The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0007-070X.htm

Old World
Introduction strategies
Old World strategies against New World
competition in a globalising wine industry
Gwyn Campbell 233
Department of History, McGill University, Montreal, Canada, and
Nathalie Guibert
Avignon University, Avignon, France

Abstract
Purpose – This introductory paper aims to place the contributions to this special issue within the
context of the recent impact of globalisation on the wine industry, characterised by rapidly growing
and evolving international markets, the expansion of New World wines on international markets, and
the response of Old World rivals to New World competition.
Design/methodology/approach – This paper examines the new competitive environment in the
wine industry created by globalisation and outlines the way in which the authors of the papers in this
special issue have contributed to an understanding of that environment.
Findings – This paper reflects a renewed academic interest in winemaking, one of the most dynamic
and rapidly developing agricultural sectors.
Originality/value – The paper hightlights how the authors of the papers in this special issue have
contributed to an understanding of this new competitive environment.
Keywords Wines, Globalization, International marketing, Marketing strategy
Paper type Research paper

This special issue of the BFJ comprises a number of papers on economics and
management, initially presented at the first international interdisciplinary conference on
“Wine in the World: History, Management and Trade” organised by PRATIC[1] at the
University of Avignon (France) in spring 2004. These papers reflect a renewed academic
interest in winemaking, one of the most dynamic and rapidly developing agricultural
sectors. Viticulture, long the focus of research into new techniques and technologies, has
recently attracted academic interest from a variety of disciplines, including economics
and management sciences due essentially to the globalisation of the wine industry over
the last decade or so, the accompanying rise in the value and profits of wines, and the
rapid emergence of new competitors on the international market (see Table I).
This introductory essay examines the new competitive environment in the wine
industry created by globalisation and outlines the way in which the authors of the
papers in this special edition have contributed to an understanding of that
environment.

The wine industry today: a global battleground British Food Journal

Vol. 108 No. 4, 2006
Although Old World countries have retained their position as top producers of wine, pp. 233-242
they have been increasingly concerned by a widening gap between production and q Emerald Group Publishing Limited
0007-070X
domestic consumption of wine (see Table II). DOI 10.1108/00070700610657092
BFJ
Country 2002 Rank 1986-1990 Rank
108,4
France 50,000 1 64,641 2
Italy 44,604 2 65,715 1
Spain 36,639 3 33,519 3
USA 20,300 4 18,167 5
234 Argentina 12,695 5 19,914 4
China 11,200 7 2,734 16
Australia 11,509 6 4,285 12
Germany 9,885 8 10,012 7
South Africa 7,189 9 7,742 9
Portugal 6,651 10 8,455 8
Chile 5,623 11 4,135 14
Table I. Romania 5,461 12 7,133 10
Twelve top wine Russia 4,060 13 na na
Producers, 2002 and their Hungary 3,564 14 10,974 10
position in 1986-1990 –
(in 000s ha) Source: International Organisation of Vine and Wine (2003)

Country 1991-1995 1997 1998 1999 2000 2001 2002

Italy Wine production 60,768 50,894 54,188 56,454 51,620 52,293 44,804
Wine consumption 35,122 30,855 31,840 31,563 30,800 30,150 27,709
Percent difference 42 39 41 44 40 42 38
Table II. France Wine production 52,886 53,561 52,671 60,535 57,541 53,389 50,000
Difference between Wine consumption 37,310 35,500 36,330 35,400 34,500 33,916 33,580
production and Percent difference 29 34 31 42 40 36 33
consumption of wine in Spain Wine production 26,438 33,218 31,175 33,723 41,692 30,500 36,639
main Old World Wine consumption 17,402 14,589 14,793 14,249 14,046 14,238 13,960
producing countries, Percent difference 42 56 53 58 66 53 62
1991-1995 and 1997-2002
(in 000s hl) Source: International Organisation of Vine and Wine (2003)

Per capita wine consumption in Italy halved from about 104 litres in 1975 to about 50
litres in 2003 and in France fell from 103 litres in 1980 to 56 litres in 2003. Falling wine
consumption is in part due to competition from beer and soft drinks, notably amongst
the young, and in France also to tighter drink and drive legislation, and restrictions on
advertising wine (USDA, 2005). In France in 2002 bottled wine sales in supermarkets
dropped 2.5 per cent, and volumes sold to the food service sector (traditional
restaurants, cafeterias and company restaurants) by 2 per cent, although quality wines
sales continues to grow slowly. It is estimated that by 2010, French wine consumption
will have declined by a full 25 per cent compared to 1999 (Gauthier, 2003) (see
Tables III-V).
By contrast, domestic wine consumption in New World wine producing countries is
growing. In Australia, for example, per capita wine consumption increased from 18.8
litres in 1997 to almost 20 litres in 2002, while in the USA and Chile it has been growing
at lower rates: in Chile from 16 litres in 1997 to 17 litres in 2003, while consumption in
the USA stood at 12 litres per capita in 2003 (USDA, 2005).
 Old World
% change
1985 1995 2000 2004 1985-2004 strategies
Old World
France 1,063 927 917 847 2 20
Italy 1,103 927 908 837 2 24
Spain 1,593 1,196 1,174 1,149 2 28 235
New World
Australia 64 73 140 164 157
New Zealand 6 8 12 18 202
Chile 106 54 104 111 5
USA 334 305 413 382 14
Argentina 295 210 209 202 2 32 Table III.
South Africa 110 103 117 126 15 Vineyard-bearing areas,
1985-2004 (in ’000s
Source: Gordon (2005, p. 52) hectares)

2004/
1998/ 1999/ 2000/ 2001/ 2002/ 2003/ 2005 Percent
1999 2000 2001 2002 2003 2004 forecast change (%)

France 54,271 62,935 59,741 55,338 51,850 47,519 58,533 23 Table IV.
Italy 57,913 58,955 54,088 51,912 46,000 46,650 49,500 6 Old World wine
Spain 34,741 37,809 45,572 33,850 38,186 47,300 44,000 27 production
1998/1999-2004/2005
Source: Brans (2004a) (in ’000s hl)

2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009-

2003 2004 2005 2006 2007 2008 2009 2010

Area under vine 140 146 153 159 163 167 171 176
Production:
red 804 1,093 1,050 1,039 1,058 1,077 1,096 1,115 Table V.
white 519 683 727 744 783 821 859 897 Australia: medium-term
Exports: projected growth in wine
quantity 508 581 679 778 880 980 1,082 1,181 production and export
value 2,502 2,606 2,791 3,013 3,251 3,560 3,879 4,260 (area in ’000s ha;
production in kt; exports
Source: Gordon (2005, p. 54) in ML; real value in A$m)

The export imperative

Falling domestic consumption has underlined for Old World producers the importance
of export markets (see Table VI).
Of particular importance for Old World producers are external wine markets
characterised by a growth in both wine consumption and wine imports. These include
essentially non-wine producing countries like Britain and The Netherlands, but also
the USA (USDA, 2005) and Germany – traditionally a white wine producer and the
main export market for Italian wines (Perini, 2003) (see Table VII).
BFJ
Percent growth in quantity Percent growth in value
108,4
Old World producers
France 26 þ4
Spain þ9 þ 12
Italy þ9 þ 15
236 New World producers
Australia þ 20 þ 29
USA þ 28 þ 28
Table VI. South Africa þ 12 þ 26
Percentage growth in Chile þ 18 þ 24
wine exports, 2003-2004 Argentina 2 17 þ 31
for selected Old and
New World producers Source: USDA (2005, pp. 17, 19)

2000 2001 2002

Germany 727 744 732

USA 543 611 718
UK 215 244 271
Switzerland 138 167 172
Canada 106 113 127
Japan 101 112 115
France 135 107 89
Austria 54 68 68
Sweden 50 66 66
Denmark 44 48 59
The Netherlands 44 49 55
Belgium 36 37 40
Spain 29 13 14
Russia 8 8 12
Czech Republic 7 9 10
Poland 10 9 7
Table VII. Others 185 175 174
Italian wine exports by Grand Total 2,401 2,555 2,729
country of destination
(in e million) Source: Perini (2003, p. 7)

However, Old World wine producers have been severely challenged in all foreign
markets by New World producers who have implemented sophisticated and
aggressive international marketing strategies and are increasing their output of
medium and quality wines.

Britain: a key market

A key market for both Old and New World wine producers is Britain, one of the few
markets showing a strong and sustained growth in per capita consumption of wine and
where, due to climatic factors, domestic wine production is minimal. Britain, the
world’s largest importer of wine by value, is characterised by rising wine consumption
by both sexes and in all age groups[1]. Per capita wine consumption there has
increased from 15.15 litres in 1993 to 24.02 litres in 2003 (compared, for example, to 21.6 Old World
litres in The Netherlands), and is projected to rise to 28 litres by 2010 (USDA, 2005; strategies
Gordon, 2005[1]) (see Tables VIII and IX).
Factors taken into account by the British wine consumer are, in order of preference,
previous acquaintance with the wine concerned, price, country and occasion. The
region and grape variety are of major concern only to a minority of wealthy consumers
of prestige wines – red Cabernet Sauvignon and Syrah, and white Chardonnay being 237
the most popular varieties. In addition, by the mid 1990s, 70 per cent of wine purchases
in Britain were from supermarkets, which offer a wide range of good quality wines and
train staff to advise customers specifically on wine choices, as opposed to 13 per cent in
specialist alcohol or wine retailers and 6 per cent in discount shops. By 2003, further
structural consolidation resulted in around ten major retailers controlling about 80 per
cent of off-premises sales – giving supermarkets enormous power over suppliers
(Gordon, 2005; Nichterwitz, 1999[1]).
Moreover, consumer trends are changing. First, there is a marked tendency for wine
drinkers to experiment rather than stick with traditional labels. Thus, whereas in 1990
almost all the most popular brands were Old World wines, the competition has
increased to incorporate about 26 wine-producing countries; the most popular brands
currently come from the New World. Moreover, most purchases are made in
supermarket chains (Shah, 2005; Nichterwitz, 1999). Second, whereas the market value
of wines sold in Britain increased by 43.2 per cent between 1996 and 2001, the volume
sold increased by only 26.2 per cent – indicating a movement towards the
consumption of better quality wines rather than a price inflation – which has been held
back by a fiercely competitive marketplace. This in turn may be a reflection of
increasing consumer incomes, greater leisure time, and continued interest in the

2001 2002

UK 3,204 UK 3,242
Germany 2,977 Germany 2,947
Belgium and Luxembourg 1,702 Belgium and Luxembourg 1,772
The Netherlands 1,530 The Netherlands 1,559
USA 1,049 USA 1,116
Denmark 696 Japan 636
Canada 636 Denmark 621
Japan 616 Switzerland 603
Switzerland 658 Canada 596
Others 14,140 14,360
Grand total 15,189 15,476 Table VIII.
France: wine exports
Source: adapted from Gauthier (2003, p. 7) 2001-2002 (’000s hl)

Table IX.
1992-2004 (av.) 1998 1999 2000 2001 2002
Britain: imports and
Imports 1,355.2 1,911.6 2,043.6 1,747.0 1,881.3 2,026.8 exports of wine,
Exports 48.8 118.0 122.9 121.8 121.4 137.6 1992-1994 (average) and
1998-2002 (in £ million in
Source: Overseas Trade Statistics (2003) real terms at 2002 prices)
BFJ potential health benefits of wine. However, the tendency even with quality wines has
108,4 been towards the purchase of New rather than Old World products (Gordon, 2005[1]).
Moreover, the trends apparent in Britain are applicable throughout most of the
Western world (Iacopo Bernetti, Leonardo Casini and Nicola Marinelli in this volume;
see also Jones, 2003; Kolkman, 2001).
The changing structure of demand in Britain has had a major impact upon Old
238 World producers. In 1997, France was still the top supplier, representing one third of
imported wine by volume and almost half in value. Since excise taxes on wine in
Britain are high, there was also considerable private import from France (rising, e.g.
from 85 million litres in 1993 to 200 million in 1995) representing 10-15 per cent of the
market. French wines also dominated the pub, club and restaurant circuits
(Nichterwitz, 1999).
However, whereas in 1995, French, German and Italian wines accounted for about
66 per cent of British wine imports, this figure had dropped to almost 35 per cent by
2003 (Jones, 2003). The French share of the British wine sale market is in steady
decline: Between 1991 and 1995 it fell from 41.09 to 32.43 per cent, picked up in 1996
but dropped 6 per cent from 1988-1997 and is continuing to decline (although it
remained stable in volume). German wines similarly fell – a reflection of growing
British consumer preference for red wines.
By contrast, New World wine-producing countries have radically increased their
share of the British market. Australia, which in 2003-2004 exported approximately 43
per cent of its wine output and for which Britain is the most important market in
quantity and value of wine exported (Gordon, 2005), has proved the most dynamic
competitor. By 2000, the production of a limited range of non-traditional blends and an
aggressive sales campaign led Australia to overtake France in the white wine market
in Britain, where its middle range of affordable wines have helped to create and enlarge
a consumer market amongst women (Usher, 2001). By 2004, Australia was strongly
challenging France in on-premise sales. Between 2003 and 2004, the French share of
on-premise wine sales by volume declined from 41 to 34 per cent, while the Australian
share increased from 13 to 17 per cent. Currently, six of the top-selling wines in Britain
are Australian (Gordon, 2005).
Also, competition is increasing amongst New World producers. Thus in Britain,
wines from California, Chile and South Africa are competing strongly with Australian
brands (Gordon, 2005) (see Table X).

2001 2002 2003

Volume Value Volume Value Volume Value

White 900,743 352,577 1,001,061 388,312 920,380 377,688

Red and rosé 880,082 440,789 1,110,784 496,247 1,056,782 427,232
Table X. Sparkling wines 35,305 24,559 38,514 23,218 48,808 26,685
Britain: imports of Fortified wines 7,874 2,675 18,029 9,014 8,476 4,086
Australian wines, Total 1,824,493 821,078 2,168,677 916,911 2,034,630 795,849
2001-2004 (’000s hl and
Aus $’000) Source: USDA Foreign Agricultural Service (2004, pp. 13-14)
New World success Old World
New World producers are not only competing strongly for Old World markets, they are strategies
also rapidly increasing their market share in the markets of the future, such as the USA
where wine consumption is expected to rise by 29 per cent over the medium term to
make it the world’s biggest market for wine by 2010, and China which currently has a
potential market of 80-100 million wealthy white-collar workers (Shah, 2005).
The rise and success of New World wine producers is due to a number of 239
factors. The first is rapid vertical and horizontal integration. Second, they have
adopted a more industrial approach that uses technology to develop new cultivars,
improve existing cultivars, and obtain standardised products (USDA, 2004). Also,
they have developed strong marketing strategies (e.g. simplified labelling and
attractive product design) aimed to appeal to the widest possible spectrum of
consumers. They concentrate on promoting mainly varietal wines (e.g. for Jacob’s
Creek, Alice White and Yellow Tail) via the supermarket chains and through
advertising building brand loyalty (Nathalie Guibert in this issue; Shah, 2005;
USDA, 2004; USDA, 2003). Moreover, whereas they traditionally focused chiefly on
the sale of medium-quality, medium-priced wines, they are widening their quality
range to include premium wines. For example, Constellation, the world’s largest
wine company, attributed record sales for its third quarter ending in November 2004
to a sustained rise in the sale of premium wines (Gordon, 2005).
To sum up, recent research indicates that the conventional assumption that
specialist producers of premium wines will thrive in the global market alongside
multinationals catering for the mass market does not necessarily hold if, as is the case
with Australia and other New World producers, investment in advertising and
marketing techniques is such that they capture even those consumers traditionally
loyal to elite Old World labels.

The response of Old World producers

To penetrate the UK market, it is essential to have a good understanding of the market, to
have a well-prepared product strategy and to be flexible . . . The merchandising strategy of
supermarkets has made wine more accessible to consumers who are now less apprehensive
(especially women) . . . Generic promotion (of appellations d’origine) can add real value to the
market if the correct marketing strategy is not compromised by the desire to please everyone
(Nico Thiriot, Director, Niconnection Ltd, ex-Sainsbury’s Calais, reported in Shah, 2005).

It is clear that the rapidly changing structure of the international wine market and
fierce competition from the New World poses major challenges to Old World
producers, and the Old World response forms the context for the contributions to this
special edition.
Only from the end of the 1990s did Old World wine producing countries start to
effectively act to redress the twin problems of global overproduction and foreign
competition. In traditional fashion, winegrowers in Old World countries have looked to
government for protection and assistance. Some tactics employed are essentially
defensive. On the EU level strict regulations have been implemented concerning the
planting of vines and of permitted varieties. However, the current CAP (Common
Agricultural Policy) call for a general prohibition of new vine planting up to 2010 has
not been followed in all regions. In 2004, European production of wine increased for the
BFJ first time since 2001: in Spain to c.40 million hectolitres, in France to an estimated 58.5
108,4 million hectolitres (a 23 per cent increase) and in Italy to 53 million hectolitres (a 20 per
cent increase). Again, Old World governments have focussed particular attention upon
protection of regional names (appellations), winemaking practices and registered
trademarks – including effective protection of semi-generic wine names such as
“Champagne” (Gauthier, 2003; Brans, 2004a, b; Pérez, 2003). Also, in January 2005 the
240 French government announced a e66.5 million aid package for the wine industry, and
in April 2005 an additional e30 million. Such aid is designed to compensate for
overproduction and, more critically for the long-term development of the wine sector, to
promote exports.
On the other hand, as shown by Emmanuelle Reynaud and Eric Simon for France
and Iacopo Bernetti, Leonardo Casini and Nicola Marinelli for Italy, many individual
Old World producers continue to rigidly adhere to the customary gods of “terror” and
family traditions of production. For example, in 2000 there were 144,000 wine growers
in France, alone of whom 42 per cent produce chiefly VQPRD wines (“Quality Wines
Produced in Determined Regions or Areas,” a European classification that combines
French AOC wines and VDQS “Superior Quality” wines). Moreover, vineyards
represented a significant proportion of cultivated land: 17 per cent in France, 15.8 per
cent in Spain and 11.9 per cent in Italy (Gauthier, 2003).
Nevertheless, the realisation that the future of their wine industries depends upon
being able to successfully compete in foreign markets has forced Old World producers
to critically reappraise how the forces of globalisation have reconfigured wine
production and trade on an international level and seek ways to identify the
opportunities and threats present in the new competitive global environment (Shah,
2005). These issues have in turn attracted the attention of researchers wishing to test
the validity of both general and specific theories regarding the effects of globalisation.
Emmanuelle Reynaud and Eric Simon demonstrate that the first step to success is
for individual wine producers to redefine their key business competences, while
Tatiana Chameeva-Bouzdine describes the main models of analysis that enable key
competences to be both identified and fully utilised – the distinctive competency most
critical to success being wine quality.
Another major factor is the ability of the most fragmented sectors of production in
the Old World to create or reinforce inter-company networks and otherwise seek
greater coordination between producers. In this, the winemaking sector constitutes a
prime field for the application of modern theories, such as Mark Granovetter’s theory of
embeddedness, which focuses on strategies to develop more coherent
inter-organisational structures (Granovetter, 1985).
Several papers presented here focus upon the importance of “networks” for
individual producers or wine merchants to effectively compete. Bernetti, Casini and
Marinelli stress the importance of cooperatives in Italy. Jean-Laurent Viviani in his
analysis of the collective response to the threats to revenue to wine-growers in France
notes that pooled resources and management appear to be key for individual Old
World producers, in terms both of risk reduction and marketing. In her turn, Nathalie
Guibert demonstrates the way in which, in the new competitive environment,
intermediaries employ a range of regulating mechanisms within their own networks of
distribution and observes that some Old World wine producers and merchants are
restructuring along New World lines, notably as regards vertical integration.
 In terms of the market, price and advertising are critical factors. In his study of Old World
18 countries including the chief wine producers and wine consumers, James Fogarty strategies
identifies the underlying factors behind variations in the elasticity of demand for
alcohol – a hitherto little studied phenomenon yet one vital to the formulation of
pricing and government tax policies. In particular, his study shows that national
variations are not significant. Finally, Iacopo Bernetti, Leonardo Casini and Nicola
Marinelli note the role of advertising, notably in terms of consumer perceptions of 241
quality and building up “consumer loyalty” as a critical area upon which the
producer-distributor chain needs to focus in order to achieve an enlarged market.
In the current environment of rapidly changing factors on the demand and supply
side – as all contributors to this volume underline – there is urgent need for further
research into organisational and managerial strategies. As noted by one of the top
independent (family-based) wine producers in Australia:
To survive, wine companies, especially smaller ones, have to match the weight and power of
retailers or offer a point of difference. That means that there is less and less room for smaller,
inexperienced players and that, even medium-sized players are going to suffer. There seems
to be room only for either very big players or very small ones with a very good offer suited to
different markets/channels and with a very good management team (Paul Pacino, CEO Simon
Gilbert Wines, New South Wales, quoted in Shah, 2005).

Note
1. “Programme de Recherche Avignonnais Transdisciplinaire sur l’Internationalisation du
Commerce” (Avignon Interdiscinary Research Programme into Management and the
International Wine Trade). The second conference in the series will be held at the University
of Florence (Italy) in June 2006.

References
Brans, H. (2004a), “European Union Wine. U Wine Labeling – Amended Rules 2004”, GAIN
Report E24043, 2 March.
Brans, H. (2004b), “EU-25 Wine 2004 EU Wine Harvest 2004”, GAIN Report E34070, 10 August.
Gauthier, R. (2003), “France Wine Annual 2003”, GAIN Report FR3072, 22 December.
Gordon, W. (2005), “Wine outlook to 2009-2010”, Australian Commodities, Vol. 12 No. 1, March.
Granovetter, M. (1985), “Economic action and social structure: the problem of embeddedness”,
American Journal of Sociology, Vol. 91 No. 3, pp. 481-510.
Jones, J. (2003), “The world’s wines flow to a brimming UK market”, AgExporter, June.
Kolkman, W. (2001), “The Dutch taste for ‘New World’ wines grows”, AgExporter, December.
Nichterwitz, K. (1999), “The Role of Côtes du Rhône in the British market”, Mémoire de Maı̂trise,
Université d’Avignon.
Pérez, D. (2003), “Spain Wine Annual 2003”, GAIN Report SP3040, 19 November.
Perini, S. (2003), “Italy Wine Annual 2003”, GAIN Report IT3029, 19 December.
Shah, M. (2005), “The future is global”, Chianto Classico Magazine, Vol. 12, March.
USDA (2005), World Wine Situation and Outlook, USDA, Washington, DC.
USDA Foreign Agricultural Service (2003), “South Africa, Republic of Wine Competition Annual
2003”, GAIN Report, 14 July.
BFJ USDA Foreign Agricultural Service (2004), “Australia Wine Annual 2004”, GAIN Report, 18
June.
108,4 Usher, R. (2001), “Portugal’s grape escape”, Time Magazine, 21 August.

Further reading
www.findarticles.com/p/articles/mi_m3488/is_7_83/ai_89240036/pg_2 (2005), accessed
242 10 September 2005.
www.mindbranch.com/listing/product/R310-0339.html (2005), accessed 10 September 2005.
www.rspb.org.uk/countryside/whatyoucando/cork/world_market.asp (2005), accessed
10 September 2005.

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints