Global Wine War 2009

Innovation is essentially the key to development of new markets. This is achieved through introduction of diverse or more effective products, processes, services, skills, or concepts that are readily acceptable to markets, governments and society. In my opinion, the New World producers used this weapon to the best of their generation's abilities. Primarily, the weak characteristics of French wine industry were extremely uneven vineyard and wine production, increasing estate prices per acre, complicated distribution and sales system, long multilevel value chain, threat of bad weather conditions and disease; and poor infrastructures and complex tax system. The modernists had numerous advantages over traditional wine makers as far as production norms were concerned. First, large pieces of land were easily available at relatively cheaper prices. Second, they exploited the restrictions of the Old World producers. They began to experiment at every stage of the wine making process. They used mechanical harvesters, irrigation methods. Further, using fertilizers and pruning methods increased yield and enhanced grape flavor. Third, they used on-site laboratories that helped scrutinize and improvise upon harvesting decisions. Lastly, as a result of these modernizations in production they were able to cut their cost per ton approximately to half of French wine. While Old World wine producers continued to embrace the common liter bottle wine packaging, Australians developed the box wine concept that saved marginal amounts on transport costs and made storage more convenient. They also began replacing traditional cork stoppers with screw caps to increase efficiencies and continue to keep product quality control. Traditionalists held these innovations as violations and said that New World producers had lost the purpose that came with various vintages being made in traditional ways. Yet, these innovations have proven to make the entire process much more efficient, thereby getting satisfied customers as well as high profit margins.

The second most important aspect in the success of New World producers was Product Differentiation i.e. distinguishing products on the basis of demand structures of target markets. They entered the global market in an exceptionally planned and prudent way, catering even to that segment which was not habituated with the regular consumption of wine. The traditionalists had created a strict distribution with a multilevel value chain that made efficiency and consistency in quality difficult. New World producers adopted a unique distribution method. Since the bottle of wine had their name on it, they ensured that their reputation remain unharmed. Keeping in mind the profit margins, the modernists adopted a customer oriented attitude and sophisticated marketing skills, both previously unseen.

In exhibit 7, we see that the price varied from $5 to 50 thereby finding a customer in every possible segment ranging from strictly