Is Tradition Affecting the Old World Producers?
Problem:
A “problem” is identified in the beginning of the case, indicating that there is titanic shift in the global wine industry. The drastic change inevitably caused both the New World and the Old World to clash for market share and profitable stake in the $230 billion global industry. Amidst the battle, the New World gained the competitive advantage, and challenged the Old World’s traditional ways and former dominance.
Analysis:
The global wine industry is being influenced by numerous factors, specifically consumer demand and changes in the way wine is produced and sold (Old vs. New). In regards, consumers and producers have shifted away from the traditions of the Old World and have transitioned to accept the innovating techniques the New World has brought to the wine industry, thus the challenge the new world is presenting upon the old.
When World War II ended, there was an increasing demand for wine in the New World countries, contrary, liter consumption per capita declined in traditional wine consuming countries such as Italy, France and Spain. Old World producers were not capable responding quickly to the demand or penetrating the new markets because limited land and strict rules and regulations. For instance, land is abundant, inexpensive, and extremely apt for grape production in the New World. With much access to land, vineyards were able to expand greatly; vineyards in the United States averaged around 213 hectares, Australia 167 hectares, whereas Italy averaged around 1.3 hectares, and France 7.4 hectares. This caused Old World producers a limited capability of supporting demand. In addition, Old World producers were bound to traditional wine making techniques that we...
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... producers utilize, but it will also give them the ability to penetrate emerging markets. In addition, Old World producers need to find a solution for its physical constraints too. For example, Old World producers should opt to purchase land in New World regions such as Argentina or Chile, where land and labor cost is low and efficient. It is from this that the Old World producers will be capable of growing their production size and meeting the mass demand of consumers. Further, this will also give the Old producers the opportunity to tap into emerging markets such as South America, or even China (the 5th largest wine consuming nation) to expand market share. By altering the strategy to not only meet the mass demand of the global industry, but also the booming generation Y market, Old World producers will be able to competitively compete against New World producers.
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