The French wine industry is respected for its competitiveness and its lead position within the global market (Heien & Martin, 2003), (Anderson, 2004). In terms of the market share, French wine has been known to take up the largest portion; it currently stands at approximately seventeen percent of all the world’s wines. Spain and Italy are some of the few wine producing nations that have come close to reproducing France’s success.
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The latter country has secured such a position in the industry due to its high quality brands. Some of the common names include Champagne and Bordeaux (Jenster, 1993). However, Auriol et al. (2004) and Orange.com (2006) point out that recent trends may give France a reason to worry over the possibility of maintaining this position.
Not only does the country rely on the wine industry for economic stability, it also considers wine to be an essential part of its culture. It must therefore work towards reorganizing itself and getting back the market share it is loosing to other competitors. One way of achieving this is through first understanding what could have led to the drop of French wine in the industry.
Warren and Melewar (2006) carried out a comprehensive research on the French wine industry. Their interest was to determine how the poor performance of the French wine industry was related to marketing failure. The researchers looked at the French wine industry through an analysis of English and French literature as a well as a small analysis of current drinking habits.
It was found that independent wine producers were having a difficult time in marketing their product because they did not have the leverage that older wine makers did. Additionally, it was found that there were problems with overall marketability of French wines because instead of integrating into local cultures, most French wines were marketed on the basis of the country of origin.
While this piece was very insightful, it mostly focused on marketing. There is a need to look at a more comprehensive outlook on poor performance of French wine in the global market and this will be done in the research.
Other kinds of articles that have done the same include: Swaminathan (1995), Bevarland (2000) and Dodd (1999). The first two authors blamed overall failure in wineries to marketing challenges but the research will not just be restricted to this angle.
Jenster and Jenster (1993) did research on the European wine industry. They were mostly concerned with general emerging trends in the global industry. To this end, the literature did not focus on the global wine leader and its dwindling sales. This research will attempt to specify this aspect even more.
Moran (1993) focused on appellation legislations and how they affect the most powerful groups in the French wine industry. Although this research was quite useful in understanding the working of winemaking regions in France, other dynamics of the industry were not discussed in the article.
This research will focus on sealing those gaps by not just looking at the territorial aspect but by examining economic, social and political reasons behind the poor performance of French wine makers in the global market.
Chollette (1993) worked on a comparison between the French wine industry as well as the Californian one. It looked at matters revolving around the business cycles and market patterns. Although this article is pretty insightful on the business aspect of French wine, its emphasis on the comparisons has led to a compromise on France as a wine producer of its own.
This article has also disregarded other elements of the industry such as marketing. In other words, it is more inclined towards the business side but not the marketing side yet the latter is just as important. The research will focus on covering that gap by focusing on none business related as well as business related factors in French wine making.
Hall (2007) wrote a book on wine tourism around the world. This book is insightful and does mention tourism in the French context. However, very little attention goes to other emerging trends in the French wine industry. It would be crucial to bridge that gap by making a comprehensive list or compilation of all other patterns affecting this industry. This is what will be done in the research.
All business. com (2001) covered a story on how France is losing its market share. The article is quite good for understanding some of the basics on France’s performance in the global market. However, it will not be useful in revealing some of the deeper issues that could be causing these poor results. Therefore, the research will aim at covering that up by offering a deeper analysis of the patterns within the global wine industry.
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Charteau – Barbey (2009) describe the wine industry in general. Here they talk about the cultural significance of the commodity to the French and then go further to look at certain elements such as wineries. The major difference between this article and the research to be carried forward is that no solutions are identified or no deep analyses are made in the former. These issues will be incorporated in subsequent sections of the research.
Goode (2006) does a very good job of highlighting what the major issues in the French wine industry really are. However, he does not cover them with regard to global challenges.
The research will attempt to inculcate these aspects into a study of the French wine industry. It will also attempt to include some of the missing issues related to the international wine market. Furthermore, the research will be more objective than the article because a myriad of factors will be incorporated.
Orange.com (2006) looked at the crisis that is currently being faced by the French wine industry and they asserted that this has been brought on by the new world.
Although the author’s points are quite insightful, it is essential to understand that he mostly focuses on the new world as being the major cause of these problems. However, there are still numerous other internal reasons that are causing the French wine crisis. These are the aspects that the research will focus on.
Bisson et al (2002) have studied overall trends within the wine industry and have therefore used current trends to predict future ones. However, these authors did not focus on one of the world leaders; the French. Theirs is more of a generalisation rather than a specific examination of the issues in this country.
Essentially, what this implies is that there is a need to narrow down on the former heavy weight – France and this will be done quite easily in the research.
The research will mostly focus on secondary data through the use of content analysis. In this regard, because there are a series of issues that need to be investigated, then it will be insightful to look into some of the written documents that will be related to the research topic.
Hypothesis testing is often quite easily done through content analysis because it makes it possible for one to compare the legitimate causes with the illegitimate ones. Certain themes are often prevalent in articles to be used in the paper and they will act as the major background against which one can gauge public sentiments.
Alternatively, it is essential to look at some of the explanations that have been sought by writers as explanations for the decline of the French wine industry within the global scene. However, because content analysis heavily depends on the character of authors then a myriad of such writings will be utilised in the process of coming up with answers and solutions to the French wine crisis (Sridhar, 2007).
This method was selected because there was a need to place matters within a certain context and also to ensure that the biases associated with case study or overemphasis on primary data collection were overcome.
The wine industry is now characterized by entrance of new players such the United States, Australia and Argentina. These stakeholders have been responsible for a twenty percent upset in market share because that is the percentage that they account for (Allbusiness.com, 2001).
Sometimes, market leaders may still perform well when other entrants emerge but this is not the case with French wine. It has consistently been recording reduced market share for over twenty years and clearly something must be done in order to alter this.
As described by Chateau-Barbey (2009) wine reserves a very special place in French culture. Consequently, its failure is something that would tarnish the country’s identity in the international arena.
The economy heavily depends on the wine industry so low performance in the wine industry denotes low performance for the entire economy and this is not good for the French. By understanding the factors behind this low performance, France can be in a position to revitalise its stagnating performance because it will have reached the root of the problem (Goode, 2006).
In the 1980s, France, Spain and Italy were largely considered as the major players in the wine industry. However, in the next decade, it became evident that Argentina, Australia and the US were forces to reckon with in this industry (Beverland, 1993 and Mercer, 2006). They managed to upset market shares for their older competitors by utilising good market strategies (Resnick, 2006).
The research will first focus on giving an overview of the global wine industry. This will be essential in placing all other subsequent matters in context. It will look at a history of wine and then give special focus to performances of French wine.
This overview will then be followed by an examination of recent trends in the wine industry. Once again, the level of inconsistency in performances of major players will be reviewed especially with regard to France. The third aspect will be to focus on the French wine industry specifically.
This will range from production, demand and supply laws as well raw material acquisition and the degree of competitiveness within the industry. Some issues such as brand awareness and consumer patterns will be given particular emphasis.
The fourth section will entail specific barriers that are causing the French wine market to stagnate in the world market. Lastly, the paper will give its recommendations on possible solutions to regaining a strong market leadership for France.
- To understand global trends in the wine industry
- To explain France’s drop in global wine market share
- To recommend an action plan to recover France’s wine industry loss in the global market share.
- What is the character of the global wine industry?
- What is France’s place in the global wine industry?
- Who are France’s major competitors in global wine markets?
- What factors contributed to the French wine industry’s drop in competitiveness?
Overview of the global wine industry
Benjamin and Podolny (1999) assert that the wine industry is characterised by ties between its market actors such that services and goods are transmitted between them. However, the higher the degree of relationships a wine stakeholder possesses, the greater the status that stakeholder will be accorded.
Throughout the history of the wine industry, status and perceptions of sellers have played a critical role in determining how much business will flow their way and how many resources will be invested in those organisations.
Wine production can either be an art or a science. It is a science because one must control processes and use various technologies in order to produce a high quality product. On the other hand, it is an art because organisations must be creative in delivering a product that can be appreciated by wine enthusiasts (Bisson et al., 2002). However, this does not mean that the business aspect of wine production should take third place.
Those who make it in the global wine industry usually find a way of combining all three factors. They are also immensely aware of the extrinsic or intrinsic motivators of consumption as this marketplace is quite dynamic and resilient.
Swaminathan and Delacroix (1991) claim that the degree of differentiation can make the difference between survival and non existence of a company. The period between the 1940s and 1980s in the wine industry was characterised by a high degree of competition.
Consequently, different wineries responded to these pressures by curving out their own niches and differentiating. The latter trend has caught on and continues to make small organisations adaptable to the conditions in the global wine market.
Demand in the wine industry within the past two decades has been altering back and forth. The latter observation has been brought on by two major phenomena as described by Chollette (1993). The latter author believes that economic improvements and increases in various parts of the world have affected consumers’ capacity to purchase wine.
Also, market expansion has caused these changes especially due to the cyclical nature of expansion opportunities. In other words, many wineries have taken on international markets and have decided to pursue growth through entry into different parts of the world. Therefore, regional shares have become more and more unimportant as wineries embrace globalisation fully.
Normally organisations in the 90s and 2000s have been doing this through partnerships, acquisitions or mergers depending on the nature of their business strategy. A case in point is the partnership that occurred between the United States (California) specifically and Australia to create the champagne drink. This had been done in order to garner access to the best land for production of wine grapes.
Another case in point was an acquisition made by Penfolds of the Lindeman wines (Spawton, 2007). In light of such moves, the wine industry has recorded a dramatic alteration of distribution networks since suppliers create their offerings in a totally different way.
Most importantly though, these alliances have led to greater focus especially in terms of ownership. It has also altered brand ownership as more intensification of the latter has occurred.
Anderson (2001) explains that the past two decades in the wine industry have been characterised by frequent alterations in booms and busts for various entrants. What normally happens is that when a boom occurs, grape growers experience a high number of plantings and this depresses market prices which eventually lead to very low returns.
Similarly, winemakers are also affected by these fluctuations because grape growers will be disheartened by the low returns and may then choose to go for other kinds of products. Governments within these countries may sometimes have to step in just so that they can encourage the farmers to continue with their vineyards so that the wine industry may continue to be sustained (Delacroix & Swaminathan, 1991).
Recent trends in the wine industry
Diminished consumption of wine
Spawton (2007) looked at consumption patterns of wine worldwide and found that the overall amount of alcohol being taken has gone down over the past decade. However, in terms of the type of alcoholic drink being consumed, beer and wines are beginning to have more or less the same ratios.
Initially, beer was seen as the alcoholic drink of choice; however, this has changed today. Consumers in countries previously associated with beer drinking have made a paradigm shift especially in areas like the United Kingdom. The United States and Australia have also cultivated a wine drinking culture.
Spawton (2007) warns that one should not just stop at this statistic, that is, increased wine consumption. He believes that one should go deeper into the matter. For instance, the average wine consumer has developed greater expertise in the product and is therefore quite selective. Now consumers are very keen on the quality of the wine or its brand name for that matter. Indeed, having good taste in wine is seen as a sign of great wealth.
Swaminathan (1995) states that the wine industry is experiencing a resurgence of small, specialist organisations. This can be regarded as some sort of reverse industry maturity; a trend that arises when preferences in markets or technologies alter.
Some two decades ago, the wine industry could have been described as a purely mature industry especially since it was characterised by a high degree of standardisation as seen through production processes and the products themselves. However, consumers today need different qualities from previous ones.
Additionally, industry stakeholders are engaging in greater innovation and this has caused a proliferation of specialist industries. The small size of these wine producers makes their entry and exit into the industry relatively easy so this challenges conventional assumptions. It also necessities change from existing players (Güngör & Güngör, 2004).
Butler and Brown (1995) add that the wine industry has reported a different kind of competition where small firms liaise together to become formidable forces in the industry. In other words, through these combined networks, such corporations may be able to outcompete those large firms that have established themselves firmly in the industry.
It should be noted that the coming together of industry players may not simply be done haphazardly. Studies carried out in Australia indicate that regional clustering is sometimes common (Roberts & Enright, 2004) especially in regions known for the production of wine.
Examples include North Adelaide and Queensland. Thanks to the latter phenomenon, the economies of these areas have dramatically altered and have thus shown that competitor alliances can indeed yield very positive outcomes to the respective organizations under consideration.
The role of technology
Vivier and Pretorius (2002) argue that technology has penetrated virtually all sorts of sectors and the wine industry is no exception. One particular area that has generated a lot of interest is genetic modification of grapevines. Environmentalists, consumers and wineries have reaped the benefits because this technology increases the quality of grapes and hence yields better wine.
Bruwer (2002) also looks at a very interesting trend emerging in the wine industry; wine tourism. One of the leading countries engaging in this practice include Italy, France, South Africa and many more (Toit & Ewert, 2005).
The latter has concentrated on respective wine routes that have been linked to the various visitors that come from Europe. It has started becoming a reliable source of income and will grow to be even more influential in the future (Charters & O’Neill, 2000).
Role of retailers
In the global wine market, attention has shifted from wine makers to wine retailers as affirmed by Jenster and Jenster (1993). Spawton (2007) further backs this by adding that the shift to a retail system in the industry has led to higher prices because different markets have to contend with small niche providers who then offer their products only to a small number of people.
The trend is quite common in the European continent and has caused wine producers to collaborate with the last members of their distribution chain so as to preserve their unique positions within the industry. Here, those with the most innovative marketing strategies are the ones that are likely to survive.
Companies have therefore embraced direct marketing where they coordinate with financial institutions in order to make use of the credit card market. This means that consumers have been encouraged to buy in bulk and to place the products at home thus contributing towards greater sales of the commodity.
Odorici and Corrado (2004) explain that the wine industry is becoming more complicated than would be expected because the laws of supply and demand are not the only ones that determine trends in the sector. One influential phenomenon is the effect of intermediaries. These authors affirm that consumers and producers often need to know about industry standards.
They need to have experts who can ascertain whether a specific wine product is worth considering or not. Sometimes, these opinions may be made available in wine guide books, magazines and other publications. Normally, the experts will rate a particular wine product depending on the nature of the particular product.
However, what makes the process quite complicated is the fact that rating systems alter substantially in different countries let alone different parts of the world. Consequently, wine evaluation complicates supply and demand and may lead to very different market perceptions (Odorici and Corrado, 2004).
Concern over taxation matters is an important factor shaping the global wine industry these days. Spawton (2007) explains that numerous governments are looking towards this industry as a source of revenue owing to the fact that wine is an alcoholic drink. Most alcoholic industries are frequently targeted by their governments and wines are not an exception.
Internationalisation of wine consumption
Internationalisation of wine production has also become another important element in this industry (Jan Visser and Langen, 2006). This means that wine producers are now more susceptible to external factors than ever before. Matters revolving around governance regimes have had to be re-evaluated because those companies that venture into unfriendly areas may have to contend with complications in operations.
It is also essential to remember that some wineries have benefitted greatly from this trend especially if they happen to come from emerging markets. A country like Chile has benefited from internalisation because the global markets have been developing; this has been reflected in its performance.
The latter phenomenon is also good for the global industry because major world players are coming together and seeking ways to improve performance. In areas such as innovation or training, corporations have formed alliances so as to improve them.
Nonetheless, this is solely a prerogative of the investor who must first identify an aspect about the global market that would benefit him. One must also create an investment opportunity when possible (Thach & Matz, 2003).
Recent analyses on consumption patterns illustrate that there is indeed a correlation between wine knowledge and purchasing behaviours. Rasmussen and Lockshin (2007) carried out research among twenty wine purchasers in order to determine the kind of qualities they look for in a certain wine product. It was found that almost half of the respondents relied on the region of the wine in order to make a purchasing decision.
This means that buyers now associate geographical regions with particular wines. Availability of information in the wine bottle also causes many consumers to buy these products. Most of them tend to look for the region, style, price, brand or label of the wine when deciding. Some respondents also give precedence to information acquired from wine magazines, newspapers and the like.
Sophistication of the wine purchasing process can also be seen by the fact that a number of drinkers derive pleasure from the actual process of selecting wine and even think of it as a hobby. Even the amount of time spent selecting these wines implies that consumers have changed buying habits. Average buyers are spending thirty minutes selecting wines in retail outlets thus denoting that this is an activity they take seriously.
New world producers
Most new entrants into the wine industry are recording relatively positive outcomes because of a number of reasons (Anderson, 2001). Countries such as Australia and the United States are not particularly known for being wine drinking nations. This means that local demand for the product may not be as high as expected.
Furthermore, since the latter are relatively new players, one would expect that the popularity of their brands would be quite low especially since they are struggling with other brands. However, it has been shown that these countries are doing relatively well because they decided to focus on exports and they have now become forces to reckon with (Hugh, 2001).
The French wine industry
There is no doubt that French is one of the preferred destinations of the world today. Tourists come to visit it as result of the rich cultural heritage as well as its long history. This means that elements regarded as uniquely French are likely to solicit a lot of interest from visitors; one of this is wine consumption and production in the country (Getz et al., 1999)
Wine producers in France have realised that people would like to get more information about the wine industry. In this regard, wineries have exposed themselves to the outside world through visitations (Hall, 2007). Some producers in Burgundy can receive an average of about two thousand visitors annually. It should be noted that these numbers are rather small owing to the fact that small wine cellars are being considered.
Most of the time, visitors can get into the cellars for free and may be permitted to engage in some wine tasting (Emerth, 2004). To enjoy the latter activity, tourists are normally expected to part with a small fee. However, large wine producers have turned visitations into a thriving business by entertaining close to one hundred and fifty thousand visitors annually.
Here, an area is reengineered so as to make it more attractive to tourists (Bretherton & Simpson, 2004). Those who are interested may purchase items from a shop. These areas have also installed some visitors’ centres for those who would like to make their experiences unique (Hall et al., 2005).
Also, in other areas like Bordeaux, visitors can amount to eighty thousand annually (Charlsen, 2004). A lot of investment is normally made by the latter groups and they may often benefit by encouraging buys of high quality wines (Frichot, 2001). They also get revenue through the amounts collected from the latter arrangement.
France is regarded as a traditional wine producer; new and emerging countries are becoming important forces to reckon with. Most of them resort to very powerful marketing procedures and this puts them at a very influential position in the world wine industry.
Furthermore, this increasing competition has caused prices to go down thus putting into question the degree of choice that French wine producers have in deciding on the level of quality. There is only so much effort or investment that can be put into wine production if there is no sure way of ensuring that the quality and the asking price match.
To this end, large markets like the United Kingdom are offering small margins of profit to wine producers because a high number of them now rely on large chain supermarkets as their sources of supply for wine (Bisson et al., 2002).
Several analyses show that the demand for French wine has been dwindling. This pattern has spread out even in France itself. In the 1980s, French wine takers would consume approximately ninety litres per year- per person. However, in the nineties, these numbers have dropped by a whooping thirty litres per person, per head. Furthermore the same has been replicated in countries across the world.
Higher interest in wine
Several wine consumers around the world are now taking particular interest in high quality wines although this is yet to be translated into tangible monetary incomes. Consequently, traditional players like France are getting a lot of attention from these enthusiasts (Smith & Bentzen, 2002). Greater publicity for French wine has also been achieved through recent scientific studies on the French paradox (Lockshin et al., 1999).
Members of the medical community have sought to explain why there are very few cases of coronary heart diseases in France and they have found that this has been brought on by the strong wine consuming culture among the French. Scientists are therefore sending the message that wine is good for one’s health and the French can benefit from this is they use the message to their advantage (Hall & Mitchell, 2004).
When consumers are asked about the qualities they look for in French wine most of them cite a number of factors. Some assert that it is the geographical location of the winery and in this case; wines from well known areas in France are usually considered to have a higher value (Babor, 1986).
Also, consumers claim that they now look for the name of the brand. Well known, large scale producers are highly respected and their wines are thought to possess more value than other typical wines available in the market today.
Surveys do indicate that French wine producers are overproducing when their numbers are compared to the degree of demand that is available out there (MacNeil, 2001). Most world markets may not necessarily be going through this problem because they are using a different approach. In France, wine makers often think of the consumer as the last option but in competing areas, market forces are the first consideration.
In other words, market forces and an understanding of it are what cause these producers to decide on the quantity, quality, grape variety or any other aspect that may be deemed important to the client.
This has prepared them to deal with changes in consumer markets. French wine makers still do not place too much emphasis on wine markets thus explaining why they currently do not understand the full extent of the demand for their products and are overproducing.
Legislations in France have deeply affected the manner in which the wine industry operates thus denoting the importance of political influences. In this regard, appellation legislations were passed so as to ascertain that certain areas continued to benefit from their respective positions. This has yielded immense political power amongst those groups to the point of causing a degree of territorialisation (Baron, 2003).
Therefore, the legislations may work for certain powerful figures but may not necessarily work for everyone. In this regard, wine regions have been established mostly as a result of interference by government. One only has to visit vineyards in France to see the extent of specialisation found in such locations (Moran 1993).
Studies indicate that sales of French wine products often get affected by political events from time to time. A case in point was the refusal of the French to engage in the US led Invasion of Iraq in 2003 (Leslie and Chavis, 2008). The US responded to these decisions by boycotting the purchase of French wines (Smith & Bentzen, 2007).
The boycott went on for half a year and resulted in 13-26 percent drops in sale of the French wines (Chavis and Leslie, 2007), (Ciccarella et al, 2007). The incident was a classic indication of the importance of external factors in determining the sales of particular items (Friedman & Pruitt, 1986).
Most grape growers in France belong to cooperatives. They consider these groups as unique part of their identity and also a distinct part of their history. However, these cooperatives are usually created differently depending on the kind of region that wine growers belongs to (Ulin, 2002).
White et al (2006) affirms that wine normally grows well in regions that are considered to be climatically appropriate for the product. For instance, there should be minimal heat accumulation, minimal extreme heat as well as low instances of frost to the crops. Wine growers must therefore strike a fine balance between all these issues yet it may be a little tricky for them to achieve that.
Climatic changes have been going on in various parts of the world and these are affecting wine quality in traditional wine growing parts of the world like France. If hot days keep increasing then this could reduce the possible areas of wine production that can harm farmers. That kind of sensitivity of grape production has led certain farmers to abandon the crop for other less sensitive ones.
Warren and Melewar (2006) explain that marketing strategies for the French are not exactly the best. Some brands may stand out internationally but this has not always been the case for all. Others do not forge strong names for themselves and may therefore confuse consumers when they try to get their products out.
Point of sale contacts between consumers and marketers are also rather poor and may not give much promise for the future. This scenario is true for small producers compared to their more established counterparts.
Few French manufacturers have given direct marketing a chance. This means that they have little control over the image that their brands project. They also have minimal say in determining what services are offered to consumers at the point of sale. Furthermore, because they are detached from the final consumer, the possibility of establishing a long term relationship with them is put into jeopardy and this ruins their chances.
Additionally, the opportunity to create with consumers is also lost in such cases. The wine producers do not have an ability to assess consumer wants and hence provide them with the right product. Furthermore, the complexity of the system is what is bringing French wine producers a lot of challenges that have contributed to the poor performance and confusion in the market.
This term incorporates all the key aspects of production that are needed in order to make wine within a specific vineyard. In this regard, wine producers often pay attention to the nature of the soil and hence the rock that can be found in their areas of interest. They also give attention to the landscape of any area and the degree of slopes that these products are expected to garner.
Furthermore, it is imperative for wine makers to consider the micro climate of their regions as this can alter the nature of the grapes produced. Some important aspects like sun orientation can into play. This forms the logic behind the AOC system; an appellation system based on the fact that no two regions can produce exactly the same grape variety (Robinson, 2006).
Terroir has been transferred to other parts of the world and has been shown to be a critical part of wine production. However, this has sparked a lot of controversy within the industry and may even be a source of disadvantage to wine producers.
For example, wine producers in a particular region always have several vineyards to choose from since grape varieties even in vineyards of close proximity are radically different. It implies that the kind of wine that can come from such places is also different as seen within the Burgundy region (Oz & Spurrier, 2001). Most of the wine that comes from here varies very differently from what others have considered important in the past.
France takes pride in the fact that it has been producing wine for centuries on end. In fact, vineyard cultivators often think of the wine making process as an issue of family interest.
These growers and producers often transfer the knowledge to their kinsmen in the hope of perpetuating the rich tradition of wine making (Charles, 1952). Such a phenomenon may either be a source of competitive advantage as it causes consumers to respect this rich heritage or it may also be a disadvantage to the said groups.
In fact the rich history of wine production in France has contributed to the degree of respect accorded to French wines. Most wine lovers easily recognise Bordeaux which is by far the most well known wine brand in the world (Kibler, 2006). Clearly, the makers from this region may not have too much to worry about as their commodities are still flying off the shelves in retail outlets and other point of sale locations.
French winemakers can boast of a very high level of variety that they can offer consumers who are interesting in purchasing their commodities. For instance, consumers who have a preference for dry wines can find them there. Those who would prefer sweet wines, red wines, white wines or even sparkling ones can meet all their needs among French wine producers.
Furthermore even the degree of quality has been altered dramatically depending on the price level of the purpose that a particular type of wine will serve. Consequently, wine enthusiasts can always find what they are looking for in this part of the world (Cambourne et al., 2000)
Varieties also refer to the number of grapes available in this country. More often than not, grape varieties are limited to the type of region that a vineyard belongs to especially in light of the appellation rules currently in place. However, since the grape growing regions are so many, then the grape varieties also vary correspondingly.
Some grapes can be easily identified by foreigners because they may not be unique to France while others may be unique only to that specific region. Because of these wide varieties, some French wine makers have opted to combine grapes so as to create varietal wines. Consumers can therefore enjoy the benefit of judging for themselves what appeals to their taste buds and hence can be able to satisfy their needs.
Specific barriers to international growth of French wine
Overemphasis on high end wines
The wine industry is one of the most complex product industries in the world. This is because of the nature of the products and the degree of dynamism needed in order to get a product out to the market. Currently, France is still well known for producing high end wines. These types of wines are heavily priced because they have been cultivated and produced in the same vineyards and a lot of care is put into the process.
However, consumers and buyers of wine may want to indulge in a little wine tasting without necessarily spending too much on it. Most of these individuals tend to go for cheaper wines and may not be too keen on whether the wine was made in the same vineyard or not.
These kinds of consumers have actually been responsible for the surge in wine consumption globally especially because they buy their wines from supermarkets rather than wine retail outlets (Dean & Bart, 1998). Other emerging wine producers have noticed this shift and have therefore produced wine that meets such unrefined tastes (Stevenson, 2005). They are driving the world market and making profits for themsleves.
France is somehow stuck onto successes of the past because it still believes that the highest percentages of wine consumers are the ones in the high end of the market. This mistaken thinking is what has blocked France from becoming the most formidable force in the global wine market. As soon as they reshape their thinking, then things could potentially start to change.
Furthermore, even the rules for wine production are still centred on makers of high end wine while cheap producers are pushed to the periphery. The latter government has not realised that there is no one size- fits all scenario in wine making so they should adjust some of these rules (Espey, 1989).
Differential branding in France and the rest of world
Some of the most well known brands in the international market are actually controlled by wine producers themselves. Countries like Australia and the United States have added value to their products by taking control of their branding systems (Mowle & Merrilees, 2005). In France, things are done in a totally different way. Wine producers usually concentrate on the wine production process and leave the rest to external parties.
This causes the producers to be detached from their particular brand and thus reduces the motivation to please the customer (Swaminathan & Delacroix, 1991). Over the years, this has led to lower quality wines and is therefore impeding the capacity to grow in the international market.
Failure to improve standards
The truth of the matter is that wine standards have changed dramatically over the years. What was previously considered average in the past is now almost intolerable. Wine consumers are savvy about what it takes to make good quality wines (Bruwer, 2004).
Wine producers in emerging markets came when this was already the preference and therefore responded well to it by giving relatively high standards of medium or commercial wines. France on the other hand has not adjusted accordingly and the same medium scale wine produced two decades ago is still the same one that consumers are exposed to.
As stated earlier, French wine growers and producers have been doing this for generations. They may therefore feel that they have fully grasped the intricacies of the wine market and everything it has to offer. These growers have developed a know-it -all attitude that could be costing them international expansion. If they accepted the fact that they did not have all the answers then that would be a sure way of making things work (Shaw, 2000).
However, a report made in several international newspapers has indicated that sometimes these kinds of attitudes may cause France to suffer severe losses. For example, the latter industry has recently been going through a range of controversial lawsuits (Iversion, 2010). In the past a foreign wine maker who dared to break the AOC would be quickly taken to court.
This caused an immense level of distrust and fear for wines produced from these regions. In recent times, this has been reversed; for example a French wine maker was taken to court by New Zealand over using their brand to label their products (Iversion, 2010). This caused a lot of spur over the double standards used by the French in terms of the latter trade.
Complex marketing terms
Most consumers nowadays are busy working two jobs or handling their personal responsibilities to give too much time and effort towards the process of indentifying wines. Conversely, these consumers would still like to understand the origin of the product that they are buying. In this regard, labelling products or displaying information on bottles needs to be made as simple as is reasonably possible (Belk King, 1997).
French wine producers and marketers have not paid particular attention to these issues. The AOC often use rules that make it so hard to detect whether a wine is say a Burgundy wine or not. One type of wine may have a name that is even too long to read and may not contain information that makes it easily comprehensible to the consumer.
Some have asserted that it may be an indication of arrogance on the part of the French wine producers who have refused to accept that their market is changing and that other kinds of strategies may have to be sought (Gregg, 1990). Consumers want simple processes that are not laden with complexities and the like (Engelmann & Tyran, 2005).
Failure to plan for cyclical changes
Over the past two decades wine producers in various parts of the world have been going through ups and downs in business. Sometimes there is an undersupply of the commodity and an oversupply in other scenarios. Large wine producing countries like France feel these fluctuations even more intensely than others.
Since the business cycle is rather predictable, then failure to adjust accordingly to the market alterations could be leading to the minimal profit margins that these business men and women go through. More often than not, such producers may adjust but the time lag between their responses and market changes is the cause behind their problems. Usually, the government steps in in these time lags so as to deal with the oversupply.
However when this is done over and over then farmers and wine producers can get comfortable with the arrangement and may never think of the degree of demand for the commodity. In this case, the French government has not dealt with foreseeable cyclical changes in a practical manner and this has led to current observations within the industry (Vermeulen, 2006).
Lack of a tangible export plan
Statistics indicate that wine consumption in the host country France has been declining so the future would be in export markets. In fact, this is the reason why traditional beer drinkers like Australia and the United States have managed to penetrate this complex industry (Baumgartner & Burns, 1975). They realised the inefficiencies in their local market and opted to look elsewhere.
Sadly, France is aware of this too but has enacted minimal plans in response to these adjustments. The exporting scheme is laden with too much bureaucracy and this clearly hampers their ability to engage more exporters. Also, French wine producers have not been told about the benefits of such a system and it may be imperative to think of it in the future (Cholette et al., 2005).
Failure to use traditional marketing channels
A number of wine producers are encompassing new and revolutionary marketing methods. However, this does not undermine the fact that traditional marketing tools like television advertisements cannot still work for the industry. Because the wine industry has been around for so long, wine producers have assumed that the international world is already aware of the quality of their products.
They have been underutilising the potential of television to access the international community. France rarely creates captivating adverts that would most likely make the public aware of their brands and how critical these are to the wine industry. International markets as well as domestic ones would be better informed and captivated through these traditional channels creatively.
The French ought to use their geography as specific marketing points. However, not all producers are able to display the information for users to make use and in the end; this hinders the ability of the consumer to differentiate between these categories of wine (Bevarland, 2000).
Types of wine created
The nature of wines that French wineries are concentrating on may be the reason behind their dismal performance of late. As asserted earlier, the market for high end wines is still prevalent. Middle type wines are also considered to be an important part of the process. Table wines on the other hand represent the opposite side of the scale; most local French consumers no longer purchase this type of product in large numbers.
Also, the international market has lost interest in this product as well. The French considered table wine and fine wine as the major categories of wine production and still continue focusing on these types today. However, studies show that not everything may turn out as expected especially in a changing market (Adams beverage group, 2003).
Some wines that were thought to be poor quality wines are now essential parts of the wine drinking culture especially in the commercial end of wine productions. One such case is the Rose wine which is grown in the Bordeaux region of the world (Kindersly, 2004). Surveys indicate that young consumers are embracing these types of wine over the traditional wine types (Anon, 1990).
Consequently, marketers should have targeted the latter population with the uniqueness of their flavour and other important aspects. However, since this has not been done, then very few markets have been fully tapped and the wine varieties given precedence are not the most important.
Low internet sales
Many wine producers around the world are realising the potential of internet sales especially if they are selling their commodities to persons outside their native countries (McNeil, 2007). In recent analyses it was shown that websites designed solely for the purpose of selling wine to consumers recorded sales of about 175, 333 bottles annually.
While some of the latter producers were French, others were not and it is members of the emerging markets who are realising the potential of this kind of market. France has been left behind in the new wave (Wood & Bruwer, 2005).
Lack of a single brand
The French wine industry is laden with a diverse array of products. Some of them are easily recognisable but some are not. In fact, a country that has been doing this business for decades needs to possess a brand that is synonymous to the country.
France does not have a national brand. The very name France – is a crucial selling point in wine so having a drink that symbolises this country’s tradition and richness would be extremely helpful. However, these plans may be in the making especially owing to the reports the government has made on creating one such market (Mercer, 2007).
There is a lack of one unique blend of wine that is distinctly French making the latter country miss out on useful opportunities. Plenty of advantages can easily be seen from such an approach even at a glance. For example, if there was one blend sourcing wines from different parts of the country, the wine producers would be in a position to dispense their excess produce.
This would mean fewer losses and a mitigation of the oversupply problem which frequently plagues the country from time to time. Furthermore, some wine growers may not always want to stick to the same wine manufacturers as before (Teaff et al., 2005). This sort of brand would be a unique opportunity for them to utilise wine suppliers that are effective.
A brand representing France would be a good idea to wine makers especially because it has been tried and tested in other parts of the world and has been shown to be very effective. Countries like Spain have already implemented these strategies and are doing fine as is the case.
Levelling the competitive arena
The various types of wine available in the French wine can appeal to varying tastes and there is always a reason why they still exist in the market today. However, when some wines are treated in an inferior manner owing to the use of a certain grape variety that does not belong to another region then this may create some sort of bias to those products even without considering the kind of quality dispensed by these types of wine producers.
Too much bureaucracy in French wine manufacture has made it an unattractive destination for investors or stakeholders. Business environments like Spain are highly respected for their government support and their level playing fields; a concept that is almost alien to France and its inhabitants (Benjamin & Podolny, 1999).
Poor link between brand perception and brand strategies
Although the wine industry is quite complex, there are certain essential rules of marketing that still apply. These rules must be obeyed if the latter entities have any hope of revamping their diminishing wine sales.
One of the first principles in marketing is that the price of a certain commodity is an indication of the value of the product. In other words, if there is great value addition, then it would only be fair to increase the price of the product (Lusch & Virgo, 2004). It is the reason why some wines like Champagne have very high price tags but consumers are still willing to purchase them regardless (Farmer, 1994).
Secondly, price is also an indication of the brand responsible for production of the commodity (Faith, 1992). This means that consumers would be willing to pay for a certain commodity if they think that it has high quality even when this is not necessarily true. The problem with French wine makers is that most of them presume that they all belong to these kinds of strong brands yet this is not always true.
If a wine maker has not yet established a name for himself in the international arena then it should sell its commodities at prices that reflect its brand perception (Ehrenberg & Bird, 1970). Some wines from Australia are available in world markets at affordable prices in line with their brands and this causes high sales.
However, low quality, poorly branded wines from France are sold to the rest of the world at exorbitant prices and this causes most of them to remain in supermarkets or retail outlets because there is only a small link between how the public perceives these brands and how the winemakers do.
Lack of information in the public domain
Most members of the public may not necessarily understand the intricacies of the wine making process. However, they would be in a position to appreciate this information if it was made easily available (Greatorex and Mitchell, 1988).
Some industries in the past have not just considered marketing as a channel for getting their messages across concerning a particular commodity; they have also used it as a platform for giving out information. In fact, analyses indicate that consumers these days tend to value information based advertisements than conventional ones that clearly appear to have a bias towards a certain firm.
Objective advertising through the use of experts can be very beneficial to wine producers as well as consumers because the wine makers would appear genuine and believable while the consumers will be more informed about the industry (Juster, 1966). The French have rarely used marketing strategies that are information based hence the problems it may be going through today (Armstrong, 1991).
Recommendations on possible solutions
Direct selling to consumers
In order to stay ahead of the competition, French wine makers need to result to creative methods for marketing their goods and this means direct selling. Some French wine makers are already doing this as described by Hall (2005).
Alsac and Bargandy wines are now sold through this route since wine cellars are important places for getting the commodities to said consumers. This especially applies to those who come to France in order to participate in wine tourism by visiting various vintages.
French wine was once known and respected for its high level of innovation as well as the boldness it possessed (Ulin, 2002). This was the reason why it was counted as a global leader (Warren and Melewar, 2006). In order for France to reclaim this position, it must lead the pack in terms of being proactive rather than wait for similar introductions. The only way to achieve this is through creation of a cultural shift.
In order to differentiate itself from all the crowding in the market, French should reassert itself as the ultimate guarantor of quality. In the past, this is what removed French wines from their shelves and the same can reoccur if quality is reasserted. As established earlier, the problem is with the smaller producers who are not necessarily governed by very tight controls (Duthy, 2000).
The AOC needs to reinforce the nature of their controls and this ensures that all the brands emanating from France represent the same standard of quality that large producers do. High quality will also shield small producers from price related complications because they can afford to make their wines pricey.
This would be a reflection of the effort and degree of innovation that has been put into their wine making processes (Leibold et al, 2004).
Currently most wine purchasers in the United States, UK and other big markets heavily rely on large scale supermarkets to access wine. French wine producers would be fighting a losing battle if they tried to negotiate with these chains. The best way of going about it is to look for a way of getting to consumers directly. Internet sales can be a great way to do this as access to markets is quite expansive.
They can also employ the use of new innovation in the latter sector such as social networking websites. Small scale producers should be especially considerate on this issue.
In fact, analyses show that the best bet in value addition does not lie with experts like marketers and researchers; it is in a mutually beneficial and a long term relationship between the producer and the consumer which can then be a source of information on what really matters to wine makers (Spawton et al, 1997).
The logic is that people are not likely to trust marketers because the latter tend to be after securing sales for their products. However, if a wine producer appears to be committed to a certain consumer then trust can result and an atmosphere of honesty will therefore be established.
Nonetheless, a direct selling distribution system may sometimes move too slowly as the amount of goods sold is only dependent on the ones that can reach clients at any one time. In order to overcome this inefficiency, small brands should consider integrated direct distribution (Patton & Boze, 1995).
Here, they can come together and decide on the main issues that they want to work on in the product; these should be the most valuable ones. They can then establish the right channels for this mix so that at the end of it, consumers will be the ones who can grow and benefit from the arrangement.
Planning for the opportunities will need to be done and the capacity of the products to create value should then be analysed at every single point. Although integrated direct marketing may not always be done formally since wine producers may rely on their past experiences, intuition and trial and error, this does not undermine the fact that the customer’s satisfaction is what carries the day.
Examples of channels that can be used in these scenarios include the internet, mail, trade exhibitions, organised direct selling markets and integrations of producers.
Match demand and supply
As established earlier, French wine makers are overproducing and this is causing a wide number of them to undergo great losses. If these producers simply understood the working of the present market then chances are that it would lead to accurate estimation of quantity (Madden et al., 1993).
In fact France is not alone in this kind of misconception; most other traditional wine producing countries of the world have been responsible for this.
They have continued to make wine while still remaining insensitive to the market around them and this has led to a drop in the profit margins attained by such groups. In fact, most wine producers need to correct this problem from the onset by reducing their product outcomes before they are released (Casini et al., 2006).
Free market economics
France should let free market economics rule because without it, any industry is bound to postpone problems into the future. Wine growers have used excuses such as poor climatic conditions, an unpredictable consumer market and international competition as excuses for their lack of profitability. In these circumstances, farmers and other wine producers have threatened to quit the wine producing trade all together owing to these changes.
In order to preserve its cultural heritage and the contribution that the wine industry makes to the economy, the French government has frequently intervened in the wine industry. The only problem with such an approach is that it ignores market economics. Most of the entities that seem to be having a problem making profit in this competitive industry actually are unsuccessful producers or growers.
The market should be allowed to eliminate such individuals because they saturate the market with their bad produce. French wine will be better off if it was associated with a few good producers than with many mediocre ones.
Currently, all the AOC rules are causing these farmers to hide behind the bureaucracy and government support. They are not taking responsibility for their mistakes and this is definitely hurting the industry (Spawton, 2007).
Re invention of the AOC rules
The French wine industry would definitely be better off if it changed the AOC rules dramatically. Some brands of wine may appeal to consumer’s taste buds but if they do not adhere to the strict criteria of the AOC then they may never reach the latter who would greatly respond to them. The government would do itself a lot of good if it applied these rules to the high end of the market.
However, any other commodities in between tend to be disastrous because it is the bad quality wines that can meet the AOC criteria while the genuinely good ones are forgotten. This other side of the market should be left to curve its own destiny (Spawton, 2007).
Carry out market research
Wine production in France has taken on a regional approach and it would be very difficult to change this in the short term. A workable solution would be to make those regional strongholds even more powerful (Spawton, 1991).
Information is always power and if French wine makers can engage in deep and serious market research then they may be in a position to change how the world embraces their commodities because they would be constantly monitoring it (Berglund, 2003).
This refrain from marketing of the goods could be harming the French wine industry more than anything else (East, 1997). Without solving the problem, little else can be accomplished in the business.
Abandon types of wines that do not yield results
By holding onto tradition, the French market is destroying its profitability. People no longer value table wines as they used so utmost precedence should be given to the growth and development of other types of wines that will be received in a much better manner than the traditional ones (Duthy, 2000).
The prerogative to change these types of wines may lie in the hands of the wine producers rather than other authorities, this means that it may be extremely difficult to control which wines are available and which ones are not. Therefore, one way the French government can achieve this is by offering support to those popular wines so that they can be nourished and grown.
Staying abreast of new production techniques
Australian wine producers are known for their high degree of innovation. They frequently think of the benefits that they would enjoy from a new practise and work towards improving it. Sadly enough, this is not the same case as what goes in France.
In fact, the latter country has become associated with non progressive ideas. Although it should be noted that wine makers in France are not immune to change, most of them merely borrow those practices from other producers around the world like Australia.
There may be no problem in borrowing ideas and best practices but the timing is always crucial. If one waits for one’s competitors to try and test ideas and to implement them fully then chances are that one would already have been left behind and this can only lead to subsequent failure.
French wineries should also be at the forefront of innovation in production techniques by dedicating specific personnel to be directly responsible over this (Lockshin, 1997).
Use New world patterns
Previously, wine producers from certain parts of the world were considered to be inexperienced and clueless on the wine making process. In this decade, new world marketers have become a formidable force to reckon with (Ramaswamy & Prahalad, 2004).
Their wine sales have increased by about twenty eight percent over the last two decades and this means that certain patterns inherent in this market could also work for French wine makers. Some of the strategies that were previously seen to be too simplistic can actually prove to be very useful to France.
These new markets have targeted new wine consumers who do not necessarily have a lot of experience with the commodity. Most of them are fully aware of the intricacies of marketing commodities to these kinds of consumers and have therefore gone in full throttle (Quinton, 2003).
As stated earlier, this system is discriminatory and may prevent producers from sourcing for the best raw materials. In other industries like retail, large chain stores will usually look for the most effective producers so that they their merchandise will be of high quality. Companies like Starbucks often get their coffee beans from countries as far as Kenya and this makes them very effective.
In the French wine industry, not only is production limited to the country but to certain regions as well. Manufacturers are prevented from enjoying the benefits of sourcing from various parts of the world and this has actually led to poor results currently.
France could benefit tremendously by using a different strategy. Here, it could get its grapes from different parts of the country or even the world and then assemble them into one product. Some firms are already doing this and are recording a lot of success. A company like Chamarre is getting French grapes around the country and creating products that use all the good aspects from these various areas to create a formidable product.
In the end, the latter has received a lot of acclaim from various consumers across the world. Indeed, evidence of this has been denoted by the fact that the latter products are transported to about thirty countries.
When consumers are told about how the product was created, then chances are that they would deeply appreciate it and it would cause greater results. This represents a paradigm shift in the way wine products from France are presented to the rest of the world.
There could also be opposition from stakeholders that concentrating on relatively low end wines would be detrimental to the French wine industry. This means that some massive campaigns would have to be carried out in order to spread the message that low end wines need not be seen as low quality wines or wines that have relatively little market value (Reid & Ratcliffe, 2001), (Polhemius, 1988).
Campaigners could use the success of certain new varieties of French wines that are doing so well in the wine market. In fact a wine like Arrogant Frog is giving Australian wine makers a run for their money since most of it is sold in the latter country. Estimates shows that this type of wine has gained an enthusiasm of approximately one million annual consumers.
As stated earlier, internet sales have been underexploited by French sellers yet this could be a revolutionary way of getting their products directly to consumers. However, the internet is not just an instant answer to the problems by these wine producers. Additional work will need to be carried out.
First, French producers should make the websites user friendly so that consumers can view products and make purchases as fast and as conveniently as possible. Furthermore, it should attract the attention of online users who are quite difficult to please especially given the fact that most of them are bombarded by several advertisements on a daily basis (Sumner, et al., 2007).
They should also contain useful information about the product, its advantages and how consumers can purchase it. A website that displays such information would be quite appropriate and would be a sure way of giving consumers what they are really looking.
Online selling websites should also be advertised on other websites or they should also use recent inventions such as social networking websites. Face book and twitter can be very revolutionary outlets for letting the public know about French wines.
Make use of traditional retail outlets
Restaurants are still an important source of marketing wine to the public especially in the French wine market. The French wine taking culture is such that most individuals consume this drink with their food. Consequently, wine producers need to work with the latter groups in order to fully utilise this opportunity.
Consumers who come to order foods often request for wines to keep them busy (Demossier, 2004). Restaurant owners need to be persuaded to market the commodities to these patrons. One way of doing so would be by striking a deal with the latter individuals. They could share royalties on sales or such kinds of contracts.
Alternatively small and specialised shops have also been known to be critical points of contact between wine producers and their consumers. The latter groups need to be converted into advertising strongholds.
They should also be used as places for marketing promotions and other pricing strategies designed to woo the consumer. Supermarkets as well fall in the same category and intense use of this platform should be used by stakeholders in the French wine industry (Spawton, 1998).
Improve the situation at wineries
As stated earlier, wine tourism is an important area that can attract revenues for wineries (Charlsen, 2004). However, some producers are not fully embracing the phenomenon or channelling it into a profit making venture. First, wineries can advertise and attract many consumers to their respective areas by placing advertisements in local channels (Copla, 2000).
They can also add some incentives that would make their wineries ideal destinations for wine tourism. One way of doing this is to provide visitors adequate space in their wineries for wine tasting.
They should also have access to good parking space and should be provided with guides who can take them through the wine making process (Penn, 2003). This should not just be a preserve for those with large scale industries. Even small scale wine producers need to think of wine tourism as an additional source of expenditure for them (Dodd, 1999).
However, there should be a point of caution at this point; wine makers should refrain from introducing some big time leisure elements such as restaurants (Emerth, 2004). If they do so, then patrons will think of them as hoteliers first and wine makers second.
In fact, wine makers who make their wineries too comfortable often run the risk of never realising a return on their investment because the success of one industry i.e. the restaurant business normally comes at the price of the wine related side.
Exploit the local market
Surveys indicate that one of the most critical markets for French wines is within the French borders. However, the country has not fully used this market. For instance, in the decade 2000, a record twenty percent drop in wine purchases was made. This caused most wine producers to concentrate on external markets.
The only problem with such an approach is that there are several legal hurdles to the process both within France and in respective countries of destination. Wine makers would be spared from all the expenditure that comes with the sale of their commodities in other countries if they concentrated on these local markets (Kaplan & Vigna, 2007).
They would also revitalise the French culture of wine taking. These manufacturers can use several platforms to ensure this. One of them is through local marketing campaigns and promotions that can be sustained for very long periods of time (Pike & Melewar, 2006).
Not all is lost within the French wine making industry. In fact, it has the potential to regain its position as a leader in wine making if it goes through the latter steps as recommended. In essence, the problems are many and diverse in France’s wine making industry but most of them have been brought on by excessive government interference as well as overconfidence in decades of market leadership.
Once these approaches are corrected the manufacturers can be well on their way to establishing an industry that can withstand all external forces in this industry.
It can also be in a position to easily change the image of the country. Some initiatives already demonstrate that the government is heading in the right direction. French men and women should work on maintaining those strategies as well as boosting them so that only the most effective ones are realised.
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