Global Wine War

1. How did the French become the dominant competitors in the increasingly global wine industry for centuries? What sources of competitive advantage were they able to develop to support their exports? Where were they vulnerable?

By the Christian era, wine became part of the liturgical services and monasteries planted vines and builtwineries and the European nobility began planting vineyards as a symbol of prestige, competing inquality of wine they serve on their table, i.e. start of premium wine market. French wine producersbecame the dominant competitor as a result of four reasons. First, their geographic and climatic featuresplayed significant role. As France is in the middle of Europe culture with suitable climate and soilcondition for harvesting grape, had accrued first-mover advantage and established its place as thedominant competitor in the global wine industry. Second, they became the first high-quality winemarket and gained a lot experience.

Especially, the negociants traded wine between France and othercountries and this worked as word-of-mouth effect, increasing the reputation and dominance of Frenchwine. Third, they used the latest innovations such as mass production of glass bottles, the use of cork stoppers and pasteurization. These innovations increased the stability and longevity of wine whichallowed the transportation of wine to distant places, and birth of global wine market. Lastly, thegovernment support made significant effect on the reputation and improvement of French wineindustry. Government controlled the wine production and quality, regulations like AOC and VDQS, setdetailed and quite rigid standards for vineyards and wine makers.

The main vulnerable aspects of French wine industry were highly fragmented vineyard and wineproduction, increasing vineyard prices per acre, complex distribution and sales system, long multilevelvalue chain, risk of bad weather and disease; and poor roads and complex toll and tax system 2. What changes in the global industry structure and competitive dynamics led France and other traditional producers to lose market share from challengers from Australia, the U.S., and other new world countries in the late 20th century? All over the ages, European countries were alone on the world wine market.

They have a great heritage in production and are known and appreciated in all countries. They tried to exportat their products but they had faced problems ( like transportation which is extremely expensive and wine that don’t travel well). Also, producers tried to find solutions like new packages (glass bottles in the 18th century and early the 19th) but this was done outside a competition point of view. Unfortunately, the solutions found was not very elaborated and did not allow French wine to be largely spread in the foreign countries. They did not though that this non-satisfied demand in international countries would lead them in a “wine war”.

Complex national and European Community legislations (taxes on exportations, little possibility to transform the wine and to create new excisting products around it, high cost of roduction…) added to the transportation problems did not allow French producers to satisfy the needs allover the world. Therefore, some countries began producing their own wine and also developed new processus and new technologies to produce, transport and market their product. Until today, United States, Australia, Chile and other countries manage to reach good ranking in sales and good reputation of their products.

Their creativity, innovations and lower prices permit these “New world” producers to follow the demand and understand the new young generations’ and new wine-drinker-countries’ demand. During this time, countries such are France was struggling with legislation and continued to think people prefer French wine because of it’s quality and it’s long tradition. They just looked at the decreasing consumption of “classic”, “everyday… 3. What advice would you offer today to the French Minister of Agriculture? To the head of the French Wine Industry Association? To the owner of a mid-size, well regarded Bordeaux vineyard producing wines in the premium and super premium categories?

4. What advice would you offer today to the U.S. Secretary of Agriculture? To the head of a major U.S. Wine Industry Association? To the owner of a mid-size, well regarded vineyard in the Napa Valley producing wines in the premium and super premium categories?