“GLOBAL WINE WAR 2009”44B COMBINE SYNDICATE New World VS Old World
• In Egypt and Greek era, wine wasBackground used as tributes to the dead pharaohs and tempestuous Gods. • In the Christian era, wine became part liturgical services, monasteries planted vines and built wineries. • By the Middle Ages planting vineyards as a mark of prestige (first niche market for premium wine). • Early 19th century vines being planted in rows and efficient tending and one person to work plot of 7 hectares.
Background (Wine Production) • Most small farmers sold their grapes to the local wine maker or vintner. • Payment based on weight little incentive to pursue quality by reducing yield.
Background (Distribution & Marketing)• Sold in bulk to merchant traders blended and bottled the product before distributing.• Cross border shipping extremely expensive because (1) poor roads, (2) complex toll and tax systems (3) pass through 31 toll stations.• Late 18th century mass productions of glass bottles (cork stoppers and pasteurization revolutionized).• Increased vine plantings and expanded production followed global market was born.
• Because the industry developed, cultural and economic life of the producing countries are increasing too.• In France, grape accounted for one-sixth of France’s total trading revenue and the second largest exporter.• Laws and regulations control almost every aspect of wine making.• In Germany, scheme prescribed 65 classes of quality with rules from ripeness to minimum sugar content.Background (Regulation & Classification)
• Producers often supported and even augmented them as a way of differentiating their products and raising entry barriers.• It gained wide recognition, leading the government to codify, and expand it in AOC (Appellation d’Origin Controllee) laws (defined regional boundaries and set detailed and quite rigid standards for vineyards and wine makers).• VDQS (Vins Delimites de Qualite Superieure) inexpensive but very drinkable wines for French tables and increasingly for export.• Belief that quality was linked to terroir, but couldn’t guarantee consistent quality.Regulation & Classification (cont’d)
• Many vineyards and wine makers had been set up in New World countries since the 18th century. • In the 1960’s, consuming wine had become a national culture in Argentina (80 liters per capita) and Chile (50 liters per capita). • In the pre-World War II era, wine was largely made by and sold to European immigrant communities in the U.S. • In the postwar era, demand for wine increased rapidly in the Background U.S., Australia, and other New World producers.(Stirrings New World)
• In the postwar era; – Consumption of wine per annum in the U.S. grew from 1 liter to 9 liters by 2006. – Consumption of wine per annum in Australia grew from less than 2 liters in 1960 to 24 liters by 2006. – This growth also gaining demand for higher quality of wines and domestic demand that proved aStirrings New World boost for the young New World wine industry. (cont’d)
Exhibit 3Wine Consumption Per Capita(in Selected Countries 1966-2006)
OLD WORLD• Old World producers : France, Italy, Spain, etc.• Middle ages European began planting vineyard as a mark of prestige to served their best quality wine at table (1st niche market for premium wine).• Cooperative growers join the trend• Traded by negociants, sophisticated one can handled exports.
• Wine consumption in Old World drops for about 50-60% from 1960’s to 2005.• While Old World went down, wine trend in New World goes up.• Wine industry’ growing new laws and regulations for government differentiation their products & raising entry barriers (competition with new world)• Has terriorz not consistent with is quality
• Old Worls is the trendsetter of wine with its popular history branding itself.• High quality – assured of wine (no expirated date because it has no chemical ingredients).• Has a uniqueness taste as differentiation of its product• Low cost wine with high quality• Has entered US market share and increase its exported wine• Able to capture economic advantages, Drive for efficiency and consistency STRENGTH
• Could not sense the change in consumer preference and martket trends• Traded by outsourced negociants, they didnt do marketer role lack of marketing role• Governments laws and regulation WE control every aspect of wine industry AK limit their movement and growth NE• Lack of innovasion and technology if SS its compare to New World’s digital system• Sold product exclusively (per bottle)• Has a long-multilevel value chain with many links which did not operate efficiently
• Has complex regional designations that promoted by Old World producers consumers find it hard to understand and penetrate.• Couldnt plant new variety WE vineyard to fullfill world’s AK NE demand SS• Took long time to produce its product keep the exclusiveness and quality• High production cost
OPPORTUNITY• Has entered US market share and increase its demand.• Fast growth of exclusive lifestyle in the world
• Growth of New World wine industry shows good progress from year to year (competitor). • Many subtitues product enter beverage industry give many optins toTHREAT consumer to satisfy their needs and taste • More and more laws and regulations from government can hamper their innovation • Fast growth of consumer’s taste of wine
NEW WORLD • Vineyard and wine marker has been set up in many new world countries since the 18th century • New world producer – America, Australia, Chile • In the Post era war demand for wine increased rapidly in the us, Australia, and other new world producer • In 2006 consumption per capita increase from 1 liter 9 liter , 2 liter in 1960 24 liter by 2006 • Grow consumption coupled with growing demand for high quality wine boost for the young new world wine industry
Competitive Ways• New world producer developed industry environment different from their European (old world)• The economic impact of these and other innovation became clear in comparation of the cost.• The French cost per tone of e 238 was 74% higher than the Australian cost e 137• South American grape cost were lower driving down the price popular premium wine in Europe e2 bottle
• Judgment of Paris, American entries took top honors in both red and white competition• Publicity rise awareness that the new world produce quality wines, this is the momentum for new world producer fight in export sales• There was changing in global demand, where the traditional producer have declining demand 20 % drop worldwide and there was growing in many wine country (UK, Belgium, Canada and Asia)
• The radical shift in demand proved extremely changing to old world producer• Biggest problem was declining demand at home and loss of share in export market had caused a Competitive structural wine surplus (European Analysis wine lake)• Crisis distillation program, purchase surplus wine for distillation into industrial alcohol
Competition Market • Us as the most attractive market in the world, has grown its market faster than any other major wine market • Wine sold for e 5 ($7), 48% market share, three time rate for lower price segment • Key driven for US market growth was generation Y • Wine import into US increased by 185% between 1995 and 2006, 31% market share
• The price of wine segmented into Competition super premium and ultra premium Market due to high land cost and prevailing global price/quality ratio• Europe penetrate market in US by different segmentation (super premium/ luxury segment), become number three in import by volume• Australia strategy 2025, reduce price in all export market boom in export sales. Cheap and cheerful, the image was particularly problematic as cost started to rise.
SWOT ANALYSIS Strength WeaknessLearned the value of Image problems born of theirdifferentiating their products and willingness to lower pricesmaking them more appealing to aggressively in an area of excesspalates unaccustomed to wine. supply.Able to sense changes in They had fallen behind prevailingconsumer preference and global price/ quality ratiorespond to shift in distributionchannelsInnovation with grape growing Use chemical ingredients, theand winemaking technology product has limited expireLow cost wine with high qualityInnovated in packaging ,marketing and brandingAble to capture economicadvantages, Drive for efficiencyand consistency
SWOT ANALYSIS Opportunity ThreatThe capacity and regulation Emerging sign of saturation infreedom to plant new varieties several major markets.in new vineyards and couldrespond Declining demand at home and a loss of share, Shifting demand of mature market Regulation, restriction from government Global oversupply wine production Change in wine consumer culture Competitor with high quality brand and low cost penetrate into the market
EXPORTSIn 2001, the greatest wine export were Italy (27%), Spain (23%)and France (22%), there was problem declining demand at home,culture change and there were recent growth of new market in UK,Belgium, Canada and Asia
IMPORTSIn 2001 , the world largest wine importer were UK (37%), US (34%)and Germany (20%). UK as the largest importer because the UKoffer more attractive market and in order to satisfy demand for itscountry, as we can see UK didn’t Produce wine. The most attractivemarket in the world was US, because the faster growth in winemarket.
Comparison Analysis (Production) New World Old World Producer began to experiment with Irrigation was strictly forbidden grape growing and winemaking technology • Controlled drip irrigation allowed expansion into marginal land and reduced vintage variability Cost of Production : cheap Cost of Production : expensiveProduction • Riverina District (Australia) : €137 •Langedoc region (French) : €238 Many innovation into viniculture • Night harvesting • Experiment in fertilizer and pruning methods
Comparison Analysis (Marketing) New World Old World Price of premium wine : cheap Price of premium wine : expensive •South American wine : €2 • France wine : > €3 Packaging in American : “Wine-in-a- Packaging in Europe : bottle of “Vin box” package de table”Marketing Make differentiation of their product No differentiation in their product • Ripple (US) Barossa Pearl (Australia) Many consumer marketer brand join (Coca Cola, Nestle, Pillsbury, Seagram)
Comparison Analysis New World Old WorldDistribution They control the full value chain and The wine maker only sell the wine their name was on the final product to merchant trader, so they don’t the quality is controlled control the full value chain Suitable land was widely available and Limited land and regulated by less expensive government
New World Old World Suitable land was widely available and Limited land and regulated byRegulation less expensive government There is on-site labs Reverse technology osmosis is • Experimented with reverse “removing the poetry of wine” technology osmosis • Develop process that allowed It was a forbidden practice underTechnology fermentation and aging to occur in AOC regulations huge, computer-controlled, stainless steel tanks •Some company added oak chips Comparison Analysis (Regulation & Technology)
New World Old World Still use effective high technology so producers can Cut the supply chain withoutProduction compete with globalization decreasing their quality era Give consumer a basic Improve marketing ingredient to ensure why the communication for premium price of premium wine is wine cheapMarketing Good relationship with Use interested packaging to consumer to avoid lack of get the target market trust Suggestion Production & Marketing
New World Old World Good relationship between Control the urgent value wine maker and people Distribution chain who control the value chain Use vertical technology land to plant grapes Plot the land use to plant Regulation grapes Make a win-win solution between producers and government Use effective technology to Use latest technology to Technology reduce cost compete with New World Make costumers Make innovations for each CONCLUSION satisfaction division to still process without forgot the care with them costsDistrubution - Regulation - Technology