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World Wine Market

Essay by review  •  November 5, 2010  •  Research Paper  •  2,889 Words (12 Pages)  •  2,107 Views

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TABLE OF CONTENTS

1. Introduction............................................................... 1

2. World wine producers...................................................... 1

3. World wine exports..........................................................2

4. France productions, exports and international image................3

5. Success of New World over the Old World : key factors..............4

6. Evaluation of different strategies......................................5-8

6.1 Premium & Standard wine market

6.2 Creation of an accessible French brand

6.3 The Global wine company (acquisitions and mergers)

6.4 Appellation d'origine controlee and competitive disadvantage

6.5 Protectionism versus being marketing oriented

7. World wine market: long term predictions.............................8

8. Conclusion..................................................................9

1. Introduction

International competition on the wine market is characterized by a considerable disparity of strategies used by the different producers and wine-producing regions around the world.

The objective of this report is to provide an understanding of the competition mechanisms between countries which are traditionally exporters - the "Old World" producers, represented by European countries - and the so called "New World" countries which today compete for the supremacy of the traditional model of wine growing and production.

2. World wine producers

The distribution of the world wine producers is clearly detailed in the map below.

The Old World producers are located in Europe.

France, Italy and Spain are the main producers , followed by Portugal, Balkan states, UK and Germany. The European countries are still detaining a dominant position and they accounted for 70% of world production and consumption in 1999 (by data acquired by Euromonitor).

The New World producers are scattered around the world and are represented mainly by: Australia, Chile, United States, South Africa, New Zealand, Argentina and Canada.

3. World wine exports

The world wine export are still dominated by the Old World producers (see diagram below), with only three countries (France, Italy and Spain) which account for 60% of the world volumes exports in 2003.

Among the New World producers, the largest exports are coming from Australia, Chile and United States.

Another interesting characteristic is showed by the diagram below: the value of wine in exports market are increasing at greater rate than volume.

4. France productions, exports and international image

France accounts for 20.3% or the world wine production , with one third of domestic production exported to other European countries (UK, Belgium, Germany, The Netherlands) and outside Europe (major clients are United States, Canada, Denmark and Japan).

In the most recent years, domestic sales of wine has declined constantly. The wine consumption is becoming more occasional. This is partially due to an aggressive anti-alcohol campaign and driving restrictions set by the local government, but also facilitated by a lack of marketing strategy: the wine market is losing

touch with the youth (the average age of wine drinker is gone up from 35 to 55) and young people are getting more keen to beer or alcohol pops.

Lowered domestic sales may result in a greater emphasis on exports, however the recent trend showed how French exports continue to loose market share to the New World (see diagram below).

Global Trade Atlas-Global Trade Information Source 2004

Considering France international reputation and image, it is useful to analyse its strengths and weaknesses, taking into consideration the important differences existing between standard and premium market.

Strengths: France remain quality leader in the premium market; its international image express Sophistication, Tradition and Charm.

Weaknesses: There are many weak points to be addressed . The puzzling classification and labeling, the unreliable quality, the rigid "appellation d'origine controlee" which dictates strict rules on methods of production (see more details on par.6.4) . Its international image is often seen as intimidating, boring and old fashioned.

5. Success of New World over the Old World : key factors

Question 1: "What accounts for the New World's success over the Old World's wine producers?"

The following analysis aims to elucidate the main reasons accounting for the New World success over the Old World.

We identified the following key factors:

* Taste of wine : Many people like the sophistication of wine but not so much the taste; Old World provides a wine which taste need to be acquired (more acidic, dry and harsh) and the rigid appellation controlee does not allow manipulations (the only exception is the adding of sugar known as chaptilization) . The New World wine is by contrast easy to drink (less acidic, sweet and fruity), therefore appealing to a wider range of consumers.

* Labels: Traditionally the labels of Old World wine are very cryptic. They are in foreign language, denomination of wine is by place of

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