Wine Industry Introduction Essay
Wine Industry Introduction
Innovations have made French firms dominate the wine industry in the past. In the mid-1600s, a Bordeaux producer applied new techniques that led to a new age of large-scale fine wine. The development of fine wine was enhanced by the introduction of glass wine bottles sealed with cork. These innovations not only helped wine last longer but also made it age better. After the First World War, overproduction and fraud prompted French government took steps to protect and strengthen the wine industry.
By 1935, the AOC system of legislation had defined the regions and grape varieties, controlled the yield, minimum alcohol levels, and particular method of growing and producing wine. In the fifty years after the Second World War, growing economic prosperity resulted in increased demand for wine, especially outside Europe. Wine producers emphasized quality to satisfy an increasingly educated and demanding market. During the same period, wine consumption declined in several countries, especially in France and Italy. The decline of their domestic market helped fuel the export drive in these countries.
Governments in many wine-producing countries adopted quality regulations similar to the French AOC rules. Labeling in the New World differed significantly from that of Europe. New World labels simply described the grape varieties from which wine was made. This was contrary to the European tradition that stressed geographic location. The major revolution in the wine industry in the Twentieth Century was the transformation of traditional winemaking methods into an industrial process. Modern refrigeration techniques enabled warm countries in the New World to produce quality wines of different varieties.
Combining technology and newfound expertise, modern wineries of the New World became capable of producing wine of a quality that rivaled those of the Old World. The international wine industry was highly fragmented. The world’s five largest companies in terms of volume produced about 6% of world production. In contrast, the New World was much less fragmented. In the major wine-producing countries, consumption was primarily domestic wines. The large New World firms marketed wine product lines that spanned a wide range of price and quality.
The New World producers tended to operate in more predictable climates that produced consistent grape harvests. New World winemakers invested heavily in technology and innovation, which allowed them to produce a range of wines styles and ensure consistency. Wines from Australia and New Zealand sold at higher average prices in Britain than wines from France, Italy, and Spain. Entering the wine industry was easy. Technology to produce wine was simple. However, making high-end wines that could command top prices remained a very difficult and challenging endeavor due to substantially high costs in very best grapes and oak barrels and corks.commercial success of wine relied on production of fine wine and marketing strategies.
With better technology, wine producers in the New World continuously enhanced quality of their wine to adapt to consumers’ tastes. The linking of technology and modern business practices enabled the New World’s wineries to capture a sizable share of the global wine market from well-established wineries. A more recent marketing trend for New World producers was to differentiate wines not only by the variety of grape, but also by region, place, and winery. Taste was only one element in determining wine status and market position.
Many wine consumers could not distinguish tastes of different wines. Two other key elements that influenced quality perception, especially at the trophy wine level, were scarcity and wine critic ratings. Though France was the world’s largest producer and consumer of wine, consumption within France was falling. Moreover, Australian wine dominated the ? 5-8 price category in Britain, whereas French wines often had lower prices. The AOC system seemed incapable of coping with consumer demands for wines that were defined not by geographical origin but by grape variety and the reputation of the company producing them.
One of the most significant trends was continuing consolidation in the New World markets. Another important US trend was the increased emphasis by small wineries on hiring outsiders for managerial positions. A third trend was the emphasis on innovative advertising. A fourth important trend was global shift towards higher priced wine. This trend resulted in a chronic undersupply of high quality grapes in the US and a glut of low-end grapes. Finally, brand segmentation was becoming important. Various forces were driving change in the wine industry of the 21st century.
Historically, a plethora of products and fragmented international markets made it nearly impossible for a company to establish a dominant international position. In addition, because wine is subject to the weather, reliability of supply was unpredictable. However, well-capitalized international winemakers were emphasizing global presence and brand recognition. New World producers were leading to increased emphasis on creating recognized brands, stable distribution arrangements, and focused advertising campaigns. Demand in traditional non-wine consuming countries such as China was steadily increasing.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 19 March 2017
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