Explaining regional dynamics of marketing strategies: The experience of the Tuscan wine producers

In a traditional wine region such as Tuscany (Italy), the wine production is perceived by several industry players as weak and fragmented because it is mainly managed by small and medium-sized wineries that have limited market power compared to large companies and distributors. In this paper, we hypothesise that this problem was influenced - in a period of strong market growth - by producers' choices that underestimated the impact of several external forces (e.g. competition, changes in demand and regulation) and promoted strategies without considering their combination with key context-specific physical, structural and socio-cultural factors. The study investigates the origin of these marketing strategies confronted with the contested fragmentation, exploring both current and future trends of the wine market in Tuscany. The objective is to provide a better understanding on how the combinations between these factors and firm's activities define regional settings in which the different strategies are developed and how these settings can be used to promote more effective and calibrated strategies towards greater economic sustainability of the sector. The focus is to understand the nature and the dynamics of interlinkages between the adoption of quality-based differentiation strategies, the diversification of marketing channels, and their regional and local determinants. We adopt a mixed quantitative and qualitative research approach composed of an analytical framework, an econometric analysis, and interviews with wine producers. First, the method provides a conceptual framework to understand the interlinkages between producers' strategies and local and regional determinants. Then, the winery decision-making process is modelled through a two-by-two differentiation strategy model that represents the wineries' decision towards the adoption of PDO/PGI appellation or organic certification in relation with the choice of distribution channels. Through the reciprocal of the Herfindahl-Hirschman Index (HHI−1) - calculated on alternative marketing strategies – we verified the extent of diversification of sale channels under the different quality choices (i.e. PDO/PGI and organic or without them). Then, the determinants of the choice of distribution channels were quantified by applying a censored regression model and the results were elaborated and discussed in the light of 32 producers' interviews. The main trend highlights the fragmentation of wine production that has been determined by the differentiation model adopted by the regional producers. The results confirm a great divide in strategies between those producing quality wines and those who do not: on the one hand being mainly involved in PDO/PGI or organic certification positively affects the choice of multiple distribution channels; on the other hand, those who are not involved in quality labels have concentrated their production in a restricted number of marketing channels. The analysis shows that different producers' strategies have been influenced by the interaction between structural factors, farm characteristics and terroir in response to external changes. It also reveals a transformation process in progress that involves the concentration of the supply chain. Producers are promoting greater consolidation and reassembling of the production through new producer networks and associations that aim to reduce the fragmentation and related weakness with new common strategies.