Briefly describe the changing economic geography of the global wine industry in terms of production, distribution and consumption.
The Global wine industry has undergone a monumental change in terms consumer demand and more importantly in the ways it is produced and sold. The consumption, distribution and production has migrated away from the restrictions and regulations of the Old World to the New World ways of smart marketing, branding and serving to customers preferences.
Middle ages emerged as the time when Europe served as the niche market for premium wine. But by and larger grape growing and wine making gradually became a fragmented business. Up to mid 20th century, wine was predominantly produced in European countries such as France, Germany, Italy and Spain. The wine from European region was considered as superior and these countries also turned out to be the largest consumers. As the wine industry began to influence culturally and economically, laws and regulations were prescribed for wine making practices.
In 1976, the “Judgment of Paris” signaled the change in wine industry during the last quarter of the 20th century. (Bartlett, HBR Global Wine Wars, 2009). Although insignificant, wine industry made it to the New World countries as early as the 18th century. But it was not until the post war era that demand for wine began to increase in countries like the U.S and Australia. The new world countries, unrestrained by regulations and tradition, came up with innovative ways (drip irrigation, mechanized pruning, bulk storage) of packaging, marketing and wine making using technology. By the 1990’s, there was a drop in the “traditionally produced” wine countries largely due to the tight government regulations and a long multilevel value chain, and lack of expertise.
Wine consumption began to improve in countries like U.K., Canada, Belgium, and some Asian countries as well. The New World producers had the means and technology along with the freedom to handle the demand in the wine industry which by then was slowly but steadily turning out to be a global industry. With the reduction in container-ship rates, shipping overseas was now a cost-effective way to transport wine around the globe.
One of the most important factors in how the wine industry is changing is the branding. New world markets made branding a routine part of wine marketing. They took the marketing and branding skills they had developed at home into the export markets. Branding educated the consumers regarding the type, region and bottled date. This made it easier for them to compete with several prestigious brands from Europe. The new world producers strived to respond to consumer preferences.
How did the French become dominant competitors in the global wine industry early on and maintain it for centuries? In other words, what explains France’s “old world” dominance in this industry? Culture, Government and specialization in a particular market (Premium Wines) help describe France’s dominance. France established its place as the dominant competitor in the global wine industry, largely due to the fact that France was an early entrant into the industry, when barriers for entry were pretty high. Although the consumption has been decreasing in France over the years (Exhibit 3), France still has the highest per capita consumption compared to the U.S or Australia. Government assistance in France went a long way in establishing the country as a premium wine producer. The strict regulation and on wine production and quality resulted in French wine having the best quality wines, that were more sought after. Government classification such as AOC had been successful in providing the consumer confidence (Bartlett, HBR Global Wine Wars, 2009). Wine consumption was a part of the culture in France. By the mid-18th century, there were 1.5 million families in wine-related businesses (Bartlett, HBR Global Wine Wars, 2009). French wine...
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