Clone development

FROM CLUSTERS TO INNOVATION SYSTEMS IN THE WINE SECTOR

lynn k. mytelka

Carleton University

unu/intech

ISRN Conference

Renaissance Hotel, Toronto,

5-6 May 2005

TRANSFORMING WINE CLUSTERS INTO

INNOVATION SYSTEMS

SINCE GRAPES WERE TURNED INTO WINE IN ANCIENT SHIRAZ (iRAN) GRAPE GROWERS TRADITIONALLY CLUSTERED IN LOCATIONS NOTED FOR THEIR NATURAL COMPARATIVE ADVANTAGES IN SOILS AND CLIMATE

tERROIR, HOWEVER, IS NO LONGER THE SOLE BASIS FOR SUSTAINED COMPETITIVENESS

KNOWLEDGE GENERATION AND ITS APPLICATION ARE THE FOUNDATIONS FOR INNOVATIVE CHANGES THAT SUSTAIN COMPETITIVENESS

Clone developmentRootstock developmentVirus diagnosticsCanopy managementIrrigation and drainageClimate controls/monitoringVineyard software managementIntegrated pest managementHarvesting methodsVITICULTUREKNOWLEDGE BASES & INNOVATION

Unique cepages & blendsSoft equipmentYeastsTemperature controlsHygieneMacerationBarrel ageingQuality testingVINICULTURE

Appellation and quality standardsTourism and hospitalityWine competitionsWine educationExportsMergers and acquisitionsVertical integrationPremium contracts for grape growersBrand developmentOnline retailingORGANIZATIONAL & MARKETING

Grafico2

2080022559100198

919718229175273

628319040202402

111211025172731

919145339163306

71/80

81/90

91/99

Wine exports from New World producers (tons)

Foglio1

71/8081/9091/99

Argentina20,80022,559100,198

Chile9,19718,229175,273

Australia6,28319,040202,402

South Africa11,12110,25172,731

USA9,19145,339163,306

Foglio1

00

00

00

Argentina

Chile

Differential increase of Argentine and Chilean wine exports (tons)

Foglio2

000

000

000

000

000

000

71/80

81/90

91/99

Wine exports from New World producers (tons)

Foglio3

The SA wine sector in the apartheid eraKWV controlled prices and surpluses through quota systemProduction focussed on maximising yieldsStandardised production methodsKWV sole exporter, marketer, distributorExploitative labour practicesStagnant domestic market

Learning to Change: 1994 - 1999Quota system abolished end 80sSanctions liftedCompetency gaps in marketing revealedKWV converts to a company leaving a voidDramatic increase in exportsLimited industry coordination and strategic planning

The Emergence of a Strategy: 1999 2003Focus on quality and terroirNew regions and new players establishedPlanting change in line with world trendsCo-ops converting to companiesWinetech launches Vision 2020Wosa focused on building Brand South Africa

InnovationProduction terroir focussedLabour intensive viticultureStrong soil science knowledgeWinemakers combine modern technology with tacit knowledgeSignificant investment in cellar upgradesCreate unique South African cultivars: Pinotage across between Pinot Noire and CinsautBrand South AfricaInternational distributionFunding for research and developmentIncreasing skills of labourers and managers

The Chilean ModelForeign Direct Investment Flows1975 - 2001: 118.1 million1990 - 2001: 94.5 million (origin: US, Canada, France, Spain)

Knowledge FlowsForeign Oenologist, French, at the beginningFlying WinemakersHighly skilled national Oenologists

Contradictory performance of the Chilean innovation system Strengths

1. Rising degree of knowledge intensity primarily embodied in capital goods, and partially stimulated by the massive flow of foreign investment. 2. Remarkable capacity of technological absorption and adaptation, based on the presence of dynamic leading firms, skilled human resources, and initial constructive public-private sector interaction.

3. Dynamic and increasingly articulated industrial structure

4. Quality Regulatory Body (SAG)

5. Expansion of export markets and increased export price per unit

6. Increase of fine grape plantations

7. Innovation in wine cepages & viniculture: carmeniere

Current weaknesses

1. Low degree of cooperation and interaction among wine producers

2. Lack of institutional support (e.g. Prochile) and of coordination among the different instutional actors (e.g. SAG, associations, universities, etc.)

3. Low Investment in Marketing & Promotion

4. Good quality but low price niche market

5. No endogenous research or technological Development

CLUSTERS

GEOGRAPHICAL AREAS IN WHICH

FIRMS AND RELATED SERVICES

ARE CO-LOCATED

Clusters based on traditional industries

Natural resource based industries:

Fish farming (Norway, Chile)

Horticulture (Netherlands, Colombia)

Wine (Canada, Australia, Chile, South Africa)

Consumer-oriented industries:

Textiles & Clothing (Italy, Hong Kong)

Ceramics (Italy, Spain, Brazil)

Eyeglass Frames (Italy)

Furniture (Denmark)

EMBED Word.Picture.8

_1125146869.doc

FOOD INDUSTRIES

Advanced

materials

for ponds &

enclosures

Complex

design

knowledge

Monitoring

through computer

imaging & pattern

recognition

techniques

Pharmaceutical,

nutritional inputs

for health &

feeding systems

Biotechnology

for

environmental

sustainability

Bacteriology,

microbiology, new

freezing technologies,

for storage &

packaging

FISH FARMING

POTENTIALADVANTAGES OF CLUSTERINGOPPORTUNITIES FOR LINKAGES

COLLECTIVE EFFICIENCIES

POSITIVE EXTERNALITIES

EVEN WHEN THESE POTENTIALS ARE REALIZED THE CLUSTER MAY NOT BECOME A DYNAMIC INNOVATION SYSTEM

INNOVATION SYSTEMS

SETS OF FIRMS AND OTHER ECONOMIC AGENTS, WHO,

TOGETHER WITH THE INSTITUTIONS (habits, practices, norms) AND POLICIES THAT INFLUENCE THEIR INNOVATIVE BEHAVIOR & PERFORMANCE,

BRING NEW PROCESSES, PRODUCTS AND ORGANIZATIONAL FORMS INTO ECONOMIC USE





Wine (Canada, Australia, Chile, South Africa)





Furniture (Denmark)


_1125146869.doc

FOOD INDUSTRIES

Advanced

materials

for ponds &

enclosures

Complex

design

knowledge

Monitoring

through computer

imaging & pattern

recognition

techniques

Pharmaceutical,

nutritional inputs

for health &

feeding systems

Biotechnology

for

environmental

sustainability

Bacteriology,

microbiology, new


for storage &

packaging

FISH FARMING

innovatiON SYSTEMS

have the capacity to transform

themselves overtime as COmpetitive

conditions change

of critical importance IN THIS PROCESS ARE THE

knowledge FLOWS

LINKAGES

LEARNING

AND POLICIES

THAT STIMULATE A PROCESS OF INNOVATION





Wine (Canada, Chile, South Africa)





Furniture (Denmark)


_1125146869.doc

FOOD INDUSTRIES

Advanced

materials

for ponds &

enclosures

Complex

design

knowledge

Monitoring

through computer

imaging & pattern

recognition

techniques

Pharmaceutical,

nutritional inputs

for health &

feeding systems

Biotechnology

for

environmental

sustainability

Bacteriology,

microbiology, new


for storage &

packaging

FISH FARMING

ANALYZING INNOVATION SYSTEMS

ACTORSPOLICYLINKAGES

KNOWLEDGELEARNING

Building innovation systems in traditional industries




Wine ( Australia, Chile, South Africa)




Eyeglass Frames (Italy, Brazil)

Furniture (Denmark, Egypt, Indonesia)


_1125146869.doc

FOOD INDUSTRIES

Advanced

materials

for ponds &

enclosures

Complex

design

knowledge

Monitoring

through computer

imaging & pattern

recognition

techniques

Pharmaceutical,

nutritional inputs

for health &

feeding systems

Biotechnology

for

environmental

sustainability

Bacteriology,

microbiology, new


for storage &

packaging

FISH FARMING

TRANSFORMING CLUSTERS based on NATURAL RESOURCE BASED industries INTO

INNOVATION SYSTEMS

tHE nIAGARA wINE cLUSTER IN cANADA

wINE cLUSTERS IN sOUTH aFRICA

wINE CLUSTERS IN cHILE

OVERVIEW OF THE NIAGARA WINE CLUSTER

1927-1975

Liquor Control Board of Ontario (LCBO)created in 1927 to regulate the production and consumption of wine in the Province of Ontario

No new winery licenses granted until 1975

Number of wineries fell from 61 to 6

Ontario Grape Growers Marketing Board (OGG) established in 1947 to balance the power of many small grape growers against the small number of large wineries.

1975 2002

Building an Innovative Cluster

New small wineries with a new vision: to produce wine from European vinifera grapes

Trigger for Innnovation: Negotiation of the Free Trade Agreement with the United States

New Policies risk the risks of conversion from Labrusca to vinifera grapes

Structure of the Cluster Thickens: Creation of Research and Training Organisations ( CCOVI, Niagara College); Professional Associations (WCO)

High Quality Canadian (Ontario) wines win gold medals in European competitions

Innovation in new wines meritage; new organic grape growing technologies

Surplus of Vinifera grapes appears despite the marketing board

Small firms do not grow

lynn k. mytelka

unu-intech

5-2-2004

maastricht, the netherlands

SIDA-SAREC PRESENTATION

The Paradox

Number of wineries increases to over 80

But small wineries do not grow

A surplus of vinifera grapes appears despite the marketing board

Wine output grows from 645,000 litres in 1991 to over 3.9 million litres in 2002 Value of VQA wines sales increased from $5.6 million dollars to $50 million dollars between 1991 and 2002

But Ontario wines lose market share in the domestic marketExports do not grow

Factors supporting a continuous process of innovation

in the Nigara Wine Cluster

Boundaries of the knowledge system are reconfigured by establishing linkages to a wider set of knowledge inputs creation of CCOVI, for example

Products and Markets are reconceptualized development of wines based on vinifera grapes, development of Vidal Ice Wine , moving upscale in table wines

Marketing innovations and linkages to broader regional development initiatives direct mailing domestically, tourism

Factors still to be resolved in supporting a continuous process of innovation in the Nigara Wine Cluster

Old institutions and organizations are not yet transformed through the learning and unlearning of earlier habits and practices LCBO for example needs to work more closely with smaller wineries and with export related organizations

Closer linkages between knowledge producers and users is needed movement here is underway in new research initiatives

Channels for information flows and dialogue between large and smaller firms need further development (many smaller firms are not members of the Wine Council of Ontario.

Ideal natural conditions and timingNo phylloxera No plagues and fungi (low humidity)Sunshine and high luminosityLow labour costsRising external demand for quality winesIncreasing number of new entrants, despite the hegemony of old world producersConsumer sympathy for new world wines

Documents

Clone development