Case Study #1: A New Market

Lifestyle changes through affluence

Between 2004 and 2007, India's growth averaged 8 percent annually. This economic success was due, in large part, to India opening its economy to foreign competition, making changes in manufacturing, and instituting measures to encourage international trade. The signs of economic growth in India were clear. New houses were being constructed in city suburbs, many more cars were using the already crowded roads, and a new, affluent middle class had sprung up. With the growth of the middle class had come a demand for luxury goods. One of these was wine.

Rapid growth in demand

At the beginning of the 21st century, the wine market in India was almost non-existent. By 2008, the market was expanding rapidly, with annual growth running at over 30 percent. A new habit of wine drinking had been encouraged by duty exemptions that the Indian government made to boost wine consumption. By 2008, there were three major companies in the Indian wine market that met about 90 percent of demand. However, the remaining 10 percent of the rapidly growing market was large enough to accommodate more competitors. Because the quality of Indian wine was still relatively low, some companies had started importing foreign wines and rebottling them in plants in India for domestic consumption.

A small winery sees an opportunity

Chateau Camargue was a small winery located in the Avignon region of France. Dominated by the more popular wineries in the region, the company had struggled in recent years, despite the glowing reviews its cellar had received. The owner of Chateau Camargue, Pierre Camargue, attended an international wine show at the end of 2007 and was intrigued by the possibilities of exporting to India. The European wine market was saturated, his company's expenses were rising drastically, and he needed a way to boost cash flow and expand market share rapidly. Exporting to India seemed to be the ideal opportunity.

Case study discussion question:

1. What are the main market entry barriers that Chateau Camargue faces in entering the Indian wine market?

1. In your opinion, what would be the best market entry strategy for Chateau Camargue to overcome their financial difficulties? Explain your reasoning.

1. Should Chateau Camargue consider a long-term foreign direct investment strategy in India? Explain your reasoning.