Global Wine War 2015

New versus Old

● How did french producers remain dominant competitors for centuries in an increasing
global wine industry?

By the christian era , wine became a part of the liturgical services and monasteries planted
vines and built wineries and the european nobility began planting vineyards as a symbol of
prestige, competing in the quality of the wine they serve on their table , i.e start of premium
wine market. French wine producers became dominant competitors as a result of four
reasons:-
1. Their geographical and climatic features played a significant role. As France is in the
middle of the europe culture with the suitable climate and soil condition of harvesting grapes,
had accrued first mover advantage and established its place as a dominant competitor in the
global wine industry.
2. They became the first high quality wine market and gained a lot of experience. Especially,
the negociants traders wine between France and other countries and this wired as word of
the mouth effect, increasing the reputation of the dominance of the French wine.
3. They used the latest innovations such as the mass production of the glass bottles, the use
of the cork stoppers and pasteurisation. These innovations increased the stability and
longevity of the wine which allowed the transportation of the wine to distant places, which
gave birth to the global wine market.
4. The government support gave a significant effect in the reputation and improvement of the
French wine industry. Government controlled the production and the quality of the wine,
regulations like AOC and VDQ, set detailed and quite rigid standards for vineyards and wine
makers.

● What changes in the global industry structure and competitive dynamics allowed
challengers from Australia and other New World countries to take market share from
France and other traditional producers in the late twentieth century?

The New World countries had several damages over traditional producer countries in
production norms. First, suitable land was widely available and less expensive, allowing the
growth of much more extensive vineyards. Unconstrained by the tradition, they began to
experiment with the grape growing and winemaking technology; they used mechanical
harvesters, irrigation methods. Other experiments with fertilisers and pruning methods
increased yield and improved grape flavour.
They broke the many winemaking traditions and used on-site labs to provide analysis helpful
in making growing and harvest decisions. Lastly, as a result of these innovations in the
productions they were able to reduce their cost per tonne to nearly half of french wine.
The second New World countries were reinventing the marketing model. They came up with
innovative packaging designs like ‘wine box”, screw caps instead of cork ones. Beside, they
tried to appeal to the palates unaccustomed to wine, and launched products for this market
segment. The big CPG companies -like Coca- Cola, Nestle etc- entered the market, even
though they left after a decade, they influenced the New World wine market with their
customer focused attitude and sophisticated marketing skills. Lastly, the New WOrld
producers controlled the whole value chain, extracting margins at every level and retaining
bargaining power. Overall, changes in production and marketing aspects of wine by new
world countries led to the market share loss of the traditional wine producers countries.

● Focusing in particular on opportunities and risks presented by the Chinese market,

what advice would you offer 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?

About the owner of a mid-size, well-regarded Bordeaux vineyard producing wines in the
premium and super premium categories; One of the major disadvantages that the French
wine industry faces is the strict AOC regulations. Up to a point this is an advantage for the
french wine industry since the regulation forces the French Wine producers to producers the
best wine industry in the world but with the emerge of the New World players, the industry
environment changed and these regulations turned out to be encumbering the French wine
industry with reducing the competitive power of French industry.
The EU lifting the plating rights restrictions might seem like the beginning of the end og the
current system and the legacy of the vineyards, it can be blessing where the WIA and
Agriculture minister can assist new producers as well as old wine makers to inculcate new-
world wine making processing by investing in research and technology which may help them
achieve better quality standards.

Owner of a Mid-Size Vineyard:

There has been a decline in the consumption of premium and super premium wines due to
an increased importance being given to the middle market of wines, even France focusing its
advertisement campaigns on mid-range wines with an attempt to make its wine better to the
authorities. What he can do is make investments to improve the supply chain to gain better
margins and control on his produce.