The California Wine Cluster

THE CALIFORNIA WINE
CLUSTER
PRESENTED BY:
- RIZKY ADRIYANTHO
- JUNDI MANGKU AGHNI
- ANDRE WANDI SPS
THE CALIFORNIA ECONOMY
• CALIFORNIA WOULD HAVE BEEN THE SEVEN LARGEST ECONOMY ON THE

STANDALONE BASIS.
• THE STATE HAD BEEN THE LARGEST AGRICULTURAL PRODUCER IN US FOR MORE
THAN 50 YEARS.
• FOOD PROCESSING HAD DEVELOP AS MAJOR AREA
• ANOTHER MAJOR SECTOR TOURISM GENERATED AN ESTIMATED $60 BILLION IN
ANNUAL SALES AND EMPLOYED 670,000 PEOPLE
• CALIFORNIA ATTRACTED MORE VISITOR THAN OTHER US STATES.
THE CALIFORNIA WINE CLUSTER
• CALIFORNIA WAS THE PRIMARY PRODUCER OF WINE IN THE US

• PREMIUM CALIFORNIA WINES HAD ACHIEVED A QUALITY AND CONSISTENCY ON
PAR WITH OR EXCEEDING ANY IN THE WORLD.
• ROBUST DOMESTIC DEMAND THAT WAS DRIVING THIS IMPROVED
PERFORMANCE ,HAD LED TO A CRITICAL GRAPE SUPPLY SHORTAGE IN
CALIFORNIA.
THE HISTORY OF THE CALIFORNIA WINE
CLUSTER
• IN 1700S, SPANISH MISSIONARIES - SACRAMENTAL WINES
• IN 1830S, FIRST COMMERCIAL VINEYARD
• IN 1860, PHYLLOXERA - AN INSECT THAT FED ON VINE ROOTS
• IN 1870, THE OPENING OF THE VITICULTURE AND ENOLOGY DEPARTMENT AT THE
UNIVERSITY OF CALIFORNIA AT DAVIS
• IN 1889, FRENCH INVITATION TO COMPETE IN THE WORLD’S FAIR
• FROM 1920 TO 1934, PROHIBITION - A LEGAL BAN ON ALCOHOLIC DRINKS
• IN 1960, RENEWED INTEREST IN WINE
• QUANTITATIVE ANALYSIS AND NEW TECHNIQUES
THE HISTORY OF THE CALIFORNIA WINE
CLUSTER
• U.C. DAVIS - SEVERAL NEW TECHNOLOGIES SUCH AS MECHANICAL HARVESTING, DRIP
IRRIGATION, AND FIELD GRAFTING
• IN 1976, INTERNATIONAL REPUTATION - WINNING A PARIS COMPETITION
• IN 1970S, DEVELOPMENT OF PROMOTING INDUSTRIES IN CALIFORNIA
• IN 1979, WINE SPECTATOR - LEADING WINE PUBLICATION
• IN 1970S AND 1980S, RISING CONSUMER DEMAND AND PRODUCTION OF HIGHER
QUALITY WINES
• AFTER PEAKING IN 1986, 20% DECLINE OVER THE NEXT 5 YEARS
• BY 1998, GROWING DEMAND AND SUBSEQUENTLY SUPPLY PROBLEM
US WINE CONSUMPTION
• US WAS THE THIRD LARGEST WINE MARKET BEHIND FRANCE AND ITALY
• THE US HAD ONE LOWEST LEVELS OF WINE CONSUMPTION AT ROUND 2
GALLONS PER YEAR
• 11% OF ADULT AGED 21 TO 59 DRANK WINE ON A WEEKLY BASIS FOR 88% OF
TOTAL WINE CONSUMPTION IN THE US
• WINE WAS DIVIDED BY 3 TYPES: TABLE, DESSERT OR FORTIFIED, SPARKLING OR
CHAMPAGNE
• SINCE 1992 VOLUME CONSUMPTION HAD 2% ANNUALY
GRAPE PRODUCTION
• CALIFORNIA WAS THE FIFTH LARGEST WINE GRAPE GROWER IN THE WORLD AS OF 1996
• GROWING REGIONS:
• MOST CALIFORNIA WINE GRAPE GROWERS WERE LOCATED IN THREE BROADLY DEFINED AREA ( NORTH
COAST, CENTRAL VALLEY, AND CENTRAL COAST)
• VINEYARD OPERATIONS:
• VINEYARD LAYOUT AND MANAGEMENT HAD A LARGE INFLUENCE ON GRAPE QUALITY AND
PRODUCTION COST
• VINES COULD LIVES MORE THAN 50 YEARS, AS A GRAPE QUALITY INCREASED BUT VINEYARD YIELDS
GENERALLY FELL.
• HIGHER QUALITY GRAPES WERE TYPICALLY HARVESTED BY HAND WHILE LOWER QUALITY EXTRACTED
BY MACHINE.
Wine Production
l
California accounted the largest number of wine
production
l
l
The contrast between jug wine and premium producers
still existed
l
l
Wine institute had grown into a formidable association
l
Grape procurement
l
Winery used its own vineyards to supply grapes
l
l
Jug winemakers were often willing to accept annual
contract with growers but would sign longer-term deals
l
l
The scarcity for high quality grapes in the mid-1990s
as phylloxera outbreak, was forcing premium wine
producers to establish alternative grape source
l
Bottling and Packaging
l
The final steps in wine production involved filtering,
bottling, and labeling
l
l
Natural cork had been the stopper of choice for wine
bottles for centuries
l
l
Bottle shape and labeling had a significant influence
on customers' perception of quality
l
Labeling Requirements
l
Domestic and foreign wineries were required to follow
several federal guidelines when labeling wines for U.S
distribution
Distribution
l
Tight regulations about the distribution of alcoholic
beverages in the U.S.
l
l
Most states were considered “open” in that all wine
and liquor distribution was performed by the private
sector
l
l
Liquor stores were the least profitable retailers
l
Wholesalers handled dozens to hundreds of wine
brands
l
Direct shipping had become a much-debated topic
within the industry
l
l
Distribution channels were becoming more
concentrated due to consolidation
l
l
California wines accounted for 90% of the total value
of U.S. wine exports
l
l
California wines faced higher tariffs and retail sales
taxes abroad
l
Sales and marketing
l
Sales and marketing cost varied widely
l
l
Large volume wine producers relied on mass
marketing
l
l
The premium wine industry had focused its marketing
efforts primarily at the distribution level
l
l
Direct marketing become the uppermost for premium
and large volume wineries
TECHNOLOGY DEVELOPMENT
• WINERIES HAD EXTENSIVE APPRENTICESHIP PROGRAMS OF THEIR OWN THAT

TRAINED NEW WINE MAKERS IN ALL ASPECTS OF THE WINEMAKING PROCESS.
• LARGER WINERIES HAD ESTBLISHED IN-HOUSE RESEARCH STAFFS OF THEIR
OWN WITH STATE-OF-THE-ART LABORATORIES.
FINANCING
• MOST CALIFORNIA VINEYARDS AND WINEMAKERS FINANCED THEIR ONGOING

OPERATIONS THROUGH BANK LOANS, MANY OF WHICH WERE MADE BY BANKS
LOCATED IN SAN FRANSISCO OR IN WINE PRODUCING AREAS
• IT TOOK A NEW WINERY AT LEAST FIVE YEARS TO REACH PROFITABILITY
COMPETITION
FRANCE
• WINE IS A COMMONLY CONSUMED BEVERAGE QUALITY CONSCIOUS
CONSUMERS HIGH INCOME SPENDING ON WINE
• FRENCH WINES HAVE THE HIGHEST UNIT PRICES MAIN MARKETS: UK, US
AND GERMANY
• LONG-ESTABLISHED APPRENTICESHIP PROGRAMS THE DISCIPLINE IS LIKE AN
ART THAT IS HANDED DOWN OVER GENERATIONS
• THE ROLE OF GOVERNMENT: REGULATING QUALITY STANDARDS SAFE
GUARDING THE FRENCH TRADITION OF APPELLATIONS OR QUALITY GRADES
COMPETITION
ITALY
• LOWER QUALITY AND LESS EXPENSIVE WINES OVERALL CONSUMPTION HAS
BEEN FLUCTUATING
• IMPORTS HAVE VERY LITTLE IMPACT IN THE MARKET INCREASINGLY POLARIZED
BETWEEN TRADITIONAL FOCUS AND TARGETING GLOBAL ARENA
• MAJOR IMPORTERS: GERMANY, US, UK AN SWITZERLAND
COMPETITION
AUSTRALIA
• COST-COMPETITIVE PRODUCER OF HIGH-QUALITY WINES HEAVY INVESTMENT IN
INNOVATIONS IN VINICULTURE AND TECHNOLOGY WELL-RESPECTED RESEARCH
NETWORK
• MAIN MARKETS: US, UK, CANADA AND CHINA EXPORT VALUE PER GALLON HAS
EXCEEDED BOTH THE US AND CHILE
• ROLE OF GOVERNMENT: PROVIDING FUNDS FOR EXPORT PROMOTION
COMPETITION
CHILE
• CONSUMER PREFERENCE: INEXPENSIVE AND HIGHLY ACIDIC WINE SCHILE'S
BIGGEST MARKETS: US, UK AND CANADA LOWER LAND AND LABOR COSTS
ATTRACT FOREIGN COMPANIES
THANK YOU
FEEL FREE TO ASK

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THE CALIFORNIA WINE

• CALIFORNIA WOULD HAVE BEEN THE SEVEN LARGEST ECONOMY ON THE

• CALIFORNIA WAS THE PRIMARY PRODUCER OF WINE IN THE US

• WINERIES HAD EXTENSIVE APPRENTICESHIP PROGRAMS OF THEIR OWN THAT

• MOST CALIFORNIA VINEYARDS AND WINEMAKERS FINANCED THEIR ONGOING

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