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Wine Wars Essay Global Wine War 2009: New World versus Old â€Å"We have the people, expertise, technology and commitment to gain global preeminence for Australian wine by 2025. It will come by anticipating the market, influencing consumer demand, and building on our strategy of sustainable growth. † — Sam Toley, CEO of Australian Wine and Brandy Corporation. â€Å"By phasing out the buyback of excess wine and increasing incentives for farmers to uproot their vines, the EC reforms will only bring in the New World’s agro-industry model. We need to protect the age-old European model built on traditional vineyards. † — Jean-Louis Piton, Copa-Cogeca Farmers Association. In 2009, these two views reflected some of the very different sentiments unleashed by the fierce competitive battle raging between traditional wine makers and some new industry players as they fought for a share of the $230 billion global wine market. Many Old World wine producers—France, Italy, and Spain, for example—found themselves constrained by embedded wine-making traditions, restrictive industry regulations, and complex national and European Community legislation. This provided an opportunity for New World wine companies—from Australia, the United States, and Chile, for instance—to challenge the more established Old World producers by introducing innovations at every stage of the value chain. In the Beginning1 Grape growing and wine making have been human preoccupations at least since the times when ancient Egyptians and Greeks offered wine as tributes to dead pharaohs and tempestuous gods. It was under the Roman Empire that viticulture spread throughout the Mediterranean region, and almost every town had its local vineyards and wine was a peasant’s beverage to accompany everyday meals. By the Christian era, wine became part of liturgical services, and monasteries planted vines and built wineries. By the Middle Ages, the European nobility began planting vineyards as a mark of prestige, competing with one another in the quality of wine served at their tables – the first niche market for premium wine. ________________________________________________________________________________________________________________ Professor Christopher A. Bartlett prepared the original version of this case, â€Å"Global Wine Wars: New World Challenges Old (A),† HBS No. 303056, which is being replaced by this version prepared by the same author. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright  © 2009 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www. hbsp. harvard. edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. 910-405 Global Wine War 2009: New World versus Old Wine Production Tending and harvesting grapes has always been labor intensive, and one worker could typically look after only a three hectare lot. (1 hectare. = 2. 47 acres) The introduction of vineyard horses in the early 19th century led to vines being planted in rows and to more efficient tending and allowed one person to work a plot of 7 hectares. Yet despite these efficiencies, vineyards became smaller, not larger. Over many centuries, small agricultural holdings were continually fragmented as land was parceled out by kings, taken in wars, or broken up through inheritance. During the French Revolution, many large estates were seized, divided, and sold at auction. And after 1815, the Napoleonic inheritance code prescribed how land had to be passed on to all rightful heirs. By the mid-19th century, the average holding in France was 5. 5 ha. and was still being subdivided. (In Italy, similar events left the average vineyard at 0. 8 ha. ) While the largest estates made their own wine, most small farmers sold their grapes to the local wine maker or vintner. With payment based on weight, there was little incentive to pursue quality by reducing yield. Some small growers formed cooperatives, hoping to participate in wine making’s downstream profit, but grape growing and wine making remained highly fragmented. Distribution and Marketing Traditionally, wine was sold in bulk to merchant traders—negociants in France—who often blended and bottled the product before distributing it. But poor roads and complex toll and tax systems made cross-border shipping extremely expensive. In the early 19th century, for example, a shipment of wine from Strasbourg to the Dutch border had to pass through 31 toll stations. 2 And since wine did not travel well, much of it spoiled on the long journeys. As a result, only the most sophisticated negociants could handle exports, and only the rich could afford the imported luxury. Late 18th century innovations such as mass production of glass bottles, the use of cork stoppers, and the development of pasteurization revolutionized the industry. With greater wine stability and longevity, distribution to distant markets and bottle aging of good vintages became the norm. Increased vine plantings and expanded production followed, and a global market for wine was born. Regulation and Classification As the industry developed, it became increasingly important to the cultural and economic life of the producing countries. By the mid-18th century in France, grape growing supported 1. 5 million families and an equal number in wine-related businesses. Eventually, it accounted for one-sixth of France’s total trading revenue, and was the country’s second-largest export. The industry’s growing cultural and economic importance attracted political attention, and with it, laws and regulations to control almost every aspect of wine making. For example, Germany’s 1644 wine classification scheme prescribed 65 classes of quality, with rules for everything from ripeness required for harvesting to minimum sugar content. (Even in 1971, a law was passed in Germany requiring a government panel to taste each vineyard’s annual vintage and assign it a quality level. 3) Similar regulations prescribing wine-making practices also existed in France and Italy. Rather than resisting such government classifications and controls, producers often supported and even augmented them as a way of differentiating their products and raising entry barriers. For example, the current French classification system was created by a Bordeaux committee prior to the 1855 Exposition in Paris. To help consumers identify their finest wines, they classified about 500 vineyards into five levels of quality, from premier cru (first growth) to cinquieme cru (fifth growth). 2 Global Wine War 2009: New World versus Old 910-405 Because it helped consumers sort through the complexity of a highly fragmented market, this marketing tool soon gained wide recognition, leading the government to codify and expand it in the Appellation d’Origin Controllee (AOC) laws of 1935. These laws also defined regional boundaries and set detailed and quite rigid standards for vineyards and wine makers. 4 Eventually, more than 300 AOC designations were authorized, from the well known (Saint Emilion or Beaujolais) to the obscure (Fitou or St. Peray). (A similar classification scheme was later introduced in Italy defining 213 Denominazione di Origne Controllate (or DOC) regions, each with regulations prescribing area, allowed grape varieties, yields, required growing practices, acceptable alcohol content, label design etc. 5) Later, other wine regions of France were given official recognition with the classification of Vins Delimites de Qualite Superieure (VDQS), but these were usually regarded as of lower rank than AOC wines. Below VDQS were Vins de Pays, or country wine inexpensive but very drinkable wines for French tables, and increasingly, for export. These categories were quite rigid with almost no movement across them. This was due to a belief that quality was linked to terroir, the almost mystical combination of soil, aspect, microclimate, rainfall, and cultivation that the French passionately believed gave the wine from each region— and indeed, each vineyard— its unique character. But terroir could not guarantee consistent quality. As an agricultural product, wine was always subject to the vagaries of weather and disease. In the last quarter of the 19th century, a deadly New World insect, phylloxera, devastated the French vine stock. From a production level of 500 million liters in 1876, output dropped to just 2 million liters in 1885. But a solution was found in an unexpected quarter: French vines were grafted onto phylloxera-resistant vine roots native to the United States and imported from the upstart Californian wine industry. It was the first time many in the Old World acknowledged the existence of a New World wine industry. It would not be the last. Stirrings in the New World Although insignificant in both size and reputation compared with the well-established industry in traditional wine-producing countries, vineyards and wine makers had been set up in many New World countries since the 18th century. In the United States, for example, Thomas Jefferson, an enthusiastic oenologist, became a leading voice for establishing vineyards in Virginia. And in Australia, vines were brought over along with the first fleet carrying convicts and settlers in 1788. Nascent wine industries were also developing at this time in Argentina, Chile, and South Africa, usually under the influence of immigrants from the Old World wine countries. Opening New Markets While climate and soil allowed grape growing to flourish in the New World, the consumption of wine in these countries varied widely. It became part of the national cultures in Argentina and Chile, where per capita annual consumption reached about 80 liters in Argentina and 50 liters in Chile in the 1960s. While such rates were well behind France and Italy, both of which boasted per capita consumption of 110–120 liters in this era, they were comparable with those of Spain. Other New World cultures did not embrace the new industry as quickly. In Australia, the hot climate and a dominant British heritage made beer the alcoholic beverage of preference, with wine being consumed mostly by Old World immigrants. The U. S. market was more complex. In keeping with the country’s central role in the rum trade, one segment of the population followed a tradition of drinking hard liquor. But another group reflected the country’s Puritan heritage and espoused temperance or abstinence. (As recently as 1994, a Gallup survey found that 45% of U. S. respondents did not drink at all, and 21% favored a renewal of prohibition. ) As a result, in the pre-World War II era, wine was largely made by and sold to European immigrant communities. 3 910-405 Global Wine War 2009: New World versus Old In the postwar era, however, demand for wine increased rapidly in the United States, Australia, and other New World producers. In the United States, for example, consumption grew from a postprohibition per capita level of 1 liter per annum to 9 liters by 2006. In Australia the rate of increase was even more rapid, from less than 2 liters in 1960 to 24 liters by 2006. This growth in consumption was coupled with a growing demand for higher quality wines, resulting in a boom in domestic demand that proved a boost for the young New World wine industry. Challenging Production Norms. On the back of the postwar economic boom, New World wine producers developed in an industry environment different from their European counterparts. First, suitable land was widely available and less expensive, allowing the growth of much more extensive vineyards. As a result, in 2006, the average vineyard holding in the United States was 213 hectares and in Australia 167 hectares, compared to an Italian average of 1. 3 hectares, and 7. 4 hectares in France. 6 Unconstrained by tradition, New World producers also began to experiment with grape growing and winemaking technology. In Australia, controlled drip irrigation allowed expansion into marginal land and reduced vintage variability. (In contrast, irrigation was strictly forbidden in France under AOC regulations. ) The larger vineyards also allowed the use of specialized equipment such as mechanical harvesters and mechanical pruners which greatly reduced labor costs. Innovation also extended into viniculture where New World producers pursued techniques such as night harvesting to maximize grape sugars, while innovative trellis systems permitted vines to be planted at twice the traditional density. Other experiments with fertilizers and pruning methods increased yield and improved grape flavor. These innovations, when coupled with typically sunny climates, freed New World farmers from many of the stresses of their counterparts in regions like Bordeaux where the rainy maritime climate made late autumn harvests risky, and held wine producers hostage to wide year-to-year vintage variations. New World wine companies also broke many wine making traditions. Large estates usually had on-site labs to provide analysis helpful in making growing and harvest decisions. In the 1990s, some experimented with a reverse osmosis technology to concentrate the juice (or must), ensuring a deepercolored, richer-tasting wine. (Ironically, the technique was developed in France, but most French producers deplored it as â€Å"removing the poetry of wine. † Needless to say, it was a forbidden practice under AOC regulations. ) New World wine makers also developed processes that allowed fermentation and aging to occur in huge, computer-controlled, stainless steel tanks rather than in traditional oak barrels. To provide oak flavor, some added oak chips while aging their popular priced wines—another practice strictly forbidden in most traditional-producing countries. The economic impact of these and other innovations became clear in a comparison of the costs of production in the Langedoc region of France with the Riverina district in Australia, both big producers of popular priced wines. The French cost per tonne of â‚ ¬238 was 74% higher than the Australian cost of â‚ ¬137. 7 And South American grape costs were even lower, driving down the price of popular premium wine in Europe to â‚ ¬2 a bottle, while the French vins de pays was priced above â‚ ¬3. (Exhibit 1 shows the cost composition of a bottle of French wine. ) Reinventing the Marketing Model Beyond their experiments in growing and winemaking, New World producers also innovated in packaging and marketing. While the European targeted the huge basic wine market by selling the popular liter bottle of vin de table, the Australians developed the innovative â€Å"wine-in-a-box† package. Employing a collapsible plastic bag in a compact cardboard box with a dispensing spigot, the box’s 4 Global Wine War 2009: New World versus Old 910-405 shape and weight not only saved shipping costs, it also made storage in the consumer’s refrigerator more convenient. More recently, Australian producers began replacing cork stoppers with screw caps, even on premium wines. The logic was based not just on economics, but also on the fact that many wines, particularly the delicate whites, were susceptible to spoiling if corks were deficient. From their earliest experiences in the marketplace, New World producers learned the value of differentiating their products and making them more appealing to palates unaccustomed to wine. Several early products developed for unsophisticated palates were wildly successful—Ripple in the United States and Barossa Pearl in Australia, for example—but were dismissed by connoisseurs as evidence of the New World’s inferior winemaking skills. Yet these experiments provided valuable lessons in branding and marketing— skills that were rare in this industry prior to the 1970s. With wine showing the potential for mass appeal, in 1977 Coca-Cola acquired Taylor California Cellars. Other experienced consumer marketers such as Nestle, Pillsbury, and Seagram followed, and conventional wisdom was that their sophisticated marketing techniques would finally crack the last major largely unbranded consumer product. But the challenge proved more difficult than expected, and within a decade the outsiders had sold out. Yet their influence endured in the consumer focused attitudes and the sophisticated marketing skills they left behind. The other major change driven by New World companies occurred in distribution. Historically, fragmented producers and tight government regulations had created a long, multilevel value chain, with service providers in many of the links lacking either the scale or the expertise to operate efficiently. (See Exhibit 2 for a representation. ) In contrast, the large New World wine companies typically controlled the full value chain, extracting margins at every level and retaining bargaining power with increasingly concentrated retailers. And because their name was on the final product, they controlled quality at every step. To traditionalists, the New World’s breaks with established grape-growing and wine-making ways were sacrilege. They argued that in the drive for efficiency and consistency, and in the desire to cater to less sophisticated palates, New World producers had lost the character that came with more variable vintages made in traditional ways. And they were shocked that many of these â€Å"engineered products† were sold using appellation names— Chablis, Burgundy, Champagne, and so on. In response, the European Community (EC) passed regulations making such practices illegal. New World wine makers gradually adjusted by identifying their wines by the grape variety used, and eventually consumers recognized and developed preferences defined by the varietal name—cabernet sauvignon versus merlot, or chardonnay versus sauvignon blanc, for example. Indeed, many seemed to find this easier to understand than trying to penetrate the many complex regional designations that each of the traditional wine-producing countries had promoted. The Judgment of Paris On May 24, 1976, in a publicity-seeking activity linked to America’s Bicentenary, a British wine merchant set up a blind-tasting panel to rate top wines from France and California. Despite the enormous home field advantage of an event held in Paris with a judging panel of nine French wine critics, the American entries took top honors in both the red and white competitions. When French producers complained that the so called â€Å"The Judgment of Paris† was rigged, a new judging was held two years later. Again, Californian wines triumphed. 8. The event was a watershed in the industry. The publicity raised awareness that the New World produced quality wines, to the great shock of those who dismissed their innovative approaches. It was also a wake-up call to traditional producers, many of whom began taking their new challengers 5 910-405 Global Wine War 2009: New World versus Old seriously for the first time. Finally, it gave confidence to New World producers that they could compete in global markets. In short, it was the bell for the opening round in a fight for export sales. Maturing Markets, Changing Demand â€Å"The Judgment of Paris† signaled the start of many disruptive changes in wine industry during the last quarter of the 20th century. More immediately alarming for most traditional producers was a pattern of declining demand that saw a 20% drop in worldwide consumption from 1970 to 1990, and a subsequent flattening of demand. When combined with radical changes in consumer tastes, consolidation in the distribution channels, and shifts in government support, these trends presented industry participants with an important new set of opportunities and threats. Changing Global Demand Patterns. The most dramatic decline in demand occurred in the highest-consumption countries, France and Italy. In the mid-1960s, per capita annual consumption in both countries was around 110 to 120 liters; by 2005 it was about 50 litres. Key causes of the decline were a younger generation’s different drinking preferences, an older generation’s concern about health issues, and stricter drunk-driving penalties. Simultaneously, steep declines occurred in other major of wine drinking cultures—Spain dropped from 60 liters to 35, Argentina from 80 to 30, and Chile from 50 to 15. (See Exhibit 3.). During the same period, demand was growing in many wine-importing countries, although not fast enough to offset losses in Old World wine countries. From 1966 to 2005, per capita annual consumption in the United Kingdom rose from 3 to 20 liters, in Belgium from 10 to 26 liters, and in Canada from 3 to 10 liters. Even more promising was the more recent growth of new markets, particularly in Asia where consumption in China, Japan, Taiwan, South Korea, and Thailand grew at double digit annual rates through the 1990s. In fact, by 2005, China had emerged as the worlds fifth wine consuming nation ahead of Spain, Argentina, and the U. K. (Exhibits 4 and 5 lists the world’s major consuming and producing nations). It was this shift in market demand that escalated the competition for export sales into a global wine war. (See Exhibit 6 for import and export data. ) Shift to Quality, Rise of Fashion Partially offsetting the overall volume decline was a growing demand for higher-quality wines. While the basic segment (less than $5 a bottle) still accounted for half the world market in volume, the premium ($5 to $7) and the super-premium ($7 to $14) now represented 40% of the total—and more than 50% of the market in younger markets such as the United States and Australia. (Exhibit 7 shows one version of price segmentation as defined by a leading industry analyst. ) The trend was worldwide. Even in Old World wine countries where total demand was in decline, consumption of premium wine kept rising. Despite government subsidies, per capita consumption of basic wine in the EU fell from 31 liters in 1985 to 18 liters in 2005, while demand for quality wine increased from 10 liters to 15 liters. In that same 20 year period, jug wine sales in the United States declined from 800 million to 600 million liters, while consumption of premium wines increased from 150 million to 600 million liters. With the shift to quality, a greater fashion element began to influence demand. The decline in importance of working families’ daily consumption of locally produced table wine was offset by upscale urban consumers who chose bottles on the basis of grape variety, vintage, source and increasingly fashion. The 1980s’ emphasis on lighter foods led to an increase in demand for white 6 Global Wine War 2009: New World versus Old 910-405 wines, making white wine spritzers (wine with soda water) a fashionable drink in the United States market. By the late 1980s, white wine represented over 75% of U. S. sales. This all changed following the 1991 publication of a medical report identifying red-wine as a partial explanation of the â€Å"French paradox†Ã¢â‚¬â€ low rates of heart disease in a population well known for its love of rich food. Featured on the U. S. television show 60 Minutes, the report soon led to an increase in demand, with red wine’s market share growing from 27% in 1991 to 43% five years later. Even within this broad trend of red versus white preference, the demand for different grape varieties also moved with fashion. During the white wine boom, chardonnay was the grape of choice, but by the late 1990s, Pinot Gris and Sauvignon Blanc were emerging white wine fashion favorites. In red wine, a love affair with Cabernet Sauvignon was followed by a mini-boom for Merlot, which in turn was succeeded by a demand spike for Pinot Noir. Such swings in fashion posed a problem for growers. Although vines had a productive life of 60 to 70 years, they typically took 3 to 4 years to produce their first harvest, 5 to 7 years to reach full productive capacity, and 35 years to produce top quality grapes. But New World wine regions had the capacity and the regulatory freedom to plant new varieties in new vineyards and could respond. For example, in the 1990s, the California acreage planted with chardonnay increased 36%, and merlot plantings increased 31%. As these various demand trends continued, the rankings of the world’s top wine companies underwent radical change. Despite their relative newness and the comparative smallness of their home markets, New World companies took nine slots in a list of the worlds top 15 wine companies, a list previously dominated by Old World companies. (See Exhibit 8 for the listing). Increasing Distribution Power Because marketing had typically been handled by their negociants, most Old World producers were still isolated from such fast-changing consumer tastes and market trends—particularly when they occurred in distant export markets. Equally problematic was their lack of understanding of the rapidly concentrating retail channels. In contrast, because most large New World wine companies controlled their distribution chain from the vineyard to the retailer, they were able to sense changes in consumer preferences and respond to shifts in distribution channels. Furthermore, the New World companies were able to capture even more economic advantage by him and reducing handling stages, holding less inventory, and capturing the intermediaries’ markup. Even the transportation economics that once favored European suppliers’ proximity to the huge United Kingdom market changed. As trucking costs rose, container-ship rates fell, making the cost of shipping wine from Australia to the UK about the same as trucking it from the south of France. Size also gave New World companies bargaining power in the sophisticated negotiations that a concentrated retail sector now demanded. For example, following the huge wine surpluses flooding the market in the early 2000s, Australian producers used their cost advantage to drive prices lower. But equally important in the battle for volume sales was their ability to respond to retailers’ need for a consistent supply of strong brands at a good price/quality ratio. 9 In the face of this head-on competitive challenge, the French tried to defend their position through frequent promotions. 10 But they were hampered by their lack of consumer knowledge and marketing skills. The Old World suppliers’ problems became clear from their dealings with Tesco, the worlds largest wine retailer with wine sales of ? 1. 5 billion in 2007. To maximize sales, Tesco emphasized that it wanted to work with creative suppliers. Dont just bring the deals, bring me innovation,† said Dan 7 910-405 Global Wine War 2009: New World versus Old Jago, Tesco’s Wine, Beer, and Spirits division head. If you want your prices to rise, you have to persuade customers why they should pay more. 11 While a handful of icon brands prospered at the top of the market based on image and quality, the fragmentation of Old World vineyards forced most to compete at the low end on price. When some chose to take on the New World brands under the umbrella of the AOC’s reputation, it soon became clear that they lacked the skills or resources to succeed in the last growth middle market. Tesco’s Jago complained that despite its once strong reputation, the Bordeaux â€Å"brand† was losing sway with younger consumers. Heaven knows Ive tried to help them, but our consumers have such infinite choice that they dont need to make [Bordeaux] part of it. 12 Ascendancy in of Brand Power. For years, the wine industry appeared ripe for branding. The extreme fragmentation of the European industry (Bordeaux alone had 20,000 producers) meant that few had the volume to support a branding strategy. Historically, only the handful of Old World producers whose wines achieved icon status—Lafite, Veuve Cliquot, and Chateau d’Yquem, for example—were recognized brands. But these appealed to the elite, who represented only a tiny fraction of the global market. In providing the consumer confidence that branding offers, government-supported classifications such as France’s AOC had been only partially successful. Their value was weakened not only by their complexity (in 2009 there were 327 designated AOC regions), but also by the erosion of consumers’ confidence in the classification scheme as an assurance of quality13. For example, Burgundy’s most famous vineyard, Chambertin, had its 32 acres divided among 23 proprietors. While most produced the high-quality wine that had earned its grand cru status, others rode on that reputation to sell—at $150 a bottle— legitimately labeled Chambertin that wine critic Robert Parker described as â€Å"thin, watery, and a complete rip-off. †14 As interest in wine extended beyond educated connoisseurs, new consumers in the fast-growing premium wine segment were faced with hundreds of options and often insufficient knowledge to make an informed—or even a comfortable—choice. Government classification schemes required them to have an understanding of the intricacies of region, vintage, and vineyard reputation, and even if they found a wine they liked, chances were that by their next purchase, that producer was not stocked or the new vintage was less appealing. Unsurprisingly, survey data in the early 1990s showed that 65% of shoppers had no idea what they would choose when they entered a wine store. Yet even in 2009, despite many attempts, no brand had been able to capture as much as 1% of the global wine market, in contrast to soft drinks, beer, and liquor, where global brands were dominant. Although European producers and their importing agents had successfully launched several mass appeal brands in the 1960s and 1970s (e. g., Blue Nun, Mateus, Liebfraumilch), a decade later New World producers had made branding a routine part of wine marketing. For example, by sourcing grapes from multiple vineyards and regions, Australian wine maker Penfolds built trust in its products by ensuring the vintage-to-vintage consistency that branding demanded. It then leveraged its trusted brand name by creating a hierarchy of Penfolds wines that allowed consumers to move up each step from $9 to $185 wines as their tastes—and their budgets–developed. (See Exhibit 9. ) New World producers who built their marketing expertise in their home markets during the 1960s and 1970s, learned how to respond to consumer preferences for the simpler, more fruit-driven wines that were easy to appreciate. They then took those wines and the marketing and branding skills they had developed at home into the export markets. By 2007, New World companies claimed 14 of the world’s top 20 wine brands. (See Exhibit 10). 8 Global Wine War 2009: New World versus Old 910-405. The Government Solution The radical shifts in demand proved extremely challenging to Old World producers. First, there was often no new land available to plant, particularly in controlled AOC regions. Equally restrictive were the regulations prescribing permitted grape varieties and winemaking techniques that greatly limited their flexibility. So, for example, when fashion switched away from sweeter white wines, the German wine industry which was constrained by tight regulations on sugar content, watched its exports drop from over 3 million hectoliters in 1992 to under 2 million just five years later. But the biggest problem was that declining demand at home and a loss of share in export markets had caused a structural wine surplus popularly called the European wine lake. The EU’s initial response was to pay farmers to uproot their vineyards, leading to 500,000 hectares (13% of production) being uprooted between 1988 and 1996. A parallel â€Å"crisis distillation program† provided for the EU to purchase surplus wine for distillation into industrial alcohol. An average of 26 million hectoliters (15% of total production) was distilled annually in the decade since 1999. In a 2006 reform proposal, the EU aimed to uproot a further 200,000 hectares equal to the size of the US wine industry and gradually phase out crisis distillation. Critics contended that despite their intent to move towards more market-driven policies, the EU regulators were still dealing with challenges from the supply-side perspective of the grape growers.