The Cork Industry, the Wine Industry, and the Need for Closure.” Answer the 10 Questions at the End of the Case

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Week 4:The wine industry & the need for closure

Case study: The cork industry, the wine industry and the need for closure.

This case study explores the use of cork as a way of sealing wine in a bottle; referred to as a closure in the wine industry. This 400 year old industry with all its associated working practices has continued largely unaffected by technology changes in almost all other industries- until that was the 1990s when synthetic plastic closures were used by some wine producers instead of natural cork. With a requirement of over 17 billion wine bottle closures a year the cork industry could arguably afford a little competition, but it seems the cork industry had not recognised the significant changes taking place in the wine industry to which it acts as a supplier (Cole, 2006). The wine industry was experiencing a revolution where new producers from Australia, California and Chile had new and different requirements. In a matter of a few years the industry had changed completely.

The wine industry
The Portuguese cork industry is facing an environmental and economic disaster as wine makers and large grocery chains defect from natural cork closures to modern synthetic closures, such as rubber or plastic. Portugal supplies more than half of the world’s cork and has been experiencing a slow move away from cork since the mid 1990s. More recently the trickle has turned into a flood as changes in the wine industry and buying behaviours contribute to the rise in demand for modern closures. The cork industry accounts for nearly 3% of Portugal’s GDP. Its cork forests, and workers, are under threat from innovation in one of the oldest industries in the world. For hundreds of years cork was the accepted method of closure for bottles, especially wine, but a wide range of closures for bottles have existed for many years including screw caps and re-sealable plastic caps. Few in the wine industry believed that vine yards, bottlers and wine drinkers would ever wish to use anything other than natural cork. However, the wine industry has changed significantly over the past twenty years. The historical dominant producers of Europe: France, Germany, Italy and Spain are being challenged by new wine producers such as California, Australia, New Zealand, South Africa, Chile, etc. Moreover, these new producers have developed international wine brands such as Jacobs Creek and Blossom Hill, which have fundamentally changed the wine market. This is because the international brands have demanded a consistent product that has little variation. This is in complete contrast to the traditional wine products which have always had a degree of variety dependent on the grape, the climate and production. Furthermore the buyers of wine were changing too- the supermarket chains such as Tesco, Sainsbury, Carrefour, Wall Mart, had become the biggest buyers and they now have enormous power in the industry and are able to offer wine producers access to millions of consumers and correspondingly millions of sales of wine.

Farming cork
Cork is harvested exclusively from the Cork Oak, found predominantly in the Mediterranean region. Though the tree can flourish in many climates, the conditions that favour commercial use are fairly narrow. The major cork producing nations are listed below in Table 1. Cork is harvested in a steady cycle that promotes healthy growth to the tree over its expected lifespan of over 200 years. Typically, virgin cork is not removed from saplings until the 25th year, and reproduction cork (the first cycle) may not be extracted for another 9-12 years. Cork suitable for wine stoppers is not harvested until the following 9-12 year cycle, so farmers have invested over 40 years before natural wine corks are produced.

The cork forests, owing to the mutual efforts of the European Union (EU) and various environmental groups, is expected to increase...
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