Global Wine Wars

Global Wine Wars 2015

Andrea Dunham

Introduction

Historically the old world has dominated the global wine market and has also had the highest wine consumption. When the new world entered the wine market it was not welcomed nor taken seriously. However, this all changed due to the verdicts that came from the “Judgement of Paris,” where French wine experts blindly rated a wine competition. During the judgement of Paris new world wines took top awards. The results of this challenge meant that the old world was no longer the gold standard, but rather the old standard. By 2007, wineries from the new world accounted for 14 out of 20 top brands. The new world’s favorable position in the wine industry is being challenge, however, due to the entrance of a unlikely contender, China.

Opportunities and Challenges

Opportunities and Growth

Each market understandably has their own advantages. The new world in general did not have to navigate the strict regulations of the European market. Specifically, the US and Australian markets have the technology, space and equipment to produce more wine.  This allowed the new world to advance in wine making, such as reverse osmosis, fermentation and barrel aging. This had great economic impact when comparing cost between the new world and old world.

After the judgement of Paris, when traditional producers lost market share, it opened opportunities for the new world brands to compete on price and technology. This also led to a reduction in shipping costs, as well as product differentiation by appealing to a group of unaccustomed or naive customers. The new world welcomed new entrants into this sector and competition was healthy, which led to improved products and brands—brands differentiated themselves based of grape variety and taste consistency. The entrants of new players also meant big retailers, which created a whole new dynamic for the market where big retailers now had bargaining power on their products. Not to mention, the new world distributed their wine far quicker and through and easier process then the old world. The new world controlled distribution from vineyard to retailer and allowed companies to respond in real-time to retailers’ needs

The new world markets also excelled in marketing and packaging, for example; wine in a box and screw caps. This is simple and rudimentary packing but marketing the wines this way appealed to the unsophisticated palates and showed that wine had mass appeal.

Challenges

The wine industries growth caused new entrants into the space, and wine’s growing popularity also meant more consumers using the product. However, the demand created global oversupply which brought challenges for both the old world and the new world. The challenges tended to hit the old world hard, as the old world’s demand decreased in their home markets and a loss of share in export markets caused a wine surplus, also known as The European Wine Lake. By the 21st center, the old and new world were head-to-head from chronic oversupply and decreasing demand which created the perfect opportunity for China to enter the market.