Wine Industry

Global wine market is divided in Old World and New World. In the process of gaining market share, they both experienced threats and opportunities. In mid-1850, traditional winemakers welcomed strict laws, regulations and classification systems to differentiate their product, thus, raising barriers of entry, i.e. AOC. Nonetheless, New World producers turned this into an opportunity through their innovative culture in technology i.e. controlled drip irrigation and trellis systems. New World producers also broke some winemaking traditions to differentiate themselves from competitors, for instance: having on-site labs, experimenting with reverse osmosis technology and adding oak chips. They also innovated across the value chain by experimenting with new packaging & marketing (wine-in-a-box) and distribution strategies through controlling the full value chain (quality at each step).

In 1980-2010, worldwide wine consumption dropped due to radical changes in consumer tastes and preference. Although Europeans were unable to respond these shifts, New World producers took advantage of their availability of land, structured chain value and unconstraint in regulations/traditions to rapidly meet changes in demand.  However, EU responded to the fall in market shares by introducing new policies i.e. uprooting vineyards and creating a new classification to re-gain their global recognition. In the meantime, New World also faced significant threats such as image problems due to excess in supply, boosted Australian production costs and export prices due to rises in energy, water and appreciation in AUD. Nevertheless, Australians addressed these problems by managing their supply and investing in R&D by researching on the promising wine market in China.