Global Wine War 2009 : New World versus Old
How were the French able to dominate the worldwide wine trade for centuries ? What sources of competitive advantage did they develop to support their exports ?
France and the Mediterranean region is closely tied to the Wine History. It has started since the Roman Empire, and has been fully integrated to the European culture with the Christian era : Monasteries planted vines and built wineries. The nobility started also planting vineyards as a mark of prestige. In this early market, France has been dominant thanks to key advantages :
1. Factors Conditions : First, their geographic and climatic features played significant role. As France is in ...view middle of the document...
This classification contributed to make the fame of many wine producers (Bordeaux,...)
Given the longstanding dominance of Old World wine producers, how were the New World producers, such as the Australians, able to expand their market share so rapidly in the 1990's ?
The wine production has turned global. Nowadays, the wine production is no longer the preserved domain of France and other Old World countries. Some countries such as Australia have seen many strong producers challenging the French dominance. The expansion of their market share has been made possible thanks to key advantages :
1 - Factors Conditions :
• Geographical and climate factors : suitable lands was widely available and less expensive than in France. This fact, matched with a cheaper labor force, contributed to get the price per bottle lower.
• Innovation have permitted to get the production cost lower. Controlled drip irrigation allowed expansion into marginal land and reduced vintage variability. The harvesting has been mechanized
2 - Demand conditions :
• The intern demand has kept growing since the post war period. In Australia, the annual consumption per capita grew from 2 liters in 1960 to 24 liters in 2006. This demand enable producers to built their marketing expertise in their home market during the 1970's, then they export it.
3 - Firm strategy, structure and rivalries
• Reinventing the Marketing Model : innovative in packaging and marketing. The Australian developed :
o the "wine in a box" package which is more suitable for the current market.
o screw caps
• Australia took advantages of a differentiation strategy. They made their bottle more appealing for unaccustomed wine consumers. In addition, new-world producers learned the value of product differentiation and consumer focused attitudes to create mass appeal.
• The New World companies controlled the full value chain, extracting margins at every level. new-world producers moved away from multilevel value chains that caused operating inefficiencies. Instead, the new-world producers typically controlled the full-value chain, extracting margins at each level and retaining bargaining power.
On a contrary, The main vulnerable aspects of French wine industry were highly fragmented vineyard and wine production, increasing vineyard prices per acre, complex distribution and sales system, long multilevel value chain, risk of bad weather and disease; and poor roads and complex toll and tax system. Those aspects contributed to the decline of French wine on the market.
What advice would you offer today to the head of the French wine industry association ?
The extent of differentiation was a governmental classification system of quality based on rules and controls. => The wine market was complex and highly fragmented. The classifications helped customers understand purchase
Focus was on large volume production, not quality => Wine became culturally and economically significant. In...