Sula Vineyards Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Sula Vineyards Case Study Solution

Introduction:

Indian wine industry is growing rapidly and it contains major players like Sula Vineyards who is facing strategic as well as financial issues which are managed poorly by the company. This needs a critical evaluation of the available issues for maintaining its better brand positioning which is trying to produce in large quantities for meeting the excessive demand of wine products in India and try to maintain its funding to meet its break even position by taking corrective steps to reduce its losses. This case will also discuss the different financial and strategic alternatives available to the company for managing its funds and overcoming these issues.

Q1: Adaptations for production of grapes

If we look at the adaptations for growing the production of grapes, we can evaluate that Sula Vineyards applied the different methods for planting trees for vines. Moreover, it will need the critical evaluation and valuation by an expert for the testing of its land and weather conditions so that it may possibly evaluate the viability of its land for cultivation as compared to Sonoma California. However, if we look at the soil and weather of the Maharashtra, it will need the critical evaluation and adaptations for changing its current position and may result in greater production capacity and product variants by enhancing its sugar level in wines.

Moreover, company can make adaptations by targeting those areas where there is expansion of grapes and contain the availability of wine in abundance due to effective management and irrigation procedures for maintaining its growth. Another step taken by the company would be resulting in better soil conditions by taking into consideration adequate methods of drainage at the time of Monsoon. This will lead to the growth in production pf grapes and land will be cultivated according to the demand by producing in higher quantity without any distractions caused by the poor drainage system.

Q2: Selection of grapes’ varieties:

If we look at the different varieties of grapes, it would result in the appropriate decision being taken for the cultivation of the grape plant for Sula Vineyards. Mr. Rajeev selected the France region and Blanc Chenin or Lorie Valley for the cultivation of classic plant. This resulted in finding that it is not cultivated in India. Moreover, Rajeev tried to plant his grape in year 1997 for the attraction of Indian customers and overcoming the marketing and strategic related problems.

Q3: Comparison of grape wine prices:

Issues faced by the company are pricing of retail and local for cultivating its plant and waiting until getting its final product. This resulted in a higher cost of cultivating and converting its raw materials and it took a lot of time along with more usage of its resources for the company. To reduce this risk, company has tried to give its task of cultivating and providing the end supply to the local farmers, who will eventually increase its supply and meet the demand on time. Moreover, the company was involved in table grapes, which resulted in the cost of around 0.35 dollars per case, and was sold at a retail price of around 0.70 dollars per case. This would result in 100% profit for the company by meeting its demand through effective supply on time by creating stimulus between supply and demand.

Q4: Imported Supplies

Rajeev was unable to manage the supply of local grapes, which resulted in making the job of Rajeev even challenging which consisted of technical job and complications in effectively maintaining its process. Moreover, to make its supply chain effective, he imported the raw materials from different countries. They started to grow the packaging, raw materials, marketing, processing and arrangement of finance by Rajeev. Moreover, the suppliers were chosen based on expertise internationally which consist of Barrels from France, foil from Spain, Yeast from Australia and Corks from Portugal.

Q5: Growth in Imported Wine reasons.

The Indian local market was showing a growth rate of around 20 to 25%, but it was not attractive for the new companies because there were trade barriers and it was taking a lot of time for cultivating and getting the final supply of grapes for preparation of different variants of wines. However, it was very easier for the company to get imported raw materials, which were received at tax-free excise duty that was eventually resulting in lower prices for the company by the decrease in cost of its products. Thus, it was attracting its customers even if they were given both the options in supermarket, they would prefer international or imported brand to its domestic brand because of its better brand positioning by proving higher quality at lower prices.

Q6: GEM India Advisor’s investment valuation:

The GEM India investors proposed around 33% shareholding in the Sula Vineyards, which was valued at around 10.5 million dollars. The value of enterprise was suggested as 10.5 million dollars, which deducted debt amount from its enterprise value for getting the equity value. Later on, the equity value was calculated using the EBITDA and revenue multiples, which shows that company’s equity value is around 1.2 time of the revenue and it is around 12.5 times after taking into consideration the EBITDA Multiple.Moreover, the enterprise value in terms of revenue multiple is around 2.79 times and in terms of EBITDA multiple it is around 28.07 times. This shows that the equity value is around 4.68 million dollars...............................

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