During the last few decades, the global wine industry has grown by leaps and bounds to emerge as a $90 billion market. Scientific discoveries such as pasteurization and the cork-stopper invention have revolutionized the production of wine by easing restrictions on transport of wine, thus enabling the market to open up.
The enforcement of national regulations and classification schemes pertaining to wines came close on the heels of this distribution revolution. Since wine could be exported, competition was open. Hence, occidental wine brands had to adopt differentiation tools to foster competitive advantages, such as French 400 AOCs or ‘Appellation d'origine controlee' (translates as ‘controlled designation of origin').
With the market opening up to newcomers, traditional wine makers began to feel the threat. New entrants including Australia, the United States, Chile and South Africa developed their own know-how. Apart from enjoying weather suitable for growing vineyards, these countries had numerous land resources. Above all, New World producers had no restrictions when experimenting with new technologies as they were not compelled to protect a specific brand unlike its Western counterparts. Thus, the New World innovated in marketing and packaging, and formulated new techniques and systems to increase the yield including witness drip irrigation, canopy management, aspersion, soil slotting and mechanical harvesting.
As regards the value chain management, New World wine growers adopted a vertical integration of management control. Thus, producers could respond to global quest for quality, no longer for ‘terroir' (denoting the unique geological and geographic characteristics of the land imparted by the wine produced in that specific land). Wine making was turned into a precise science, by systematizing production and phasing out the element of unpredictability from the production equation. Moreover, wine production was made more cost effective.
[...] As regards the value chain management, New World wine growers adopted a vertical integration of management control. Thus, producers could respond to global quest for quality, no longer for ‘terroir' (denoting the unique geological and geographic characteristics of the land imparted by the wine produced in that specific land). Wine making was turned into a precise science, by systematizing production and phasing out the element of unpredictability from the production equation. Moreover, wine production was made more cost effective. The Paris Wine Tasting of 1976, organized by British wine merchant Steven Spurrier, consecrated the soaring success of Californian wines. [...]
[...] We can divide this group in two categories: -Traditional European farmers: They suffer from structural fragmentation of the wine market and have little brand power -New World companies: They imitate Old World techniques, have stronger marketing approaches and more brand power Globally, New World producers challenge the traditional wine producers with new techniques and better quality products: traditional wineries have lost market shares worldwide. They are still sustained by their governments (regulations) and use their vintage and traditional image to reach out to wine connoisseurs New World producers These winemakers focus on marketing: producing sweet wines for young consumers, using attractive labels to reach out to the occasional drinkers, etc. [...]
[...] - The head of French wine industry association We totally agree with the idea of “making French diversity an asset in the business”. But at the same time, the French wine industry has to change its value chain. The French wine industry association could recommend that producers link together in order to create stronger companies that enjoy bargaining power over the retailer, and develop a brand image. In our vision, wines from different areas should be considered as a whole, rather than separating each “Chateau”. [...]
[...] Traditional wine makers are losing their monopoly on this segment as New World companies imitate their vintage techniques. The ‘icon' category (wine connoisseurs) is however less attractive than the ‘ultra-premium' (wine lovers) category, the former being smaller in terms of market share, and relying more on image and aura (does this wine have a good reputation than on quality like ultra-premium (is it good, even if not that famous For a company, it is easier to improve wine quality (for instance, by innovating their production techniques) than their reputation young company may not be reputed but can still make excellent wine) Wine amateurs Key success factors: Chemical technologies, attractive packaging, whole integrated value chain (Growing, chemistry and distribution), new marketing (Beer model), sunny climate This segment allows wine producers to blend quality, image and price strategies simultaneously. [...]
[...] For example, France uses the AOC (Appellation d'Origine Controlee) as a governmental and legal barrier to new entrants in the wine sector. Moreover, some new World firms try to control all the various processes involved in the operation right from the vineyard to the retailer, an integrative process. Consequently, they can cut costs and negotiate with retailers more easily. However, the integration process is not adopted by countries of the Old World substantially. All levels of the value chain are handled by different entities. [...]
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