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An Analysis of Globalization in the Wine Industry: Implications and Recommendations for Wineries

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Intellectual Contribution by Susan Cholette

Contribution Title

An Analysis of Globalization in the Wine Industry: Implications and Recommendations for Wineries

Publication

Journal of Global Marketing

Co-author

Hussain, M. and Castaldi, R.

Year

2007

Description

Globalization, by definition, is not a new phenomenon for the wine industry as regional wine producing and consuming countries have been trading for thousands of years. However, until the early 1990's the production and consumption of wine was relatively localized. Wine producers in distant countries were traditionally isolated from each other, and most of the world's wine drinkers consumed either local wines or imports from nearby producers, such as the United Kingdom's historical penchant for French wine. As winemakers had minimal cross-border interaction, they followed local traditions.

However, competitive positions and consumption patterns in Old and New World countries have changed radically and rapidly in recent years. For example, global wine exports as share of global production have increased from 15% to 25% percent over the 1990s (Anderson et al, 2001). Decreasing tariffs, logistical cost reductions and the lowering of certain trade barriers have afforded wine producers the opportunity to sell their products outside of their own region. This new international access is reshaping how wines are produced and consumed alike, and those countries best able to adapt to this wider and more competitive playing field will gain significant national competitive advantage.

Moreover, there has been a significant increase in export orientation by both New and Old World producing countries. In 2001 five New World countries, Australia, Canada, Chile, New Zealand, and the US, joined forces to "diminish barriers by reducing regulatory burdens faced by winemakers" by signing the Mutual Acceptance Agreement on Oenological Practices (Wine Institute, 2004). In response to increased competition from the New World, many Old World countries have expanded their target markets to Asian countries such as China and India (Business News Onlypunjab.com, 2005).

Finally, increased global trade in the past 20 years has resulted in shifts in wine consumption patterns. For example, although China ranks as only the 24th largest importer of US wine, "few countries can boast the long-term potential that this largely undeveloped market represents" (AgExporter, 2004). Moreover, Dewald (2003) reports an emerging pattern in Hong Kong from consuming Chinese tea and brandy to drinking red wine. Chinese and Indian consumers have shown increased demand for foreign wines (Wine Institute, 2004). China's emerging middle class, enriched and open to purchasing non-traditional products, could provide significant new opportunities for wineries worldwide.

The purposes of this paper are to i) examine driving forces and key success factors related to the increasing globalization of the wine industry, ii) analyze the competitive advantage positions of four Old and five New World wine producing countries, and iii) offer a few recommendations for global wineries to sustain competitive advantage in the long run. First, each country will be profiled using key industry data and analyzed regarding its na

Complete Citation

This paper was also presented at the Third Annual International Wine Marketing Symposium, and can be found in the refereed conference proceedings.

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