Cork Industry, the Wine Industry and the Need for Closure – Chapter 6

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.

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.

Some experienced marketers such as Coca-Cola, Nestlé, Pillsbury and Seagram entered the wine industry and left behind the consumer focused attitudes and the sophisticated marketing skills.

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

Vincor does market wine alternatives itself, as a way of dealing with substitute demand. Vincor makes cider and has a wine kit business division (Spagnols) that gives Vincor some product diversification. Partly because of the ease of competition and as part of the differentiation and protection of the Canadian wine industry, Vintners Quality Alliance (VQA), a quality assurance program that identifies Canadian premium grape content, assists in making start-up more difficult for those wishing to emulate Canadian wine brands. The dollars spent on marketing and brand loyalty play a large part in protecting market share and there are certain absolute cost advantages that contribute to establishing some barriers to new competition. Ultimately, there is little cost to the consumer when considering switching brands. Experimentation in wine drinking is often a characteristic of the wine drinking market and thus can contribute to promoting new substitute entry into the market.

This growing demand has added to the attractiveness of the industry with many new producers entering the market. US Wine producers have also been able to establish an improved reputation among experts and are now becoming more accepted internationally. Wine producers have managed to make their products more accessible to consumers, offering them through a wider array of distribution channels. In relation to foreign competitors, US wine consumption is still small, with Americans consuming less than 3 gallons per person, demonstrating more room for industry growth. Wine sales through eccomerce and other direct to consumer sales have also experienced rapid growth. Laws facilitating direct-to –consumer shipments have helped in the increase of distribution of wine eliminating the need for other distributers.

Cork’d started as a seeming innovative social media powerhouse for wine lovers and producers. However, its past owners did not feel they could effectively run the network. Wine appreciator, Gary Vaynerchuk, bought the network because he wanted to build a community, one that was more specialized than any other social media like Facebook for other wine worshipers like him. With this, he could establish connections that join the wine consumers and the wine producers, such as vineyards, to help others better connect with their passions. On a greater level, however, Vaynerchuk also desired to connect those who love wine with the wineries that create it. Cork’d would allow this by incentivizing wineries, with a wine devoted base, to pay a sum of

Due to this, the wineries which were mostly family operated and were financially in support of other streams of income. They took support of the limited channels like the cellar door, mail order etc. to sell their premium wines. While as the larger firms used a variety of brands, obtained high volume distribution channels via liquor stores and other retail outlets like the supermarkets. Since the consumer behavior was heavily influenced by buying labels, these retail supermarkets were in the position to sell the premium wines at a discounted price. In addition to this there were many other external factors that was impacting the industries growth. In spite of people showing willingness to support the domestic wine industry the Australian dollar rose against most other currencies during the global financial crises of 2008-09 and caused a huge price movement. Also, due to the fair trade, cheaper transport costs and increased interest in international products, wine was becoming internationally available. But this was easier for those bigger firms who had ventured into international markets by investing into their local economies, which made things much simpler for the bigger sharks and harder for the small family operated wineries. But the situation wasn’t that bad back in 1969, when Bill Taylor and sons purchased 178 ha of land in

Everyone has bought up some fantastic points. Many years ago when I started my education on wine (still learning) one of my mentors said something that I will never forget. Wine is a living biosphere that has certain needs to survive and develop over time. That said, wines need many things to develop and provide the extra layers of complexity that we are all after. There has been many technological advancements to help screen corks for TCA to lower the impacts in wines. Truth is, cork may be the primary source of TCA but it is definitely not the only one. A few wineries have been impacted by TCA independent of cork. When I first saw screw caps I was curious what the effect would be on wines that have been cellared for 10 years plus.

Since Cork’d inception in February 2006, the company was designed for and by wine lovers. Time showed that this industry had such a demand that needed more dedication and that is when

8- Do a market research for the same industry and try to implement a competitive solutions that will be a very good advantage for the organization.

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,

2. Examine Newland’s strategy in light of the special circumstances in the industry. What is your recommendation for moving the company forward?

While generally deploring much of the wine of the New World, the Old World is being forced to take notice. Australian wine has displaced French wine as the top import to the British Isles. Many traditional makers are employing some new techniques to insure a better, more marketable product. This is generally not a bad thing as France for instance has always produced lakes of cheap swill. Lacking competition many growers and producers were content to maintain the status quo.

The report will analyse and expose the various factors that contribute to determine the price point of wine factors including the labour cost to grow grapes and produce wine, the size and reputation of the vineyard and the exclusivity and scarcity of the wine. Studies have shown that the global wine market is divided into four quality segments or categories known as basic premium, popular premium, super premium and ultra premium. Input costs for single vineyards have been divided into five categories known as direct, labour, mechanisation, and maintenance and general costs. Hedonic pricing and statistical analysis review qualities of wine that induce to price differentiation Studies have shown that different regions