EDINBURGH NAPIER UNIVERSITY BUSINESS SCHOOL

Food Wine & Society – HT32420

Report

ASSESSMENT A (50%)

ASSIGNMENT TOPIC: Sales of European wines are being overtaken by new world ones. Discuss why this is the case and how the balance can be readdressed.

STUDENT NAME: Naresh Kumar

MATRICULATION NUMBER: N08012846

WORD COUNT/WORD LIMIT: 2003/2000 (+/- 10%)

Institute Name and Address:

Institute of Advanced Management,

Wood Bourne Resort and Country Club,

Gonvoloy, Nuvem, Salcette,

Goa-403601

India.

1

HT32420 Food, Wine and Society

Assessment Marking/Feedback Session Written Report

Module Leader/Marker – Gordon Rule

Student Name: Naresh Kumar

Matriculation No.: N08012846

Marking Criteria Total Mark

Mark Excellent Good Average Fair Poor

Presentation 15

Information Utilisation 10

Research Analysis 20

Conclusions/Recommendations 15

Bibliography/References 10

Topic Knowledge 20

Reading Evidence 10

TOTAL 100

Any additional comments

Total Assessment Mark:

2

Contents

Abstract 4

Introduction 5

Major European Wine Producing Countries 5

New World Wine Producing Countries 6

Consumer Behavior 7

Potential in market 8

Appellation system 9

Climatic difference in European countries and new world wine countries 9

Conclusion and Recommendation 11

Reference 12

Abstract

3

Australia, New Zealand, Chile, South Africa, USA are included in new world wine

countries, while Spain, France, Italy, Portugal, Austria and rest of Europe are known to

be old world wine countries. France is topping in chart in term of production and

consumption, Italy exports the 19% of total wine export in the world, but all these

countries are declining in term of business and consumption leaving Spain which has

shown positive sign.

Australia is largest wine exporter in new world wine countries; USA has great potential

in its domestic market, Australian wine are getting popular day by day, because new

world wine are value for money and easy to understand labeling and all, so slowly new

world wine are overtaking old world wine.

Introduction:

Wines from South America (California), Australia, New Zealand, Chile and South Africa

are generally described as being from the new world. Wines from these countries are

4

fruitier and full bodied, because climate in these countries is warm and grapes in the

vineyards are more ripen and sweet if compare to old world wine countries. Old World

wines refers to wines that come from regions with a long documented history of wine

production, for example Spain, France, Italy, Portugal, Austria and rest of Europe are

known to be from the old world. The climatic condition in these countries is cold and

grapes produced here are sharper. And these wine need to be matured for a longer

time, while new world wine can be drink younger.

Major European Wine Producing Countries:

France:

France is the leader in wine producing countries in term of consumption and

production, it produce 20% of total world production and consume 14% of total in world.

But from last few years there is decline in per person consumption domestically, export

of French wine is also decreased, it has been pulled down to third position from second.

The major markets like UK is importing wine from Australia and giving less preference

to old world wine countries. France has been loosing market share in United States also

because of political decision during Iraq war and also currency fluctuation against dollar.

The primary risk to the French wine export market is the internal appellation system

which is not appealing well to the global scenario. The labeling of French wine is

complicated, many irregular wine consumers don’t even understand or can not

remember, what they drink last time, but Australian wine label are more accessible.

(Business Report, 2009)

Italy:

Italy is the largest exporter in the world of wine by volume, and second largest

producer and consumer of wine. The 19% of total wine exported in the world, but from

last few years it is decreasing otherwise it had a better position in term of volume.

Spain:

5

Spain is the only country in old world wine countries, which is showing positive

mark in production and export both; it is the third largest producer of wine after France

and Italy. And showing a positive growth in recent years. Domestically it consumes half

of its produced wine, but still there is decline in per-capita consumption. (Anon, 2009)

New World Wine Producing Countries:

Australia:

Australian wines are getting very popular now days. The Top-selling brands like

Jacob’s Creek, Alice White etc have become reputed brand in the world, Colorful labels,

not complicated names a decent value intention, value for money helped Australians to

be the fourth largest exporter in recent years, with a rapid growth it has doubled its

export in just few years. The main importers of Australian wines are United Kingdom

and United states. The big competitor of Australia is United State but still it manages to

create a big market for the Australian wine. (Decision News Media, 2009)

United States (California):

United State came in chart of wine producing country globally, when it won two

gold medals for Napa Valley wines at a blind testing competition in 1976 held in Paris.

Than onwards it has become a major exporter for the big wine markets like UK and

Canada. (Business Report, 2009)

South Africa:

South African wine is one of oldest in new world wine countries, but its wine

industry has faced challenges in both production and consumption, because of

regulatory and bureaucratic requirements deriving out of an ever-evolving new

government, uncertainties of economic, and Political stability. The South African wine

industry is also merging as seen by the projected consolidators of the country's Distillers

Corporation with the Stellenbosch Farmers Winery Ltd, with these collaborations wine

industry was enabled to be effective wine producing country in the world. (Decision

News Media, 2009)

6

Chile:

The climate of Chile is ideal for grape growing, which is a benefit for the country

and after the democracy came in the economically it has positive sign with huge global

investment, which helped wine industry to improve in quality and production, which lead

to great improvement in quality wines from Chile. (Essortment, 2009).

Consumer Behavior:

Consumer behavior is very important in wine industry, it derive the force of demand in

the market. The old world wine producers have the advantage of belief and history

behind them in the domestic markets. Over the centuries wine has become an important

part of European cultures, they are the biggest producer and consumer also. But still

there is room for expansion in their domestic market, but most of these countries are

experiencing decline in consumption per person and there are many reasons behind it

like social champagne against alcohol et al. In non European countries wine

consumption per-capita is comparatively very low but it is increasing with a positive

growth, the driving force behind this growth is the affordable wines from new world wine

producing courtiers.

Individual tastes differ drastically and consumers are not consistently able to notice

even objective qualities in wine, so wine’s consumer demand ranking plays important

role in setting up consumers mind. And so many people take these ranking very

seriously, because many new consumers want to try the best one because they don’t

get so many wines to drink, so they follow what professional say. Which increase the

demand for wine which is on top in the rank?

Potential in market:

7

The two major wine producing countries in new world wine countries Australia and

Chile have small populations that tide them in domestic market with less potential for

growth, but they are very well positioned to export wine all around the world and also

attracting the foreign investment, which provide them a strong competitive position in

term of wine production. Cost structure of Australia and Chile is better than the United

States, but US have its own advantages of economies of scope in market and domestic

consumers. US market is bigger and have more potential to expand.

While the countries like France and Germany with large domestic market and strong

position in production in old world wine countries they are at weak position in

competitive advantage, they have less opportunity for growth. The attentiveness of

production keen on small wineries, limited land and man power, complex labeling,

inability to force new production and marketing techniques does not assure for effective

competitor in a global market.

Few of old world wine countries decreasing their vineyards area while countries such as

Australia and US are expanding. Oversupply restricted the markets to import but few

countries have signed a trade agreement to keep market open for Australia, US, New

Zealand etc. and France use to be the major exporter to the UK, but now Australia

position no. one wine exporter to the United Kingdom, which is the world biggest market

of wine in the world. (Decision News Media, 2009)

Appellation system:

8

New or inexperienced wine consumer gets confused about all the wine choices,

especially the details of foreign appellations, which they find quite complicated to

understand. In France AOC is used for the appellation which stands for Appelation

D’origine Contrôlée. It starts with geographical details and rules regarding wine making.

They meant to assure the standard in both quality and type, of the region. There are so

high standard and particular about rules that there is no scope for creativity and also not

much of experiment. But a kind of same system is used in United States, which is easier

to understand and provide required information, AVA system potentially provides

information to reduce the customer’s uncertainty about what’s in the bottle and so

increase confidence of buyer decision making. Consumer needs to know what the

appellations mean and this can be difficult if the regions are very large and geographic

sense.

Climatic difference in European countries and new world wine countries:

Old world wines tend to be lower in alcohol, higher in acidity, less fruity, and wines that

are aged in oak tend to be aged in less new wood or for a shorter period of time, giving

less of an oaky impression. But new world wines will be drinkable and delectable when

younger in age. Where old world wine need to be mature for a longer time, while new

world wine can be consumed young.

Many of the new world wine regions are near to the equator than the old world

harmonizes this effects length of the day and the angle and strength of sun. Because of

it grapes appears to have more sugar and less acid when grown at lower autonomy. So

the consistency of weather throw out the year matters to temperature swings and

beneficial for the whole day and night. Like in California in the afternoon it is too hot that

vines shut down than cold in the night vines again shut down. While in most of old world

wine countries the day time temperature is not so high and in night also it is constant for

the vines. Which help new world wine grapes in ripening process resultant these are

more sweet and fruitier in nature. The soil is also not rich in nutrient as compare to new

world wine countries. Most of European countries grapevine root system goes deep to

9

the ground for the nutrients and moisture. While in new world wine countries roots goes

hardly 10-20 feet deep in compare to Germany and France 30-40 feet down.

(CBS INTERACTIVE INC, 2009)

Some other reasons effecting old world wine countries:

Old world wine countries hardly try new things other than there classic procedure of

wine making. Like the new world wine countries try many new thing for example

recently Australia invented a synthetic substitute for cork won the prestigious award for

innovative idea and also proved that consumer like simple packaging of wine rather

than complex classic style.

Conclusion and Recommendation:

10

Wine from France, Spain, Italy and Germany are called old world wine and wines from

Australia, New Zealand, Chile, USA and all other parts of world are new world wine. As

France is leader in wine consumption and production both, but slowly it is coming down,

so it need to concentrate on its major market that domestic and UK, USA got

recognized after winning the two gold medals for Napa Valley wines at a blind testing

competition in 1976 held in Paris, from than onwards it is a big market to export. South

African wine is oldest in new world wine countries, but its wine industry was faded

because of wrong government policies. The climate of Chile is ideal for grape growing,

which is a benefited the country after the democracy.

Consumer behavior is very important in wine industry, it derive the force of demand in

the market. Like individual tastes differ severely and consumers are not constantly able

to notice even objective qualities in wine, so wine’s consumer demand ranking plays

important role in framing of consumers mind. New or inexperienced wine consumer also

gets confused about all the wine choices, especially the details of foreign appellations.

Some factor affected old world wine like few of them are decreasing their vineyards

area while countries such as Australia and US are expanding. Which definitely compact

the market for old world wines.

Reference:

11

Anon, (2009).” A country-level analysis of competitive advantage in the wine industry”.

Retrieved on 26th March 2009 from

http://ageconsearch.umn.edu/bitstream/14859/1/wp060002.pdf

Business Report, (2009). “French wine producers beaten at point of sale in US”.

Retrieved on 27th March 2009 from http://www.busrep.co.za/index.php?

fSectionId=565&fArticleId=2120848

CBS INTERACTIVE INC, (2009). “Old world vs new world wine 101”. Retrieved on 26th

March 2009 from http://chowhound.chow.com/topics/474349

Decision News Media, (2009). “Australia teaches Old World how to sell wine”. Retrieved

on 28th March 2009 from http://www.beveragedaily.com/Industry-Markets/Australia-

teaches-Old-World-how-to-sell-wine

Essortment, (2009). “Wine production in Chile” Retrieved on 29th March 2009 from

http://www.essortment.com/all/chilewine_rmmn.htm

12

Declaration

Procedure if Plagiarism Identified:

If a case of plagiarism is suspected (SDR 14.2):

The member of staff marking the work will seek a second opinion from another member of the teaching team and, if suspicion is upheld, report the matter to the School Academic Conduct Officer (ACO).

If the case is considered minor, a range of sanctions may be applied, including reduction of the assessment mark.

If the case is major, the matter will be referred to a School Disciplinary Committee, who will consider application of a broader range of more rigorous sanctions which range from a nil mark for plagiarised assessment and hence failure in module to rustication.

I declare that I have read, and understand the above, and that the attached piece of work for HT 32420 is my own work and is free from plagiarism as defined above.

Signature: Date: 30th march 2009

Matriculation No: N08012846

13