Catching-Up Trajectories in the Wine Sector: A Comparative Study of Chile, Italy and South Africa

Abstract

Up to the end of the 1980s, European countries, and particularly France and Italy, dominated the international market for wine. Since the beginning of the 1990s, their supremacy has been under attack due to the spectacular performance in terms of both exported volumes and values, of new international players. The so-called ‘New World’ countries eroding the long established position of traditional (Old World) producers, includes affluent nations that are relatively new to the wine sector such as USA and Australia, and less developed countries such as Chile, Argentina and South Africa. From a development perspective, an investigation of the changes occurring in the wine industry is of particular interest, as it provides empirical evidence on how some emerging economies have been able to acquire significant shares of the international market in a dynamic sector. In the wine industry, a number of different factors have contributed to the emergence in the international market of New World wines. On the supply side, a process of technological modernization and pervasive organizational change has been spurred by consistent investment and research effort in the new producing countries and supported by the establishment of specialized research institutions. The demand side has also been important in the wine industry’s evolutionary trajectory, with New World players being particularly responsive to changes in wine consumption habits across the world, and aligning emerging scientific approaches and institutional building efforts with their branding and marketing strategies.Given the multiplicity of factors involved in the evolution of the wine industry, a SSI approach provides a useful analytical framework for interpreting its trajectory and the New World catch up experiences. In this paper, the catching up process in the wine industry is investigated through comparative analysis of two emerging countries - Chile and South Africa - and a long established Italian wine region - Piedmont, which provides new empirical evidence on academic researchers and wine cellars in these three areas.We argue that the emergence of New World producers has been favoured by significant discontinuities in both technologies and market demand and implies a co-evolution of physical and ‘social’ technologies, that is, of formal and informal institutions supporting the adoption of knowledge oriented procedures and a novel division of labour among the main industry players. The rapid adoption of a scientific approach to a rather traditional industry, and co-ordination between research communities and wineries, has spurred New World performance.This perspective shows that catch up experience in the wine industry significantly differs from successful catch up trajectories in other industries: in the wine sector the emerging countries have been driving the process of technological modernization and product standardization, rather than focusing on market niches. At the same time, the wine industry case provides support for the argument that access to foreign knowledge is crucial for catching up and sustaining diverse development trajectories. Our investigation of the different dimensions of the wine sectoral system demonstrates the variety of strategies and growth paths involved. The analysis highlights the main differences between latecomers and established countries, while at the same time pointing to the persisting heterogeneity among catching up countries. Overall, this paper contributes to the literature on catching up by providing new empirical evidence that, under certain conditions, latecomers can successfully catch up with leaders. The analysis provides useful insights into the strategies that emerging economies might implement to foster sectoral level growth, and suggests, more broadly, that the agro-food sector can significantly contribute to the development of these economies.