Global Wine Wars

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 Old Market consumers are more sophisticated and price sensitive than those in the New World. The main sales channels

The premium wine segment is quite concentrated with high barriers to entry making mergers and acquisitions a strong and prevalent growth strategy. With industry analysts forecasting the demand for premium wine to grow at 8% to 10% per year, many former non-rivals are now becoming a threat. Jug wine producers are entering the premium market and beer and spirit producers

The dynamics of the global wine industry are better understood through a brief history of wine as well as an overview of the wine making process. Some countries have longer historical and cultural ties with wine then others and that can affect the quality and perception of the product in the eyes of the consumer. Also, the conditions in which the wine grapes are raised and the processes used to make the wine can create a superior wine and therefore a competitive advantage.

The concept of production and sale of wine was originated in the European countries known as the old world according to the article "Global Wine War 2009: New Word versus Old" these are; France, Italy, Spain and Greece. Here the wine culture was developed mainly due to the habits of religion and high society which caused them to have the highest consumption per capita in the world, creating a very attractive and important industry for the governments of those countries.

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 Global wine industry has undergone a monumental change in terms consumer demand and more importantly in the ways it is produced and sold. The consumption, distribution and production has migrated away from the restrictions and regulations of the Old World to the New World ways of smart marketing, branding and serving to customers preferences.

The scope of the innovation expertise that New World wine producers have is value-chain wide in scope, and in-depth enough to completely re-order manufacturing, fermentation, distribution channel, pricing, marketing and customer service (Cholette, 2009). New World wine producers

Table Wines in the United States must contain less than 14% + 1.5% ABV (12.5 – 15.5% ABV) but when we look at European wines their ABV is 8.5 – 14.0%. In places like Italy and France wine is served throughout the day, many times at each meal. Imagine if the wines were at 17% ABV there would be a tremendous effect on the work

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.

Wine has been considered a luxury in many cultures since before biblical times. However, “upon recent years wine has become more of a commodity”(Reeves). With this, it has decreased the luxurious value of wine, making it cheaper and less desirable. To learn when wine became the important commodity that it is today, the history of it must first be explored.

The Scarborough Wine Market Report recently released new research on the average American consumer of wine. The report states that within the last three month, approximately 39% of all Americans over the age of 21 have purchased a bottle of wine. In addition, 33% of purchasers have a household income of over $75,000. Furthermore, of those surveyed, 39% of purchasers had attended at least some college. The report went on further to state that 25% of purchasers were between the ages of 21-34 and 45% of purchasers were between the ages of 35-54.

This industry has seen very limited growth since 1986. Based on Exhibit 4 (C-271, the total wine consumption in the US) and Exhibit 5 (C-271, per capita wine consumption in the US) the wine industry is in the maturity stage. It could

Given wine’s history, the market for wine is almost truly global. However there is disparity within the “development” of the consumers within different segments of the market, the segments being largely geographically defined. This development is often tied to disposable income, whereby those with higher disposable incomes have the available resources (time and money) to become educated in how to choose a “quality” wine. The biggest markets, particularly as export markets from Australia, are the U.K., U.S.A., Germany and Japan (Australian Wine Industry Association, courtesy of Exhibit 2 of the case study).

In the most recent years, domestic sales of wine has declined constantly. The wine consumption is becoming more occasional. This is partially due to an aggressive anti-alcohol campaign and driving restrictions set by the local government, but also facilitated by a lack of marketing strategy: the wine market is loosing touch with the youth (the average age of wine drinker is gone up from 35 to 55) and young people are getting more keen to beer or alcohol pops.