Chateau Margaux free essay sample

How should Chateau Margaux best market and launch their new offering – their third wine? Previously considered a left-over, the quality of the third wine in 2009 was so good and unexpected that the management team of the vineyard decided to sell as a Chateau Margaux wine. This raises the following subquestions: a. To which target consumer and market should it be addressed to? b. How can this vintage wine be positioned in relation with the Chateaux’s first and second wines? c. What should the price be? d. What are the best channel and communication approaches? What places should they sell the wine to if they bypass the negociants? 2. Analysis of the situation 2. 1. Swot Analysis Strengths Weaknesses Prestige (1855, the â€Å"Premier cru† rank, â€Å"our picture made the Wine Spectator cover in 1984†) Well established presence in the wine industry (â€Å"enthusiasts from all over the world were coming to visit, taste and compare†) The quality and quantity of the 2009 third wine Their first and second wines are very well appreciated in markets like China, Pioneers in their harvesting practices and techniques Robert Parker’s highly favorable reviews Increased engagement with media â€Å"Ambassador† strategies for better communicating the value of their brand Loss in the popularity of the image of the Bordeaux wines among â€Å"Sommeliers† (â€Å"Bored of Bordeaux†) No control on end-consumer prices and types Limited production – they cannot satisfy an eventual increase of the demand in one of their wines Lack of experience of the management team in the marketing area Selling en primeur reduces their benefits of the real market price evaluation Opportunities Threats Increasing wine consumption in several New World countries (USA, Brasil, Australia, Canada) as well as in Russia, China, Japan = potential target markets (importers) New buyer behaviors and influencers (Image seekers/ luxury consumers in China) All wine imports taxes and restrictions were abolished in Hong Kong Sommeliers’ new interest in more traditional and less snob appealing wines A number of negociants showed already interest in marketing the Chateau’s third wine The raise of the ecommerce as a distribution channel Strong competition from the New World producers (USA, Argentina, Chile, South Africa, China, Germany) Decreasing consumption in Europe (France, Italy, Germany, Denmark) Counterfeit wine in China Weather conditions – global warming 2. 2. Porter 5 forces analysis New entry barriers MEDIUM High price of land of vineyards Large capital investments in equipments High expertise requirements Requirements for processing and storage facilities Slow ROI due to years of aging needed for a wine to be ready to market High power concentration Increased availability of technologically advanced equipments/machines Accessibility to transferable know-how thanks to the Internet Difficulty in finding lands with high quality of the soil and good weather conditions Power of buyers HIGH Strong bargaining power of distributors (negociants for example influence market prices through their speculations, especially when buying en primeur) High power of retailers High consolidation between retailers and distributors Power of the suppliers LOW They produce their core row material themselves (vineyards) The other material required doesn’t have a big influence Substitutes HIGH Great competition on the wine market in terms of types of wine, producing countries, quality, and so on Great competition from substitutes such as sparkling wine, champagne, cider and so on Competition HIGH â€Å"Bordeaux† wines are numerous The competition in the wine sector is high due to the characteristics explained before 2. 3. Pestel analysis Politico-Legal The diverse appellations are strictly controlled and quoted Subsidies are allowed to producers to deal with economic issues Economic The global wine industry is estimated around $65 billion The global production is estimated around 30 billion bottles The worldwide competition is so big that producers are obliged to lower their prices The globalization opens the wine market to Asia (mainly China) Social Wine consumption is affected by the different level of social classes Technologic Technologies don’t affect so much the wine production Ecologic Strict control imposed from the food industry 3. Strategic recommendations a. Target consumer and target market Target consumer We do need more presence in traditional markets, but we should reach consumers new to the wine-loving world and introduce them to our brand† (Aurelien Valance, Commercial Director). â€Å"I would like to regain the hearts of the loyals who have been priced out. They admired our wine because of its uniqueness and excellence. But we need to think hard about how to position a third wine to them, as they grew up on our first and second wines. We cant allow a perception that this is an inferior product. † (Mentzelepolous). A midway/combination profile of the â€Å"Enthusiasts† and the â€Å"Traditionalists†: Passionate and knowledgeable Enjoy wines Like to be offered well-known brands from established wineries (the case for Chateau Margaux) Because these 2 consumer segments have significant common criteria for selecting a wine; their divergences do not represent an impediment for the promotion and distribution channel strategies. Target markets Today, a staggering 35% of their global sales come from the Chinese market, from luxury consumers. Since the â€Å"connaisseurs† represent less and less of their total sales and this new third wine can be a great opportunity for the vineyard to â€Å"regain the hearts of the loyals who have been priced out†, the Chateaux should choose to target their former biggest clients: France, US, UK and Japan. However, they should not forget about other countries, where they can reach consumers new to the wine-loving world: Canada, Australia. b. Positioning in relation to their other 2 wines To begin with, the third wine does not have the attributes of a high-end product. So far, their first 2 wines are from the luxury category, so introducing a less excusive product in their portfolio will generate a brand dilution risk. Therefore, a different positioning should be stated via the price, via the target consumer, but also via its brand name. On the one hand, they should keep the Chateau Margaux Appellation d’Origine Controlee, in order to guarantee the provenience and thus quality of the wine, but on the other hand, the brand name should be different, with the purpose of avoiding confusion and expectations. This way, the risk of diluting the brand will be significantly reduced. The brand name should, of course, keep the end link â€Å"Chateau Margaux† but shouldn’t necessary be linked to the â€Å"Pavilion† appellation. Indeed, the third wine should take advantages of the producer’s brand but it shouldn’t be link to the second wine. Depending of the perceived quality, the term â€Å"petit† should be avoided because it could be wrong interpreted by consumers who could think that the wine has a lower quality. The name of a wine can influence a lot the purchase behavior. Appellations such as â€Å"Reserve† or â€Å"Grand Cru† are often well interpreted. This is why a brand name such as â€Å"Reserve (du) Chateau Margaux† might be appropriate while the appellation spirit refers less to wine. c. Price The price communicates to the market the company’s intended value positioning of its product. Since the Chateau should consider positioning their third wine as an affordable value wine, its price should not be higher than Pauillac de Latour’s, which is currently sold at $97 per bottle. d. Channels and communication approaches Due to the emergence of ecommerce and the Internet as a direct means of communication and promotion, we can say that the negociants have become obsolete. Besides, thanks to its prestige and long presence on the market, the Chateaux has already created strong connections with many of the importers and other key global purchasers. Therefore, bypassing the negociants in marketing their third wine is a smart and more profitable strategy. Also, this way, the Chateaux can have a better control on the reached end-consumer and prices for their third wine. Since the wine is still a very qualitative one and a similar product from the Bordeaux Region (Pauillac de Latour) is sold with $97 per bottle, it should not be distributed to retailers where normally their bulk wine would end up at. They have to focus their efforts on the sommeliers, which can further place their wine in the high-end restaurants. A tasting should specially be organized for them, trying this way to regain popularity amongst them, but also reestablish the lost, but otherwise fruitful relationship. When consuming wine on the premises (in the restaurants/bars), both the â€Å"enthusiasts† and the â€Å"traditionalists† will accept the recommendation of the Sommelier to try out the new wine from Chateaux Margaux.