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The issues affecting the wine industry included the resource differences between wine producing countries of the Old World in comparison to the New World wine producers such as the US and Australia. Previously established sales volumes were affected by inefficiencies in distribution and marketing, as well as changes in wine tastes and preferences. The value chain of wine in the old world consisted of small-scale producers of grapes who sold to vintners. The vintners produced and sold the wine in bulk to merchant negociants that were in charge of blending and mass distribution. Such a long value chain drove the price of wine to unusually high levels, thus reducing its marketability. In order to prevent the problem, the governments and wine producers in these countries should merge their capacity for producing grapes and processing their wine. It could be achieved by formation of cooperatives for harvesting grapes and producing wine in order to reduce the losses resulting from the many intermediaries involved in the trade.
Such producer cooperatives would be able to develop economies of scale in their production, thus providing the wine in the market at lower prices than individual producers do. It would enable wineries to reconcile growing grapes with the production of wine. It would also encourage producers to improve the quality of their grapes by reducing of quantity or using high quality seeds for their vines. It would also increase the ability of the producers to handle exports through reduction in packaging and other costs such as transportation (Foster & Spencer, 2002).
Reduction of Government Regulation
Another strategy that would enable the wine producers to capture the mass market is the reduction of regulation in the market. Government regulations on aspects such as assignment of vintage quality level were meant to ensure the quality of wine. These measures also increased the entry barriers in the market. The variation in wine segments in the market resulted in highly differentiated categories of products with little movement across the segments. This made it difficult for the wine makers to progress in their production from one category to another. Despite the rigidity of these measures and the uniqueness developed for the different wines from different parts, the measures did not ensure quality, and thus it would be beneficial for the market if the regulations were made less stringent.
The reduction in regulations for the wine producers would enable the different producers to access the market with their products. It would also reduce the barriers to entry in the market, thus enabling the production of wine at lower production costs. It would enable the wine producers to experiment with new processes and grape growing techniques. Allowing the wine producers to use specialized methods and equipment such as irrigation would boost the production of grapes. It enables the production of large quantities in order to enjoy economies of scale. It also reduces the cost of production and losses resulting from spoilage or poor weather conditions. These factors would enable the production of wine in a more conducive environment, thus increasing productivity and lowering the overall costs to the producers. Reduction of regulations would also allow the application of processes and techniques of viniculture such as night harvesting and strategic pruning. It would also reduce the variations in vintage quality as the producers could be able to guarantee relatively steady quality in their grapes.
Branding and Marketing
The increase in consumers with unsophisticated tastes and the reduction of experienced connoisseurs forced wine producers to shift their focus. The traditional wine producers should respond to this trend by producing wines that are attractive to consumers unaccustomed to wine. It would enable them to market to the larger segments that do not have much experience with wine. Mass appeal of wine in the market would enable producers to increase their market penetration and acceptance, thus improving sales. It would also be beneficial in reducing the negative effects of reduced market for specialty wines. Growth in the new markets such as Argentina, China, Japan, and Taiwan provided new market opportunities for wine producing countries. The new opportunities in these markets, however, would be of great benefit to those wineries that produce wines with a mass appeal. Many wine importing countries have also increased their consumption (Vrontis, Thrassou, & Czinkota, 2011). Thus, wine producers should target them in their production in order to ensure their growth.
The wine producers should focus on the competition emanating from other drinks such as beer and liquor. The threat posed by these competitors is significant, and the wine producers and marketers should come up with strategies that address the norms and perceptions of consumers. It would be essential in convincing consumers of other beverages to consume more wine. Marketing strategies should address to the shifts in the market demand. Marketing for the wine should be differentiated depending on the target countries in order to ensure that the strategies respond to the culture, trends and demographics of the country. It would increase the effectiveness of the marketing strategies and enable the wine producers to improve their sales. Proper identification of wine varieties in ways that are easy for consumers to identify and relate is also necessary in increasing the efficiency of marketing. Despite the changes in tastes and preferences, the demand for premium wine has been on the rise and the wine producers should consider this fact in their marketing strategies. The consumption of premium wines has been on the rise, and, thus, the market should respond by producing more wine and marketing it with an emphasis on quality differentiation. Selling quality, as opposed to price competitiveness, would be an essential strategy in ensuring the survival of the wine producers because of the cyclical nature of the wine market. The marketers should move their strategies in relation to changes in trends in the market (Draskovic et al., 2011). Issues such as health benefits, laws on drinking, and the differences in preferences for white and red wines should also be considered in the production and marketing decisions. The preferences of consumers in relation to grape varieties also need to be considered in the marketing strategies implemented by wine marketers.
Branding strategies are essential in enabling the marketing of different products. Producers in old wine producing countries should have a branding strategy that enables them to reach the target markets. Because of the large number of producers for wines such as Bordeaux, few of them could support adequate brand strategies in order to market their products. The success of government-supported classifications for branding was limited because of low consumer confidence resulting from the little brand awareness. The complexity of government brand strategies resulted in the low level of consumer confidence, as well as a reduction of consumer confidence in the standards as assurances of quality. Therefore, individual wine makers should brand their wine adequately in order to create consumer confidence and improve their prospects (Draskovic et al, 2011). Government classification schemes are intricate and require knowledge about reputation, vintage, and regions, which was previously hard to find.
Advantages and Disadvantages of the Strategies
Formation of Cooperatives
Advantages of cooperative formation. The strategy of different producers cooperating in order to pool their production would be beneficial in enabling wine producers to reduce their operating costs. It would also reduce the loss of value for producers in the value chain. It is due to the fact that these producers will have the capacity to process their wine without the use of intermediaries. Control over quality would also be increased because of the involvement of the wine producer in all aspects of the production and distribution chain. Collection of grapes for processing by a large cooperative would result in economies of scale in the operational processes. It would also increase the bargaining power of the producers in the market, thus enabling them to get better pay for their work (Foster & Spencer, 2002). It would also increase the efficiency of the wine producers in exporting their produce.
Disadvantages of Cooperatives Formation. The main disadvantage of forming cooperatives for grape farmers would be the reduction of autonomy of the individual producers. it would result in the mass production of wine, thus removing the aspect of wine character or uniqueness based on origin of vines. It might reduce the variability in vintages from different vineyards, thus reducing the variety available to consumers. It would also result in standardization of wines produced, thus removing the uniqueness of different wines because of the use of similar varieties of grape seeds in the vineyards.
Reduction of Government Regulation
Advantage of government regulation reduction. Reducing government regulation in the market would benefit the industry by removing entry barriers. Reducing government regulation would also enable wine producers to use innovative methods of producing wine or growing grapes in order to improve vineyard productivity. Wine producers in the Old World countries would also be able to use innovative methods of producing wine, managing vineyards and other equipment in order to ensure the quality of wine. These measures would result in high quality grapes and wine, as well as reduction in the variability of vintages. Such strategy would ensure that supply is always high, and the standard of wine produced can be guaranteed.
Disadvantages of government regulation reduction. One of the disadvantages of reducing government regulation is the reduction of variability in vintages. It, according to the critics, would result in reduction in the varieties of wine and, thus, its spontaneity. Other methods used for increasing the productivity of grapes and vineyards would also result in reduced differentiation across the different types of wines. It is because of usage of similar technology and processes in the production of wine across the different countries. It would result in few noticeable differences in wine produced in the Old World wine producing countries and the New World wine producing countries.
Mass Marketing and Branding Strategies
Advantages of mass marketing and branding strategies. The use of modern branding and marketing strategies by wine producers would result in increased revenues for the wine producers and their ability to reach the markets. Producing what consumers want would result in the company being able to survive in the market despite the cycles in consumer preferences and demands.
Focusing on competition in the market would also be beneficial to the wine industry by convincing consumers to purchase wine. Proper identification and branding of wines also increases consumer confidence because of the control provided by the producers in relation to the quality of wine. As well, it enables the producers to guarantee the quality of their wine, thus improving sales and market share (Vrontis, Thrassou, & Czinkota, 2011). Implementing marketing strategies in line with trends in the market would be beneficial in enabling the Old World wine producers to survive in the market.
Disadvantages of mass marketing and branding strategies. Mass marketing of wine and its branding have the potential to produce the effect of losing some niche markets. High-end premium wines are preferred because of their rarity and difficulty of locating. Branding and mass marketing would increase their availability, thus reducing their luxury value. Mass marketing and use of grape variety in branding may result in reducing the significance of the region of origin in the naming of wine (Foster & Spencer, 2002). Consequently, it may reduce the value of the wine, especially in the domestic markets.