THE CRISIS IN THE FRENCH WINE INDUSTRY
I. Introduction
The country image of a particular state tends to affect the perception of consumers regarding the quality of a product. This claim has been supported by a lot of studies on consumption and exporting. For instance, there is an existing assumption that the best electronic gadgets comes from Japan; the best luxury automobiles are made in Germany; and the best wines comes from France. The industries involving such products take advantage of this theory of country image as much as they can as it will essentially amount to more revenues and higher profit on their part. The products of the French wine industry has benefited from its reputation of high quality and rich flavour. The country image of France as a foremost creator of the finest wines in the world has been a foregone assumption especially for those who import such products. From red wine to champagne, the wine products coming from the said country tends to equate to the mechanical engineering of the automobiles from Germany. Nevertheless, despite the epic reputation of French wine, the industry has been under a lot of trouble as it encounters numerous circumstances ranging from the political to the mundane marketing shortcomings of the wine distributors of the country. The following discussions will be focusing on the description of these issues and the pending crises based on the account of existing literature directly related to that topic. The nature causes, and reforms will also be addressed in this paper to establish a clear set of arguments and observation regarding the French wine industry.
II. The Nature and Magnitude of the Crisis
Traditionally, the wine market share in the global scale was battled by two noted countries in wine exporting: Italy and France. Lead changes have always been prevalent in this friendly competition between the manufacturers in these said countries. (1990) However, the industry in the French sector has been in a progressive nose-dive up until the recent developments in wine-making.
The crisis has been accounted by articles and reports on the industry in the late 1990s and the early parts of the new millennium. As indicated in the report of (2001), he pointed out that the decline in the industry amounted to 22% reduction of the market share in the international scene. This is compounded by the fact that other countries have been vigilant enough to take advantage of the surge in the wine consumption of UK consumers. ( 2001)
On the other hand, the United States market for French wine has also accounted for the crisis in the industry. Specifically, studies have indicated that in 2003, there was a decrease of 13% in the overall sales of French wines in the market. (2006) This was due to certain boycotts of the American public on French products, with the wine industry taking most of the damage.
The crisis has even come to the point where violence ensued with direct relation to the conditions of the wine industry. (2007) reported that militant winemakers engaged in violent attacks in certain areas in Southern France. The Comité (Régionale) d'Action Viticole took responsibility on the series of arson and bombings in supermarkets all across the said area. This shows that, despite the recent reports of developments in the performance of in the international sales of French wine, winemakers from that area still feel the pressures of the crisis in the industry.
Despite this perceptible rut that the French wine industry is in, there is an indication from recent reports that the industry is slowly climbing out of the mire. Reports from the CNBC (2007) indicated that 4.16 billion euros has been accumulated in the first half of 2007 in terms of exports of French wine. Specifically, champagne exports sold 904 billion euros which is approximately over 13% increase in exports along with the 23% increase in export of cognac. Though Bordeaux wines dropped 2.4%, it was offset by the 20.9% of the exports Bourgogne wines.
This development as stated in the report of CNBC is a giant step for the French wine industry as it relies heavily in the sales outside of the country. As indicated in the study, “two-thirds of national wine production” is sent in exports as there was a significant decline in the wine consumption among the locals were experienced during the start of the crisis. In any case, the improvements in such areas, though limited to exports and specific spirits, are welcome developments in the industry.
III. The Cause of the CrisisThe crisis in the wine industry has been triggered by several elements present in the industry. One perceptible element is the structure of the wine makers in France. In the article of (2001), the structure of the industry in France is characterised by different autonomous chateaux. This indicates that the country’s fragmented structure limits the development of the industry, even contributed to its near demise. (2001) further pointed out that the current state of the French wine industry has been surpassed by its Australian counterpart because in the latter, only three major companies are in control of the industry. This means that these companies are able to manage the development of their industries both locally and internationally without compromising the welfare of the other Australian companies. They could even work hand-in-hand so that the demand for their products is sustained both within Australia and the rest of the wine-consuming world.
In addition to that issue within the structure, the competition in the wine industry has rather intensified with the emergence of new players in the market. As indicated in the earlier parts of the paper, Italy and France were among the top providers of top quality wines all over the world. However, countries like Australia, United States, Chile and New Zealand has been progressively been invading the international wine market. ( 2001) Collectively, they are known as the new world producers in the industry. Specifically, Australia is fast becoming the monolith in the industry as it is slowly taking on the UK market with its wine products which was originally owned by France. The original owners of the said market share, Italy, Spain, Germany and France, are characterised as traditional producers in the industry. This distinction between the new world and the traditional producers tend to fall on the way these countries market their products. For instance, the products from France usually markets their products based on the process of appellation or by indicating the place where it was made. On the other hand, the new world producers like Australia, they label their products based on what type of wine they are selling which makes it more convenient for the consumer. ( 1995, )
Another cause of the crises in the French wine industry, particularly in the United States market, is rooted in the recent boycott of Americans of French products. (2006) This was the response of the US consumers in the policies of France regarding the US-led war in Iraq. Recent studies have indicated that the exports of wine in this country have suffered significantly with over 13% reduction. Though it seems negligible at first, this proportion is rather huge given that the United States is one of the biggest markets for wine. This was not the first time that the US public has initiated boycotts on products coming from France, most especially wine. In 1995, the US public voiced their opposition on the nuclear tests carried out by the French government. (2001) This shows that the political stand of a particular state could actually affect commerce as seen in the case of France.
Moreover, (2001) pointed out that there are inherent shortcomings on the part of the wine distributors and winemakers as they tend to continue in exhibiting their rather discriminatory attitude. Particularly, there is an observed idiosyncrasy among winemakers in France with specific concern on their total disregard of the needs of the consumers. Reports claim that they have this traditional yet skewed philosophy that buying their wine is more of a privilege. ( 2001) And apparently, this has been the key in the self-destruction of the French wine industry as they are taken over by companies that are more customer-centred.
IV. Reforms Proposed to Deal with the CrisisIn order for reforms to actually be effective for the French wine industry, change in the national level and the individual company level is in order. For the national level, the French government should be start initiatives to relieve some pressures in the industry. This will encourage producers to be more efficient with the same level of quality as expected of French wine. Some other reform programmes could be tax exemptions and marketing funds for the producers and major players in the French wine industry. At this point, the French government should realise that there is a problem in its wine industry, and it’s a rather complex one. This is an issue so complex that government intervention should be seen as essential. Marketing funds and other financial assistance are therefore welcome types of support. In the same regard the system at which the regulation and administration of the industry in France should be taken into consideration. The possibility of changes in the structure and possibly the bodies that should have been in control of the industry requires modifications to suit the demands of the existing environment in the global wine industry.
In the same time, the individual company should also take into consideration the improvements of their marketing strategies given that the competition has already been using its big guns to take over the existing market share. Specifically, they have to focus on the United States and Europe as these are the largest wine consuming markets of the world. Similarly, they should also take the initiative to study Asia as a potential market as China and Japan are slowly becoming major wine-consuming countries in the continent. (Wine for Asia 2006)
V. Conclusion and Personal CommentaryThe paper has provided a clear discussion of the nature, cause, and reforms made in the French wine industry. It has been established in the discussions of the paper that the concept of country origin and country image for French wine products has been so ingrained such that the consumers tend to use their power as buyers as a means of reaction to certain political and national policies held by France which they oppose. The boycott discussed above is one of the best examples of such actions from the buyers. Thus, for countries like the United States the power of buyers seems to transcend the realm of business as the boycott tends to have spawned from the nonchalance of the French government on the US-leg war in Iraq. Apparently, there is the possibility that notable products coming from a particular country could suffer from the unpopular policy decisions of their government, this is evident in the case of the French wine industry. On the other hand, the French wine distributors have been similarly liable to the crisis in their industry. The lack of the marketing schemes from the wine makers and distributors has made them lose a considerable part of the market share in the United Kingdom. In any case, the government as well as the individual units of the industry should find a way to work hand-in-hand to acquire greater market share in the top economies and wine drinking nations in Europe and possibly open up new ones in the rest of Asia.
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