and turn out the inner disciplinary talents. The second is to
update the old knowledge so that coca cola could be able to be the leader in drink market.
Because of coca cola supply very good education and welfare to the employee, employee
                                                           Willamette Valley Vineyards 52


usually very trust the company. Also Coca Cola Company has excellent management
groups in different level in the company. Basically Coca Cola Company get these skillful
people from two sources, the first source is very strict job interview, the other come from
the internal training.
        Coca Cola has powerful brands with a high level of consumer acceptance; a
worldwide network of bottlers and distributors of Company products; sophisticated
marketing capabilities; and a talented group of dedicated employees.
        A higher manager of coca cola company said in public, he said “even if Coca
Cola bankrupt today, I can recover it easily on tomorrow only if I have the brand name of
coca cola” the reputational resources of Coca Cola is the most valuable resource for Coca
Cola.

Capabilities
Distribution
        The actual production and distribution of Coca-Cola follows a franchising model.
The Coca-Cola Company only produces a syrup concentrate, which it sells to various
bottlers throughout the world who hold Coca-Cola franchises for one or more
geographical areas. The bottlers produce the final drink by mixing the syrup with filtered
water and sugar (or artificial sweeteners) and then carbonate it before filling it into cans
and bottles, which the bottlers then sell and distribute to retail stores, vending machines,
restaurants and food service distributors.

Human Resources
        Coca-Cola puts great emphasis on the skills and motivation of all its employees.
Strategies designed to attract, develop and retain the best people have helped to build an
organization that can meet future challenges hiring new employee, training the employee,
retaining the valuable employee, motivating employee are the basic content of human
resources. As the previous part of intangible recourses said. Coca Cola headquartered in
Atlanta has a requirement in place that all managers‟ detail in their personnel files any
noteworthy event. Managers at all levels express their gratitude to employees for
performance well done daily. Coca Cola's employees maintain a high degree of
motivation and work ethics because "they feel good" working at Coke. This "positive"
management solution attracts the very best in the work place and employee turn over is
minimized.

Management information systems
        The SAP R/3 solution is the foundation for providing The Coca-Cola Company
with a common system across the enterprise. This will allow employees to leverage the
same data, react faster to change and make more-informed business decisions. Coke's
business benefits, as the rollout expands, will include consistent management reporting
across operational units; improvements in closing the books on a global basis, and local
closings; the ability to execute purchasing on a global basis and streamline costs across
the entire enterprise; better vendor management; clearer views on global financial data;
and, over time, a better negotiating position through improved analysis of purchasing and
                                                          Willamette Valley Vineyards 53


vendor operations. So coca cola could effective and efficient control of inventories
through point of purchase data collection methods.

Marketing
        The Coca-Cola Company is the world's biggest drinks company, controlling more
than half the global market in carbonated soft drinks as well as a substantial chunk of the
non-carbonated segment. The Coca-Cola Company manufactures syrups, concentrates
and beverage bases for Coca-Cola, the company's flagship brand, and also produces over
230 other soft-drink brands sold by and its subsidiaries in nearly 200 countries around the
world. It owns four of the world's five best-selling soft drinks.
        Coca Cola dominating fountain sales. For example: Thousands of consumers visit
fast-food restaurants every day and Coke feels that it is very important to have the
consumer see and drink their product at such chains as McDonalds, Burger King, and
Domino's Pizza. Coca-Cola is also testing a new plastic cup in the famous Coca-Cola
contour. Coca-Colas' marketing strategies are very affective and are going to continue to
increase its market share. The advertising of Coca Cola is everywhere in the world.

Management
        Be the most successful drink company in the world for a long time, Coca Cola‟s
goal is not just maintain the leadership in this industry. Beside continue expanding the
global market and keep increasing sales, Coca Cola Company also effort in the
development of environment and education. For example, in 2006, Coca-Cola spent $60
million in an effort to reach the PET recycling goal, which included support of Recycle
Bank‟s curbside recycling program and the construction of a PET recycling facility in
Spartanburg, S.C. In addition to the PET recycling goal, Coca-Cola also has set a long-
term goal to recycle 100 percent of the aluminum cans it sells in the United States.

Manufacturing
         The first step in creating "Coca-Cola" is quite simple: to make syrup of sugar and
water. The water is carefully purified because for "Coca-Cola" absolutely top quality
ingredients are required. To be certain that the water used for bottling and canning is
clean and pure, local drinking water is filtered and purified. Quality control technicians
test the water frequently as it is used to make the finished product. The checking and
testing continues. Sophisticated equipment helps technicians check everything from the
condition of each package to details of the carbonation level, taste and syrup content.
Here the syrup mix is checked. "Coca-Cola" concentrate is added to the syrup. This
flavor base for "Coca-Cola Company manufacturing plants and still remains one of the
world's great trade secrets. Technicians carefully sample, check and record the blend of
each batch of syrup. After blending, it is ready to have the 'bubbles' or carbonation,
added. Strict quality control is the reason "Coca-Cola" is famous for a perfect level of
'bubbliness'. An army of glass and PET (Polyethylene terephthalate) bottles, as well as
cans, is now ready to be filled with the finished product. The bottles go through a
throughout test: first they're washed, rinsed and inspected electronically and visually
Only then are they ready to be filled with the world's most popular soft drink. At last the
bottles are labeled, date coded and packed into cartons. The sales centre is then ready to
dispatch "Coca-Cola" to the more than 420,000 outlets in Indonesia which stock "Coca-
                                                           Willamette Valley Vineyards 54


Cola" product. (Quote from: http://www.coca-
colabottling.co.id/eng/ourbusiness/index.php?act=manufacturing#)

Research and development
        The Coca-Cola Company owns what is perhaps the world‟s most famously secret
commercial trade secret. Yet, even at Coca-Cola, patenting and intellectual property
management go on. Coca-Cola is committed to maintaining its leadership position in
research and development for the beverage industry. Coca-Cola will continue to focus its
research and development strategy on maintaining its industry leadership position and
continuing to deliver value to the consumers of their products. The value proposition to
their consumers is the key driver of Coca-Cola‟s research and development because it is
also the fundamental goal of the entire organization. Coca-Cola does not outsource
research and development, but it does work jointly with development partners in many
technology areas. Joining developments allow Coca-Cola to leverage its beverage
expertise in connection with certain technology areas key to their business, such as
packaging and vending equipment.


Company Value Chain
       Because we are already done the industry value chain analysis, so next company
value chain analysis will be unique to Coca Cola Company, it‟s kind of different from the
industry value chain.

Primary activities
       Inbound logistics: there are many suppliers of coca cola, they supply raw
materials. These companies include: Jones Lang Lasalle, prudential, Ogilvy and Mather.
Many of the suppliers have good relationship with coca cola, some of them have long
term contract. These suppliers provide coca cola with such as packaging ingredients and
machinery. In order to make sure that these materials are excellent, coca cola has specific
standards to these materials. Coca cola also hire third parties or employees to assess their
suppliers. If the suppliers have questions about these requirements of coca cola, they
usually negotiate with the issue in a certain time. At the end, coca cola maybe correct the
requirement, or coca cola will terminate their contract with the suppliers.

Operations
        Coca Cola's core operations consist of Company-owned concentrate and syrup
production. Some of the main environmental impacts of their business occur further
along the value chain through system's bottling operations, distribution networks, and
sales and marketing activities. Management of these operations across the business value
chain tends to be more challenging outside of the core operations. According to Coca
Cola, they continue to address this by working with their partners to reduce the effects at
every level of the manufacturing process by enlarging their comprehension of the
complete environmental impact of their business through the entire lifecycle of their
products from ingredient procurement to production, delivery, sales and marketing, and
post-consumer recycling
                                                           Willamette Valley Vineyards 55


Outbound logistics
        This process includes warehousing, order fulfillment, transportation, and
distribution management. Coca Cola has the world's largest distribution system. They
own, lease, and operate in over 800 plants around the world. The 2,400 beverage products
which they market reach consumers in more than 200 different geographic locations. The
chain stores, the fast food restaurant and vending machines are some of the distribution
units used to ultimately reach consumers. Coca Cola has over 300 bottling partners which
range from publicly traded businesses to small family owned operations. They have
implemented the "Coca Cola System" in which they work cohesively with their partners
in order to develop strategies aimed to meet the needs of all their customers.

Sales and marketing
        The Coca-Cola Company is the world's biggest drinks company; it manufactures
syrups, concentrates and beverage bases for Coca-Cola, the company's flagship brand,
and also produces over 230 other soft-drink brands sold by and its subsidiaries in nearly
200 countries around the world. It owns four of the world's five best-selling soft drinks.
Coca Cola Company focus on the demand of customers, also they lead the demand of
customers. They constantly reinvent their product. Coca cola connect with customers
very close. Techniques which they have used to achieve this include developing new
products and brands, changing the design of their packaging, and designing various new
advertising campaigns.

Service
        Activities that maintain and enhance a product's value include customer support,
repair services, installation and training. Coca Cola's customers range from large
international retailers and restaurants to smaller independent businesses and vendors. As
a result, they provide services tailored to meet their customer's needs. Coca Cola also
supports their customer's by providing them with the training necessary to help their
businesses become more effective and profitable. They have established Customer
Development and Training Centers which are available to more than 21,000 independent
retailers, which provide training at no cost in areas such as general management,
marketing, finance, inventory management and customer service

Supporting activities
Procurement
        Coca-Cola has plants, production sites and bottling facilities all around the world.
This plays an important role in their business since they are one of the global leaders of
the non-alcoholic beverage industry. According to the CIO of Coca-Cola, "outsourcing
comes at the expense of improving in-house skills, which will eventually lead to reduced
costs." As a result, Coca-Cola uses outsourcing to be a world leader by implementing
control mechanisms to its contractors, as is mentioned in appendix 1. In the mean time,
they invest in and train their employees in order to achieve their long-term strategic
goals. They take corporate responsibility very seriously, and make sure that all of their
business partners comply with their Supplier Guiding Principles
                                                           Willamette Valley Vineyards 56


Technology development
        Coca cola believe that technology development could maximize their
productivity. Coca-Cola's sales representatives are now able to visit 30-40 outlets daily.
Technology investment brings different benefits to Coca Cola. These include increased
productivity for sales representatives and increased number of sales visits by 25 percent.
In the future, technology will continue to provide the highest level of service to the Coca
Cola Company by improving efficiency, leveraging existing knowledge, and proactively
mitigating legal issues by educating clients on key issues affecting the company.

Human resource management
       Within Coca Cola's human resource department, strategies are developed and
implemented which will ensure that the organization builds the capability to deliver
desired business results. Coca cola provides very good training and retraining for the
employee. Employees receive the best value and are provided with diverse benefits and
options. Some of these include health and life, retirement, tuition and program, and
additional benefits.

Firm infrastructure
Coca Cola Company has very good company culture; the strength of their culture derives
from "the passion, leadership and integrity demonstrated by all employees world- wide".
Through the training of new employee, Coca Cola convince many different people, and
make them accept the culture of company.
Coca Cola has expended its operations over the past 120 years. They now operate in over
two hundred countries with nearly 2400 product offerings. Their global operation is
divided into six geographic locations- the Africa Group, East and South Asia and the
Pacific Rim Group, the European Union Group, the Latin American Group, the North
Asia Eurasia and Middle East Group, and the North American Group. Coca Cola has
established high standards at all levels which they strive to meet in order to ensure that
they achieve international best practices in terms of transparency and accountability.

Core Competency
       The core competency of Coca Cola Company is distribution. The distribution of
Coca Cola is direct sell to retailer as much as possible, so Coca Cola could directly
connect with the buyer without too many wholesalers.



Valuable                                     The direct distribution is valuable,
                                             because Coca Cola can touch the point-
                                             of-sale-terminal, thus Coca Cola has a
                                             comprehensive grasp of the market at the
                                             very first time. As long as any change in
                                             the market, Coca Cola can make the
                                             necessary adaption immediately
                                              Willamette Valley Vineyards 57


Rare                             The distribution is rare in the soft drink
                                 market. Usually a soft drink company
                                 sells products through many different
                                 wholesalers. Coca Cola promises never to
                                 give up one small retailer, Coca Cola
                                 gives up many wholesalers. The bottler of
                                 Coca Cola delivers goods to the retailer.



Costly to imitate                The cost of directly selling is very high,
                                 especially for a soft drink company.
                                 Because of the feature of soft drink
                                 transportation (low value, big bulk, high
                                 loss), many soft drink companies don‟t
                                 even want to take part in the
                                 transportation, let alone direct selling.



Organized to exploit resources   Coca Cola is almost exploiting all of its
                                 resources. Coca Cola use technology to
                                 reduce the cost of distribution, and
                                 constantly improve the products. Coca
                                 Cola also rearranges the schedule of
                                 production according to the demand of
                                 the market.
                                                           Willamette Valley Vineyards 58


STRATEGIC RECOMMENDATIONS AND
IMPLEMENTATION
       Our group has evaluated the performance of Willamette Valley Vineyards in
multiple areas to see where they are strongest and weakest. Through these evaluations
we have found that they would be wise to implement three new strategies to improve the
brand.

Plan 1- Improve Distribution
         Wine making is a very long process and takes a lot of knowledge on how to
produce a good quality wine that people are willing to eventually drink and purchase.
This is the easiest part of the process thought. With the wine industry quickly becoming
one of the most saturated industries today getting your wine known has become very
difficult. When customers walk into a store they do not see a small selection of wine but
instead they see hundreds of wines that stretch from wall to wall. Without taking
advantage of the proper distribution channels a certain wine may become lost in this
massive selection of substitute wines.
         At the current moment Willamette has done a great job saturating the Oregon
market, yet the other parts of the Northwest, which are their target markets, they are not
as prevalent. One of the first things that a Winery must do is look into which distribution
channel they would best fit into and which one will help them to generate the most profit.
Three distribution channels exist for the wine industry, each of which caters to a different
type of consumer.
         The first of these distribution channels are supermarkets. Over the mast couple
years they amount of wine that is offered in supermarkets has dramatically increased. A
couple things happen when a winery chooses to use this distribution channel. First off
using a supermarket allows for very high volumes of wine to be purchased and sold. It
also allows for a winery to carry a larger product line because the array of customers who
will be purchasing the product changes. Willamette has been wise in creating a number
of different products and price points to sell in grocery stores.
         The thing that happens is that supermarkets have lower margins than other
channels, this leads to lower retail prices. For wineries that are producing large quantities
of wine and are able to take advantage of economies of scale this distribution channel
offers a lot of advantages. Since they are large enough to take advantage of economies of
scale they are already producing a wine at a lower cost, so selling the wine at a lower cost
still generates a good profit. An example of this is Trader Joes which offers a large
selection of wine that is all sold for under $10. These are wines that have low production
costs so selling their wine for under $10 will still create a good profit. Willamette Valley
can not do this. Willamette Valley Vineyards has slightly higher production costs so they
are unable to sell their wine at such a low cost, if they were to do this they would have a
very difficult time meeting their bottom lines. (Distribution and Retail Channels)
         The second distribution channel that wineries can use looks at high street chains
and banner groups. A winery that is considered to be smaller to medium in size will
benefit the most form this distribution chain. This distribution chain offers a lot more
advantages than the previous supermarket chain channel. One of the biggest advantages
                                                            Willamette Valley Vineyards 59


that wineries will have when using this channel is that they will be feature more
predominantly than they would in your typical supermarket. Other large advantages that a
winery will have with this distribution channel are more collective purchasing,
advertising, store branding, and marketing when they are working with a group or chain
in this channel. This is a huge advantage for companies that are not able to afford a lot of
marketing or branding. This also helps wineries become noticed in an industry that has
new entries opening up all the time. One other advantage that wineries will have when
they use this distribution channel is access to more knowledgeable employees. At your
typical supermarket the employees are not taught on the individual wines so when asked
about a wine they typically can not offer that much information. While at a high street
chain or banner group the employee will be able to inform the customer about their
purchase and help inform them about the advantages of a certain wine over others.
(Distribution and Retail Channels)
         The third and final distribution channel that wineries are able to use is the
independent or specialist distribution channel. This distribution channel gives wineries
direct access to those consumers that are highly educated regarding wine as well as
customers that are able to tell the subtle differences between wines. Once again certain
advantages are associated with this distribution channel that the others do not. One of the
biggest advantages is access to employees that are extremely knowledgeable. Employees
in these stores most often have qualifications or certifications that show just how much
about wine they really know. This distribution channel is also very good for wineries that
are considered to be back vintages and experimental wines. Since these are often
produced in smaller quantities are most often much more expensive the independent or
specialist store is the best way for a winery to sell its wine. (Distribution and Retail
Channels)
         Willamette does excel at most ways of distribution in the traditional sense. Yet
there is another way for a winery to distribute their wine that Willamette has not yet
done. This is the restaurant industry. A large portion of the restaurants in the Northwest
prefer to feature wine from the area because the people are so proud of the abilities of
their state. Fine dining is becoming a more and more popular activity in the Northwest.
People are finding that the costs of living are reasonable which allows them to eat out
more. This has translated into more and more middle to upper scale restaurants popping
up all over Portland to Seattle.
         As the industry grows, more people in the age range of 25-35 years of age, have a
much larger disposable income then before. The trend has shifted for adolescents to go to
college, get a career, then start having a family. This trend produces consumers who are
more educated, more social, and wanting to discover new finer things in life they can
enjoy. Wine is one of the things this new consumer market has been focused on. They
way that most are learning of new wines is by having a server at a restaurant show them.
A server at a restaurant is one of the most influential sales people. People come in tired
and hungry and most of the time does not want to make a decision for themselves. A
server has to just suggest a bottle of wine, and most of the time the customer will just
take it because they trust a well verse server. Willamette needs to start to using these
sales people to their advantage.
         Willamette has the ability to truly utilize the frontline sales force that restaurant
servers are. Their central location to their target market allows for Willamette to have
                                                          Willamette Valley Vineyards 60


better first hand training. The McKay group, based in Seattle, owns and runs more
middle to upscale restaurants then any other company in Oregon and Washington.
Willamette needs to create a partnership with that company to not only sell their wines at
their restaurants but also to train their servers on how to talk about their wine. Once the
partnership is in place, creating an annual mid-week trip for McKay servers to come to
the winery and do wine tasting will be the next step. This allows for educated servers to
be the frontline of the new “sales team” to not only be fully prepared but excited to talk
about how wonderful the Willamette is. Servers also always tell their customers about
things they have done or want to do or suggest activities for customers so after the trip,
the excitement from the hands on experience at Willamette will sell more wine then any
other training experience.

Plan 2 - Company Merger
        There are many different parts of a company that can be used in a partnership
with another company. The connections, agreements, and other partnerships with a
company may have obtained that allows for another company to utilize or better its own
business abilities. A good example of a company that has merged with many others to
create mutually beneficial partnerships is Anheuser-Busch. They have a current situation
with many different beer companies to use their name, and the companies use their
distribution systems. It would be wise for Willamette to use a similar partnership to
better improve their distribution abilities and also to improve their brand awareness.
        Looking at the financials of Willamette one can see that their ability to buy out a
company is limited due to their main assets being in product. They need to revamp their
financial spread sheets and move funds to a different area within the company. It would
also be wise not the have so much liability and money into actual product because having
product you can‟t sell does not make you any money. It is also noticeable that they have
board members that receive a large part of the profits. If the distribution of wealth within
the company changes it would allow Willamette to be able to purchase a company or start
a partnership with a company that has better established distribution channels.


                         Willamette Valley Vineyards             Central European Distribution Corp.
                           2007         2006     2005                   2007       2006         2005

Current Assets            11,018     10,189    9,048                 765,868    567,093     503,094
Current Liabilities        1,856      2,377    2,260                 560,156    396,180     320,826
Current Ratio               5.94       4.29     4.00                    1.37       1.43        1.57

Current Assets            11,018     10,189    9,048                 765,868    567,093     503,094
Inventories                7,976      6,752    6,951                 180,304    141,272      89,522
Current Liabilities        1,856      2,377    2,260                 560,156    396,180     320,826
Quick Ratio                 1.64       1.45     0.93                    1.05       1.07        1.29

Cash                       1,083      1,612      416                 107,601     87,867     159,362
Accounts Receivable        1,867      1,717    1,659                 455,069    321,418     229,911
                                                            Willamette Valley Vineyards 61

Current Liabilities         1,856      2,377    2,260                 560,156    396,180      320,826
Acid-Test Ratio              1.59       1.40     0.92                    1.00        1.03        1.21

Debt                        3,666      4,458    5,001                1,537,837   966,732      805,060
Shareholder's Equity       13,517     11,340    9,726                  945,849   815,436      520,973
Debt-to-Capital Ratio        0.21       0.28     0.34                    0.62        0.54        0.61

Joining Anheuser-Busch would give Willamette a whole new approach to selling their
wine. If it is able to become a more commercially known company then they would not
only be able to sell more product but create a entirely new brand image. Also Anheuser-
Busch does not yet have a product line that involves wine so Willamette would be
offering a lot to the partnership.
         We feel that joining Anheuser-Busch and creating an intangible partnership with
them would be mutually beneficial to both companies. Not only will Willamette be able
to sell more wine and grow to their fullest potential, they will have the ability to stay true
to their original intentions. Anheuser-Busch will be able to enter a new market and start
a new product line that will give them more profit and a better perspective of their current
industry.

Plan 3 – Brand Revitalization
        There are many different reasons that brand image or a just a brand is one of the
biggest assets a company has. It not only creates loyalty within its customers but also
gives consumers a sense of trust within the product because they “know” of the company.
        As discussed earlier, Willamette Valley Vineyards needs to implement a broad
spectrum of changes in order to take advantage of the increase in supply that will soon be
available due to their expansion and acquisition. Effectively immediately, our first
recommendation for Willamette Valley Vineyards would be to start a company wide
revitalization. This does not mean changing every aspect of the company, rather, create a
consistency that customers and suppliers can more easily recognize and relate to. We
believe that the company rebranding can be done by implementing four different aspects
of company revitalization that will increase brand loyalty. The four aspects of company
revitalization are,
     1. Consistency across communication tools
     2. Increasing brand outreach opportunities
     3. Writing and pitching feature articles
     4. Consistency in use of logo
If these four aspects of company revitalization are followed, we believe that company
loyalty from employees, suppliers, and customers will be greatly increased due to
increased brand recognition.

1. Consistency across communication tools
        At a quick glance, it is difficult to notice similarities between Willamette Valley
Vineyards communication tools. As a growing company, it is vital for this company to
create consistency that can be easily seen across all its communication tools such as the
internet (their website WillametteValleyVineyards.com), various publications, and their
design standards.
                                                          Willamette Valley Vineyards 62


         As a three step approach to increase consistency across the company, the easiest
to start with is the company website. Throughout this project, Willamette Valley
Vineyard‟s website has proved to be a valuable asset to both the company, and to us
working on this report. The website is easy to use without clutter or appearing plain.
They have clearly put a lot of time and money into the website, and the overall feel of the
website does a great job of forecasting what the company wants to do in the future, and
also explains what the company has done in the past. We believe that the website is the
standard in which the rest of the company‟s communication tools should be compared.
         The second communication tool to be addressed is the company‟s publications in
various magazines. On the website, it is clear that Willamette Valley Vineyards was both
founded on, and continues to strive towards excellence in wine making, as well as being
environmentally conscious. In fact, from the website, we learned that Willamette Valley
Vineyards has pledged to take steps to become carbon neutral by the year 2010. From
the various publications Willamette Valley Vineyards has been featured in, it would be
nearly impossible to differentiate Willamette Valley Vineyards from any other Oregon or
Northwest wine maker. We believe Willamette Valley Vineyards should continue to
praise their excellent wines in the publications as they have done, but also use their
sustainability as a way of differentiating themselves as they have done on the website.
Using this two step approach of marketing, we believe there would immediately be a
stronger tie that the readers could use to relate the companies publications to their
website.
         The final communication tool for Willamette Valley Vineyards to increase
consistency is their design standards. As mentioned, the website is the is the design
standard to which the rest of the company‟s communication tools should be compared to.
With core competencies of having great wine and sustainable practices, Willamette
Valley Vineyard‟s wine bottles don‟t do a very good job of showing these two strengths
that the website portrays. Since the company was founded and still run with
environmental sustainability at the forefront of the companies thinking, we believe more
consistency in their design standards would show both the company‟s astounding
reputation for great taste, while still portraying their environmental sustainability. In
practice, the wine bottles should show both their awards that they have won in tasting
competitions, as well as their environmental awards. In this, they would create
consistency between all their communication tools.

2. Increasing brand outreach opportunities
        After creating consistency across all the company‟s communication tools,
Willamette Valley Vineyards needs to focus on increasing outreach opportunities to
increase brand awareness. Brand outreach would allow the company to further penetrate
untapped markets all over the Northwest. Like the consistency across communication
tools, creating more brand outreach opportunities would be a three step approach.
Willamette Valley Vineyards can tap new markets by increasing the amount of wine
festivals in which they participate, participating in more county fairs, and sponsoring
events within Northwest communities.
        Important to all wineries, wine festivals are both a celebration of a new seasons
wine, and it allows wine connoisseurs to gather and taste a variety of companies different
wines in a safe and convenient event. Currently Willamette Valley Vineyards showcases
                                                            Willamette Valley Vineyards 63


its many wines in several wine festivals in northwestern Oregon. Because the public
response has been so great in all the festivals they participate, we believe that increasing
the amount of wine festivals that Willamette Valley Vineyards participates in will only
increase their following all over the greater Northwest (Oregon, Washington, Idaho, and
Northern California). With greater exposure, we believe wine festivals can increase the
consumers demand through brand recognition when potential customers buy wines from
local stores and restaurants after being introduced to the company‟s wines at their local
wine festival.
        Much like wine festivals, county fairs all over the Northwest often feature booths
in which wineries and breweries showcase their products. Even though county fairs don‟t
have the same direct purpose of bringing wine lovers together, participating in county
fairs further deepens the company‟s exposure to the public.
        The final way for Willamette Valley Vineyards to gain brand awareness is
sponsoring events within Northwest communities. For example, sporting events, charity
walks, and community celebrations are all examples of events that Willamette Valley
Vineyards could sponsor to get their name out to the public. Many times consumers are
more likely to purchase a product that they believe betters the community in which they
live. The sponsorships are not only good for the community, but increase the brands
standing in society. This is a great way to build rapport all while selling more product
due to increased brand awareness.

3. Writing and pitching feature articles
        Another way to increase brand awareness would be for Willamette Valley
Vineyards to write and pitch a feature article that plays on their strengths as a company,
and further differentiates them from the competition. Since the wine industry is so
saturated, it is difficult for companies to differentiate themselves, especially in a positive
manner. To further penetrate the wine market, Willamette Valley Vineyards should write
and pitch a feature article playing on their strengths mentioned in the previous two
aspects of company revitalization (great wines, and environmental sustainability). Paying
for a featured article can be seen as a marketing expense, and placing such an article in
Seattle, Portland, Spokane, Boise, Salem, and other small local publications could greater
increase the brand awareness and fall in line with the company‟s brand revitalization.

4. Consistency in use of logo
        The final aspect of brand revitalization for Willamette Valley Vineyards is
designing a logo that greater exemplifies exactly what the company represents. We feel
that the logo of the company (on their publications, buildings, and products) is dated and
not effectively geared towards their target market of baby boomers and young couples.
Considering the company‟s take on environmental responsibility, the company needs to
redo their current logo and feature a look that is fresher and more modern. We have
developed a logo that is more modern, and using this logo, along with the other three
aspects of complete company revitalization; we believe that Willamette Valley Vineyards
will further penetrate the wine market. Once incorporated, these aspects of revitalization
will help create a larger demand for the growing supply of the company. This will
greatly increase the company‟s bottom-line and allow for further growth in the future.
                                                          Willamette Valley Vineyards 64


         Willamette needs to improve their efforts in branding themselves. Currently the
brand of the Willamette is not known within their new desired target market. To gain a
larger market share a company needs a strong brand image that makes a consumer choose
their bottle of wine over the next at the same price point for no other reason then them
being confident in the company‟s image. The market that Willamette is in is incredibly
saturated with over 600 different wineries in Washington alone to compete with. The
best way to make a splash within the current over saturated market is to create a brand
that is not only edgy but true to the intentions of the product.
         Willamette has the ability to transform its current look into something that makes
them unique and different then the rest of those at the grocery store. Changing the label
is one of the first steps to improving the brand image. Below the first image is the
current look of Willamette‟s label. It is very similar to many other labels that are
currently seen in the grocery store.

Current Image
                                                          Willamette Valley Vineyards 65


       What we propose for Willamette to do first is to change their current label to
make it more exciting, modern and edgy so that it can appeal to their new target market
of consumers age from 25 years to 35 years. Below is an idea of what we feel will not
only make Willamette stand out but will help give a new younger less stuffy image then
they currently have.


Proposed New Image




TIMELINE
        How quickly Willamette implements these strategies is important because their
product does have some qualities of perishables because white wine does not keep as
long or as well as red wines. The most stock that Willamette is sitting on is their non-top
sellers which are the chardonnay and riesling. Financially it is easier to say implement all
of these actions now then to fund the actions.
                                                          Willamette Valley Vineyards 66


        The first thing that needs to be done in the next 4-12 months is the brand
revitalization. Giving an image that is consistent and unified between the company is the
least expensive, and most easily done out of all the strategies. After a standardized brand
image is in place, the distribution channels need to be addressed. This is a step that will
take place in 6-12 months as long as the brand image is updated. The cost to follow
through with this step is more then just re-doing the brand image but will give a larger
return on the initial investment. Our third strategy of partnering up with Anheuser-Busch
should start to take place in 12-18 months. There are a lot of steps required to be
complete before a company is able to partner with such a large firm so it will take more
time to implement. It will also make Willamette more desirable to a company like
Anheuser-Busch once they have a more established feel and direction for the brand.




Conclusion
       Willamette Valley Vineyards has been a very successful company due to its
constant focus on environmental responsibility, and producing high quality wines. It is a
very exciting time for the company, as they have just purchased enough land to increase
production as much as 50%. We believe that the implementation of our three strategic
recommendations will help Willamette Valley Vineyards grow and prosper in the future.
                                                         Willamette Valley Vineyards 67


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