Wine Management and Marketing Opportunities for Companies and Challenges for the Industry

Foued Cheriet, Carole Maurel, Paul Amadieu, Herve Hannin

• Publisher: Wiley-ISTE
• Year: 2020
• Print ISBN: 9781786305282
• eBook ISBN: 9781119777410
• Edition: 1
• Topic: Business
• Subtopic: Marketing
• Index: Business

This work highlights the new challenges facing the French wine industry and the issues that arise from it. Written on the basis of academic work and field studies, conducted by a group of Montpellier academics in Economics and Management Sciences (Groupe Montpellier Vin), this book presents recent and original research results and raises the key issues related to finance, strategy, international management and marketing. Professionals in the sector, academics, students and wine enthusiasts will find up-to-date information, in-depth analyses and above all, an invitation to a stimulating debate on the prospects of this traditional, yet innovative sector.

PART 1
Business Strategy Applied to Wine

1
Land Strategies and Installation in Viticulture

1.1. Introduction

The land issue in viticulture has obvious particularities for analysts in the sector. The vine is a perennial plant with a long lifespan, sometimes 50 years or more, producing grapes, the raw material for a complex technological transformation, subject to detailed production regulations, associated with specific local constraints. Three main regulatory categories define the production conditions for wines without a geographical indication (non-GI wines), wines with a protected geographical indication (PGI wines) and wines with a protected designation of origin (PDO wines in European terms, AOP in French). The distinction and reputation of these wines is reflected in their price, which ranges from one euro to several hundred for a liter of this nectar.

This diversity is also reflected in land and its value. The average price of vine exchanges was €14,000 in 2018 in Occitania, for the production of non-GI wines (SAFER 2019b). On the contrary, François Pinault pays one million euros a piece for a Montrachet ouvrée¹, a traditional measure in Burgundy, or 23.364 million euros per hectare (Abellan 2012).

These “stratospheric” prices clearly show the complexity of the wine property market and, as for real estate, other considerations than just return on investment enter into the calculation: assets, prestige, taxation, inheritance tax, and so on (Comby 2010).

In addition, the “Cognac vultures” strategy illustrates the complexity of regulatory constraints, resulting from the various European reforms of planting rights, as much for planting as for localisation.

To install oneself on a vineyard, we need vines that are inherited, rented or bought. This chapter therefore first focuses on the issues of installation, justifying the legal forms that support it. The decline of the agricultural population and the development of corporate forms are the major trends. Since 1962, the settlement assistance policy has been steadily strengthened. The financial support, both for training and administrative support, notwithstanding, access to land remains the main limiting factor, particularly because of its price. We will note and try to explain the main mechanisms for setting prices for vinegrowing land, which is far from being a free market. We will detail this regulatory framework in terms of public support, conditions of access and financing, which will allow us to define what a successful installation is. We will then detail the institutions and organizations that have emerged from land policy at both national and European levels, determining the price and conditions of purchase.

1.2. Issues and legal forms of installation

1.2.1. Issues of installation: the decline of the winegrowing population

The drastic reduction in the agricultural population explains the importance given, both by the public authorities and the winegrowers’ Association, and professional bodies, to the installation of young and not-so-young people in agriculture. In 1900, France was 79% peasants, about the same percentage as in all developed Western countries. In 2000, the number was down to 2.3%, and only 1.05%, i.e. 702,216 agricultural workers (UTH²) in 2016 (Agreste 2019). One of the first considerations to be accounted for is, of course, access to the means of production, and, in particular, land.

In viticulture, the trend is identical, marked, like the rest of agriculture, by the development of paid employment: viticulture includes 132,500 UTH in 2016, with a reduction of 0.2% compared to 2010, distributed between 54,000 unpaid workers (-2.2%) and 76,600 employees (+1.3%). The proportion of paid employment is much higher than the average for French agriculture, with 35.2% for agriculture and 58.7% for viticulture.

Employment continues its trend towards instability with the relative development of seasonal employment at the expense of permanent employment. There is also strong differentiation between regions. Aquitaine, which has a larger share of PDO wine production, has more employees and more permanent employees than the Grand Est and Occitania.

The traditional vision of many rural economists, which emerged from the laws of 1960 and 1962, is that agricultural settlement is characterized by the establishment of a farmer, often the son of a farmer, on land inherited, purchased or rented, possibly assisted by his wife or a family assistant, possibly a permanent worker, i.e. the famous two man-work unit (MWU) farm, i.e. a two-UTH³ farm supported by the CAP (Common Agricultural Policy). An analysis of the legal forms of this installation shows a strong evolution towards corporate forms.

1.2.2. The legal forms of land and agricultural enterprises: from the individual to the collective

“Agriculture is constantly being modernized, including in legal terms. Small farm or large estate, how to get better profitability? How to pass it on without causing disagreements? Why create an agricultural company?” (Notaire.fr 2017).

An important step in installation is, of course, the choice of the legal form of the farm and, increasingly, the choice is made to create agricultural companies of various forms.

Many forms are available to the operator, and the choice of the type of company depends on its objectives. Generally speaking, the corporate form makes it possible to combine material, financial and human resources. The company is sustainable because it does not die. It is easier for the farmer to withdraw because they can sell shares rather than tractors or livestock. Overall, the corporate form makes it possible to distinguish between personal and professional assets. Working capital is separated from land capital, which facilitates its financing, more particularly in the GFV (groupement foncier viticole: Vineyard Land Group).

Notaries distinguish three main types of agricultural companies: property companies, management and operating companies, and commercial companies.

As a land company, we will focus on the GFA (groupement foncier agricole: Agricultural Land Group), called GFV in viticulture. Its purpose is to create or preserve one or more agricultural estates. It requires at least two partners and “externalizes” the property of the farm. It allows “relief” for the cost of installation and offers many tax advantages, especially in the context of inheritance. This “tool” has been particularly used in some forms of crowdfunding (see below).

Management or operating companies, as their name suggests, encode the management of the operation and the performance of joint work. In practice, these forms are not very far apart in their functioning from that of a family farm, from a social point of view. These are the SCEA (société civile d’exploitation agricole: French civil society of farming corporations), the GAEC (groupement agricole d’exploitation en commun: French collective farming corporation group) and the EARL (exploitation agricole à responsabilité limitée: French private limited farming company).

In the case of the GAEC, all members must be operators, whereas SCEA and EARL may have non-operating partners.

Commercial companies are also useful. The GIE (groupement d’intérêt économique: French economic interest group) allows the development of a common activity such as the ...

Table of contents

• Cover
• Table of Contents
• Title Page
• Copyright Page
• Foreword
• Introduction: Specificities and Challenges
• PART 1: Business Strategy Applied to Wine
• PART 2: International Management and Wine
• PART 3: Finance Applied to Wine
• PART 4: Marketing and Communication in Viniculture
• Conclusion
• List of Authors
• Index
• Other titles from ISTE in Agriculture, Food Science and Nutrition
• End User License Agreement