Global Wine War 2009, Old World Versus New World

The winery industry can be categorized into red and white wine segments. The red wine segment, measured by tonnage of varietals crushed, has grown at a compounded annual rate of 4.7% for 10 years from 1989 to 1998, and a year over year growth rate of 8.2% from 1998 to 1999. Judging by the strong growth rate experienced in the red wine segment, it is reasonable to conclude that the red wine segment is in the growth phase of the life cycle model. In addition, production of red wine varietals which are relatively unknown such as syrah and sangiovese nearly doubled in a year from 1998 to 1999. The white wine segment, however, is at the mature phase of its life cycle as the segment shrunk slightly by 0.42% from 1998 to 1999. Overall, the industry is still at the growth stage lead by growth in the red wine segment.

A History of the World in 6 Glasses, is a book that explains what is happing in the world during the time of a popular drink. From, Beer in Mesopotamia to Coca-Cola in America, our world changed, a lot. The most interesting drink out of the 6, (Beer, Wine, Spirits, Coffee, Tea and Coke) was defiantly wine. As I read the book I could always connect a section of every chapter back to wine. Wine went through many changes, like the other beverages, but it stuck out to me for 3 main reasons. First off, the “Capitol of Wine” wasn’t in the same place the whole time. For example the Coca-Cola section was basically all based in America, where as wine went from place to place. The second reason the wine section stuck out to me was because of all the

The structure of the wine industry is quite different around the world. The barrier to entry is relatively higher in the New World than in the Old World. Referring to the market data on the level of concentration in 1998, people can see a few players dominate the markets in Australia and the U.S. while the level of concentration is quite low in Europe. Therefore, the rivalry in Old World is intense there.

Wine production involves two parts of economic activity – viticulture and wine making in the winery. In the global context, wine production is dynamic due to the influence of globalization, technological advancements and extensive research. These have essentially influenced the nature, spatial patterns and the ecological dimensions of the wine industry.

The buyer’s power within the wine industry varies between different places in the world. There are for example strategic differences between Europe and the “New World”. The “New World” includes countries like the US, Australia, Chile and South Africa. In Europe there is a big competition

Some of the largest New World producers were the United States, Australia, Chile and Argentina. The largest of the Old World producers were France, Italy and Spain. The world’s top 10 wine exporters accounted for more than 90 per cent of the value of international wine trade. Of those top 10, half were in western Europe, and the other half were New World suppliers, led by

The Canadian Wine industry is a relatively small player on the worldwide market with a wine export value of approximately $54 million in 2013, making up just 0.15% of global wine exports. This is largely due to Canadian grape grower’s inability to compete with producers in countries with more favourable weather conditions for growing grapes. For example, in 2007 Canada used approximately 8,000 hectares of land to grow grapes compared to the EU’s 3.5 million hectares, 2.5 million of which were in France alone. Despite Canada’s land size, there are only a few regions where the climate allows for a long enough growing season for grapes to mature on the vine.

Current Situation: In 2016, Robin Budowski has almost acquired Château d’Agel – a previously unprofitable wine property in the South West of France. However, his dream of owning and running a vineyard does come with its own financial and operational risks. Robin may be the best candidate for this acquisition opportunity, but to make it worthwhile in the next 5 to 7-year time horizon, he has to decide which wine market he should focus his resources on, and how his wine can be effectively distributed across France and exported to foreign developing markets.

1. The industry structure in the Old World is significantly different than the New World. First, the Old World has a very low concentration ratio, while the diversity of competitors is high. Along with other factors the Old Worlds industry rivalry is very high. In contrast the industry rivalry is relatively low because of the extremely high concentration ratio and the low diversity of competitors. The New World is made up of large publicly held firms in comparison to the small private owned vineyards in the Old World that historically have produced for their own consumption. Another difference is between the suppliers in both industries. The suppliers in the Old World are one in the same with the

Large-scale wine suppliers from New World countries (US, SAm, SAf, Australia) were exploiting modern viticulture and more scientific winemaking practices to produce more consistent “high-quality wines”.

Ernest Hemingway once said, “Wine is one of the most civilized things in the world and one of the most natural things of the world that has been brought to the greatest perfection, and it offers a greater range for enjoyment and appreciation than, possibly, any other purely sensory thing.” More simply and literally put, wine is an alcoholic beverage made from the fermented juice of grapes. Wine making and drinking dates to thousands and thousands of years ago. In fact, the earliest record of vinification, or wine making, is placed in the Bible in Genesis 9:20-21 where it states that Noah planted a vineyard and drank wine produced from it around 4100 B.C. Over the years, people have experimented making different types of wines with different kinds of grapes, which have been split into 4 categories. These categories are Wild Vine, Indistinct Vitis Vinifera, Distinct Vitis Vinifera and Hybrids. These different types of wines have been divided into 5 different classifications which are Table Wine, Sparkling Wine, Dessert Wine, Fortified Wine and Aromatized Wine. Concurrently, these different wines are made in several different locations around the world. The top producing wine country is Italy with the United States falling not too far behind in 4th place. The wine that I will be focusing on in this paper is Syrah while the location is Santa Barbara, California. I will also speak about Syrah in relation to Santa Barbara and its significance on the region.

In 2001 there were over 1 million wine producers worldwide, and no firm accounted for more than 1% of global retail sales. Because of this, it would be nearly impossible for the Robert Mondavi winery to dominate sales in any region. Due to Mondavi’s efforts, the winery became one of America’s most innovative,

distribution and inequality to a fairly high degree. French children are taught to be emotional reliant on their parents. As they proceed through different stages of their life, they begin to depend on teachers and superiors therefore creating acceptable standards of inequality. Wine and culture are interdependent in the personal and professional cultural realm of France. Just like a “flawless bottle of vintage wine, France displays perfection in the land and its people” (Gannon & Pillai, 2013, p. 229). As a result, wine has “shaped the country’s disposition weaving a common thread through all the varying walks of French life” (Gannon & Pillai, 2013, p. 227). The classification of wine has contributed to the classification of

The demand of wine in the world will never go down, so huge profits can be made if the wine is exported to the targeted places. [Jackson S. Ronald, 2008]

In the global marketplace, wine has always acted as a catalyst for economic development. New Zealand being responsible for less than 1% of the global production of wines (NZ Wines, 2014), The New Zealand wines came into global attention in 1980’s with its production of one of the best quality wine, Sauvignon blanc in no time gained an international reputation of producing quality and boutique wines (Howland, 2014). Noted for cool climate wines slow ripened, intense and with fresh acidity (Howland, 2014, p. 1), Central to their success is New Zealand’s maritime climate, temperature and unabated passion of New Zealand wine producers and the highly distinctive flavour profile and wine styles (NZ Wines, 2014).