Global wine wars and market competition

Global Wine Wars

Since the mid to late 20th century a shift has been occurring in how various wines are produced and sold around the world. At the heart of the dispute, is the battle between traditional (old world) and new world producers / distributors. Simply put an old world producer / distributor, is a company that will focus on manufacturing and selling wine using established customs and practices. These kinds of growers are located mainly in Europe and are considered to be small farms that have embraced the same traditions for many generations. While new world growers, are those producers / distributors that will use the last techniques to manufacture and market their products. In general, the majority of these producers are located in: the U.S., Argentina, Chile, Australia and South Africa. (Bartlett) This is important, because it shows how the overall amount of competition between these different producers / distributors has become more intense. To understand what is taking place requires: examining two relevant factors affecting competition, conducting a strategic growth analysis and studying the new world / old world value chains. This will be accomplished by examining: the major problems facing old world wine growers, how their business model contributed to various challenges, how new world growers were able to pose a substantial threat, the way it relates to traditional producers, how old world growers have tried to solve the problem and the effects of government intervention. Together, these different elements will provide the greatest insights, as to how the industry is continuing to change.

The Major Problems Facing Old World Growers

The biggest problems facing old world growers are: there is sense of arrogance and the inability to quickly change. These two elements are important, because they would have an impact upon: the quality of wine that is being produced, in what form it was distributed and it would hurt the grower's ability to evolve with consumer demand. As their refusal to embrace new ideas caused them to lose market share to new world growers. This is because their products were considered to be superior in quality and they had lower prices. The PESTEL analysis reveals; that economic and social issues would have an impact upon the old world producers' ability to adapt to various changes. (Bartlett)

How the Old World Growers Business Model contributes to different Challenges?

The old world growers' business model contributed to various challenges, because it lured many producers into thinking that they can adjust. However, the reality is that the market conditions were changing. A good example of this can be seen with the constant declines in consumption since 1966. This is important, because it shows how despite an implosion in demand, many producers felt that their underlying business model would overcome these issues. (Bartlett)

How New World Growers were able to pose a substantial Threat?

New world growers were able to pose a major threat by using some the latest techniques to address the underlying problems. This can be seen through VRINE analysis, as: the lower price would represent value, the unique taste showing rarity, the same kind of wines as old world producers highlighting imitations, the growth in other regions of world signaling no sustainability and the expansion into new markets showing explore ability. These different elements are important, because they are highlighting how new world producers were able to create a shift in consumer tastes (posing a substantial threat). (Bartlett)

How Old World Growers have tried to solve the Problem?

Old world producers tried to solve the problem by stressing their traditions and quality. This is problematic, because VRINE analysis reveals: they were having trouble creating value (due to their higher prices), they felt the public was use to drinking their wines (creating a sense of rarity), the belief that these wines were one of kind highlighting imitations, the focus on the UK market is indicating un sustainability (in their marketing strategy) and the ability to form various alliances with new world producers is showing explore ability. When you put these different elements together, they would underscore how the strategic alliances that were used to address the problem did not work. This is because the business model could not tackle fundamental changes in the industry. (Bartlett)