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XXIV EuAWE 2017
7A
Bologna Conference
Behavioral analysis of French wine multinational enterprises
on African markets
Nicolas BROUTÉ
Université Bretagne-Loire, Ecole Supérieure d’Agriculture, Angers – France
[email protected]
Since the end of the 20th century, multinational wine firms (“Wine MNE’s”)
– producing and selling wine on a global scale - have emerged and gained market
shares over local and national producers. While these firms are logically based
where wine consumption is significant (i.e in Europe and in North America), or
where it grows fast since more than a decade (for example in Asia), some pioneer
MNE’s are investing in Africa which they consider to be the next frontier.
Wine consumption in Africa grows indeed five times faster than the world
average (IWSR, 2015) and the African continent has now become an attractive
magnet for the wine industry, especially for French wine firms which are
geographically and historically close to these markets.
These pioneer Wine MNE’s use various entry modes (export, distribution or
licensing agreements, direct investment) which reflect different approaches
towards the African continent. But how different are these approaches? And how
are these corporate strategies being formulated within the firm? Investigating this
topic is useful for at least two reasons.
• At a corporate level, it shows how Wine MNE’s are adapting to African
markets where levels of uncertainty are very high
• At a market level, it explains which strategies and which firms will have
the greatest impact on African emerging markets.
This article describes and analyses the market entry modes of 4 French
wine multinational enterprises that are involved in Africa: Groupe Castel, Les
Grands Chais de France (LGCF), Louis Vuitton Moët Hennessy (LVMH) and PernodRicard. We have chosen to focus on these French firms as it allows us to compare
investment strategies because of their impact on the global wine trade – each of
them belonging to the top of the oligopoly formed by the first 40 world wine
companies (Montaigne and Coelho, 2012).
First, it establishes a typology and mapping of wine firms of the 54
countries that make up Africa. Then, it looks closely at the choices and decisions
made by these MNE’s following the behavioral analysis of the firm. We used
qualitative survey research and conducted semi-structured interviews with 14
managers currently working in each of these wine MNEs.
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XXIV EuAWE 2017
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Bologna Conference
To establish a typology of market entry modes by the 4 studied MNE’s on
African markets we explore the firms’ corporate websites. We then complete the
subsequent information by analyzing the specialized press and media that focus
on the wine industry (ex: Meininger’s) and investment on the African continent
(ex: Forbes Africa). According to the eclectic paradigm (Dunning, 1977), three
generic forms of market entries (Export, Licensing, Foreign Direct Investment) can
be identified when examining international activities of firms, with Foreign Direct
Investment (FDI) and licensing providing the strongest competitive advantages. To
categorize the Wine MNE’s in Africa we therefore distinguish whether the
company exports its wine using the distribution network of a local / international
partner (Licensing or “alliance”) or its own network (FDI or “subsidiary”). In the
case of a direct investment in the country we trace the reason why, in line with
the strategic configuration of wine MNE’s (Montaigne and Coelho, 2012). Indeed,
we see that most of wine distribution networks put in place by producers in Africa
emerge after beer or spirit distribution is already in place.
Then, since our objective is to understand how choices are made by
individuals and groups of individuals within the wine MNE’s (the firm), it has been
decided to proceed to a qualitative survey. Some specific criteria have been
established to select our experts. The interviewees must indeed be familiar with
the firm strategy in Africa (1), preferably at managerial level (2), and with good
knowledge of the internal procedures when operating in international markets
(3).
Our interview guide follows a thematic progression with a general-tospecific pattern. We also use the word “company” instead of “firm” or “MNE’s”,
since it is a more common and neutral term for our audience.
1. General questions about the company
2. Market environment in Africa
3. Organizational procedures (or routines) within the company
4. Implementation of the corporate strategy in Africa
A list of 102 contacts has been established and all of them have been
emailed a short outline of the research project, describing which general topic we
would like to hear them talk about. 14 contacts agreed to be interviewed: they
form our final expert panel. Therefore, 14 interviews have been conducted by
telephone, all of them recorded, with an average duration of forty-five minutes
each.
Our results show that family firms like Groupe Castel and LGCF seem more
flexible than financially-driven firms like LVMH (and to a lesser extent PernodRicard) when dealing with uncertain market conditions that they find on most
Africa markets. Also, the strategic development of leading firms like Groupe Castel
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XXIV EuAWE 2017
7A
Bologna Conference
and LGCF suggest that some individuals (like the chief family officer and/or
specific employee intrapreneur) play a key role in taking the initial risks. Indeed,
the detailed observation of these 4 Wine MNE’s based on a behavioral analysis of
the firms tell us that proactiveness, risk-taking capability and general flexibility
could explain why family firms have so far developed a more expanded
distribution network in Africa than financially-driven firms. It therefore confirms
the recent works in the field of Entrepreneurial Marketing (EM); with EM activities
being described as “unplanned, non-linear, and visionary actions of the
entrepreneur” (Morris et al, 2002). It shows that in certain circumstances the
behavior of multinational enterprises can look like that of small and medium
enterprises (SME’s).
This study therefore contributes to a better understanding of how Wine
MNE’s are behaving in the African markets by mapping their distribution network
and investigating internal decision processes that eventually lead to international
strategic decisions. It also raises the question of how will these pioneer firms
behave during the next market life phases, which calls for additional research and
follow-up of Wine MNE’s in Africa. That could be done by combining this
behavioral analysis with performance criteria such as the firms’ market share,
return on investment and corporate image.
Future studies may also further explore the behaviors of these wine MNEs
and how they affect the development of wine markets in Africa. Another axis
would be to analyze how irrational factors, especially when it concerns emerging
and less documented markets such as Africa’s, influence the decision-taking
process inside wine MNEs.
Keywords: wine, multinational, Africa, firm behavior, market entry
JEL-Code: L2, M16, N17
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