Q1: What competitive advantages did the French wine producers develop to remain dominant competitors for centuries?
French wine producer remained dominant because of political support that acts as the key factor in the thriving of the French winemaking industry in the 19th century. Bordeaux committee formed a wine classification system as a marketing strategy enabling their consumers to identify the best wine from the vineyards classified in five levels of quality. Furthermore, in the 21st century, the French government revised its AOC laws to new AOP Laws adopting a new classification system that helped to raise the standards of French wine as compared to other brands. Also, the new classification systems allowed the use of innovations originating from the modern world such as the use of steel tanks rather than traditional oak barrels. The move improved wine production in France. Therefore, the French government facilitated the marketing of French wine and regulations that enabled product differentiation and checking of new entrants making its wine have a competitive advantage.
Secondly, the French wine producers were embracing new technology that gave the company an advantage. For instance, the application of innovations such as the use of glass bottles, pasteurization and the use of corks stoppers increased the lifespan of the French wine. Moreover, it became easier for the transportation of wine to longer distances.
Lastly, strategies by the French wine producers made the producers gain a competitive advantage. For example, the venture with Chinese distributors to protects profits and maintain the reputation of the traditional distribution system, five-year modernization plan to boost competitiveness and increase mass production and the revitalization plan by Bordeaux wine industry to promote mid-priced wine in key markets made the producers competitive.
Q2: What changes in the structure of the industry and in the competitive dynamics allowed the Australian and New World competitors to take market share away from the French producers in the late 20th century?
The market experienced a shift in consumer preferences reducing French wine customers. For instance, with the health issues and substitute products associated with French brands, it facilitated the shift of customers from French brands to new world wine brands.
The absence of strict regulations in Australia and other new world countries facilitated the introduction of new methods irrigation such as drip irrigation which further increased the acreage under vine farming and reduction in vintage variability. In contrast, these new methods were prohibited by French wine regulations. Also, the absence of regulations resulted in innovations such as stainless tanks and use of oak chips which helped in reducing production costs. The French industry was disadvantaged due to the strict laws regulating its wine industry.
Also, the new world countries devised new methods for packaging and marketing. The new packaging strategies include the use of card box and screw caps rather than the traditional corks. Besides, the new methods made it to easier to package wine reducing production costs and wine spoilage. Further, the new world wine producers controlled the distribution chain retaining the value share and the bargaining power up to the consumer level. The control helped in reducing the channels and reduction of the stock held. Conversely, France distribution was controlled by the négociants.
To summarize, branding was the key aspect in the Australian and the new world wine producing countries as compared to France that embraced traditional wine. For instance, the Australian created hierarchy of wines which enabled their customers to grow gradually from one level to another. The move helped in building trust in their brand.
Q3: Focusing on risk and opportunities in the Chinese market, what advice would you give to French wine producers producing premium and super premium Bordeaux wines?
The France producers should prioritize promotional events, wine educational seminars, and tastings across major cities in China. These initiatives will prove to be effective as it had boosted the France wine Vin de Frances sales by 12% in a year. Also, the initiatives were the secret success tools for Australia wines in China since they helped make France mid-level wine recognizable.
Also, the France government should merge its wine producers into a single group. The group will advocate for the interests of wine producers in China. Moreover, it will address issues of demand, price premium, and global competition. Australia government used this strategy to address the issue of worsening image and decrease of wine exports to China increasing its exports by 6.4% in volume in 2015.