Cooperation, Competition, and Regulation: Constructing Value in French and Italian Wine Markets
- Author(s): Carter, Elizabeth Ann
- Advisor(s): Vogel, Steven K
- Zysman, John
- et al.
In 1976, virtually unknown Californian wine producers shocked the culinary world by beating top French Bordeaux houses at the blind tasting event known as "The Judgment of Paris." The challenge was repeated in 1986 and 2006, with Californian vintners emerging victorious each time. Yet as producers in other countries increasingly meet or surpass French producers in terms of quality, the price differential between French wines and other wines continues to increase. What enables French producers to maintain market price dominance, absent clear qualitative dominance?
I demonstrate that French wine producers maintain price dominance because the French government made regulations that defined geographic zones, which drove prices up by (1) limiting supply and (2) locating brand value with grape growers. Quality French producers were able to pressure the government for these market protections because of strong political organization among growers and deep levels of compromise across the supply chain, notably between growers and wine merchants.
Why have some producers secured these market protections, but not others? And why have these regulations worked in France, but achieved mixed results in other contexts? Unlike quality French producers, both the Italian wine market and the French table wine market are characterized by weak levels of vertical supply chain cooperation, which undermines the construction of a protected market space. I argue these different patterns of political organization explain national and sub-national patterns of production and subsequent market outcomes. I then extend my case to the broader luxury market.