Continued Success Of America's Wine Industry example essay topic

America's winemakers are making superior wines and reaping global acclaim. In a single generation the United States wine industry's global success is a fascinating story of entrepreneurial vision and savvy marketing. The American industry has new innovations, new competition, and new markets, which make the future look bright for the wine industry. In terms of worldwide recognition and success, individual American wineries have made their mark only in the last 50 years. Not until the end of Prohibition in 1933 did the American wine industry take off on a large scale. America has now become the fourth largest producer in the world behind Italy, France, and Spain.

The wine market consists of still wine, sparkling wine, and vermouth. Since the 1970's, per capita consumption in the United States has grown from 1.3 to 2.7 gallons in 2003. Retail wine sales in the U.S. were a record 21.1 billion. In 2002, Americans consumed 595 million gallons of wine.

Core wine consumers, about 19.2 million, account for 86% of table wine volume consumed in the U.S. Marginal wine consumers, about 28.9 million, account for 14% of table wine volume consumed in the U.S. Core drinkers are somewhat older than marginal drinkers. 51% are between 40 to 59 years, with a high level of education and a high income of about $79,000.15% of core wine drinkers have wine daily, 48% drink a few times a week, and 37% weekly. Marginal wine drinkers prefer white wine, about 46%, followed by red, 35%, and blush / rose, 19%. They are somewhat younger than core drinkers, 49% are between 40 and 59 years and have a relative high income of around $63,000.52% drink wine two to three times a month, 30% drink once a month and 18% drink once every two to three months. Fifty to fifty-nine year olds drink 16.4 bottles per year. Twenty-one to twenty-nine year olds drink 6.6 bottles per year.

The United States is arguably the best place to grow grapes in the world. The United States boasts world-famous growing areas that rival France and Italy in quantity produced and in quality of wine, as the technology and weather are extremely similar. Napa and Sonoma Valleys are also key tourist attractions, providing a constant source of customers. The wine market in California represents more than 90% of all the United State's wine production.

People drink wine in California and France because there are wineries there and it brings an appreciation. Many feel that as the wine industry develops in a locality, more wine will be drunk. The U.S. ranks 34th in per capita wine consumption, just behind Slovakia and Canada, and ahead of Latvia. Per capita wine consumption is 2.72 gallons.

According to 2002 Adams Wine handbook, 32.2% of adult Latinos, 28.8% of adult Asian Americans, and 25.8% of adult African Americans are wine drinkers. America's top 10 export wine markets are the United Kingdom, Canada, Netherlands, Japan, Belgium, Germany, Ireland, France, Sweden, and Denmark. Infrequent increases in Federal alcohol taxes have led to significant erosion in inflation adjusted values of these taxes. In 1951, inflation adjusted value of tax was $1.16 per wine gallon.

The inflation rates imposed on wine currently is about $1.07 per wine gallon. The wine taxes vary based on alcohol content. They currently range from $1.07 to 3.40 per wine gallon. Infrequent and modest increases in state and Federal alcoholic beverage excise taxes contribute to declines over time in inflation adjusted alcoholic beverage prices. Federal, state and local governments can use a variety of policies to raise the price of alcoholic beverages.

Infrequent and modest increases in taxes and repeal of some control policies have contributed to sharp reductions in inflation prices over time. The U.S. Gross Domestic Product of the wine industry was 3.20% in 2003. The inflation rate in 2003 was 1.9%. While states have broad powers to regulate alcohol sales and distribution under the 21st Amendment to the U.S. Constitution which ended Prohibition, there are limits under the Sherman Act to what a state can do to limit or regulate competition, and some state actions can violate the antitrust laws. Price differentials create more legal problems than any other aspect of pricing, especially in "price-posting" states that require sales to all trade buyers at the same price.

Regulators uniformly want the posted price to be the "real" price, but there are relatively few regulations or guidelines. In a few states, "tied house" laws extend to the supplier-wholesaler relationship, requiring review of economic benefits, especially those varying by the wholesaler. The federal Robinson-P atman Act introduces complexities whenever suppliers of goods charge different prices to different customers who may compete with one another. A supplier's quantity discount usually does not justify a lower price to the higher volume competing buyer. The wine industry is one of the most regulated industries in California.

Both Federal and State laws govern and affect the daily operation of the wine growing enterprise. These statutes and regulations often interrelate and overlap, creating a maze of complex rules that can be difficult to interpret. The 21st Amendment to the United States Constitution ended nationwide Prohibition and granted to the states broad powers over the transportation and importation of alcohol. All fifty states now regulate to some degree the interstate shipment of alcohol directly to consumers within their borders, which are called "direct shipment laws". In recent years, as the dramatic growth of the Internet and increased reliance on home shopping have resulted in a boom in the direct shipment business, states have begun moving toward stricter enforcement of direct shipment laws. Interstate direct shipment laws restrict the shipment of alcoholic beverages directly from out-of-state producers and retailers to in-state consumers.

After Prohibition, most states adopted the "three-tier system" of alcoholic sales under which alcohol producers must go through wholesalers and distributors, who must in turn go through retailers, who can then sell to consumers. This developed to displace the alcohol distribution system that existed before Prohibition, in which producers owned retail outlets where they sold their products. State legislatures claim that the laws will enable states to collect tax revenue from alcohol sales. In-state sales are subject to sales tax at the wholesale tier, while out-of-state suppliers who ship directly to consumers need not charge sales tax. Also, legislatures and supporters of direct shipment laws claim that restrictions on mail-order and internet sales will prevent minors from obtaining access to alcohol.

The wine advocacy group Women for Wine Sense has been an effective force for the wine industry, helping to counter a bombardment of negative press that associate wine consumption with physical and social diseases like fetal alcohol syndrome and underage drinking. Women have certainly taken a larger role in the wine industry; more and more decisions, from marketing to wine making, are made by women. Women are hoping to become an even bigger influence in the wine industry. Premier Pacific Vineyards, Inc. has taken a had-line approach to farming organically and focusing on environmental stewardship in all the vineyards they are working with. Special vineyards such as Premier Pacific will require ecological methods to control erosion, and innovative ways to develop the appropriate types of compost that can naturally build up the fertility of the soil and attract helpful predators to such an isolated area. In the United States we produce millions of tons of pollution annually and spend tens of billions of dollars yearly in pollution control.

It is of great concern to Federal, State, and local agencies to closely regulate all aspects of pollutant emissions to ensure public health and environmental quality, and to restore, protect and enhance the environment. Innovative technologies from innovative winemakers, together with great grapes, helped launch America's wine industry. America's wines also benefited from a production and marketing approach, taken early on, that encourages the production of wines made predominantly from a particular kind of grape. Initially, many American winemakers followed the pattern of France and Italy, naming their wines after the famous European winemaking regions. U.S. regulation now identifies 15 wine-type names of European origin and requires these generic wines to be qualified with the true place of origin, such a "California Sherry". Many companies are trying to explore and come up with new and innovative ways to meet the needs of consumers.

G-3 Enterprises is expanding its services and wishes to produce a new "Royal 90 long flange bottle closure". This offers an alternative source for customers looking for a long-flange screw cap. G-3 have also purchased new machinery called the "Vision system" which is an automatic detection feature that deselects off-round printing or other errors not possible to view at the speed of the machine. O 2 Essential Ideas came up with a unique product called "Wine Prism". This is a personal device that separates the various components of wine, revealing its positive characteristics as well as its flaws. It "increases oxygen over 70% in wines already decanted while helping to reduce palate fatigue".

This device favorably changed the perception of wine being tasted. The Wine Marketing Research Group has developed a course designed to improve the sensory and marketing communication skills of those within the wine distribution chain, from production to sales. This will help students wishing to learn and attend classes about wine tasting, it includes an aroma kit, a textbook, video, and a set of notes to both train the palate and hone the communication skills. The United States forms 15.2% of the global market for wine. Europe dominates the global wine market, accounting for 72.6% of total revenues, while Asia-Pacific represents just 6.5% of the world market. E. & J. Gallo Winery is the world's largest wine maker and produces about 30% of the wine sold in the United States. The company distributes and markets its wines worldwide and is the major U.S. wine exporter.

Its competitor, Constellation Brands, Inc., is the world's second largest wine producer. They distribute all over North America, the UK and Australia. In 2001, the events of September 11 crushed the volume and value that French exports had achieved in 2000 by over 8% and 10%. Then just as things started to look up, volume in 2002 rose by 6.4% and value by almost 10%. America's response in 2003 to France's political stance on the Iraq war sent volume plummeting again by about 12%.

Rivalry is fierce in the wine industry because there are more producers of wine than any other beverage product. There are so many different producers because it correlates with the high varieties and agricultural feat of each producer. Globalization is also increasing rivalry among competitors in their local markets. By 1999, imports in the U.S. had risen to 20% of the market. The potential of new entrants is moderate and leads to more intense rivalry as well.

Smaller wineries were able to compete by consistently producing high-quality wines in limited quantity. Global communication networks have also created the potential for small brands to access the same consumers as large ones. Smaller wine producers, however, remained at a disadvantage when trying to compete for grape sources against the larger, better financed competitors. In the three-tier distribution system of wine, the second tier, or wholesalers, is critical. Wholesalers are consolidating due to the advantages of scale and scope, and the fact there is similar consolidation under way on the retail side. There are less buyers and this forces more competition in the industry.

The relative bargaining power of buyers is of larger interest to the firm's marketing strategies. Firms are recognizing consumer wine patterns to consume wine as a complementary good, rather than a substitute of other beverages and foods. Any beverage found in a restaurant or supermarket is a potential substitute product. Wine consumption was historically part of daily life in Mediterranean countries.

Wine was consumed with the cuisine of the area, and the two complemented each other. Beer and other liquor are considered more stand alone drinks and usually aren't consumed in the same situations. The U.S. wine market has many domestic suppliers, regions and styles. A competing wine from outside the U.S. finds it difficult to compete on a varietal basis alone; however, many wine Regions in the U.S. produce wines of extremely variable quality, even within the regions of Northern California. Where the French and Italian producers aim for quality over quantity, U.S. wine sales and production seem to concentrate on bulk sales.

Wine suppliers are important in this system. They may serve all three tiers: the winery acts as supplier, as the producer of the product, and as wholesaler when sales are made to retailers directly from the winery. The tasting room acts as a retail establishment on the winery grounds. Tasting rooms eliminate some additional shipping and distribution channel maintenance costs. There is a large threat of new entrants, especially in the pop-premium market, to all wineries in California. Ultimately, the continued success of America's wine industry will depend on its ability to meet all types of challenges, and continue to produce choice grapes and the finest wines.

In the short space of a generation, the American wine industry has maintained the tradition of boldness, innovation, creativeness, and success. American wineries that have been successful cannot rest on those successes, however. The industry and its competitive forces continue to change and members of the current industry will survive only if they are able to anticipate and deal with these changes. While there are significant threats to the American wine industry, there is also a large domestic and worldwide market of potential consumers who have yet to enjoy the fine taste of America's wines.