GLOBAL WINE WAR 2009:NEW WORLD VERSUS OLD

BACKGROUND

• Wine has been well known since Egyptians and Greeks• Under Roman Empire : Almost every town had its local vineyards and wine become a peasant’s beverages.• Christian era : Wine used for liturgical services• Middle ages : Wine as a mark of prestige and become a first niche market for premium wine• In early 19th vines being planted in rows, so that become more efficient.• Distribution : sold in bulk to merchant traders• Problems in distribution : poor roads, and complex toll and tax systems so shipping become expensive• Late 18th, mass production of glass bottles innovations, user of cork stoppers, and development of pasteurization.• Result : greater wine stability and longevity, distribution became the norm, expanded production, and global market was born.

SWOT Analysis of OLD World

SWOT Analysis of NEW World

How come the old wine industries enter the US market?

PROBLEM IDENTIFICATION

AnalysisOLD WINES• The New World nations has the distribution channel of wine in Europe,

because they are able to innovate the value chain. This makes the local producer to distribute their products with the New World distribution.

• The local wines are losing their customers, because the Old World could not understand their customer and they are not good at marketing.

NEW WORLD• In Australia, overproduction damaged the price, and in US the

cost is very high. Those things could impact on unstable wine production.

• Many factors bring the demand decrease, such as substitute products, the government law, and the health issues. Also the New World producers need to fight against the Old World producers to keep their market.

DistributionThe 3 main channels for retailing wine are: • Supermarkets - high volume, mainstream brands,

convenience and competitive pricing• High Street - diverse selection of wines and a different

category mix• Independent Specialists – more involved experience,

exclusive or limited release product offering.

The Old World wines could not compete on the supermarkets and high streets because the retailer need a fast-moving and famous brand to increase the sales, which was dominated by the New World wines.Also the Old World hampered by the lack of customer knowledge and marketing skills.

Exhibit 6

2001 Consumption Production Exports Import

Country (Total hls 000s)France 34200 45400 15180 5370

Italy 28150 45900 18480 1750Argentina 12200 15050 3260 140

Spain 14260 34700 15280 200Germany 20380 10500 3450 14240Australia 5960 14304 7980 340

United Kingdom 12760 - - 12910

United States 25125 20000 4240 8450

Substitute Products

Analysis

• As US, Australia, and many other wine producers compete with substitution product, the old world wine producers better get a higher target market to avoid directly competing with substitution products

Brand Power• 7 US wine brands:

– Gallo– Robert Mondavi– Beringer– Sutter Home– Blossom Hill– Kendall Jackson– Inglenook

• 6 Australian brands:– Yellowtail– Hardy’s– Jacob’s Creek– Lindemans– Wolf Blass– Penfolds

Source: http://www.drinkspowerbrands.com

Solutions

• By entering the premium price wine products

Solutions• Keeping the old production process and sell

the heritage into US market

Analysis

• No brand awareness means that every old world’s wine could has a value on their history because customers only care about the year of production, not the brand

LESSON LEARNED• The heritage could not be last forever, they still need to

innovate if they want to keep exist on the market• Sociological influences on consumer behavior, for examples :

- rituals in a culture- social class

- generalization• Psychological influences on consumer behavior :

- life style- motivation- perceptions- desire to (show) status