Wine Industry
Essay Preview: Wine Industry
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Size of Industry and types of wines: The global wine industry is roughly the size of $130 billion to $180 billion in retail sales which is attributed to three types of wine: Table wine, dessert or fortified and sparkling (Champagne), where Table wine accounted for the major share of the market.
Producers: There were more than 1 million wine producers worldwide, however, no firm accounted for more than 1% of global retail sales in 2001.
Market concentration: Substantial variations are observed in different countries. Four firms account for 75% of the Australian market; top 20 firms control 75% of the U.S. wine industry; 75% of world production happens in Europe and 50% of world’s supply by just 3 countries (France, Italy and Spain.
Demand: The shift towards premium wines is evident as jug wine sales in U.S. have declined by roughly 3% per year during the past decade, while premium wine sales have grown by 8% to 10%.
Criterion
Old World (Europe)
New World (Aus, Chile, SA, US)
Type of Vineyards:
Small Family Owned Vineyards in majority. Some households produced for their own consumption.
Large Publicly Traded Firms owned majority of Vineyards. Almost all of the Wine was purchased by consumers.
Technological Orientation
Less technologically inclined. Grapes were usually handpicked.
Highly inclined towards investing in new technology & innovative methods. Machines used to harvest grapes.
Government Regulations
Severe regulations especially in France
Moderate regulations in US, Chile and South Africa while loose controls in Australia
Consumer Education and Branding.
Very little focus towards educating customers. Wines were named as per their region of production.
Huge investments made to educate customers. Wines classified on the basis of the type of grape used for production.
Other structural differences include:
Based on these differences, the New World appears to be a more attractive industry than Old World.
The major impetus behind the differences between the 2 worlds is the Government Policies and Regulations prevalent in these areas. The Old World has strict and moderately strict regulations. For instance, in France there are strict rules for nomenclature of wines. While the New World – countries like Australia – enjoys loose regulations like freedom of sourcing of grapes from any location. Also the government subsidizes small grape farmers in European nations while no such subsidies exist in the New World. This is why there are small vineyards in Old World and Large firms in the New World. Another reason for these differences is that of the strategies employed by these firms. Companies in the New World have completely modified the industry structure