Global Wine War 2015: New World Versus Old
In the Global Wine Industry “New World” wine producers – (Australia, Chile and the United States) challenges “Old World” wine producers – (Italy, France and Spain), gradually earning the New World producers a better position in the completive global markets. Resource-based view of strategy and the institutions-based view of strategy assist to analyse the “Global Wine War” and its ever-changing conditions and circumstances.
Although Old World wine producers dominated, how were New World producers able to expand their markets so rapidly during the 1990s? As a growing economy is in action, Old World countries are no longer the largest exports, but rather New World countries have taken dominance by adapting and understanding the changes that are needed to be made.
Climate and soil are natural resources that allow New World producers and their vineyards to flourish, this paired with typically sunny and hot climate enabled a richer more favourable grape to be produced. By challenging production norms, New World producers have the advantage of new advanced and improved planting technology, developing extensive vineyards which lowered labour costs and the use of equipment, including mechanical harvesters and pruners. Controlled drip irrigation is used wide spread across Australia, which not only allowed the expansion of vineyards into new regions but also reduced the vintage variability. Although this technology is accepted and used by many New World producers, it is a practice strictly forbidden to Old World producers under Appellation d’Origine Contrôlée (AOC) regulations. In the 1990s experimentation on a reverse osmosis technology was developed to concentrate the juice of the grape ensuring a deeper, richer tasting wine. The technique of allowing fermentation and aging in computer-controlled, stainless steel tanks was a practice that was forbidden under AOC regulations.
Rates per capita consumption in traditional wine consuming countries declined and the rates per capita increase in New world producer’s countries drastically, this was due to many circumstances including: But poor roads and complex toll and tax systems,
different drinking preferences by the new generation, health issues and concerns to the older generation and stricter drunk-driving penalty law that was enforced. Though this put Old World producers at risk, it gave New World producers at an advantage, seeing this situation as an opportunity to develop the expansion their newly found brand. As a result of these innovations, New World countries have the benefit to use their vineyards to plant vines at twice the traditional density as of Old World producers.
Reinventing the Marketing Model allowed many New World producers an innovation on the improvement of packaging and marketing. Resulting in the development of “wine in a box” and the replace of corks with screw caps. This innovative packaging revolutionized the wine industry, creating a more suitable appeal to the current global markets as it allowed easy storage for consumers and therefore gave New World producers the advantage of differentiating their products with many others. In addition to the new packaging, this in turn not only saved on the shipping costs but significantly reduced spoilage during the distribution and shipment of products.