Global Wine War Analysis Essay
Global Wine War Analysis
1. Due to French history and tradition it was possible to gain a strong image in regard to vinery and example, which can be highlighted might be the invention of Champaign. The experience of France as a quality wine producer going back to the middle ages can be regarded as a source of competitive advantage. Another source is the strong wine culture in France creating a positive image for customers. The wine industry by itself is a very important economic factor in France, in the mid 18th century the wine industry accounted for 17% of the overall industry.
As a consequence, in 1855 the government classified wine yard into five different levels of quality. This helped the consumers to identify the best possible wines and was unique at the time, which created sustained competitive advantage. Simultaneously, the introduction of mass production of bottles and use of cork stoppers facilitated the former difficult distribution of French wine to foreign markets. The “phylloxera” insect destroyed almost all French wine yards in the late 19th century, giving the first opportunity for New World ( US, Chile and Australia) wines to rise.
Due to the complex protection system of French wines, quality was an issue in the production of wine as for example irrigation systems under the “AOC”-label are prohibited while in the New World there were no limits toward innovations. What changes in the global industry structure and competitive dynamics led France and other traditional producers to lose market share to challengers from Australia, united States, and other New World countries in the late twentieth century? 2. There were important developments in the global wine industry that lead to shifts in market share of old world producers to new world producers.
First, demand changed severely starting in the late 19th century. Consumption in traditional wine consuming nations like France and Italy decreased significantly. This was mainly due to changing drinking preferences brought about by health concerns of substitute products. At the same time, although numerically not compensating for the decline mentioned before, wine demand rose in importing countries, a lot of them located in Asia. Second, drinking wine moved away from its mere traditional touch and became subject to quickly changing fashions and trends.
This put France at disadvantage: They were unable to adequately adapt to these fashions because the French vineyards were too small to grow different kinds of grapes that could have met the currently preferred wine and growing high-quality grapes took several years. On the other hand, the US producers’ vineyards, for instance, were many times bigger on average allowing them to spread risk by growing different grapes. Third, the new world producers took away market share by actively engaging in innovations in the areas of production technology and marketing.
For instance, Australian producers substituted the traditional glass bottles with containers reducing production costs and facilitating export. These innovations were possible because the new world countries were not subject to strict national regulations that wanted to preserve the traditional wine business in the old world countries. Fourth, the newly rising competitors often controlled the entire value chain from production to distribution. This left them with a bigger margin then their traditional competitors and made them less dependent of specific distribution channels. 3. a.
Advice to the head of the French wine industry •Develop a brand “Produit en France”: Customers do not know what they want when they enter a wine store. Sharpen the image of the certification system, reduce its complexity, and communicate this to the customers so that they recognize the classification label as a strong brand b. Advice to the owner of the a Bordeaux vineyard •Get to know your customers and discuss founding a consortium to better adapt to changing fashions: Engage in thorough market research to predict consumers’ preferences and try to influence their preferences with targeted advertising.
Discuss founding a consortium of different wine producers to produce different wines that will be high in demand soon in the future. c. Advice to the French Minister of Agriculture •Help your producers sell their vine: provide more funds for marketing campaigns and fund workshops on how they can identify their target group and do targeted, cost-efficient marketing ? 4. a. Australian Minister of Agriculture: The labeling of wine according to regions in Australia has been already done but not with protection by law.
Tighten laws in relevance of how to label wines can be beneficial in the long run when it comes to value creation, as can be successfully recognized in France. Simultaneously, a financially subsidy should support wine yards with their surplus production hence the successful long-term strategy “Directions to 2025”, which foresees value growth by 2015 and global leadership on the wine market by 2025 might be eased. This is necessary since Australia will cannot compete on price in the long-term bringing to mind low cost production countries such as Chile. b. Australian wine industry association.
Align marketing activities with the plan of “Direction to 2025”. Support the Australian’s wine image from cheap and cheerful into a classified and recognizable labeling scheme. It might be added that the new scheme can be restructured in a way that it does not mix up psychographic targeting with regional ones, since this might be confusing. The implementation of a regional scheme might pay off better, as it is currently done in other New World wine markets. Moreover the surplus production can be used in order to producing premium strong drinks hence value is added to products, as it is done in Italy with the “Grappa” or France with “Cognac”.
c. Mid-size, well regarded vineyard Target customers more directly through own website and social media activities. Moreover a convenient retail should be found, both domestically and globally in order to assure a thriving placement of the vineyard’s products reflecting the premium brand image. In the long run brand value should be sustained and if possible enhanced in order to assure that his products do reflect supreme quality and is not associated with the “cheap and cheerful” Australian wine image. This can be achieved through the transition towards organic wine grow.