Conditions of Moldovan Wine Company - Case Study Example

Critically examining demand conditions of Moldovan Wine Company - Milestii Mici Moldova is a country in southeastern part of Europe. The country hasan area of 33, 7000 km squared and it has a population of 2,32 million people. The country’s capital city is Chisinau city. The locals in the country have fields of grapes and it is not possible to describe the country well without mentioning the major economic activity which involves grape farming and the production of wine. Major regions of this country specialize in the production of wine (Bruchis 23). Winemaking in the country is a tradition and someone becomes famous due to the quality of wine that he produces. “Milestii Mici” which is the State Enterprise Quality Wines Industrial Complex is situated near the village of Milestii Mici which is about half an hour ride from Chisinau. The area has a moderate continental climate. It has short winters and warm and long summers. The climate therefore is appropriate for the cultivation of European types of grapes and it also favors their ripening. The coming up of the State Enterprise Quality Wines Industrial Complex was because of the three factors which are fundamental and they include: outstanding materials for the making of high quality wine, brilliant oak barrels for their survival and the perfect conditions for giving the wine a precious quality (Neale 34). Following the story of the Milestii Mici village, we find that it is one of the oldest in Moldavian as it is mentioned in ancient books and chronicles dating from 30th of March, 1528. The early chronicles talk about King Petru who gave his wealth to Lashko-Voda and this wealth included three villages. Lashko gave one of the villages to Milea, his relative and this same relative later immortalized his name to the future commercial brand "Milestii Mici". Milestii Mici was fromed in the year 1969 and it was a mini complex for storing, preserving and maturing high quality wines. The company produced a small quantity of wine and this was stored in oak barrels and still tanks which were enameled and stored in cool and quite wine cellars. The result was a high quality wine which was appreciated by wine experts and the consumers. The enterprise has changed its name and status severally during the past years. The company specializes in second wine making stage and it matures the best wine in the whole of the country. It uses high-quality raw materials which it gets from Moldavian industries and the wine making specialists follow the unique traditional wine making steps. In the making of noble white and powerful red wines, the specialists select the raw materials with a lot of care. After this selection, the wines are then taken to the enterprise where the materials are rechecked by senior experts. Checking does not only entail looking at the properties of the material alone but the specialists analyses the components in a scrupulous way by use of advanced laboratory equipments. This ensures that undeserved elements are removed which are forbidden by the wine making practice. The company also has its own vineyard which stretches 40 hectares long and allows it to get its own raw materials for about 4 years. The wine factory and collection, Milestii Mici, has an underground city which stretches for 250 km but only 120 km of this area is being used currently. It is large such that one will need a car to travel from one winery area to another. The employees of the city are regularly seen traveling by use of a bicycle from one workshop to another. The city is located at 40-85 meters below the surface and the temperatures are kept chilled between 12 to 14C degrees. There is a golden collection there which holds an amazing 2 million bottles and recently, it was recognized as the biggest wine collection by Guinness book of records. This golden collection contains around 70% red wine, 20% white and 10% dessert type. It has some bottles worth 480 Euros which were produced between the years 1973 and 1974 and they are the most expensive. These are exported to Japan only. Millestii Mici produces a several high quality, sparkling and table wines. It matures all its wines in oak barrels and takes special care of them. The wines are able to get more powerful because of their conduct to the oak’s surface. This count for the high quality of the wine produced from the enterprise. The optimum conditions for storing wine in the underground galleries are constant temperatures of between +12 to +14 while the humidity should be 85-95% all round the year (State Enterprise Quality Wines Industrial Complex “Milestii Mici.”). More than ten different sparkling wines are produced in the company. These are always on demand for sale in the different wine markets. The wine prepared using the traditional method is of a higher quality as these are of almost of the same properties as the classical champagne. The bottles used for the wine are from Europe and they are easy to open. Currently, the company is a state enterprise which has its specialty as production, storage and selling of alcoholic drinks. The drinks are striking because of their perfection which brings out an image of Moldavian wines as a whole. The quality of the wine produced is improved yearly as specialists select the best wines from Moldavia and work with them. The making of wine is an important economic activity in Moldovan and it represents 18%-20% of the country’s GDP. The sector also creates employement for 27% of the country’s labor force. Milestii Mici is famous all over the world for its high quality wine which has been made according to the wine traditions in the country. The company forms part of the country’s wine output majority of which is exported to other countries. Any one who knows about the company would like very much to buy wine from the company and thus the wine has very high demand. Some of the wine produced in the company is exported to several areas which include; Russia (80.2%), Ukraine (6.0%), Kazakhstan (1.4%), Belarus (8.1%), and Lithuania (1.1%). The countries which import the wine are very lucky because they get the best quality wine in the world (State Enterprise Quality Wines Industrial Complex “Milestii Mici.”). Because of the high quality and demand for the wine from the company, the prices have been adjusted accordingly. In other words, the company has the most expensive wine. The high prices are obviously because of the economic law of demand which believes that, when the demand for a product is high, this makes the prices for the product rise and when the demand is low, the prices for a product goes down. On the 27 march, 2006, wine from Moldavia was banned from Russia. This was because of the allegation that the wine contained pesticides which are not allowed in Russia. The argument further said that most of the imports into Russia did not meet the requirements of sanitary safety in Russia. This ban was however lifted in July of 2009. After lifting the ban, Russia was even ready to open extra custom points. Moldovia was allowed to supply 60 t0 70 million liters of wine each year. The ban had dealt a severe blow to the wine companies. The lifting of the ban however came with strict issues on quality. Economically, it meant that the demand for wine had fallen and there was surplus within the country as much wine was not being exported during the ban. Milestii Mici was also affected as it did not have enough places to sale its products. Good thing about wine is that it can be stored. Imagining that wine was perishable, then it means that the company would have been affected greatly and maybe run bankrupt. The company however had its underground storage chambers or caves where this extra wine was kept safely. Explaining this in terms of price elasticity of demand, it can be said that wine is inelastic with demand meaning that, when the demand for wine falls, the prices are not much affected. This is because the wine can be stored to be sold at a future date. It means that this fall in demand did not have much effect on the wine prices. The company stored the wine and it resumed its selling after the ban was lifted. The company however still has a lot of wine in stock which had accumulated during the period of the ban. This stock will take some time to clear. In the year 2007, the company sold its products worth 9 million within the country. This was 3 times more than the year 2006. During this time, the company exported its products to France, USA and Germany. During that time, there were also about 22 million tourists to the company’s underground galleries. Due to the high interests on wine depositories which exceed the supply, the company has come up with a big investment program which allows itself to receive a bigger number of tourists. The company is also working very hard to come up with new vineyards and develop new wines. The company’s total annual sales volume amount range around US $10 million to US $ 50 million. The percentage of the company’s product’s exported range from 61% to 70%. This is a clear show that most of the company’s product is exported to other countries. Only a small percentage is consumed within the country. This does not mean that the country does not have much internal demand. The company’s products are known to be of very high quality and so, the company gets a lot of money from exporting. This is why, after meeting the internal demand, the country exports the remaining amount of its products (Masters 30). Using the above information about the company, we can say that the company is like a monopoly. A monopoly produces goods which have no close substitutes and looking at the quality of the products produced in the company, they are like no other. An example is the 1973 and 1974 wines which are of very high costs. These are very unique wines and not everyone can afford them. This makes the company a monopoly since for such products; it just sets the price for this rare commodity (State Enterprise Quality Wines Industrial Complex “Milestii Mici.”). The products from the company have been termed by many companies as exquisite. The wines are perfectly produced and they taste like nothing else. It is because of this that the company’s products have high demand all over the world. The company is proud to sale at high prices because it is sure that its products are of good quality and this is what the consumer is mostly looking for. The company is working hard to increase its production so that it can meet its high demand within its market. In order to meet this demand, the company has to increase its capital so that it will be able to produce more. The increase in capital will involve increasing the raw materials and this may result in the company acquiring more land to plant more of its raw materials. The company might also be forced to add or increase the size of its production plant so as to be able to take the new added raw materials. The employees will also need to be added so as to be able to operate wih the new size machinery. The other thing that might need to be added is the storage space. In this case, the company already has an oversize storage chamber and it means that it might not have any problems. We do not also expect the company to store much as the high demands will be expected to meet the extra supply. The only storage that will be needed for the wine is for it to get ready. This means that storage space will be needed after all as the produced wine will need to be stored first. The company has an advantage in that it can grow to a bigger size and still have enough customers for its products. The size of the company is an advantage to it as it enjoys economies of scale (Masters 34). To conclude, the company can be said to be very unique due to its underground storage chamber which makes produce high quality drinks. This has also attracted many tourists and can be said to be a contributor of the high demand for the wines. The underground chamber provides just the right environment for the maturing of the wine which turns out to be perfect in the eyes of the consumers. The quality of the wine attracts many from all over the world up to the point of being recognized by the Guinness Book of Records. The wine is very much loved and has customers from all over the world. It is demanded both locally and internationally. The company makes the whole country proud for its unique products which are very much demanded all over the world. Works Cited Bruchis, Michael. The Republic of Moldavia: from the collapse of the Soviet empire to the restoration of the Russian empire. East European Monographs, 1996. Masters, T. Eastern Europe. PublisherLonely Planet, 2007. Neale, Adam. Travels through some parts of Germany, Poland, Moldavia, and Turkey. Longman, Hurst, Rees, Orme, and Brown, 1818: State Enterprise Quality Wines Industrial Complex “Milestii Mici.” About our enterprise. Retrieved February 20, 2010 from http://www.milestii-mici.md/eng/about/ Стойлик, Георгий. Moldavia. Новости Пресс Агенций Пуб. Хусе, 1987. Read More