1.

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

France has very nice continental climate and good geography to make balanced wines.
The main consumers of exported wine were the British and the people of low countries. Since
those areas had a climate that were too cold to grow high quality wine themselves, they
turned to the closest location that could produce great wine: France. The close geographical
proximity, and easy shipping made especially the Bordeaux region the primary producer and
exporter of wine. Starting from the late middle ages and early modern period, the wine trade
became the great import/export commerce in Europe. Some historians even argue that the
wine trade was the source of the beginnings and rise of capitalism. Through export, the
French vintners could access wealthy, discerning customers, who would pay a premium for
quality. They also had a wealthy internal market in the French court and aristocracy. From
1305, for a century, they also had access to the Papal court in Avignon. For even longer
period, they had access as well to the rich court of the Dukes of Burgundy. Having three rich
and sophisticated courts nearby, and a substantial export market, gave French vintners access
to markets which would pay a considerable premium over the price of ordinary wines for
superb wines. The French began to build brands for their fine wines early. In 1855, the
Bordeaux classification of wines by quality, into the cru system was officially adopted. In
1936, the French government instituted the appellation controlee system of wine
regulation, ensuring that wines labeled from an appellation which could only contain grapes
from that appellation, and had to meet quality standards. Though many other countries have
subsequently adopted similar systems, France was the leader in promoting its wine brands
internationally, regulating quality, and defending the traditional wine brands against
counterfeiting in other countries. France had a huge internal market in Paris. Cheap wines
were produced in France for the Paris market because of the convenient water transport in the
city. Many peasants owed their livelihood to produce wine for Paris. It magnified the
importance of wine industry in France. Therefore, the major economic powers of the world in
Northern Europe had huge appetite for French wine in addition to the areas of the world
which started to become economically powerful. A lot of wine consumerism was to prove
one's social fitness that was important to have wine from historically prestigious regions. The
French wine districts were also at the rivers, and near the sea which helped to make export of
heavy wine barrels economically. The French learned the export business earlier than its
competitors. The experience, knowledge, and connections helped French to continuously
dominate the wine business. In 2002, France was the number 1 producer of wine in the world,
followed by Italy, Spain and the USA. France produced more than twice as much wine as the
USA in that year. France was also the number two consumer of wine after Luxembourg. The
main vulnerable aspects of French wine industry were highly fragmented vineyard and wine
production, increasing vineyard price per acre, complex distribution and sales system, long
multi-level value chain, risk of bad weather and disease, poor roads, 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 to challengers from Australia,
United States, and other New World countries in the late twentieth century?
As the New Market and the New World were opened, their wine companies were
introducing innovations at every stage of the value chain. They had people, expertise,
technology and commitment to obtain global preeminence. They had competitive advantage
to anticipate the market. Therefore, they influenced consumer demands, and built their
strategy of sustainable growth. New markets opened in the 18th century. Climate and soil
allowed grape to grow nicely in the New World. Consumption of wine increased annually. In
the post war era, demand for wine increased rapidly in the US, Australia, and other New
World countries. Norms of the production were also changing which favored the New World
countries. On the back of the post war economic boom, New Worlds wine became widely
available and less expensive which allowed the growth of more extensive vineyards. Also,
without being trapped by tradition, New World producers began to experiment with grape
growing and wine making technology. In Australia, controlled drip irrigation allowed
expansion into marginal land and reduced vintage variability while irrigation was strictly
forbidden in France under AOC regulations. The larger vineyards also allowed the use of
specialized equipment such as mechanical harvesters and mechanical pruners which greatly
reduced labor costs. Innovation also extended into viniculture where New World producers
pursued techniques such as night harvesting to maximize the sugar in grapes. Other
experiments with fertilizers and pruning methods increased, and improved the flavor of
grapes. New World wine companies also broke many wine making traditions. Large estates
usually had on-site labs to provide analysis to be helpful in making, growing, and harvesting
the grapes.

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?
One of the major disadvantages that French wine industry faces is the strict AOC
regulations. This is an advantage for French wine industry since these regulations forces the
French wine producers to make the best wine in the world. However, with the emerge of the
New World players, the industry environment changed and these regulations turned out to be
an obstacle to the French wine industry with reducing competitive advantage. If I were a head
of the French wine industry association, I would try to lessen the restrictions coming from
AOC. For example, I would try to increase the usage of technology in wine production, wine
making, and labs to get better harvests and better taste of wine. Besides, the severe
intervention by government should be stopped. The government purchase of surplus wine
which are distilled into industrial alcohol has to be stopped. They need to stop rewarding the
poor growers who make unsellable wine. They should let them go out of business so that
their land can be utilized by more productive and successful growers. The owners of a mid-
size, well-regarded Bordeaux vineyard produce wines in the premium and super premium
categories. They are lucky because there are shifts of quality wine in the global market. But,
he should be

4. What advice would you offer today to the Australian Minister of Agriculture? To the
head of Australian wine industry association? To the owner of a mid-size, well
regarded vineyard in the Barossa Valley (a premier Australian wine region) producing
wines the premium and super premium categories?

5. What advice would you offer to the US Secretary of Agriculture? To the head of a
major US wine industry Association? To the owner of a mid-size, well regarded
vineyard in Napa valley producing wines in the premium and super premium
categories?