PEST analysis Advertising Industry India

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Most of us are consciously trying to ignore the industry that determines the way we live. The industry silently persuades us into something or the other without we ever realizing it. But this industry gets less respect and many harsh words are spoken about it. Yet, its impact is profound on the very fabric of our lives. Thinkers dub it as the 'spark' that runs the 'economy engine' and critics call it as the 'evil thing' that constantly creates wants! Yes, it's the advertising industry.

Advertising is one of the oldest industries. Traditionally, agencies that sell media space at a commission have given birth to present day's advertising agency. Then, their sole purpose is to act like media space selling agents and thrive on 15 percent commission. Gradually, they started to offer whole range of allied services like, providing creative ideas, media planning and coordinating in so- called below the line activities. Thus, media space selling agencies evolved to become modern day's full service advertising agency. When industry attractiveness grew, new players started flocking in, eventually to combat competition; consolidation and diversification became the order of the day. No one can completely visualize the direction towards which the industry is moving. The pace of transformation seems very high when one is about to gather and share a view, the industry is no longer the same!

The Political and legal, Economic, Social and Technological environment, in which the industry operates is subject to constant change and has an immense impact on the advertising industry itself. Here, each of these factors has been analysed in detail.

Political and Legal Environment

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Governments all over the world have always craved control over their media, either directly or indirectly. The several laws and regulations that regulate the advertising industry are given as under

1. MINISTRY OF INFORMATION & BROADCASTING FOREIGN INVESTMENT

POLICY

(Ministry of Information and Broadcasting is the nodal Ministry for formulation of policies on

foreign investment in broadcasting, film, print and advertising sector. It invites foreign investment

and frames laws keeping an eye on the widest national interest.)

ADVERTISING SECTOR

Following guidelines for foreign direct investment in advertising sector is being pursued

There should not be any cap on the percentage of foreign investment in a new project. Where the proposal is for a new joint venture or enhancing foreign direct investment in an existing joint venture, foreign direct investment should be limited to 74%. In exceptional cases, the 74% limit could be relaxed to go up to 100% with the consent of the Indian partner/partners and subject to the justification being established to the satisfaction of the Government.

Where a foreign company/investor already has a joint venture in this sector, a new wholly owned subsidiary shall normally not be permitted, unless there are strong reasons to make such an exception.

Foreign Direct Investment would include all repatriable investment, irrespective of who or what the investor is. Such investment would be permitted through the automatic approval route.

ELECTRONIC SECTOR

Foreign investment proposals directly linked to Broadcasting will be kept pending till Broadcasting Law comes into effect. Presently, companies with 80% Indian equity may be allowed to uplink for satellite channels. The proposals related to production of software and marketing of TV rights, airtime, advertisements, etc. may be recommended with the condition that

a). All future laws on Broadcasting will be applicable to them and they will not claim any privilege or protection by virtue of this approval;

b). They will not undertake any broadcasting from Indian soil unless specially permitted to do so;

c). Companies desiring to market TV software in India will in addition to conditions mentioned at (a) and (b) above will observe the Programme Law and Advertisement Codes of Doordarshan. Proposals having an Indian equity of atleast 5% will be encouraged, however, in genuine cases, even 100% foreign equity can be allowed. There is no foreign equity allowed in private FM broadcasting (to be introduced).

PRINT MEDIA

Foreign ownership of newspapers and periodicals in India and publication of their Indian editions is guided by the Cabinet decision of 1th Sept., 155. The relevant extracts of the decision are

•No foreign owned newspapers and periodicals should, in future, be permitted to be published in India. Foreign newspapers and periodicals which deal mainly with news and current affairs should not be allowed to bring out Indian editions.

•Above decision was taken on recommendation of the First Press Commission, which inter-alia had observed that proprietorial interest in the daily and weekly newspapers should predominantly vest in Indian hands. It also considered Indianisation of both capital and staff desirable, especially at the higher level. It was felt that newspapers should not be viewed similar to an industry since their true function was to influence working of democracy by shaping public opinion. Foreign participation in ownership or control of newspapers could be used for purpose of influencing Indian opinion in support of foreign interest and in some cases such participation could be at the instance of a foreign Government as well.

•In pursuance of the above decision, this Ministry has since 155, consistently denied permission for any foreign equity holding in print media or publication of Indian editions of foreign newspapers and periodicals. Due to many developments taken since then in the overall media scenario in the country and grant of Open General Licence to foreign newspapers and magazines, which resulted in their easy availability in the market, efforts are being made to review the 155 Cabinet decision.

FOREIGN OWNERSHIP OF NEWS AGENCIES

The existing policy of foreign ownership of news agencies in India is governed by the Cabinet decision of 156 which was also based on the recommendation of the first Press Commission. The relevant extracts of the decision is reproduced below

•Communication facilities should be granted to foreign news agencies only where the distribution of news within the country is to be effected through an Indian news agency owned and managed by Indians, which would have full and final authority in the selection of foreign news for distribution and which would also be in a position to supply Indian news in a reasonable volume to the foreign news agency with whom they have a working arrangement.

This decision has been the yardstick for examining requests of foreign news agencies to operate in India. Direct distribution of financial news by foreign news agencies is not violative of the 156 Cabinet decision. Subsequent to this decision, this Ministry conveyed to its no objection to the permission accorded by RBI to M/s Reutors, subject to the condition that their financial services would be only for selected Indian non-media clients for their own use and not for reproduction and public distribution.

. DOORDARSHANS ADVERTISING CODE

General rules for conduct in advertising

1. Advertising shall be so designed as to conform to the laws of the country and shall not offend the morality, decency and the religious susceptibilities of the people.

. No advertisement shall be permitted which

derides any race,caste,colour,creed and nationality;

is against any of the directive principles, or any other provision in the Constitution of India;

tends to incite people to crime or glorifies violence or obscenity in any way;

adversely affects friendly relations with foreign countries;

exploits the National emblem or any part of the constitution or the person or personality of a national leader or state dignitary.

relates to or promotes ciggarettes and tobacco products,liqour,wines and other intoxicants;

in its depiction of women violates the Constitutional gaurantees given to all citizens such as equality of status & oppurtunity and dignity of the individual Women must not be potrayed in derogatory light and in a manner that emphasizes passive, submissivequalities and encourages them to play a subordinate and secondary role in family and in society. The potrayal of the female form shall be aesthetic and within the well established norms of good taste and decency.

. No advertisement shall in any way be presented as News.

4. Advertisements must not be directed towards any religious or political ends or have any relation to any industrial dispute.

5. Advertisements for services concerned with the following services shall not be accepted

money lenders

chit funds

savings schemes and lotteries other than those conducted by the Central & state Government organisations, Nationalised or recognised banks and public sector undertakings;

unlicenced employment services

betting tips &guide books relating to horse racing or other games of chance.

6. No advertisement shall make claims to the effect that the product advertised posesses any miraculous or supernatural property or quality which is difficult of being proved, eg cure for baldness, skin whitener.

7. Scientific or statistical excerpts from technical literature etc. may be used only with a proper sense of responsibility to the ordinary viewer.

8. Advertisers or their agents must be ready to furnish evidence to substantiate any claims or illustrations since the Director General of DD has the right to demand the same.

. Advertisements shall not contain disparaging or derogatory references to another produt or service.

10. Testimonials must be genuine and used in a manner not to mislead viewers.

11. No advertisement shall be accepted which violates AIR and TV Broadcast code which is reproduced below

Criticism of friendly countries;

Attack on religions or communities;

Anything obscene or defamatory;

Incitement to violence or anything against maintenance of law & order;

Anything amounting to contempt of court;

As persons against the integrity of the President and the Judiciary;

Anything affecting the integrity of the Nation; and

Criticism by name of any person.

1. Information given to consumers in relation to the price quality & weight of products shall be accurate.

1. Any pretence in advertising copy must be avioded. The simulation of appearance or voice of a personality in connection with the advertisements for commercial products requires a permission from the personality to that effect.

14. Advertisements for a product or a service shall not be accepted if it suggests that if children do not buy it they shall be lacking in thir duty or loyalty to any person. Also if it is suggested in the advertisement that the children shalln be condemned,ridiculed if they do not buy the product. The advertisements shall also not create in the children an interest to do something which can prove to be dangerous to the children.

15. No advertisement shall try to take advantage of the superstition or ignorance of the public.

16. Advertisements should be truthful,avoid distorting facts and misleading the public by means of implications and ommissions.

17. Testimonials of any kind from experts etc.other than Government recognised standardisation agencies shall not be permitted.

18. Imitations likely to mislead the viewers shall be avoided.

1. Advertisements shall not be obscene, vulgar and offensive in their theme or treatment. This also applies to such advertisements which advertise objectionable books or photographs.

0. For advertising for medicines the general principles have laid down the following guidelines

No advertisement shall contain a claim to cure any ailment or symptoms of ill health.

There should be no exaggerated claims regarding the composition, character, action and suitability of the purpose for which it is recommended.

Appeals to fear shall not be made.

Advertisements for diagnosis or treatment by correspondence are strictly prohibited.

When words such as college, clinic, institute, laboratory are used in advertisements, such references can be made only when the said establishment does actually exist.

Advertisements for products specifically offered to women shall not be advertised as products that are effective in inducing miscarriage.

Advertisements relating to claims about curing of sexual weakness, premature ageing, loss of virility, sexual excesses etc. shall not be accepted.

No advertisements should offer any medical product that is for the purposes of slimming, weight reduction or figure control.

No advertisement shall contain any offer to diagnose or treat complaints or conditions by hypnosis.

. GUIDELINES FOR UPLINKING FROM INDIA

The Union Government has taken a decision on 5th July, 000 to further liberalise its Uplinking Policy and permit the Indian private companies to set up uplinking hub/teleports for licensing/hiring out to other broadcasters. The new policy also permits uplinking of any television channel from India. It also allows the Indian news agencies to have their own uplinking facilities for purposes of newsgathering and its further distribution. The salient features of eligibility criteria, basic conditions/obligations and procedure for obtaining the necessary permission for these services are briefly described below. For details, reference should be made to the relevant terms and conditions of Licences/Permission/Approval.

1. LICENCE FOR SETTING UP OF UPLINK HUB/TELEPORTS

(i) Eligibility Criteria

Company to be incorporated in India.

Foreign equity holding including NRI/OCB/PIO not to exceed 4% .

(ii) Period Of Licence 10 years.

(iii) Basic Conditions/Obligations

To uplink only those TV channels which are specifically approved or permitted by the Ministry of I&B for uplinking from India.

To stop uplinking of TV channels whenever permission/approval to such a channel is withdrawn by the Ministry of I&B.

Can uplink both to Indian as well as foreign satellites. However, proposals envisaging use of Indian satellite will be accorded preferential treatment.

To keep record of materials uplinked for a period of 0 days and to produce the same before any agency of the Government as and when required.

To permit the Government agencies to inspect the facilities as and when required.

To furnish such information as may be required by the Ministry of I&B from time to time.

To provide the necessary monitoring facility at its own cost for monitoring of programme or content by the representative of the Ministry of I&B or any other Government agency as and when required.

To comply with the terms and conditions of the licensing Agreement to be signed between the Applicant and the Ministry of I&B.

To comply with the terms and conditions of the Wireless Operational licence to be issued by WPC.

To uplink in C-Band only. • The satellite to which uplinking is proposed should have been co-ordinated with Insat system.

Failure to comply with the terms and conditions of above licences would result in termination/cancellation of the licences.

. PERMISSION/APPROVAL FOR UPLINKING A TV CHANNEL FROM INDIA

(In case a TV channel proposes to set up its own uplinking facility/earth station, it has to apply separately for the same after following the procedure as in case of 1 above.)

i) Eligibility Criteria Any TV channel irrespective of its ownership, equity structure or management control which is aimed at Indian viewership.

ii) Period Of Approval/Permission 10 years.

iii) Basic Conditions/Obligations To undertake to comply with the Broadcasting (Programme & Advertising) Codes laid down by Ministry of Information & Broadcasting.

To keep record of materials uplinked for a period of 0 days and to produce the same before any agency of the Government as and when required.

To furnish such information as may be required by the Ministry of I&B from time to time.

To provide the necessary monitoring facility at its own cost for monitoring of programme or content by the representative of the Ministry of I&B or any other Government agency as and when required.

 If the applicant hires its own transponder on a satellite, the same should be in C-Band and should have been coordinated with INSAT system.

To comply with the terms and condition of the permission/approval of the Ministry of I&B.

Failure to comply with the terms and conditions of the permission/approval would result in withdrawal of such permission approval.

. LICENCE FOR UPLINKING TO INDIAN NEWS AGENCIES

i) Eligibility Criteria

The Company/Agency to be incorporated in India

Accredited by Press Information Bureau (PIB).

 100% owned by Indian with Indian Management Control.

ii) Period Of Licence As per WPC licence.

iii) Basic Conditions/Obligations

To use uplinking for news-gathering and its further distribution to other news agencies/broadcasters only.

Not to uplink TV programmes/channels for direct reception by public.

To keep record of materials uplinked for a period of 0 days and to produce the same before any agency of the Government as and when required.

To furnish such information as may be required by the Ministry of I&B from time to time.

To provide the necessary monitoring facility at its own cost for monitoring of programme or content by the representative of the Ministry of I&B or any other Government agency as and when required.

Conformity with the provisions of inter-system coordination agreement between INSAT & the satellite to be used.

To comply with the terms and conditions of the No Objection Certificate to be issued by the Ministry of Information & Broadcasting.

To comply with the terms and conditions of Wireless Operational Licence to be issued by the WPC.

Failure to comply with the terms and conditions of the No Objection Certificate or the Wireless Operational Licence would result in withdrawal or cancellation of such certificate or licence.

The government is now contemplating on a media regulator as it feels that it is the government's responsibility to have a free and fair media. Regulation is, perhaps, needed due to the great divide among the stakeholders MSOs (multi-system operators), cable operators, broadcasters. The question is, how will they work together? Will the relationship between the stakeholders be there? As of now, there is a Convergence Bill which talks of a common regulator for TV, telephone and airwaves, also, content and carriage. But regulation has three aspects one is a very bad advertisement, other is a very bad programme (content) and the third is the rate part of it (carriage rate). The existing Convergence Bill envisages one regulator for both content and carriage. However, it is to be decided whether to go for a separate regulator for broadcasting.

But the question remains how can a regulator make things better? The FIPB (Foreign Investment Promotion Board) or the I & B ministry has not clarified some issues like, is the 6 percent cap of foreign investment in print and TV news applicable only to FDI and not portfolio investment? And why is investment by foreign institutional investors (FIIs) allowed in radio when FDI is not? Again, there is little that a regulator can do about technology issues other than laying the ground rules. Where Cross media restrictions are being dismantled around the world what sense would it make in India? Some experts feel that as long as equity caps are enforced and 51percent Indian control is in place, there is no need for any other regulation. That leaves pricing and content. Pricing, in any country, is left for the industry to decide. It is a business decision and hence it is for the broadcasters to decide whether the pay channels should carry ads or not. Then there is content. India has a fairly well defined programming and advertising code which no foreign or Indian broadcaster or publisher is allowed to violate. In case there is any odd obscene ad or show, usually the I & B ministry steps in. Even though the press in India is very independent, a few instances show that the government is not averse from using its stick from time to time. Moreover, the concept of an independent regulator appointed by the government is an oxymoron. Thus, with the rising change in the political and legal scenario in which this industry is operating will lead to many more changes in the way it operate.

Economic environment

The major trend is the changing revenue model of agencies. Traditionally, all agencies used to get a commission from the media groups. Thus 15 percent commission was in vogue. When we observe remuneration patterns across the world, fee- based remuneration models have increased from 5 percent to 5 percent in comparison with the decline of commission based model from 61 percent to 5 percent, as per the study conducted by Association of National Advertisers of United States. The scenario in Asia, Hong Kong and Singapore is at about 0 percent working on a fee or commission hybrid model. The real issue seems to be accountability and transparency in dealings. Analysts opine that there are three reasons for the increased popularity of fees. Primarily, to overcome hyperinflationary trends in media costs so as to maintain comparable levels of media impressions and share of voice. Secondly, to offset media expenses, advertisers reduced commissions from 15 to 10 percent. Thirdly, when commissions were eroded, agencies demanded labour based fees. The confluence of all these factors led to the shift and had an effect on profits. Unlike in the past, advertising is now short term. Nearly 70 percent of the expenditure goes towards sales promotion and a flimsy 0 percent towards branding. The number of promotional campaigns has also increased in the recent times. The possible reasons for this shift could be, consumer inclination towards freebies, impulse buying behaviour or the sheer attractiveness of the promotion itself. However, a notable change behind the change could be the stock market pressure exerted on advertisers. Whether this shift dilutes the role of creativity in the industry as a whole or are the agencies forced to adopt more lateral thinking techniques in designing promotional campaigns, are questions that have no answers at the moment. If at all there are any, they are inconclusive.

Adding on to this, much against the convention, clients have started preferring one stop shops for all their communication requirements. Unable to survive with low commissions, many players are wiped from the business or have become prey for major giants touting around to increment size and consolidation. Industry as a whole has seen many mergers and acquitions. M & As though consolidated the industry; yet they have redefined the client agency relationship. To counter the heavy toll, many agencies spun off their own sister concerns and started claiming, as independent arms without any link with the parent company or accounts. In addition to this, the ever changing market dynamics also increment problems. In 00, 57 percent of the agencies admit that existing clients knew that they grew, whereas 76 percent of the agencies now say new business wins will push growth in 00. Experts however, say that growth will be tied to maintaining the same level of spending from existing clients and a little extra business and this extra won't be for many.

The biggest trend is the explosion of media, which has an all round effect on the way the industry operates. Traditional media vehicles lost their lustre, as advertisers felt that they no longer have the desired reach or efficacy to lure the customer base. Print media in particular witnessed slump in advertising revenue worldwide. Advertisers preferred more of local media vehicles than those which have nation wide presence. Magazines were a hard hit than dailies. Competition has further intensified with more and more players entering into the fray and all of them choose to fight the pricing model as the differentiation plank. This is further eroding the advertising revenues. Although, radio and television with varied sounds and images continue to lure customers, now they are on the verge of losing their efficacy due to clutter.

Social Environment

The industry perceived the consumer as a naïve 'object' and bombarded him with commercials. Traditional media vehicles, both broadcast and non broadcast, intrusively persuaded him. Commercials accomplished their objectives through cajoling and kindling consumer desire. Suddenly, a host of new technological devices started empowering consumer. The industry finds itself in a vulnerable situation. Industry can no longer take consumer for granted as the new technological gadgets hardly allow the advertiser to reach them. Now, it is the consumer who decides which advertisement to watch and through which medium. Advertisers are finding it hard to reach their prospective consumers at right place, right time, through right medium and get noticed which they hope will get transformed into sales. Michael Goldhaber rightly says, "The scarcest resource in the new economy is consumer attention".

Technological Environment

New technologies like TiVo enables viewers to both record programmes and to take the commercials out of them has become a marketing executive's nightmare as it affects television as a medium. But now TiVo has adorned a new role of a friend to advertisers by providing them with statistics of advertisements, which are being skipped by the viewers. This helps the advertisers to ascertain which type of ads are generally not liked by the viewers and therefore helps them in preparing better ads. The recorder sends the data back to the headquarters without revealing the user. Driven by regulations and a desire for transparency and accountability consumers are preferring to obey Conditional Access System (CAS) through set-top boxes, a powerful device to empower consumer. In post CAS era, advertisers' reach by default gets limited and at the same time tailor- made communications to specific customer segments may increase. On the whole, the days of intrusive advertisements seems to be over, communicating at 'mass' gradually getting replaced by one to one communication sowing the seed for interactive advertising. With the change in consumer viewing habits, outdoor advertising is no longer a reminder media. In some markets indeed, it is turning out to be the main media. Several new brands are built using outdoor advertising. With the development of sci fi technology it is now possible to identify a passerby on the road and interact with him as well as display individualized communications. The real onslaught on these conventional media was due to the advent of World Wide Web. Search engines gained more prominence. Their speed and ability to crawl through, determined page exposures. Advertisers tried several methods to reach net savvy modern consumer. Otherwise ignored, contextuality of banner ads helped to increase involvement of consumers and was felt suitable for small business enterprises. Intrusive forms, pop ups and pop under were vehemently opposed. New and innovative forms like advergraming, streaming videos are still under nascent stage due to technological, financial as well as compatibility constraints. The most significant development of this new form of media Web, is the shift in power from advertiser to consumer. New media empowered all the consumers as they use their discretion whether to get exposed to an ad or skip it. Intrusive marketing tactics were replaced by permission based concepts. Spams were treated as illegal and offenders penalized. Thus reaching customers has become the toughest task for marketers in the Web age. This is where media planners' role becomes significant. Traditionally they were back room boys, now they lead the bandwagon. Increasingly, traditional media planning approaches were taken over by modern, sophisticated methods. Conventional cost led media planning strategies were replaced by brand strategy led consumer psychographics. On the whole, broadcasting techniques lost their relevance and increasingly narrow, casting methods are gaining prominence.

Another interesting trend across the globe that shall have a greater role to empower consumer is also taking place. Consumers have started using more of mobile devices to get information. Now an advertiser has to reach consumers on the move mobile advertising and the tool is through SMS or MMS. New versions of mobile devices and the technological compatibility barriers are slowly phasing out. SMS advertising is increasingly becoming popular as a most effective, low cost, personalized advertising technique. Ring tones also help to build brands based on sounds (sonic branding). Hence, the potential is endless.

It was SMS, now it is wi fi (wireless fidelity), popularly termed as "Hot Spot" or wireless Web. The possibilities thrown open are endless. Now it is a challenge for advertisers and agency people to own the upside of the inflection curve rather than get subdued at the downside. With every twist and turn, the industry jolts. Ti Vos, CAS, In film advertising and ever explosive media with no proportionate increment of audience attention are all the hurdles that the optimistic marketer has to surpass. Change is imminent and the ideal way is to embrace it!

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Lucille Ball: The World's Greatest Actress

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Just mention Lucy, and everyone knows who youre talking about. Lucille Ball is without a doubt the worlds greatest actress and the most famous redhead. She is remembered most for her famous TV character, Lucy Ricardo, but there was more to her than just the famous character she portrayed on I Love Lucy. Lucille could play all types of roles, including drama, comedy, and musical. There was much more to her than what people thought.

Her film career began with bit parts in the early 10s. Lucille was frequently cast in comedies because she was so good at physical comedy. She would do anything to get a laugh, and she didnt care if she looked different or did something out of the ordinary. The only thing Lucille cared about was actually being comical and making people laugh.

Even though she was a successful comedienne, Lucille wanted very much to be recognized as a dramatic actress. She wasnt offered many dramatic roles during her career, but Lucille did have a few opportunities to prove her talent as a dramatic actress. In 14, she starred in The Big Street, and her performance was highly successful and received rave reviews.

Lucille wanted to be cast in more dramas, but she didnt have much luck. The public loved her most when she was doing comedy, and it became quite clear that people didnt want to see Lucille Ball as a drama queen. They wanted to see her as the Queen of Comedy and nothing else.

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She also wanted to do musicals, but

Lucille was only given two opportunities. In 160, she appeared in the Broadway show Wildcat. Then, she starred in the film version of Mame in 17.

Mame was thought to be her last film, but it wasnt. Lucille shocked everyone when she appeared as a bag lady in the 185 TV movie Stone Pillow. Once again, she proved she could play dramatic roles.

There has never been nor will there ever be another actress like Lucille Ball. She had so many talents to offer the world, and she gave her best in everything she ever did. She will always be the worlds greatest actress. Lucille Ball may be gone, but her spirit lives on through her movies and television shows. She was someone who was and always will be a true star.

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Wine Industry

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Executive Summary

The American wine industry is a stable and present market in the United States with room to grow. The wine industry began with the first settlers and has persevered for centuries. There are three classifications of wine Red, White, and Blush, and table wine (a wine containing 7% to14% alcohol traditionally consumed with food) is the most popular and fastest-growing type of wine consumed. Even though wine is produced virtually everywhere in the U.S. the wine producers in California have the largest economic impact of $0 billion. Wine sales have risen in the last ten years from 11.7 billion dollars to 1 billion dollars. The Alcohol, Tobacco, and Firearms division of the Internal Revenue Service, at 8%, which is around $1.07 per gallon, heavily taxes these sales. Technological impacts have allowed winemakers to help control the quality of the wine from the vine to the liquor store.

The wine industry contains high barriers to entry due to high costs of land and building manufacturing facilities. Product differentiation is quite vast, being able to make several different types of wine varieties. The value of the wine varies year to year and is often set by the opinions of a few wine experts. The economies of scale in the wine industry have the greatest impact on the cost of land for grape growing. This because the type of land needed to produce quality wine is limited in the United States. This provides an advantage to existing wine producers already having ownership of farmland. Access to distribution channels is through commercial trucking for small distributors, and leased trucking or privately owned trucking for medium to large wine producers. The bargaining power of suppliers is lower today because there is an excess amount of grapes making the supply of wine and grapes exceed demand. The bargaining power of buyers drive up the price of some wines, and drives down the price of others. The wine industry's threats of substitutes are mainly form alcoholic competitors such as the micro brews and non-alcoholic competitors such as the premium coffee shops. The wine industry relies on each other for grapes needed for blended wines and low production years. Rivalry between companies has increased in recent years because of increased competition for shelf space.

There are three top wine producers in the U.S. E&J Gallo Winery, Constellation Brands, and The Wine Group. Their success has comes from recent acquisitions, and their ability to change with the needs of consumers. Three key issues the wine industry is facing today are upholding advertising standards, the threat of corporate buyouts, and increasing a market for wine.

Introduction

Humankind has enjoyed wine for many centuries. The first settlers of the United States of America found the new world to be filled with thousands of beautiful grape vines. Much to the dismay of the settlers the wine produced from native grapes was undrinkable, tasting "overly musky" (Lukacs, 000, p.17). This did not deter early American Settlers from trying; Thomas Jefferson was one of the earliest advocates in making American wine. Thomas Jefferson once stated, "Good wine, is a daily necessity (Lukacs, 000 p. )." He chose the wines that George Washington drank, and kept the White House well stocked. Much to Jefferson's dismay he was unable to see any quality wine come from America in his lifetime. It would be 150 years before America was able to produce quality wine (Lukacs, 000, p). Rarely turning a profit, wine making in the 1800 was a profession for the rich. The first successful entrepreneur was Nicholas Longworth, who came to Cincinnati Ohio in 180. His fortune was made from real estate, but his love was of wine. Longworth was the first American to successfully make wine on American soil, using imported European Vinifera Grapes (Lukacs, 000, p. 1). His success was short lived. The Vinifera Grapes could not survive for very long in American soil, due to lack of immunity from disease and insects (Lukacs, 000, p.18).

Americans continued to develop a grape that would flourish, and taste good. It was fifty years before hybridization became an accepted practice to produce a grape vine that could resist disease and insects. Today wine is made in nearly every state with the largest producer being California. The most crucial moment in Americans' wine history came in 176 when wines from America went up against French wines in a blind taste test. The judges were Frances' most esteemed wine professionals. Twenty wines were entered twelve from northern California. The two wines picked as the winners of the taste test were both American wines from Napa Valley, California (Lukacs, 000, p. 4). This was a definite turning point in American wine industry. American wine was, for the first time, thought to be of good quality.

This Industrial Analysis will evaluate the Wine Industry in three different ways, first by a macro level, which will look at the Social and Cultural Impacts, Political and Legal Impacts, Economic Impacts, and technological impacts that the industry has encountered in recent years. Then, through Porter Five forces of industry standards, the Analysis will discuss major barriers to entry Threat of Substitutes, Product Differentiation, and Firm Rivalry. Then the analysis will look at the wine industry through a competitive analysis of the industries top three competitors. The evaluation will end with short discussions of three issues the wine industry is facing today.

Description of Industry

Wine differs by what kinds of grapes are used and what type of flavoring is added. The flavor often comes from the type of barrel used in the wine making process (usually oak). There are three main classifications of wine Red, White and Blush. White wines are made from light-colored grapes and are generally lighter in taste than red and blush wines. Red wines are typically produced with darker grapes, and often their stems are included in the crushing process. Today, the industry categorizes wines into six different categories see figure 1.1.

Table Wines Comprising about 84% of U.S. production.

Sparkling wine Comprising about 6% of U.S. production

Special naturalComprising about 5% of U.S. production

Dessert wineComprising about 4% of U.S. production

VermouthComprising about 1% of U.S. production

SpecialtyComprising about less than 1% of U.S. production

Fig. 1.1

Table wines are the most popular and fastest-growing type of wine in the United States. Table wine contains 7% to 14% alcohol by volume and is traditionally consumed with food (Standard & Poor, 001). Table wines that retail at less than $.00 a bottle are considered to be generic or "jug wines", those retailing for $.00 to $7.00 per bottle are considered to be premium wines, $7.00 to $14.00 super premium, and ultra premium wines retail at more than $14.00 per bottle (Standard & Poor, 001).

The United States is the fourth largest wine producer in the world, averaging 465,400 gallons of wine a year. The top three countries are France, Italy, and Spain. (www.wineinstitute, 00). Wine is produced in every state. The total of Bonded Winery Premises (licenses issued by the Bureau of Alcohol, Tobacco and Firearms for tax purposes) in the United States currently is ,44; Half (1,10) of the licenses are in California, making California the number one factor when discussing American wine production.

Social and Cultural Impacts

Wine drinking and knowledge of wine is regarded as part of the wealthy and educated community. Wine is an alcoholic product however, wine producers continually try to advertise wine as part of everyday dining, to be enjoyed by people who can afford the finer things in life. According to Standards and Poor, the number of consumers buying premium wine should increase because of the increase in customers over the age of 55 who tend to consume more wine, especially premium (Standards and Poor, 001). This increase is however very small, only about a one percents increase in sales. Wine is specifically not marketed to younger children, or advertised in a way that emphasizes the effects the alcohol will have if consumed in excess. There are voluntary standards that the wine industry published to facilitate this type of market (www.wineinstitute, 00). This emphasis on wine drinking for the mature and sophisticated has created a general stereotype that wine is connected with a higher standard of living, because it can enhance one's meal enjoyment.

Political & Legal Impacts

Wine, which is an alcoholic product, is regulated by the Alcohol, Tobacco, and Firearms division (ATFD) of the internal Revenue Service. This makes it subjected to high levels of tax. The Federal Excise tax on these products was last increased in January 11, which increased the tax on wine by eight percent making the tax $1.07 per gallon (Standards & Poors, 001).

Economic impacts

California carries the most economic importance of any wine producers in the United States. Wine is the number one finished agricultural product in retail value from the state. The industry has a total annual economic activity, according to a comprehensive new report commissioned by the wine institute and the California Association of wine grape growers, of nearly $0 billion (www.wineinstitue.org, 00). This research shows that California's wine industry and affiliated businesses provide 145,000 full-time equivalent jobs in the state, with a total of $4. billion in gross wages. California receives an average of one-billion dollars in taxes and other business licenses and fees, the federal government and other states and local municipalities collect an additional $.1 billion a year. The tourism generated by the vineyards brings in expenditures of $1. billion annually (www.wineinstitute.org, 00). California also employs around ,16,000,000 employees working in the winery and vineyards.

See figure . for more detailed descriptions of the economic impact California's wine industry brings.

TOTAL ECONOMIC IMPACT

RevenueCalifornia Economic Impact

Winery Sales $7,00,000,000

Retailers and Restaurant Wine Sales (in California) 4,45,000,000

Distributors Sales (in California) ,000,000,000

Retailers and Restaurant Wine Sales (in California) 4,45,000,000

Wine Grapes (excluding Thompson Seedless) 1,600,000,000

Tourism1,00,000,000

Glass1,150,000,000

Tax Revenues 1,00,000,000

Financing Revenues Debt886,000,000

Vineyard Development Independent Grower Overhead/Financing/Prop Tax 64,000,000

Vineyard Development Materials (excluding vines) 7,000,000

Corks/Capsules/Screwtops175,000,000

Boxes and Bag-in-a-Box170,000,000

Wine Labels 106,000,000

Grapevines81,000,000

Trucking6,000,000

Charitable Contributions6,000,000

Cooperage 56,000,000

Financing Revenues Equity 0,000,000

Stainless Steel Tanks11,000,000

Wine Labs 4,000,000

Grapevine Assessments,000,000

Winery Research ,000,000

Wine Industry Indirect - IMPLAN from Appendix 4.,65,000,000

Other Industry Induced - IMPLAN from Appendix 4. 1,55,000,000

Other Industry Indirect - IMPLAN from Appendix 4.1,481,000,000

Wine Industry Induced - IMPLAN from Appendix 4.161,000,000

Total Revenue $8,40,000,000

Fig. . www.wineinstitute.org

California wineries weathered last year's economic slowdown and the September 11 attacks, which were especially hurtful to wineries. Shipments from California wineries have grown steadily during the past five years. The wine institute estimates the retail value of California wines sold in the US to be $1.4 billion in 001 compared with $1 billion in 000 (Theodore, 00). This slow growth fits in with the small but steady increase in sales over the last ten years, which have risen from $11.7 billion dollars to $1 billion dollars (www.wineinstitute, 000)

Technological Impacts

Recent Technological advances allow wine-makers to control the winemaking process more carefully than ever before. The use of stainless steel containers and careful temperature control during fermentation has revolutionized the making of white wines. Quality control during the harvest and juicing has improved also, with such innovations as night harvesting to avoid high grape temperatures and field crushing to more quickly separate juice from grapes. Improved techniques have been developed for sulfur dioxide fermentation, for monitoring sugar levels during fermentation, for stabilizing wines, and for controlling malic-lactic fermentation (a secondary process in which malic acid in the new wine is converted into lactic acid). Various chromatographic methods have been developed for determining, in detail, the composition of grapes and wines, though they have not yet replaced human tasting and sensory evaluation (Peters, 17). The increase in use of technology has enabled the Wine makers to deliver a more consistent quality product.

Porter Five Force Model

Major Barriers to Entry

According to Standards and Poors, the wine industry has high barriers of entry. Such as the level of sales needed to justify the enormous legal costs associated with producing industries. The capital needed to build manufacturing facilities, together with the high costs of advertising and distribution, are other substantial barriers to entry in these industries. Small wine makers may achieve local success. However such firms often have difficulty attaining profitability with such a level of operations and may find it virtually impossible to go national (standards and Poors, 001). There is also a very high cost of ferial farmland.

Product Differentiation and Switching Costs.

In a Fortune magazine an article was published in September 001 entitled Making Wine is easy. Making Money doing it is not states that the numbers of distributors is shrinking, making it harder for the average person to get into the wine market. "Brand building in this market is a daunting challenge, but anonymity is death," states Walter Channing, author. Luckily for the new wine producer consumers typically enjoy trying new and different wine all the time. Wine drinkers look for the experience of tasting new wines. The determining factor in their selections is usually due to word of mouth, by taking a recommendation from a wine expert. Robert Parker, a wine mega critic, in May of 00 declared the Bordeaux of 000 to be one of the greatest vintages of the century, proclaiming it "something that comes once every thousand years"(Forbes, p.8). This drove the value of the wine per bottle to $0 solely due to Parker's critique. This type of name recognition is necessary to achieve sales, according to Market Experience, Consumer Attention and Price-quality relationships for new word wines in the U.S. Market, Therefore, the price of wine increases with the increase in the producers' reputation. This vastness in the market also makes switching costs for the consumers low. It generally will not cost them any extra money to change the type of wine they enjoy drinking.

Economies of Scale And Cost Disadvantages Independent of Scale

The largest factor in the wine industries Economies of scale is the cost of land for grape growing. Grapes being an agricultural product will flourish where the soil contains the right nutrients and the climate has an extended summer, which gives the grapes time to grow. Even though different types of grapes will grow virtually in any soil, the different nutrients in the soil will change the taste of the wine. In the United States California is one of the only states with both needed agriculture components to make good quality wine. Land is a limited resource, making it the highest start up cost in a vineyard. On the other hand, this gives an advantage to the wine producer who has ownership of prime properties who no longer has the cost of the land as a financial burden.

Access to Distribution Channels

The final step in wine production is getting the product to the customer. If the distribution channels are overlooked there can be a significant impact on a wine company efficiency, product quality, cost of operation and on the perception it holds in the minds of distributors and consumers (Beverage industry, Nov 001). Most distribution from the vineyards is done with private, leased, or hired trucking companies.

Most wine producers hire a trucking company to distribute their product. Kendall-Jackson, the 10th largest winery in the United States is located in Sonoma County of Northern California. Seeing a problem with hiring a trucking company, they saw a need for better transportation cost accounting, flexibility to expand with growth, and improving customer service. In wine production timing is key, whether it is transporting juice from the vineyards, moving finished product or hauling cases of bottled product to distributors, a well-run winery relies on precise timing (Kendall-Jackson Smart Transportation Route to Continue Growth, Beverage Industry, Nov 001, p. 46). Kendall-Jackson discovered having its own trucking fleets was not cost effective so they incorporated a leased trucking fleet for high priority transportation needs, and used a hired trucking fleet for outside carriers. Therefore there are several avenues that wine producers can use to transport their wine. The cost in any of the three distribution channels is high, limiting the distribution power of the smaller vineyards that typically rely on local sales.

Bargaining Power of Suppliers

There are two different suppliers in the winemaking industry, those who produce the grapes, and those who produce the wine. Most wine producers are their own main suppliers, because of the great timing needed from harvest to production. To ensure the quality of the juice most vineyards make and bottle their wine at their vineyards. Many vineyards will sell their grapes to each other to compensate for a bad year, or for use in blended wines. Several factors contribute to the power the suppliers have on price. If there is a shortage of a certain type of grape, due to poor production the vineyards with the products have the most power. On the other hand when there is excess in product like in the present production, the excess inventory will bring the prices down. (Time, 11, 00). Currently the bargaining power of the suppliers is very low in the wine industry due to excess grapes, which will be later discussed as one of the key issues facing the American wine industry later in this analysis. The same is true with the wine product. The wine that has a supply lower than demand can fetch a higher price than the wine that exceeds supply.

Bargaining Power of Buyers

The fate of American's wine industry lies primarily in the hands of wine consumers. Patterns of wine consumption are key (Peters, 17). The major buyers of wine from the vineyards are liquor stores and restaurants. Competition between these buyers can either force down the price of the wine, or increase the price of the wine. Certain wines are naturally (due to the lack of needed farm land) scarce. Competition between buyers can drive up the price of the wine per bottle because the demand is greater than the supply. On the other hand if there is excess in the production of wine the competition can force the prices down.

Threat of Substitute products and services Threat of Substitutes

There are wineries in more than forty states; most people live within driving distance of some version of wine country. Wineries are welcome by residents and communities because winemaking is a clean industry, and a good neighbor. Also, the associated tourism brings in a source of income (Peters, 17). Even though vineyards are virtually everywhere the amount of threat of these vineyards is minimal. These small vineyards generally also have small markets, generally only a few hundred miles from the vineyard and other larger producers are still present in the stores and restaurants, which works to the larger producers' benefit.

On the other hand the large producers don't benefit from the same type of branding that large beverage companies like Coke and Pepsi do. This is due generally because of the vastness of product differentiation in the market. Generally a consumer shows more favor to one cola than to another, either preferring Coke or Pepsi, then usually just drinks the one type of cola. Wine is thought to enhance food; therefore different types of wine enhance different types of food (Peters, 17). The consumer may prefer a Chardonnay with fish, and a Merlot with a Steak. When choosing the brand of wine, customers look most for price and value. During periods of both recession and prosperity the consumption of wine tends to stay the same, however the quality of the products produced changes. This is related directly to disposable income. A decline in disposable income puts downward pressure on the prices of consumer products, as people shift away from buying premium-priced brand name products in favor of lower-priced brands and private-label goods (Standards and poors).

There are several substitutes in products that may take some of the market away from even drinking wine at all; there are competitors from other beverages (Peters, 17). Winescapes author suggest two competitors that are making a claim to the time and money of the growing number of people there is the micro brewing industry and its related brewpubs. The other, however less threatening is the growth in premium coffee shops, led by Starbucks (Peters, 17).

Firm Rivalry

Rivalry Amongst Existing Competitors

The buying and drinking of wine is luxury item than a needed commodity. The tastes and preferences of the consumer continue to evolve with time, and experience. Chardonnay is still the leader in wine sales in the US, but American consumers are increasingly showing a preference for red (Seeing Red, 00). During the past decade, volume share of red wines has grown 118 percent, according to the Wine Institute; reds held 17 percent of the market in 11, 5 percent between 15 and last year jumped to 7 percent market share. During the same ten years white wines dropped from 4 percent market share to 40 percent, an 18 percent drop. Blush wines held their own for the first half of the decade, with 4 percent market share, but dropped to percent between 15 and 001, a percent decline. The California wines priced at more than $5 a bottle are a hot category, selling around three million cases per year. These premium California wines were almost non-existent in the mid 180s, but are currently growing at a rate of 0 percent per year.

Table wines are by far the biggest-selling category of wine in the US. With 504 million of the 56 million gallons sold last year, reports the wine institute. Table wines had 4 million gallons in sales in 000, and have grown steadily from 461 gallons in 17. Desert wines came in with 4 million gallons in 001, and increase of million gallons over 000, and up from 0 million gallons in 17. Sparkling wines sold 5 million gallons last year, down from a peak of 7 million gallons in 1, when millennium celebrations caused consumers to stock up on the bubbly.

Competition was higher in the wine industry last year than it has been in a decade, according to The Wine Institute. Wineries had to compete harder for retail shelf space and restaurant wine listings, and the dollar compared to other currencies also contributed to competition for California vintners, making foreign-made wines more affordable to U.S. consumers (Seeing Red, 00).

Competition between US states and Colorado wines are not soon going to drive either California or French wines off the shelves of wine shops in Denver, Colorado Springs, or Aspen, they may however develop sufficient local interest to allow the state's emerging wine industry to survive. Elsewhere, in Arizona and New Mexico, or in Missouri and Arkansas the same is true. Survival is likely to be tied primarily, if not exclusively to regional loyalty. New York and Virginia are producing wines that are becoming important competitors on the national wine scene. Texas seems somewhere in between. The western wine regions along the pacific Rim of California, Oregon and Washington will continue to produce the lion's signs of trouble in paradise, especially in the vineyards of the northern state, which can at least be partly alleviated by better weather and higher yields and by new plantings of popular cultivars (mainly Chardonnay, Merlot, and Cabernet Sauvignon) a grapevine pest and a disease have become significant nuisances.

Competitive Analysis

There are three top wine producers in the United States (see figure .). The top producers are E&J Gallo Winery, Constellation Brands, and The Wine Group. The key to top production is size of these three. The only producer who produce solely wine is E&J Gallo. One determining factor in all three of these producers that has contributed to their success is their recent acquisitions and partnerships. Constellation Brands Inc. have just acquired Ravenswood (Wall street Journal, June, 0 001); The Wine Group's partnership of Southern Wine & Spirits of America Inc (Beverage Industry, March 00), and E&J Gallo recent acquisition of California's oldest wineries Mirassou Vineyards in San Jose (Beverage Industry, October 00). This growth has enabled these three to become the leading producers in America.

The main competitive advantages that these three have are their size, branding and connection with distribution channels. Because they are so large they are able to produce several different products varying in cost and quality. For instance although The Wine Group produces both Franzia, and MD (Mad Dog) 0/0, the quality between these two products is quite different. Franzia can be found at many medium to high quality restaurants, while MD 0/0 is considered to be more of a "wino" drink, only being consumed for the sole purpose of becoming intoxicated (Lucas, 47). Constellation Brands and The Wine Group also do not win many awards for their wines, because where production of wine is concerned quantity often hurts the quality of the wine.

Top Wine producersTheir Brands

E&J Gallo WineryCarlo Rossi; Gallo Livingston Cellars, the wine Cellars of Ernest & Julio Gallo

Constellation BrandsAlmaden' Abor Mist; Inglenook; Paul Masson; Richards Wild Irish Rose; Ravenswook' Taylor California Cellars; Simi; Franciscan Oakville Estates; Estancia

The Wine GroupFranzia; MD 0/0

Fig . Standard and Poors

E&J Gallo has grown and expanded for three generations because of its ability to change. E&J Gallo is a name synonymous with American wine. In recent years the family owned company has gone through some changes. One of the granddaughters has taken over the company and is striving to put quality in the wine produced, in reaction to customer demand for higher quality wines. One factor that American wine producers have faced is the lack of daily wine drinking among the American public. While in other countries wine is served with each meal, Americans don't incorporate wine with meals on a daily basis. After Prohibition when the accepted alcohol content in wine went from 1% to 0%, wine was looked at as a way to become intoxicated and the wines that sold were inexpensive with high alcohol content. E&J Gallo saw this market and produced what Americans wanted. This has made the company extremely successful, but also the company is known for having lower quality products (Lukacs, 18). Just like after prohibition now the public is demanding higher quality wines and E&J Gallo is shifting to meet the demands of the public. Over the last few years E&J Gallo have won several awards for their wines. Figure 4.4 lists the top 0 wine brands and the company that produces them in America today, according to Standard and Poors. E&J Gallo hold 5 of the top 0 spots for the best American wine brands, it is E&J Gallo's ability to make both high quality wines and less expensive wines, along with their distribution ability and branding, that gives E&J Gallo the largest competitive advantage from other smaller and less known competitors in the wine industry.

BrandsCompany

1. FranziaThe wine Group

. Carlo RossiE&J Gallo Winery

. Livingston Cellar E&J Gallo Winery

4. AlmadanCanadaigua Wine

5. E&J WineyardsE&J Gallo Winery

6. Sutter HomeTrinchero Family Estates

7. WoodbridgeRobert Mondavi

8. BeringerBeringer Wine Estates

. InglenookCanandaigua Wine

10. VendageTurner Road Wintners

11. Arbor MistCanandaigua Wine

1. Turning LeafE&J Gallo Winery

1. Turing leaf E&J Gallo Winery

14. Peter VellaE&J Gallo Winery

15. Corbett Canyon The Wine Group

16. Glenn Ellen UDV Wines

17. FetzerBrown-Forman Beverages

18. Boone'sE&J Gallo Wines

1. Gossamer BayE&J Gallo Wines

0. Concha y ToroBanfi Vintners

Fig 4.4 Standards and Poors

Key issues

Advertising Standards

There are several wine producers who want to make America into a quality wine producer that can compete with the rest of the worlds wine producers in quality. One of the main stumbling blocks for this initiative is the general wine consumption habit of the American people. Paul Luckas, author of the book American Vintage The Rise of American Wine talks extensively about American wine consumption in America. Even before Prohibition wine was not thought of in the same context as other liquors. Other types of liquor were thought of as having the sole purpose of intoxication, while wine was regarded as an experience, and an enhancement to food and general living (Luckas, p65). There has also been a general consensus between premium wine producers that it is the job of the wine producers to ensure that wine keeps a positive reputation. The Wine Institute last year published a Code of advertising Standards that they feel is a good addition to the informal principles of good advertising practice for the winegrowing industry that was first adopted in 148. (www.wineinstitute.com). These voluntary standards use such rules to encourage the proper use of wine. The code states that there should be no references are made to the effect of what the alcohol content may produce, or how one would act under the influence of alcohol, and any advertising should only be of people of legal age through a media where over 0% of the viewer are of legal age. One of the most import aspects of the code is for says A distinguishing and unique feature of wine is that it is traditionally served with meals or immediately before or following a meal, Therefore, when subscribers to this code use wine advertising which visually depicts a scene or setting where wine is to be served, such advertising where appropriate shall include foods and show that they are available and are being used or are intended to be used (www.wineinstitue.com)." These codes are helpful to facilitate the proper use of wine, but also instill the purpose of everyday use with the use of food that the wine industry would like to see as a common practice.

Corporate buyouts

The second issue that the wine industry faces is the threat of large corporate buyouts. One of the most interesting aspects of most wine producers is that they are small, usually family owned businesses that are able to produce quality wines. Sixty percent of all U.S. wine today is produced by five companies (Time, November4 001). Times are tough for most in the wine industry today, which has created an opportunity for larger companies to buy out smaller. As vineyards expand in the U.S. there has become an oversupply of grapes, which has depressed prices for growers but has offered a boom to companies like Canandaigua, which buys % of the grapes (Time, November 4 001).

Companies are snapping up wineries that are struggling, and everyone is trying to improve quality so that the wines can command higher prices. For the consumer, this is a good thing. New winemaking technology, new foreign producers and intense competition are resulting in higher quality bottles at all price levels (Time, November 4 001).

Increase Support For Table Wine in the U.S.

The last issue this analysis will discuss is the lack of support for quality table wines in the U.S. An article published in American Demographics magazine's February 00 issue discusses the hope that after the September 11 attacks there will be an increase in wine buying. New advertising campaigns are targeting the middle class (over forty) age group who now turn more to family and enriching home lives after September 11.

The above Article commercials about wine generally show wealthy people enjoying a perfect dinner that is enhanced by the particular type of wine they are consuming. The new commercials show the more middle class typical families coming together to enjoy a bottle of wine with dinner. With new advertising such as these the wine industry hopes to increase a feeling that all social classes with dinners should enjoy wine.

Conclusion and Recommendations

The wine industry has existed since the beginning of the U.S. The wine industry throughout history has continued to grow making a large economic impact in California. Technology has improved the production and quality of wine in the U.S. By looking at the wine industry through Porter five-industry forces model revels high barriers to entry and even higher barriers to widespread success, however there is easy access to distribution channels. Both buyers and suppliers hold bargaining power, which equally control the price. The wine industry's largest threat of substitutes comes from micro-brew, and specialty coffee shops. Firm rivalry is strong between the competitors, because of the large number of grapes, easy access to distribution channels and the technological improvements enabling wine makers to control the quality of their product.

The trend today in the wine industry is moving toward large corporations. For this reason and the high entry barriers I would not recommend anyone to join this industry. Successful competitors have been making wine for generations, who have perfected their wines, and have created a brand for themselves. There is also and excess amount of grapes that drives the price of wine down, and increases the competition. After my research I think making wine will have to stay a hobby.

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Review Of Related Literature

A.Bacteria

IINTRODUCTION Help with essay on BacteriaBacteria (Greek bakterion, "little staff"), large group of mostly microscopic, unicellular organisms that lack a distinct nucleus and that usually reproduce by cell division.

Bacteria are tiny, most ranging from 1 to 10 micrometres (1 micrometre equals 1/5,000 in), and are extremely variable in the ways they obtain energy and nourishment. They can be found in nearly all environments from air, soil, water, and ice to hot springs; even the hydrothermal vents on the deep ocean floor are the home of sulphur-metabolizing bacteria. Certain types are found in nearly all food products, and bacteria also occur in various forms of symbiosis with most plants and animals and other kinds of life.

IICLASSIFICATION

In the currently used five-kingdom scheme of classification, bacteria constitute the kingdom Monera, also known as Prokaryotae organisms in whose cells the nucleus is not enclosed by a membrane. About 1,600 species are known. Generally, bacteria are classified into species on the basis of characteristics such as shape cocci (spheres), bacilli (rods), spirochaetes (spirals); cell-wall structure; differential staining (see Grams Stain); ability to grow in the presence or absence of air (aerobes and anaerobes, respectively); metabolic or fermentative capabilities; ability to form dormant spores under adverse conditions; serologic (serum) identification of surface components; and nucleic-acid relatedness.

The most widely used reference for taxonomic classification of bacteria divides them into four major groups based on cell-wall characteristics. The division Gracilicutes encompasses bacteria with thin, gram-negative-type cell walls; the Firmicutes have thick, gram-positive cell walls; the Tenericutes lack cell walls; and the Mendosicutes have unusual cell walls made of material other than typical bacterial peptidoglycan. Among the Mendosicutes are the archaebacteria, a group of unusual organisms that includes methanogens, strict anaerobes that produce methane from carbon dioxide and hydrogen; halobacteria, which grow at high salt concentrations; and thermoacidophiles, which are sulphur-dependent extreme thermophiles. It has been argued that the archaebacteria should be classified into a separate kingdom because recent biochemical studies have shown that they are as different from other bacteria as they are from eukaryotes (the nucleii of which are membrane-bound). The four major bacterial divisions are further subdivided into about 0 numbered sections, some of which are divided into orders, families, and genera. Section 1, for example, is made up of spirochaetes long, corkscrew-shaped bacteria with gram-negative cell walls and internal (between the cell wall and cell membrane) filamentous flagella that provide the organisms with motility (ability to move). Treponema pallidum, causing syphilis, is a spirochaete, a member of the order Spirochaetales, and the family Spirochaetaceae.

Not all bacteria can move, but the mobile ones are generally propelled by screw-like appendages flagella that may project from all over the cell or from one or both ends, singly or in tufts. Depending on the direction in which the flagella rotate, the bacteria either move forward or tumble in place. The duration of runs versus tumbling is linked to receptors in the bacterial membrane; variations enable the bacteria to move towards attractants such as food sources and away from unfavourable environmental conditions. In some aquatic bacteria that contain iron-rich particles, locomotion has been found to be oriented to the Earths magnetic field.

IIIGENETICS

The genetic material of the bacterial cell is in the form of a circular double strand of DNA (see Nucleic Acids). Many bacteria also carry smaller circular DNAs called plasmids, which encode genetic information but are generally not essential for reproduction. Many of these plasmids can be transferred to other bacteria by conjugation, a mechanism of genetic exchange. Other mechanisms whereby bacteria can exchange genetic information include transduction, in which bacterial viruses (see Bacteriophage) transfer DNA, and transformation, in which DNA is taken into the bacterial cell directly from the environment. Bacterial cells multiply by binary fission; the genetic material is duplicated and the bacterium elongates, constricts near the middle, and then undergoes complete division, forming two daughter cells essentially identical to the parent cell. Thus, as with higher organisms, a given species of bacteria reproduces only cells of the same species. Some bacteria divide every 0 to 40 minutes. Under favourable conditions, with one division every 0 minutes, after 15 hours a single cell will have produced roughly 1 billion progeny. This mass, called a colony, may be seen with the naked eye. Under adverse conditions some bacteria may undergo a modified division process to produce spores, dormant forms of the cell that can withstand extremes of temperature and humidity until more favourable conditions return.

IVWORK OF BACTERIA

Two main groups of bacteria exist the saprophytes, which live on dead animal and vegetable matter; and the symbionts, which live on or in living animal or vegetable matter. Saprophytes are important because they decompose dead animals and plants into their constituent elements, making them available as food for plants. Symbiotic bacteria are a normal part of many human tissues, including the alimentary canal and the skin, where they may be indispensable to physiological processes. Such a relationship is called mutualistic. Other symbionts gain nutrients from their living host without causing serious damage; this is commensalism. The third type, parasites, can destroy the plants and animals on which they live.

Bacteria are involved in the spoilage of meat, wine, vegetables, and milk and other dairy products. Bacterial action may render such foods unpalatable by changing their composition. Bacterial growth in foods can also lead to food poisoning such as that caused by Staphylococcus aureus or by Clostridium botulinum (see Botulism). On the other hand, bacteria are of great importance in many industries. The fermentative capabilities of various species are manipulated for the production of cheese, yoghurt, pickles, and sauerkraut. Bacteria are also important in the production of tanned leather, tobacco, ensilage, textiles, pharmaceuticals and various enzymes, polysaccharides, and detergents.

Bacteria are found in virtually all environments, where they contribute to various biological processes. For example, they may produce light, such as the phosphorescence of dead fish (see Bioluminescence); and they may produce enough heat to induce spontaneous combustion in haystacks or in hop granaries. By decomposing cellulose (the main constituent of plant cell walls), certain anaerobic forms produce marsh gas in stagnant pools; by oxidizing processes, other bacteria assist in forming deposits of bog iron ore, ochre, and manganese ore.

Bacteria have an immense influence on the nature and composition of the soil. One result of their activities is the complete disintegration of organic remains of plants and animals and of inorganic rock particles. This action produces in the aggregate vast quantities of plant food. In addition, the leguminous plants that enrich soil by increasing its nitrogen content do so with the help of Rhizobium radicicola and other bacteria that infect the roots of the plants and cause nitrogen-fixing nodules to grow (see Nitrogen Fixation).The photosynthetic process on which plant life itself is based was almost certainly first established in bacteria; the recent discovery of an unusual photosynthesizing bacterium called Heliobacterium chlorum may help in understanding this fundamental development in the history of life.

VPATHOGENIC BACTERIA

About 00 species of bacteria are pathogenic, or disease-causing, for humans. Pathogenicity varies widely among various species and is dependent on both the virulence of the particular species and the condition of the host organism. Among the more invasive bacteria responsible for human disease are those that cause cholera, tetanus, gas gangrene, leprosy, plague, bacillary dysentery, tuberculosis, syphilis, typhoid fever, diphtheria, undulant fever, and several forms of pneumonia. Until the discovery of viruses, bacteria were considered the causative agents of all infectious diseases.

The pathogenic effects of bacteria on body tissues may be grouped in four classes as follows (1) effects of the direct local action of the bacteria on the tissues, as in gas gangrene, caused by Clostridium perfringens; () mechanical effects, as when a mass of bacteria blocks a blood vessel, causing an infectious embolus; () effects of the bodys response to certain bacterial infections on body tissues, as in the forming of lung cavities in tuberculosis, or destruction of heart tissue by the bodys own antibodies in rheumatic fever; (4) effects of bacterial-produced toxins, chemical substances that act as poisons to certain tissues. Toxins are generally species specific; for example, the toxin responsible for diphtheria is different from the one responsible for cholera.

However, it is worth noting that an increasing number of scientists are emphasizing the indirectly beneficial effects of mild pathogens. Exposure to germs allows the body to develop immunity (see Immune System, Immunization) to those bugs, and there are some proponents of bacterial inoculation for asthma sufferers, for example. It is believed that a certain level of bacteria is needed to kick-start babies' immune systems in order to prevent allergies, something that may be lacking with the high levels of hygiene in modern homes and hospitals.

VIANTIBIOTICS

Various micro-organisms, including certain fungi and some bacteria, produce chemical substances that are toxic to specific bacteria. Such substances, which include penicillin and streptomycin, are known as antibiotics; they either kill the bacteria or prevent them from growing or reproducing. In recent years antibiotics have played an increasingly important role in medicine in the control of bacterial diseases. See Also Antiseptics; Bacteriology; Disease.

Illustrations

Microsoft Corporation. All Rights Reserved.

Anatomy of a Simple Bacterium

A simplified bacterium has three external layers surrounding internal structures the slimy capsule layer protects the rigid cell wall, which in turn covers the semi-permeable cell membrane. The flagellum propels the bacterium, and the pili, hairlike structures that extend beyond the capsule, help the bacterium attach itself to various surfaces. Genetic material is contained in DNA that forms the nucleoid. Ribosomes floating in the cytoplasm help the process of protein synthesis.

Table

Bacteria Types

Microbiologists broadly classify bacteria according to their shape spherical, rod-shaped, and spiral-shaped. Pleomorphic bacteria can assume a variety of shapes. Bacteria may be further classified according to whether they require oxygen (aerobic or anaerobic) and how they react to a test with Gram's stain. Bacteria in which alcohol washes away Gram's stain are called gram-negative, while bacteria in which alcohol causes the bacteria's walls to absorb the stain are called gram-positive.

TYPECHARACTERISTICS

Acetic acidRod-shaped, gram-negative, aerobic; highly tolerant of acidic conditions; generate organic acids

ActinomyceteRod-shaped or filamentous, gram-positive, aerobic; common in soils; essential to growth of many plants; source of much of original antibiotic production in pharmaceutical industry

CoccoidSpherical, sometimes in clusters or strings, gram-positive, aerobic and anaerobic; resistant to drying and high-salt conditions; Staphylococcus species common on human skin, certain strains associated with toxic shock syndrome

CoryneformRod-shaped, form club or V shapes, gram-positive, aerobic; found in wide variety of habitats, particularly soils; highly resistant to drying; include Arthrobacter, among most common forms of life on earth

Endospore-

formingUsually rod-shaped, can be gram-positive or gram-negative; have highly adaptable, heat-resistant spores that can go dormant for long periods, possibly thousands of years; include Clostridium (anaerobic) and Bacillus (aerobic)

EntericRod-shaped, gram-negative, aerobic but can live in certain anaerobic conditions; produce nitrite from nitrate, acids from glucose; include Escherichia coli,Salmonella (over 1,000 types), and Shigella

GlidingRod-shaped, gram-negative, mostly aerobic; glide on secreted slimy substances; form colonies, frequently with complex fruiting structures

Lactic acidGram-positive, anaerobic; produce lactic acid through fermentation; include Lactobacillus, essential in dairy product formation, and Streptococcus, common in humans

MycobacteriumPleomorphic, spherical or rod-shaped, frequently branching, no gram stain, aerobic; commonly form yellow pigments; include Mycobacterium tuberculosis, cause of tuberculosis

MycoplasmaSpherical, commonly forming branching chains, no gram stain, aerobic but can live in certain anaerobic conditions; without cell walls yet structurally resistant to lysis; among smallest of bacteria; named for superficial resemblance to fungal hyphae (myco- means fungus)

Nitrogen-fixingRod-shaped, gram-negative, aerobic; convert atmospheric nitrogen gas to ammonium in soil; include Azotobacter, a common genus

Propionic acidRod-shaped, pleomorphic, gram-positive, anaerobic; ferment lactic acid; fermentation produces holes in Swiss cheese from the production of carbon dioxide

PseudomonadRod-shaped (straight or curved) with polar flagella, gram-negative, aerobic; can use up to 100 different compounds for carbon and energy

RickettsiaSpherical or rod-shaped, gram-negative, aerobic; cause Rocky Mountain spotted fever and typhus; closely related to Agrobacterium, a common gall-causing plant bacterium

SheathedFilamentous, gram-negative, aerobic; swarmer (colonizing) cells form and break out of a sheath; sometimes coated with metals from environment

SpirillumSpiral-shaped, gram-negative, aerobic; include Bdellovibrio, predatory on other bacteria

SpirocheteSpiral-shaped, gram-negative, mostly anaerobic; common in moist environments, from mammalian gums to coastal mudflats; complex internal structures convey rapid movement; include Treponemapallidum, cause of syphilis

Sulphate- and Sulphur-reducingCommonly rod-shaped, mostly gram-negative, anaerobic; include Desulfovibrio, ecologically important in marshes

Sulphur- and iron-oxidizingCommonly rod-shaped, frequently with polar flagella, gram-negative, mostly anaerobic; most live in neutral (non-acidic) environment

VibrioRod- or comma-shaped, gram-negative, aerobic; commonly with a single flagellum; include Vibrio cholerae, cause of cholera, and luminescent forms symbiotic with deep-water fishes and squids

Pathogenic E. coli

Left Escherichia coli cells. Right E.coli colonies on EMB Agar

Escherichia coli

The GI tract of most warm-blooded animals is colonized by E. coli within hours or a few days after birth. The bacterium is ingested in foods or water or obtained directly from other individuals handling the infant. The human bowel is usually colonized within 40 hours of birth. E. coli can adhere to the mucus overlying the large intestine. Once established, an E. coli strain may persist for months or years. Resident strains shift over a long period (weeks to months), and more rapidly after enteric infection or antimicrobial chemotherapy that perturbs the normal flora. The basis for these shifts and the ecology of Escherichia coli in the intestine of humans are poorly understood despite the vast amount of information on almost every other aspect of the organisms existence. The entire DNA base sequence of the E. coli genome has been known since 17.

E. coli is the head of the large bacterial family, Enterobacteriaceae, the enteric bacteria, which are faculatively anaerobic Gram-negative rods that live in the intestinal tracts of animals in health and disease. The Enterobacteriaceae are among the most important bacteria medically. A number of genera within the family are human intestinal pathogens (e.g. Salmonella, Shigella, Yersinia). Several others are normal colonists of the human gastrointestinal tract (e.g. Escherichia, Enterobacter, Klebsiella), but these bacteria, as well, may occasionally be associated with diseases of humans.

The Enterobacteriaceae are distinguished from the Pseudomonadaceae in a number of ways known reflexively to competent microbiologists. The pseudomonads are respiratory, never fermentative, oxidase-positive, and motile by means of polar flagella. The enterics ferment glucose producing acid and gas, are typically oxidase-negative, and when motile, produce peritrichous flagella.

Physiologically, E. coli is versatile and well-adapted to its characteristic habitats. It can grow in media with glucose as the sole organic constituent. Wild-type E. coli has no growth factor requirements, and metabolically it can transform glucose into all of the macromolecular components that make up the cell. The bacterium can grow in the presence or absence of O. Under anaerobic conditions it will grow by means of fermentation, producing characteristic mixed acids and gas as end products. However, it can also grow by means of anaerobic respiration, since it is able to utilize NO, NO or fumarate as final electron acceptors for respiratory electron transport processes. In part, this adapts E. coli to its intestinal (anaerobic) and its extraintestinal (aerobic or anaerobic) habitats.

E. coli can respond to environmental signals such as chemicals, pH, temperature, osmolarity, etc., in a number of very remarkable ways considering it is a single-celled organism. For example, it can sense the presence or absence of chemicals and gases in its environment and swim towards or away from them. Or it can stop swimming and grow fimbriae that will specifically attach it to a cell or surface receptor. In response to change in temperature and osmolarity, it can vary the pore diameter of its outer membrane porins to accommodate larger molecules (nutrients) or to exclude inhibitory substances. With its complex mechanisms for regulation of metabolism the bacterium can survey the chemical contents its environment in advance of synthesizing any enzymes necessary to use these compounds. It does not wastefully produce enzymes for degradation of carbon sources unless they are available, and it does not produce enzymes for synthesis of metabolites if they are available as nutrients in the environment.

E. coli is a consistent inhabitant of the human intestinal tract, and it is the predominant facultative organism in the human GI tract; however, it makes up a very small proportion of the total bacterial content. The anaerobic Bacteroides species in the bowel outnumber E. coli by at least 01. however, the regular presence of E. coli in the human intestine and feces has led to tracking the bacterium in nature as an indicator of fecal pollution and water contamination. As such, it is taken to mean that, wherever E. coli is found, there may be fecal contamination by intestinal parasites of humans.

Pathogenesis of E. coli

Over 700 antigenic types (serotypes) are recognized based on O, H, and K antigens. Serotyping is still important in distinguishing the small number of strains that actually cause disease.

E. coli is responsible for three types of infections in humans urinary tract infections (UTI), neonatal meningitis, and intestinal diseases (gastroenteritis). These three diseases depend on a specific array of pathogenic (virulence) determinants. The virulence determinants of various strains of pathogenic E. coli are summarized in Table 1.

Table 1. Summary of the Virulence Determinants of Pathogenic E. coli

Adhesins

CFAI/CFAII

Type 1 fimbriae

P fimbriae

S fimbriae

Intimin (non-fimbrial adhesin)

Invasins

hemolysisn

siderophores and siderophore uptake systems

Shigella-like invasins for intracellular invasion and spread

Motility/chemotaxis

flagella

Toxins

LT toxin

ST toxin

Shiga-like toxin

cytotoxins

endotoxin LPS)

Antiphagocytic surface properties

capsules

K antigens

LPS

Defense against serum bactericidal reactions

LPS

K antigens

Defense against immune responses

capsules

K antigens

LPS

antigenic variation

Genetic attributes

genetic exchange by transduction and conjugation

transmissible plasmids

R factors and drug resistance plasmids

toxin and other virulence plasmids

Urinary tract infections

Uropathogenic E. coli cause 0% of the urinary tract infections (UTI) in anatomically-normal, unobstructed urinary tracts. The bacteria colonize from the feces or perineal region and ascend the urinary tract to the bladder. Bladder infections are 14-times more common in females than males by virtue of the shortened urethra. The typical patient with uncomplicated cystitis is a sexually-active female who was first colonized in the intestine with a uropathogenic E. coli strain. The organisms are propelled into the bladder from the periurethral region during sexual intercourse. With the aid of specific adhesins they are able to colonize the bladder.

The adhesin that has been most closely associated with uropathogenic E. coli is the P fimbria (or pyelonephritis-associated pili [PAP] pili). The letter designation is derived from the ability of P fimbriae to bind specifically to the P blood group antigen which contains a D-galactose-D-galactose residue. The fimbriae bind not only to red cells but to a specific galactose dissaccharide that is found on the surfaces uroepithelial cells in approximately % of the population.

The frequency of the distribution of this host cell receptor plays a role in susceptibility and explains why certain individuals have repeated UTI caused by E. coli. Uncomplicated E. coli UTI virtually never occurs in individuals lacking the receptors.

Uropathogenic strains of E. coli possess other determinants of virulence in addition to P fimbriae. E. coli with P fimbriae also possess the gene for Type 1 fimbriae, and there is evidence that P fimbriae are derived from Type 1 fimbriae by insertion of a new fimbrial tip protein to replace the mannose-binding domain of Type 1 fimbria. In any case, Type 1 fimbriae could provide a supplementary mechanism of adherence or play a role in aggregating the bacteria to a specific manosyl-glycoprotein that occurs in urine.

Uropathogenic strains of E. coli usually produce siderophores that probably play an essential role in iron acquisition for the bacteria during or after colonization. They also produce hemolysins which are cytotoxic due to formation of transmembranous pores in host cells. One strategy for obtaining iron and other nutrients for bacterial growth may involve the lysis of host cells to release these substances. The activity of hemolysins is not limited to red cells since the alpha-hemolysins of E. coli also lyse lymphocytes, and the beta-hemolysins inhibit phagocytosis and chemotaxis of neutrophils.

Another factor thought to be involved in the pathogenicity of the uropathogenic strains of E. coli is their resistance to the complement-dependent bactericidal effect of serum. The presence of K antigens is associated with upper urinary tract infections, and antibody to the K antigen has been shown to afford some degree of protection in experimental infections. The K antigens of E. coli are capsular antigens that may be composed of proteinaceous organelles associated with colonization (e.g., CFA antigens), or made of polysaccharides. Regardless of their chemistry, these capsules may be able to promote bacterial virulence by decreasing the ability of antibodies and/or complement to bind to the bacterial surface, and the ability of phagocytes to recognize and engulf the bacterial cells. The best studied K antigen, K-1, is composed of a polymer of N-acetyl neuraminic acid (sialic acid), which besides being antiphagocytic, has the additional property of being an antigenic disguise.

Neonatal Meningitis

Neonatal meningitis affects1/,000-4,000 infants. Eighty percent of E. coli strains involved synthesize K-1 capsular antigens (K-1 is only present 0-40% of the time in intestinal isolates).

E. coli strains invade the blood stream of infants from the nasopharynx or GI tract and are carried to the meninges.

The K-1 antigen is considered the major determinant of virulence among strains of E. coli that cause neonatal meningitis. K-1 is a homopolymer of sialic acid. It inhibits phagocytosis, complement, and responses from the hosts immunological mechanisms. K-1 may not be the only determinant of virulence, however, as siderophore production and endotoxin are also likely to be involved.

Epidemiologic studies have shown that pregnancy is associated with increased rates of colonization by K-1 strains and that these strains become involved in the subsequent cases of meningitis in the newborn. Probably, the infant GI tract is the portal of entry into the bloodstream. Fortunately, although colonization is fairly common, invasion and the catastrophic sequelae are rare.

Neonatal meningitis requires antibiotic therapy that usually includes ampicillin and a third-generation cephalosporin.

Intestinal Diseases Caused by E. coli

As a pathogen, E. coli, of course, is best known for its ability to cause intestinal diseases. Five classes (virotypes) of E. coli that cause diarrheal diseases are now recognized enterotoxigenic E. coli (ETEC), enteroinvasive E. coli (EIEC), enterohemorrhagic E. coli (EHEC), enteropathogenic E. coli (EPEC), and enteroaggregative E. coli (EAggEC). Each class falls within a serological subgroup and manifests distinct features in pathogenesis.

Enterotoxigenic E. coli (ETEC)

ETEC are an important cause of diarrhea in infants and travelers in underdeveloped countries or regions of poor sanitation. The diseases vary from minor discomfort to a severe cholera-like syndrome. ETEC are acquired by ingestion of contaminated food and water, and adults in endemic areas evidently develop immunity. The disease requires colonization and elaboration of one or more enterotoxins. Both traits are plasmid-encoded.

ETEC adhesins are fimbriae which are species-specific. For example, the K-88 fimbrial Ag is found on strains from piglets; K- Ag is found on strains from calves and lambs; CFA I, and CFA II, are found on strains from humans. These fimbrial adhesins adhere to specific receptors on enterocytes of the proximal small intestine.

Enterotoxins produced by ETEC include the LT(heat-labile) toxin and/or the ST (heat-stable) toxin, the genes for which may occur on the same or separate plasmids. The LT enterotoxin is very similar to cholera toxin in both structure and mode of action. It is an 86kDa protein composed of an enzymatically active (A) subunit surrounded by 5 identical binding (B) subunits. It binds to the same identical ganglioside receptors that are recognized by the cholera toxin (i.e., GM1), and its enzymatic activity is identical to that of the cholera toxin.

The ST enterotoxin is actually a family of toxins which are peptides of molecular weight about ,000 daltons. Their small size explains why they are not inactivated by heat. ST causes an increase in cyclic GMP in host cell cytoplasm leading to the same effects as an increase in cAMP. STa is known to act by binding to a guanylate cyclase that is located on the apical membranes of host cells, thereby activating the enzyme. This leads to secretion of fluid and electrolytes resulting in diarrhea.

Symptoms ETEC infections include diarrhea without fever. The bacteria colonize the GI tract by means of a fimbrial adhesin, e.g. CFA I and CFA II, and are noninvasive, but produce either the LT or ST toxin.

Enteroinvasive E. coli (EIEC)

EIEC closely resemble Shigella in their pathogenic mechanisms and the kind of clinical illness they produce. EIEC penetrate and multiply within epithelial cells of the colon causing widespread cell destruction. The clinical syndrome is identical to Shigella dysentery and includes a dysentery-like diarrhea with fever. EIEC apparently lack fimbrial adhesins but do possess a specific adhesin that, as in Shigella, is thought to be an outer membrane protein. Also, likeShigella, EIEC are invasive organisms. They do not produce LT or ST toxin and, unlike Shigella, they do not produce the shiga toxin.

Enteropathogenic E. coli (EPEC)

EPEC induce a watery diarrhea similar to ETEC, but they do not possess the same colonization factors and do not produce ST or LT toxins. They produce a non fimbrial adhesin designated intimin, an outer membrane protein, that mediates the final stages of adherence. Although they do not produce LT or ST toxins, there are reports that they produce an enterotoxin similar to that of Shigella. Other virulence factors may be related to those in Shigella.

Adherence of EPEC strains to the intestinal mucosa is a very complicated process and produces dramatic effects in the ultrastructure of the cells resulting in rearrangements of actin in the vicinity of adherent bacteria. The phenomenon is sometimes called attaching and effacing of cells. EPEC strains are said to be moderately-invasive meaning they are not as invasive as Shigella, and unlike ETEC or EAggEC, they cause an inflammatory response. The diarrhea and other symptoms of EPEC infections probably are caused by bacterial invasion of host cells and interference with normal cellular signal transduction, rather than by production of toxins.

Some types of EPEC are referred to as Enteroadherent E. coli (EAEC), based on specific patterns of adherence. They are an important cause of travelers diarrhea in Mexico and in North Africa.

Enteroaggregative E. coli (EAggEC)

The distinguishing feature of EAggEC strains is their ability to attach to tissue culture cells in an aggregative manner. These strains are associated with persistent diarrhea in young children. They resemble ETEC strains in that the bacteria adhere to the intestinal mucosa and cause non-bloody diarrhea without invading or causing inflammation. This suggests that the organisms produce a toxin of some sort. Recently, a distinctive heat-labile plasmid-encoded toxin has been isolated from these strains, called the EAST (EnteroAggregative ST) toxin. They also produce a hemolysin related to the hemolysin produced by E. coli strains involved in urinary tract infections. The role of the toxin and the hemolysin in virulence has not been proven. The significance of EAggEC strains in human disease is controversial.

Enterohemorrhagic E. coli (EHEC)

EHEC are represented by a single strain (serotype O157H7), which causes a diarrheal syndrome distinct from EIEC (and Shigella) in that there is copious bloody discharge and no fever. A frequent life-threatening situation is its toxic effects on the kidneys (hemolytic uremia).

EHEC has recently been recognized as a cause of serious disease often associated with ingestion of inadequately cooked hamburger meat. Pediatric diarrhea caused by this strain can be fatal due to acute kidney failure (hemolytic uremic syndrome [HUS]). EHEC are also considered to be moderately invasive. Nothing is known about the colonization antigens of EHEC but fimbriae are presumed to be involved. The bacteria do not invade mucosal cells as readily as Shigella, but EHEC strains produce a toxin that is virtually identical to the Shiga toxin. The toxin plays a role in the intense inflammatory response produced by EHEC strains and may explain the ability of EHEC strains to cause HUS. The toxin is phage encoded and its production is enhanced by iron deficiency.

Table . Pathogenic E. coli Summary of Virulence Characteristics of Intestinal Pathogens

ETEC

fimbrial adhesins e.g. CFA I, CFAII, K88. K

non invasive

produce LT and/or ST toxin

watery diarrhea in infants and travelers; no inflammation, no fever

EIEC

nonfimbrial adhesins, possibly outer membrane protein

invasive (penetrate and multiply within epithelial cells)

does not produce shiga toxin

dysentery-like diarrhea (mucous, blood), severe inflammation, fever

EPEC

non fimbrial adhesin (intimin)

moderately invasive (not as invasive as Shigella or EIEC)

does not produce LT or ST; some reports of shiga-like toxin

usually infantile diarrhea; watery diarrhea similar to ETEC, some inflammation, no fever; symptoms probably result mainly from invasion rather than toxigenesis

EAggEC

adhesins not characterized

non invasive

produce ST-like toxin (EAST) and a hemolysin

persistent diarrhea in young children without inflammation, no fever

EHEC

adhesins not characterized, probably fimbriae

moderately invasive

does not produce LT or ST but does produce shiga toxin

pediatric diarrhea, copious bloody discharge (hemorrhagic colitis), intense inflammatory response, may be complicated by hemolytic uremia

E. coli info #

the labels on frozen steak products

Frequently Asked Questions

•What is Escherichia coli O157H7?

•How is E. coli O157H7 spread?

•What illness does E.coli O157H7 cause?

•How is E. coli O157H7 infection diagnosed?

•How is the illness treated?

•What are the long term consequences of infection?

•What can be done to prevent the infection?

•What can you do to prevent E. coli O157H7 infection?

Escherichia coli O157H7 is an emerging cause of foodborne illness. An estimated 7,000 cases of infection and 61 deaths occur in the United States each year. Infection often leads to bloody diarrhea, and occasionally to kidney failure. Most illness has been associated with eating undercooked, contaminated ground beef. Person-to-person contact in families and child care centers is also an important mode of transmission. Infection can also occur after drinking raw milk and after swimming in or drinking sewage-contaminated water.

Consumers can prevent E. coli O157H7 infection by thoroughly cooking ground beef, avoiding unpasteurized milk, and washing hands carefully.

Because the organism lives in the intestines of healthy cattle, preventive measures on cattle farms and during meat processing are beinginvestigated.

What is Escherichia coli O157H7?

E. coli O157H7 is one of hundreds of strains of the bacterium Escherichia coli. Although most strains are harmless and live in the intestines of healthy humans and animals, this strain produces a powerful toxin and can cause severe illness.

E. coli O157H7 was first recognized as a cause of illness in 18 during an outbreak of severe bloody diarrhea; the outbreak was traced to contaminated hamburgers. Since then, most infections have come from eating undercooked ground beef.

The combination of letters and numbers in the name of the bacterium refers to the specific markers found on its surface and distinguishes it from other types of E. coli.

How is E. coli O157H7 spread?

The organism can be found on a small number of cattle farms and can live in the intestines of healthy cattle. Meat can become contaminated during slaughter, and organisms can be thoroughly mixed into beef when it is ground. Bacteria present on the cows udders or on equipment may get into raw milk.

Eating meat, especially ground beef, that has not been cooked sufficiently to kill E. coli O157H7 can cause infection. Contaminated meat looks and smells normal. Although the number of organisms required to cause disease is not known, it is suspected to be very small.

Among other known sources of infection are consumption of sprouts, lettuce, salami, unpasteurized milk and juice, and swimming in or drinking sewage-contaminated water.

Bacteria in diarrheal stools of infected persons can be passed from one person to another if hygiene or handwashing habits are inadequate.

This is particularly likely among toddlers who are not toilet trained. Family members and playmates of these children are at high risk of becoming infected.

Young children typically shed the organism in their feces for a week or two after their illness resolves. Older children rarely carry the organism without symptoms.

What illness does E. coli O157H7 cause?

E. coli O157H7 infection often causes severe bloody diarrhea and abdominal cramps; sometimes the infection causes nonbloody diarrhea or no symptoms. Usually little or no fever is present, and the illness resolves in 5 to 10 days.

In some persons, particularly children under 5 years of age and the elderly, the infection can also cause a complication called hemolytic uremic syndrome, in which the red blood cells are destroyed and the kidneys fail. About %-7% of infections lead to this complication. In the United States, hemolytic uremic syndrome is the principal cause of acute kidney failure in children, and most cases of hemolytic uremic syndrome are caused by E. coli O157H7.

How is E. coli O157H7 infection diagnosed?

Infection with E. coli O157H7 is diagnosed by detecting the bacterium in the stool. Most laboratories that culture stool do not test for E. coli O157H7, so it is important to request that the stool specimen be tested on sorbitol-MacConkey (SMAC) agar for this organism. All persons who suddenly have diarrhea with blood should get their stool tested for E. coli O157H7.

How is the illness treated?

Most persons recover without antibiotics or other specific treatment in 5-10 days. There is no evidence that antibiotics improve the course of disease, and it is thought that treatment with some antibiotics may precipitate kidney complications. Antidiarrheal agents, such as loperamide (Imodium), should also be avoided.

Hemolytic uremic syndrome is a life-threatening condition usually treated in an intensive care unit. Blood transfusions and kidney dialysis are often required. With intensive care, the death rate for hemolytic uremic syndrome is %-5%.

What are the long-term consequences of infection?

Persons who only have diarrhea usually recover completely.

About one-third of persons with hemolytic uremic syndrome have abnormal kidney function many years later, and a few require long-term dialysis. Another 8% of persons with hemolytic uremic syndrome have other lifelong complications, such as high blood pressure, seizures, blindness, paralysis, and the effects of having part of their bowel removed.

What can be done to prevent the infection?

E. coli O157H7 will continue to be an important public health concern as long as it contaminates meat. Preventive measures may reduce the number of cattle that carry it and the contamination of meat during slaughter and grinding. Research into such prevention measures is just beginning.

What can you do to prevent E. coli O157H7 infection?

Cook all ground beef and hamburger thoroughly. Because ground beef can turn brown before disease-causing bacteria are killed, use a digital instant-read meat thermometer to ensure thorough cooking. Ground beef should be cooked until a thermometer inserted into several parts of the patty, including the thickest part, reads at least 160º F. Persons who cook ground beef without using a thermometer can decrease their risk of illness by not eating ground beef patties that are still pink in the middle.

If you are served an undercooked hamburger or other ground beef product in a restaurant, send it back for further cooking. You may want to ask for a new bun and a clean plate, too.

Avoid spreading harmful bacteria in your kitchen. Keep raw meat separate from ready-to-eat foods. Wash hands, counters, and utensils with hot soapy water after they touch raw meat. Never place cooked hamburgers or ground beef on the unwashed plate that held raw patties. Wash meat thermometers in between tests of patties that require further cooking.

Drink only pasteurized milk, juice, or cider. Commercial juice with an extended shelf-life that is sold at room temperature (e.g. juice in cardboard boxes, vacuum sealed juice in glass containers) has been pasteurized, although this is generally not indicated on the label. Juice concentrates are also heated sufficiently to kill pathogens.

Wash fruits and vegetables thoroughly, especially those that will not be cooked. Children under 5 years of age, immunocompromised persons, and the elderly should avoid eating alfalfa sprouts until their safety can be assured. Methods to decontaminate alfalfa seeds and sprouts are being investigated.

Drink municipal water that has been treated with chlorine or other effective disinfectants.

Avoid swallowing lake or pool water while swimming. See more information about this.

Make sure that persons with diarrhea, especially children, wash their hands carefully with soap after bowel movements to reduce the risk of spreading infection, and that persons wash hands after changing soiled diapers. Anyone with a diarrheal illness should avoid swimming in public pools or lakes, sharing baths with others, and preparing food for others.

For more information about reducing your risk of foodborne illness, visit the US Department of Agriculture's Food Safety and Inspection Service website at http//www.fsis.usda.gov or the Partnership for Food Safety Education at For more advice on cooking ground beef, visit the U.S. Department of Agriculture web site at http//www.fsis.usda.gov/OA/topics/gb.htm

The term E. coli is an abbreviation for the bacteria Escherichia coli.

E. coli bacteria were discovered in the human colon in 1885 by German bacteriologist Theodor Escherich. Dr. Escherich also showed that certain strains of the bacteria were responsible for infant diarrhea and gastroenteritis - an important public health discovery. Although the bacteria were initially called Bacterium coli, the name was later changed to Escherichia coli to honor its discoverer.

Soon after its discovery, E. coli became a very popular lab organism because scientists could grow it quickly on both simple and complex mediums. E. coli can grow in air, using oxygen as a terminal electron acceptor (aerobically) or without air, by what is called fermentative metabolisman (aerobically). The ability to grow both aerobically and anaerobically classifies the E. coli bacteria as a facultative anaerobe.

Although E. coli has been often in the news as a foodborne pathogen, the vast majority of E. coli strains are harmless, including those commonly used by scientists in genetics laboratories. E. coli is found in the family of bacteria named Enterobacteriaceae, which is informally referred to as the enteric bacteria. Other enteric bacteria are the Salmonella bacteria (also a very large family, with many different members), Klebsiella pneumoniae, and Shigella, which many people consider to be part of the E. coli family.

E. coli O157 H7

Because there are so many different strains of E. coli, microbiologists classify it into more than 170 serogroups. Within each serogroup, there are one or more serotypes. For example, O16H and O16H7 represent two serotypes of E. coli, with the O16 signifying the particular serogroup to which these serotypes belong. E. coli O157H7 was identified for the first time at the U. S. Centers for Disease Control (CDC) in 175. However, it was not until seven years later, in 18, that E. coli O157H7 was conclusively determined to be a cause of enteric disease. Specifically, in 18, following outbreaks of foodborne illness that involved several cases of bloody diarrhea, E. coli O157 H7 was firmly associated with hemorrhagic colitis.1 As a result of this association, E. coli O157 H7 was designated as an enterohemorrhagic E. coli, or EHEC.

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