Global Wine Wars

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CASE REPORT: Global Wine Wars: New World Challenges Old
(Harvard Business School Case # 9-303-056) NMI

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

French wine makers also face challenges that are not internal to the industry. For instance, France lost market share in the United States due to informal boycotts in the wake of the Iraq war. The rise of the euro against other currencies, such as the 30% increase relative to the dollar in the last few years, has put French wines at a comparative cost disadvantage. But
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The first joint venture was Baron Philippe de Rothschild’s venture with Robert Mondavi to create Opus One in 1979. Gallic presence in the Napa sparkling wine industry is strong as Domaine Caneros, Domain Chandon, Mumm Cuvee Napa, Pieper-Sonoma, and Roederer Estate are all owned by French champagne houses. Pernod Ricard owns wineries in Australia, Argentina, Chile and Spain (Economist, 1999).

Most (90%) production is concentrated in California. Started primarily by French and Italian immigrants in the late 1800’s, California’s winemaking tradition is only a few generations old and was interrupted by Prohibition. A global reputation for fine wine is even more recent, when two Napa Valley wines won gold medals at a 1976 blind-tasting competition in Paris, a victory unexpected by the rest of the world, including many Americans (Lukcas, 2000). The US adapted the French appellation system with over 130 approved American Vineyard Appellations ranging in size from the multi-state Ohio River Valley to the smallest, Cole Ranch, a 150 acre property in Mendocino County (Wine Institute, 2003). One of the most acclaimed appellations is Napa Valley. Most American winemakers also label by varietal if a wine contains at least 75% of that varietal by volume.

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

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