Case analysis
It is evident that the wine market in the United States is growing tremendously. The same can be evidenced in European countries. The improvement of the wine quality in recent years has proven that the demand for the product is high, especially in the United States. Moreover, the competition for the US market as a strategic and high priced wine market is an indication that the market is growing with time.
Moreover, the resuscitation of the old world wine producers in the European countries is an indication that wine market is yet to saturate. Over the years, the demand of wine has fluctuated as can be evidenced in the case study of the global wine war. Some of the factors that has affected this demand include, price, customer preferences, market distance, chain of distribution and wine quality (Anderson 278).
On the other hand, the supply of the wine has been affected by the following factors; the price of the product, wine producing technology, the price of related products such as beer, the climatic conditions of the wine producing countries and subsidies given to wine producers or grapevine growers. In the following discussions, the above aspects will be outlined in an in-depth manner.
As earlier indicated, the wine market is growing rapidly. An example of such is exemplified in the US wine market. It is asserted that with time a new generation of wine consumers started to prefer wine compared to conventional alcohol consumers in America. From this perspective, it is notable that majority of the Americans are used to liquor and beer (Bartlett 3).
However, with time, majority of the alcohol consumers started to understand the health benefits that are accrued from taking wine. As a matter of fact, American wine producers could not satisfy the domestic market, prompting more wine to be imported from the old world’s wine producers.
Another justification of the expanded market of wine is that some of the old world wine producers had already started to battle for a ready market of wine in America. The competition was largely contributed by price and quality factors. The Europe’s advance on the American market through various tactics is an example of a promising wine market. An example of such is evidenced by the subsidized marketing on wine products.
As a matter of fact, the subsidizing of these products is as a result of a European Union policy on agriculture. On the other hand, the American US producers have taken another role of rebranding the foreign wines as their own. Examples of such wine are the Italian wines; Ecco Domania and the Bella sera wines.
In order to determine the demand of wine in the wine industry, one has to consider the various factors that influence the commodities’ demand. In this case, the wine’s demand has incredibly changed or fluctuated over time. First, the price of the wine in old world wine producers was relatively high.
This is due to the fact that, wine was only associated with class and prestige. The increasing of the price affected the demand of the product and in due time, the demand of wine had reduced in many of the old world wine producing countries. Example of such is evidenced in Chile, Argentina and in Spain.
The entrance of the new world wine producers, namely; US and Australia, saw the reverse of this demand. The two countries ensured that wine was produced with the newest technology and made available at lower prices to many of the wine consumers. Relatively, this increased the demand for wine. America has a lot of alcohol consumers and their preference sometimes depends on the price of the commodity.
In the same context, the consumers’ preferences will determine the demand of the product in question. In case of the American wine consumers, most of them preferred the foreign wines. This was after the domestic wine producers in America started to increase the price of their wines (6). Moreover, some of the wine consumers in America believed in the authenticity of the wine blended in the old world.
This affected the demand of the local American-made wines, prompting for more wine imports into the country. Another reason that affects the demand of wine in America is the price of other alcoholic drinks such as beer and liquor (Bartlett 3). As indicated earlier, majority of the conventional Americans are used to beer and liquor. Beer and liquor can be termed as substitutes to alcohol. Since the prices of the two substitutes are relatively lower than wine, the demand for wine goes down.
However other factors such health benefits make more of the Americans consume wine than other alcoholic drinks. However, a higher demand on wine does not make beer and liquor inferior. The superiority of a commodity depends on the preference of the consumer. Majority of the wine consumers in the US are well endowed people, well educated and internet savvy. According to the case study on the global wine wars, the US wine clientele is also termed as price-sensitive (6).
This exhibits the sophistication of the US wine consumers. This means that they have the ability to buy wine regardless of the price, but with certain considerations; utility. The wine consumers want to buy a product of value and which they consider as quality. This is the reason they prefer low-priced wine from foreign countries, and which they still believe is still of good quality.
Supply is another major aspect to consider when discussing the wine industry in the US. According to Amerine and Josyln (146), the supply of wine into the US market has been influenced by factors discussed herein. Firstly, the price of the commodity in the US was relatively high considering that the product was under strict regulations (Bartlett 2). On the other hand, most of the old world wine producers had little wine production capacity.
This made the new world wine producers monopolize their market territories making the price of the commodity go high. In most of the European countries, the price of the grapevines was bought relatively low by the merchants and other corporations that were involved in large-scale wine production. The price of essential factors that contribute to production of wine such as land or labor can either reduce or increase the supply of the commodity.
For example, the fragmentation of land in many of the European countries like Germany and UK reduced the supply of wine. In this case, farming of the grapevine was done in small-scale and only few growers supplied the vines. On the other hand, large tracts of land in both Australia and America were used as vineyards. With time, the new technology used in producing wine by the new world made it easier to reduce labor and all costs associated with land and production (4).
Therefore, this reduction of the production costs increased the supply of wine in the expanding of wine market. Thirdly, the government’s action to subsidize farmers who had vineyards and wine making companies ensured that some of the old world wine producers supplied more wine.
Works Cited
Amerine, A., Maynard and Josyln, A., Maynard. Table wines: The technology of their production, Volume 2. Berkeley, CA: University of California Press, 1970. Print.
Anderson, Kym. The world’s wine markets: Globalization at work. Northampton, MA: Edward Elgar Publishing, 2004. Print.
Bartlett, A., Christopher. Global wine war 2009: New world versus old. Harvard Business School Case Study, August 13, 2009. Print.