Global Wine Wars: New World Challenges Old

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Global Wine Wars:  New World Challenges Old

        With the emergence of New World players in the global wine industry many of the Old World players have been losing market share.  At first France, Italy, Spain, and Germany simply laughed at the wine-making techniques of the new players - U.S, South America, South Africa, Australia, and New Zealand. However, it quickly became apparent that the newcomers pose a serious threat to the traditional winemakers. The French were especially hurt when they began to lose their global market share as well as the coveted U.K. market to the Australians. The main issue in this case is the following question:

        How can France regain and increase its market share in the global wine industry?

Analysis

The following are the major problems of the French winemakers:

  1. Strict AOC regulations

One of the advantages that the New World competitors have over France is their innovative culture.  France’s hundreds of years of tradition are matched by the Australians ability to experiment with different techniques, packaging, and marketing strategies.  Their technological and innovative approach allows the New World competitors to meet their consumers’ needs and tastes better while the French are stuck with the AOC regulations. The AOC regulations are really only applicable to “fine wine” that has minimal value market share according to Exhibit 4.  With France’s limited amounts of available land, AOC regulations only make it difficult to adjust to the consumer’s changing tastes.  The New World producers have a lot more natural resources that allow room for changes. As a result, France must decrease regulation in order to regain the ability to compete with the New World.

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  1. Excessive government intervention

The government’s purchase of surplus wine to be distilled into industrial alcohol has to stop eventually.  They need to stop rewarding the poor growers that make unsellable wine and let them go out of business so that their land can be utilized by more productive and successful growers.  A certain level of government support for an industry that is going through some rough times is understandable.  However, with wine’s extremely long production lag time, the encouraged increase of supply now will create a major lack of demand in the future.  Therefore this solution can only be ...

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