Inception and Growth of Wine Industry

The wine industry has come a long way since 4000 BC, when vines were first cultivated and wines produced for the first time in the Middle East. Today, the wine industry is approximately a USD 300 billion industry. Several factors have contributed to this growth over the centuries.

Wine-olution

Egypt and Crete began to trade wine as early as 2500 BC. Around 1000 BC, the Greeks introduced winemaking to Sicily, southern Italy, and northern Africa. Another 500 years later, France, Spain, and Portugal joined the race. By first century AD, wine was being produced throughout the Roman Empire. The Romans introduced viticulture and wine production to France. Later it spread across the Mediterranean, and northern and much of southern and western Europe. By now, wine was endowed with powerful religious and secular meanings and offering wine to Gods was a common practice. Throughout the Dark Age, the church and monasteries kept the production of wine going. As Europe came out the Dark Age, irregular supply of water made wine a necessity, thus fuelling wine trade. The growth continued in the 17^th century, where innovative techniques were introduced for the first time – like careful selection of grapes, new barrels instead of old ones, and wine in glass bottles sealed with cork instead of the usual practice of pouring directly from barrels to jugs. These techniques allowed wines to be preserved and to age better, which in turn led to a surge in the wine trade. In Australia, British settlers planted vines in 1788 and the first wine was produced in 1792. In North America, wine was first made in California by Franciscan priests. Viticulture reached Napa and Sonoma regions by 1820. By 1890, the Hunter, Barossa, and Yarra Valleys were also producing wines.

Factors Fuelling Growth

If Ancient Age saw wine business thrive as a result of knowledge transfer over centuries, and innovative techniques taking precedence over old methods of wine production, the New World saw transformation of traditional winemaking methods into an industrial process. This has been a major influencer in promoting the wine industry. Modern techniques of fermentation and refrigeration led to successful production of quality wines. In addition, institutions like the University of California at Davis and Roseworthy Agriculture College in Australia opened academic departments dedicated to the study of viticulture and winemaking. Technology combined with new-found expertise led the New World to produce quality wines that rivaled those of the Old World.

Another differentiator between the Old and New World was climate. While the Old World had no control over the climate, the New World wine producers operated in more predictable climate that produced consistent grape harvests. Technology and innovation allowed the New World to come up with a wide range of wine styles and ensure consistency, which was not there in the earlier era.

Mantras of Success

For a wine producer, the success lay not only in production of fine wine but also on marketing strategies. Better technology ensures constant enhancement in the quality of wine, while a sound marketing strategy, which includes stable distribution system; and focused advertising, guarantees the brand is well established among the consumers. Quality wine, coupled with excellent brand recall among consumers ensures a successful product. The New World wineries follow this combination religiously and so have been able to capture a sizeable share of the global market.

Talking about the global market, the year 1995 saw Australia’s largest brewery – Foster Brewing – buy its first wine company. Over the next six years, it acquired six more companies, including Beringer of California for USD 1.7 billion, thus marking the advent of a continuing spate of mergers and acquisitions. In 2001, Australia’s BRL Hardy got into a joint venture with U.S’s Constellation Brand. Similarly, large companies were acquiring small wine companies in the U.S. In this manner, various forces are creating a change in the wine industry in the 21^st century, even as well-capitalized international winemakers emphasize on global presence and brand recognition.

Market for New Players

While there are many established, big players in the wine industry today, there is still scope for new entrants. For example, Asia is discovering wine and is definitely in the race. It is important to mention here that due to recession – which the world has been witness to – the overall growth of wine business had taken a beating in the past two years. However, recovery is on its way. As per IWSR Forecast Report 2009, France and Spain may still show a small decline in wine consumption but China is expected to show robust growth. China, one of the world’s major importers of wine, is expanding rapidly the vineyard near Beijing, while in Japan, Honshu is becoming the center of infant wine industry. If we take a look closer home, the wine market in India still remains largely untapped. As per Indian Wine Industry Forecast 2012 by RNCOS, India is one of the fastest growing wine markets in the world. However, in 2008, India recorded a per capita wine consumption of approximately nine milliliters, which is quite low compared to its one billion population. Ideally, India has not been a wine consuming nation, but the habits of the people are changing and this is paving way to a potential wine market. For new entrants, the wine market is waiting to be explored – the need of the moment, however, is to identify the viable areas and tap them.