Australian Wine Industry

Australian Vintage Limited is a leading Australian wine company. Championing a fully-integrated wine business model, the breadth of our capabilities extends to vineyards, boutique and bulk wine production, packaging, marketing and distribution. As one of the largest vineyard owners and managers in Australia, Australian Vintage

The assignment for this week was to write a paper based on the case Global Wine War 2009: New World versus Old. We experienced that it was an interesting case considering both Porter’s five forces model and Resource-Based theory, because they give two different perspectives of competitive advantage: Outside in and Inside out. Besides that we could have a closer look at innovations and what they mean for the competitiveness in the world wine market. In this paper we make an effort in explaining what the main aspects

“The size of global wine industry in terms of revenue , at the beginning of 21st century ranged from 130 to 180 billion in retail sales.” Furthermore, There are over 1 million wine producers in the world.

The dynamics of the global wine industry are better understood through a brief history of wine as well as an overview of the wine making process. Some countries have longer historical and cultural ties with wine then others and that can affect the quality and perception of the product in the eyes of the consumer. Also, the conditions in which the wine grapes are raised and the processes used to make the wine can create a superior wine and therefore a competitive advantage.

During the last decades, some remarkable evolutions of the global wine industry have dramatically influenced the base of the industry structure, with technological update, innovation, and new players coming in, the wine market as well as the competition within this market have come to a new dimension. In the following, we will analyze briefly the main points of this evolution and group those points into several categories. Change on the demand side ‐ Demand went down in the traditional market. There is a huge geographic shift in demand from the traditional highest-consumption countries like France, Germany, and Italy to the new markets in countries like the USA and Australia. In addition, there is

Align marketing activities with the plan of “Direction to 2025”. Support the Australian’s wine image from cheap and cheerful into a classified and recognizable labeling scheme. It might be added that the new scheme can be restructured in a way that it does not mix up psychographic targeting with regional ones, since this might be confusing. The

Historically, the French had been the dominant competitor in the global wine industry due to the low effect of the five forces of competition. The main barriers to entry that kept the threat of competitors low for the French were incumbency advantages, unequal access to distribution channels and restrictive government policies. This first barrier, incumbency advantages, can be explained by the domestic French Wine Industry in the late 18th to mid 19th century that was already supporting 1.5 million families for both the growing of grapes and other wine-related businesses. France already had a domestic market for the growth and cultivation of vineyards that was able to provide French producers with a steady supply of agricultural inputs.

On a contrary, The main vulnerable aspects of French wine industry were highly fragmented vineyard and wine production, increasing vineyard prices per acre, complex distribution and sales system, long multilevel value chain, risk of bad weather and disease; and poor roads and complex toll and tax system. Those aspects contributed to the decline of French wine on the market.

The climate in Coonawarra is perfect for wine cultivation for it has bountiful rain and extensive clouds, which maintains the climate at a range of 66 degrees Fahrenheit. The price would be determined on the quality of the grapes and how it will be distributed. Sydney Cove wines will market very high and are targeting middle to upper class clientele. The promotion will be to build and encapsulate the history of Australian wine. The distribution and supply chain risk are very minor. Australia exports products to South Asia and India and built a market share of 16%. This could be the starting customer for Sydney Cove Winery (Countries and Their Culture, 2011). Australia and New Zealand consumes 500 million liters of wine providing large revenue distributed into the economy making wine extremely high demand (Countries and Their Culture, 2011).

The understanding of cultural changes is essentially transforming the general environment. The demand for wine has been consistently in favor of premium wines, while “jug” wines have been lagging. Drinkers of wine are finding it much more affordable than in the past, but are also increasingly affluent themselves. Also, foreign wines are becoming more popular in native countries than ever before. The consumption of wine has moved to ‘off-premises’ locales as a result of 9/11 and its effect on the restaurant business.

While generally deploring much of the wine of the New World, the Old World is being forced to take notice. Australian wine has displaced French wine as the top import to the British Isles. Many traditional makers are employing some new techniques to insure a better, more marketable product. This is generally not a bad thing as France for instance has always produced lakes of cheap swill. Lacking competition many growers and producers were content to maintain the status quo.

Studies done in Australia during 2001 by the wine journal industry emerged with a very similar quality segment system which is divided in four categories as well; Commercial wines, Semi-premium wines, Premium wines and ultra-premium wines. Various winemakers have stated that there is only a hedonic difference between the last two categories (Blok, 2007). Retail distribution channels will therefore vary between wine categories as the winery management determines which channel to target. Depending on quality and quantity the winery could select to distribute for wholesalers, retailers, cellar doors, direct consumers or a combination of these (Heijbroek, 2003; SCSD, 2010).

“Delamere Vineyard is a small, integrated winemaking business in Tasmania, specializing in pinot noir (red) and chardonnay (white) wines. Richard Richardson, Delamere's owner and winemaker, manages and operates the vineyard and winery largely alone. His products have won praise and awards in the past, but Richardson strives continuously to improve. Delamere competes in the high-priced segment, in which quality is paramount. Richardson is well equipped as a winemaker--with a Ph.D. in agricultural chemistry and 15 years' experience.” (Harvard Business School, 2000) Winemaking is a very exclusive, yet competitive business that requires great care and understanding of customer demands.

In common with the other major wine-producing nations of the “old world” such as France Germany and Spain, Italy has undergone something of a reality check during the course of the past 20 years. The old certainties that appeared to guarantee a healthy export trade reaching far into the future have been dented somewhat by the appearance of the new kids on the block. “New world” nations such as the United States, Argentina, Chile and, in particular, Australia have helped to concentrate minds and sweep away complacency.

The perception of wine being “upmarket” and “sophisticated” is helping in bringing about this change. One sign of this happening is the emergence of wine clubs in a number of cities. The biggest consumption of wine (up to 80%) is confined to the major cities, of which the largest are Mumbai (39%), Delhi (23%), Bangalore (9%) and the foreign tourist