Global Wine War Case

Matthieu Albert

Global Wine War

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

France has a strong wine production and culture that took root centuries ago. Over the decades wine became the most important beveurage in France because the opinion leaders such as French Lords, but not only, also contributed to give recognition to wine. Wine became a legacy and a way for French regions to be differenciated, to compete with each other. Even though the productivity was not the best French asset, they used innovation such as mass production of glass bottles or more importantly the development of pasteurization to gain advantage over others. Obviously France always had a really strong domestic market, that helped developping wine as an economic business and giving money to producers. This is these knowledge, roots and money that allowed the development of the French industry.

Sources of competitive advantages to support their exports : a strong domestic market that allowed their producers to earn money, also a good location in order to export (as the wine industry was focused on Europe for a while and the coutries at the French borders were good consumers). France benefited from the fact that its politicians realized earlier than others the importance of regulation in order to create Brands (the famous AOCs, Appelation d’origine controllée), to differenciates types of wine, to give the recognition and to be a quality guarantee. France was one of the first country to understand how important the wine industry could become.

French were vulnerable in several ways. First, they had mostly small vineyards which mean multiple small producers rather than stronger ones. As a result, there were only small production of each brand. In other words these producers had no real power of negociation, not much control and could not reduce their costs through economies of scale. Besides too many brands can be confusing. If political measures helped at the beginning they also became a burden as they prevented innovation (new products, new ways of production). France also relied a lot on its domestic market and the mentality was also an issue : French were to pride to admit they had lost their advantages. They thought they were the best (« the poetry of wine ») and no one could beat them.