1. Changes in the Wine Market

• World wine consumption rose rapidly in the early 2000s.
• After the global financial crisis in 2008, it began to decline.
• Sparkling wines consumption has increased by an average of 3% annually between 2002 and 2018.
• Wine consumption has declined significantly in countries where wine is traditionally consumed. (e.g., France, Italy)
• In 2011, USA became the world’s largest wine consumer.
• China has seen a significant increase in wine consumption over the past 20 years as its middle class has grown.

2. Supply and Demand

Capture the market with PESTEL, a framework for analyzing the external environment.

• Political：政治
• Economic：経済
• Social：社会
• Technological：技術
• Environmental：環境
• Legal：法律・制度

1. Demand

No	Area	Factors influencing
1	Political	➖ Government campaigns on the health effects of alcohol. ➖ Decreased availability of cheap wine : government control of overproduction ± Changing Consumer Preferences : increased demand for low-alcohol wines and decreased demand for fortified wines. ± Changes in Reputation : wine’s reputation with critics and influencers. ± Changes in Spending Patterns : lower prices due to increased competition in price-sensitive markets (Germany, UK), premiumization of consumer behavior (USA).
2	Economic	± Strength of the Economy : Changes in the level of consumers’ disposable income. ± Fluctuations in Currency Exchange : The Risk of (1) lower sales and (2) lower profits caused by a decrease in competitiveness due to a rise in the value of a currency, or the opposite effect, offsetting profits due to import prices of consumption goods. ± Changes to the Market : Entry or exit of new firms or products.
3	Social	➖ Young people drinking less wine ➖ Changes in Lifestyle : Shorten meals and limit alcohol consumption during work hours.
4	Technological	–
5	Environmental	–
6	Legal	➖ Laws Prohibiting or Limiting the Sale of Alcohol : In many countries there is a minimum drinking age and restrictions on the hours of sale. ➖ Government Policies to Reduce Alcohol Consumption : Enforcement of laws aimed at reducing the amount of alcohol consumed by the population. e.g. ・France：Loi Evin (ban on TV and cinema advertising of alcohol) enacted in 1991. ・Scotland：Minimum unit price introduced for the first time in the world in 2018. ・BAC：NZ, Scotland：reduced to 50mg/100mL, Norway, Sweden: 20mg/100mL (30mg/100mL in Japan). ➖ Taxaion : Imposition of taxes and duties on alcoholic beverages (Hong Kong abolished excise duty in 2008 with the aim of becoming the “hub of wine trade” in East Asia). ➖ International Trade : Many countries impose tariffs on imported goods (protectionist policies to promote the sale of domestic products). ± Wine Laws : GIs are increasing worldwide to improve branding and recognition.

2. Supply

No	Area	Factors Influencing
1	Political	➖ Vine Pull Schemes：Pulling of poor quality vines as a measure against overproduction. ± EU restrictions on Planting new Vinyards：e.g. EU allows planting up to 1% annual growth rate from 2016 onwards, increasing the area planted in France and Italy.
2	Economic	± Conversion of Vineyard Land to Other Uses：Conversion to higher value crops. e.g. Elgin, South Africa from grapes to apples, California from almonds to pistachios.
3	Social	➖ Abandonment of Rural areas：Declining human resourcesavailable to work in the vineyards and lack of investment in the local economy.
4	Technological	± Introduction of Modern Technology：Modernization of vineyard management and winemaking techniques to achieve mass production of high quality wines. e.g., average production in Spain has increased despite a decline in vineyards.
5	Environmental	± Natural Factors：Changes in wine production due to year-to-year changes in weather. e.g. ・France : In 2017, devastating spring frosts and hailstorms combined with a heat wave had a significant impact. ・South Africa, California, Chile : Water shortage due to severe drought.
6	Legal	➖ Limitations by PDO：Limitation of cultivable area and yield.

The purpose of PDO and its impact on wine production

Purpose of PDO

1. Define the style of wine produced in a particular region.
2. Match supply and demand to reduce the risk of downward price pressure.

Impact of PDO on Wine Production

• Expansion of production areas into unsuitable areas when demand for a particular wine is rising, resulting in a decline in overall quality.
• Strict PDO regulations make it impossible to remain competitive against wines from less regulated areas.
  e.g. the introduction of the Vin de Pays system in the 1970s led to a significant increase in production and quality.