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Week 4: The wine industry & the need for closure

Case study: The cork industry, the wine industry and the need for closure.

Introduction
This case study explores the use of cork as a way of sealing wine in a bottle; referred to as a closure in the wine industry. This 400 year old industry with all its associated working practices has continued largely unaffected by technology changes in almost all other industries- until that was the 1990s when synthetic plastic closures were used by some wine producers instead of natural cork. With a requirement of over 17 billion wine bottle closures a year the cork industry could arguably afford a little competition, but it seems the …show more content…

The cork industry employs an estimated 30,000 workers in a variety of jobs. Wine corks are the most visible and most profitable of the many products derived from cork. They account for approximately 15% of total production by weight and two thirds of cork revenues. Table 2 displays a comparison of the different segments of the cork industry as measured by revenue generated (Corkindustry.com, 2006). The wine industry is by far the most important customer of the cork industry, the dominant cork producer being Amorim. More than 13bn wine bottle closures are needed each year and the market is growing.

Table 2: Applications of cork Industry Segment | Value in Eurodollars (000) | Value in % | Wine Stoppers | $1,000,000 | 66% | Floor & Wall Coverings | $300,000 | 20% | Expanded Agglomerated Cork | $100,000 | 7% | Other Products | $100,000 | 7% | Total Cork Products | $1,500,000 | 100% |

The wine industry
Wine consumption in the UK has grown dramatically over the past five years and this has been the case in the US too. Research from the International Organisation of Vine and Wine (OIV) claims that French wine consumption dropped 2% between 2004 and 2005, while British wine consumption rose 5% in 2005. Britain and the United States are the world's two fastest growing wine markets. Consumption in the United States grew 3% in 2005 and if this trend continues, the US will oust France from the top spot within three years. French wine exports