Sanjit Sengupta

Marketing Department
San Francisco State University
1600 Holloway Avenue
San Francisco, CA 94132.
Phone: 415 338-1016
Fax: 801 650-9310
Email: sengupta@sfsu.edu

Richard M. Castaldi

Management Department
San Francisco State University
1600 Holloway Avenue
San Francisco, CA 94132.
Phone: 415 338-2829
Fax: 415 338-0501
Email: castaldi@sfsu.edu

Introduction

On May 24, 1976, during the US Bicentennial celebrations, a blind taste test of California versus French wines was conducted at the Paris Intercontinental Hotel. Assembled judges were nine of France’s leading wine experts. In the first tasting of white wines, California wines claimed three of the top four spots. In the second tasting of red wines, a 1973 Cabernet from California’s Stag Leap Wine Cellars took the top spot followed by three French wines. This event was a landmark in the international growth of the California wine industry. It marked the end of the French monopoly in global fine wines and put California’s boutique wineries on the world map (Peterson 2001).

About 95% of US wine production takes place in California. (Wickham et al 2001). Between 1986 and 2000 US wine exports increased from $35 million to $560 million, yet the US still only holds a 4% share of the world export market (Wines and Vines 2001). While US wineries have enjoyed sustained growth in domestic and international markets, competition from imports now constitute about 20% of the US domestic market (Wine Institute 2000). Tremendous inroads have been made by Australian and Chilean wines into the US market in recent years. During 1995-1999, Australia increased the value of its exports to the US by 243% and Chile by 152% (Wine Institute 2000). Australian winemakers now show signs of doing to US and French wines exactly what US wines did to French wines a quarter century ago. In Cabernet tastings these days, Australian wines often beat American and French wines (Peterson 2001).

The wine industry is undergoing global consolidation. During the year 2000, two mergers and acquisitions involving Australian companies created new multinationals. Australia’s Foster Group bought Napa Valley-based Beringer Blass Wine Estates for $1.9 billion and Australia’s Southcorp bought premium winemaker Rosemount for $725 million (Echikson et al 2001). The wine industry is being transformed from a fragmented domestic industry into a global competitive industry.

US wineries must shift their perception of competitive threats from the old-world wine producers (France, Italy, Spain) to also include the new-world wine producers (Australia, Chile, Argentina among others). They must defend their position in the increasingly competitive domestic market as well as aggressively pursue opportunities in the evolving global marketplace. While the entry barriers into the US domestic market seem relatively low, the entry barriers into the global market are formidable, calling for new strategies and competitive practices (Barney 2002; Porter 1986). In this study, we focus on documenting best practices of 133 exporting US wineries with regard to improving export performance in global markets. Analysis of these best practices will help US wineries compete more effectively against new and old-world wineries, to enhance their position in global markets. They will also help improve the attractiveness of US wineries as acquisition candidates for multinational new entrants.

The next section reviews the extant literature, develops an initial conceptual framework and identifies key success factors affecting export performance. Hypotheses are derived on the interrelationships between these key success factors and export performance. The methodology for testing the framework, and the results are presented next. Finally, best practices are summarized for the managers of US wineries to enhance exports in the increasingly competitiveglobal environment.