PEST Analysis for the Wine Industry

by Timothea Xi; Updated September 26, 2017
Vineyard landscape, Montagne de Reims, France

A PEST analysis is a business tool that takes a snapshot of the overarching political, economic, social and technological environment faced by an industry. Applied to the U.S. wine industry, the PEST presents an overall picture of the external influences that can impact the viability of domestic wine operations.

Political

The political dimension of a wine industry PEST analysis cites existing legislation and regulatory bodies that affect wine producers. In Hannah Wickford's PEST analysis of the U.S. wine industry, she gives an historical overview of political challenges to the wine industry stemming from Prohibition-era laws through the 2010 political debate on privatized alcoholic beverage sales. The state of Virginia's PEST analysis of the local wine industry discusses support by the governor and state department for agriculture, as well as legislation enacted by the General Assembly allowing cooperatives to ship wines directly to consumers.

Economic

Economic elements of a PEST analysis for winemakers include economic trends affecting the wine industry, taxation of wine products, exchange rates, as well as seasonal and cyclical patterns that affect wine distribution. A wine-oriented PEST report addresses challenges wrought by recent economic downturns, and distinguishes the wine industry from others that were relatively harder hit. It discusses economically pertinent developments, such as the tendency for people to enjoy local vintages rather than travel far afield and spend more money.

Social

In Hannah Wickford's PEST analysis, she examines the social component that bears on the U.S. wine industry. She identifies demographic groups that drive the luxury wine segment: Baby Boomers and Generation X. She notes that this trend should be in effect through 2020, with millennials expected to become the new drivers of the industry. The PEST analysis of the Virginia wine industry notes the beneficial impact of the "eat local" social movement on the state's wine industry.

Technological

Technology is the last component of the PEST analysis, and for the wine industry, Wickford notes developments as they impact specific niches of the industry. She points to mobile bottling as a technological advance that should spur the growth of small boutique wineries as of 2011, whereas computer hardware and software involving customer relationship management, mobile marketing and cybersecurity were a technological focus for large wine industry companies during the same time. The Virginia PEST analysis discusses sustainable technological improvements in the state, while also stating how certain organic-production technologies are not suitable for the local climate.

About the Author

Timothea Xi has been writing business and finance articles since 2013. She has worked as an alternative investment adviser in Miami, specializing in managed futures. Xi has also worked as a stockbroker in New York City.

Photo Credits

  • artJazz/iStock/Getty Images