Globe Wine War 2009

Topics: Wine, Terroir, Cabernet Sauvignon Pages: 5 (1089 words) Published: April 15, 2013
Global Wine War 2009: New World versus Old
History of old wine industry (France, Italy, Germany, Europe) 1) Wine production: labour intensive, small vineyards (wars), no incentive for high quality wine 2) Distribution and marketing: poor roads and complex toll and tax systems international shipment expensive; later mass production of glass bottles, cork, pasteurization global market increase 3) Regulation and classification: AOC classification, AVQS classification (for lower rank wines than AOC); quality was determined by terroir

New world wine industry (USA, Australia, Argentina, Chile, South Africa) 1) Opening new markets: after War2, demand of wine in new world producers’ countries increase sharply. 2) Challenging production norms: suitable land (wide and inexpensive), unconstrained by tradition--experiments, innovation of technology, broke many wine making traditionsefficiency and lower production cost (3euro VS 2euro) 3) Reinventing the marketing model: innovation in packaging and marketing a) E.g. “wine-in-a-box” package, replace cork stoppers with screw capsMore economic and practical b) E.g. differentiation of products: learnt marketing skills from coca-cola, Nestle c) Control the whole value chain to quality control

d) New world’ “engineered wine” named by place is illegal by EC 4) The judgment of paris: blind-tasting panel to rate top wines from France and California. California wonshock the traditional producers the bell for a fight for export sales

Maturing markets, changing demand
1) Changing global demand patterns:
a) Demand decrease: France and Italy’ demand decline due to younger generation’s different preference and old people’s concerns about health. Argentina and Chile also dropped. b) Demand increase: wine-importing countries: Canada, UK, Belgium, China, Japan, Taiwan, South Korea and Thailand c) But overall is decreasing.

2) Shift to quality, rise of fashion:
d) Worldwide trend: demand of high quality (premium) wine increasing while basic wind consumption decreasing. e) Fashion influence demand; a medical report stated drinking red-wine is good for heart disease demand increase sharply f) New world producers can response the demand change quickly, thus become 9 of top 15 wine companies. 3) Increasing distribution power: New world producers control the full value chain, thus move quicker to response, lower transportation cost, cost efficiency, cost leadership. Old producers lose due to lack of innovation and knowledge of consumers and marketing. 4) Ascendancy in of brand power:

g) Lack knowledge of branding: old producers have few brands, even some good brands they supply some bad wine. Customers confused about choosing a wine. But new world producers do well in building a brand h) The government solution:

i) Problem: limited land, non-advanced techniques
ii) Demand declined at home and share loss in export marketsstructural surplus (called European wine lake) iii) Solution: focus on the growers but less to marketing support, innovation iv) Challenge of new world: global oversupply

The battle for the US market
1) The US market
a) Market increasing: Generation Y like wine than G X
b) Change of entry barriers: Long distance; Complex distribution system; Different regulatory strictures by states but now entry barrier became to removed 2) The American defense: Since US producers have high cost (land, labour), thus US producers importing wine from low cost countries to supply in US market. 3) Europe’s renewed advance:

c) EU agricultural policy changes to subsidizing marketing and promotion sale increase in US; d) France extend to super premium segment;
e) American domestic producers facilitate the European success by importing 4) Australia’s new challenge:
f) Sale decrease in UK but...
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