The Douro wine region: a cluster approach

Abstract

Abstract The globalization of the wine industry needs to be perceived as a challenge and an opportunity to innovate by traditional European producers' countries, like Portugal, characterized by a terroir model, that is, an economic structure supported by a large number of grape growers, small and medium wine firms and high public regulation, to compete in international markets. Using a cluster approach, this article presents the case of the most important Portuguese wine region, the Demarcated Douro Region (DDR), which is a strong reference of terroir and known for producing Port wine. To increase its competitiveness in the world wine market, the DDR needs to evolve from an organized to an innovative cluster. Keywords: competitioninnovationwineDouro regioncluster Notes †An early version of this article was published as a working paper in AAWE (Rebelo & Caldas, Citation2011). This revised version benefits from the comments of two anonymous referees. The usual disclaimers apply. Other goals of the CMO are: the restructuring of the chain of production, green harvesting and innovation, changes in wine-making practices, simpler labeling rules that will base quality assessment on designations of origin and protected geographical indications. Terroir is defined as a clearly identified and homogeneous territory endowed with a strong identity which is characterized by the whole of natural and cultural resources (Rastoin & Vissac-Charles, Citation1999), generally backed up by a certificate of guaranteed origin label (Ditter, Citation2005). During the last two decades, the authors have developed published research on the economic issues of the DDR and, simultaneously, worked as consultants in private firms, providing them with a deep perception of the aims, problems and components of the DDR cluster. There is no doubt that this article benefits from and reflects the experience and knowledge of the authors. For Porter, clusters help productivity, boost innovation and encourage the emergence of new firms. Firms' geographical proximity, close competition and the production networks around them make a winning contribution. However, globalization has made this far less certain. More open trade and improved transport links may mean that bunching together in a cluster no longer offers such a strong defense against cheaper foreign rivals. There is also a study (Cusmano, Morrison, & Rabellotti, 2009) that compares the regional wine clusters of Italy, Chile and South Africa, suggesting that there are strong differences between countries, and that the New World countries are driving the international process of innovation and cluster analysis. Based on data provided by Anderson and Nelgen (Citation2011b), on value, the world wine ranking of Portugal (production and exports) is similar to that on volume. Based on this indicator, Migone and Howlett (Citation2010, p. 121) classify the countries in: non-export-oriented (0–10%), weakly export-oriented (11–25%), export-oriented (26–40%) and strongly export-oriented (over 40%). Applying an exchange rate of 1 euro = 1.18 US$ and using information contained in Migone and Howlett (Citation2010), the average prices per liter on wine exports, in 2005, are: Argentina, 1.18; Australia, 2.57; Chile, 1.78; France, 3.99; Germany, 1.99; Italy, 1.98; Spain, 1.12; South Africa, 1.63; USA, 1.50. The economy of the region is not quite diversified, being based on wine industry and public support services to the resident population. The region has 257,100 inhabitants, with a population density of 46.62 inhabitants per square kilometer. Over the last four decades, it has lost 40% of its population and the remainder is aging. Additionally, a small quantity is also produced (almost 2% of the total production) from a fortified Douro Muscat. The IVDP only collects systematic information in AOC wines only since 2005. Regarding table wine, whose market information is controlled by the IVV (a national organization), there is no detailed data. A trader is a firm or group of firms that trade wine products (including grapes to process) in bulk or retail. Additionally, in the case of Port wine, it is required to hold a permanent stock at less 1500 hl. Firm that makes and bottles wines from fresh grapes from its own farm or bought from other grape growers, but assuming the exclusive responsibility for the final product (bottled wine). Firm or group of firms whose activity includes the wholesale of wine and byproducts of wine, in bulk or bottled. As an example, see the ratings/awards published in Wine Spectator of 30 April 2010 and in Wine & Spirits of April 2010. There is no published information on the number of researchers, institutions and firms involved. The best-known case is the Douro Boys, an informal network constituting five producer-bottlers, with recognized success in the AOC Douro super-premium wines (Muhr & Rebelo, 2011).