Marketing Strategy Analysis - Chateau Margaux vinery.
This Analysis introduces a new value proposition for the French Vinery firm. Suggesting some concrete actions that the company could take in order to expand its business without losing its core values.
2. Value proposition Chateaux Margaux
Segment
-Quality wine drinkers with high income
Target
- Connoisseurs: traditional buyers, buy it
regularly and because of the taste & quality.
- Luxury buyers: status symbol, price
appeal, vintage lovers, for special occasions,
design.
-Age from 40 up to 70
Positioning
- Frame of reference: Considered as a
superstar among wines. It improves in
power, elegance and charm with age
- Point of difference: Most seductive and
elegant of all bordeaux wines.
- Reason to believe: traditional methods and
quality above making a profit
Richard (53)
Richard is the CEO of one of the most famous consultancy
firms in the UK. In his spare time, he loves to go to wine
tastings and share his purchased wines with his business
partners. The wines of Chateau Margaux give him a feeling
of luxury and satisfaction.
Differentiation
- High quality → vs New World wines
(California, Australia, South Africa, New
Zealand)
- Traditional & rich historical → vs New
World wines
- Structure of a farm
- Premium prices
- Not available online or at the house itself
- High scores in rankings (e.g. Parker’s
scoring system)
- Exclusive brand reputation
Relevance
- Growing demand of premium (first-growth)
wine
- Globalization (new demand from
Russia/Asia market).
- Wine has become a status symbol
Difference between first growth and Pavillon Rouge
- Pavillon rouge, has a different frame of reference.
Lower quality, not first ranked grapes.
- Price difference (first growth €165-200, second
growth €30-80
- Both have a different target group; target of
Pavillon rouge are the connoisseurs, target group
of the first wine are the connoisseurs and luxury
buyers.
Conclusion: Chateau Margaux has a strong image and a clear target group. Their distribution
system is still a bit narrow, which makes them exclusive, but also inaccessible for customers.
3. 2. Market orientation
Outside-in
-Market sensing: losing market to New World producers with bigger vineyards, marketing budget, lower costs,
modern production techniques
-Customer linking: a primeur system à specialist merchants from Bordeaux
-Channel bonding: importers, wholesalers and large retailers à great excitement when it is finally offered to the
customer.
-Technology monitoring: new world producers use more modern technologies
Inside-out
- Financial Management: put quality above profit. Thanks to the high price level and good vintages, revenues
had been good in the last 10 years. Expenses are stable.
- Cost Control: Company has a structured farm
- Technology Development: maintaining and protecting crops from diseases, financial situation allowed to buy
the right equipment, to work better and also to be more selective
- Integrated Logistics: Specialist merchants & The en primeur system → creates scarcity and helps the prices
- Manufacturing/Transformation Processes: Better drainage & new plantings
- Human Resources Management: Pontallier, 27 year old doctor enology. 70 people in production & four people
in administration
Spanning process
* Customer Order Fulfilment:
merchants
* Pricing: Goal is to be on the top of
the first five growth Bordeaux wines,
premium pricing
* Purchasing: customers can only
purchase from selected importers
wholesalers and retailers
* Customer Service Delivery: no
connection with consumers directly
5. ● Chateau Margaux has not committed toward any relevant market oriented actions.
● They sell the wine as “en primeur” → Only focus on quality.
● They see themselves as operating in the business of selling top quality wines rather than in the business of identifying and
satisfying customers’ need, at the moment.
→ We know that a commodity business firm can still be profitable and perform well even if it is not market oriented. This means
Chateau Margaux can choose to either do no marketing at all and lean on their loyal richest customers ór go all in with marketing to
create an even bigger customer group and enhance its overall profitability as well.
2. Wine is becoming a commodity (See references)
6. 2. Internal analysis conclusion
Strengths → derived from the MCAs
- Strong brand equity → Intangible resources
- Experience and expertise in winemaking → Intangible resources
- Strong financial position → Financial resources
- Unique mix of natural resources → Physical resources
Weaknesses → derived from the MCAs
-Dependency on négociants
→ Absence of customers’ database
-Weak marketing and little knowledge of customers
→ No marketing strategy implementation
-Constraint by AOC regulations
MAIN TAKE AWAY FROM THE INTERNAL ANALYSIS
Despite of the experience accumulated over the years, the
absence of a solid customer database due to the lack of
marketing strategy, can lead to a competitive disadvantage
compared to its competitors
7. 3a. Drivers of brand importance & analysis
Brand are of enormous economic importance in commodity markets (Chateau Margaux)
→ brand power is reflected in higher firm valuation. Based on Fischer (2010) there are two main
drivers for brand importance/relevance:
Risk reduction: Consumers want to be sure they buy a good tasting/high quality wine.
● They base this decision on their knowledge about the wine brands
● Traditional wine brands like Chateau Margaux would have higher risk reduction
because of successful history of good taste and quality.
● New World wines still have to gain a good brand image
● Country difference (European countries, US vs Asia)
● All depends on function of the wine: occasion → special event, wine tasting, regular
basis.
Social demonstration: projecting self-image by buying & serving the wine
● Luxury wine brands are suitable to communicate sophisticated status
● New world wine can have the opposite effect because it is more a mass market
product and not exclusive, more for the ‘casual’ wine drinkers.
→ Upcoming market.
● Status symbol in Russia (bottle, highest price on the list)
● Special occasion wine in Asia (e.g. wedding of your daughter)
Important moderator: Age
-The older the person, the more need for risk reduction and less need for personal achievement →
older people want to be sure of the quality of the wine but don’t necessarily want to show off
-younger people value the risk reduction less but more social demonstration.
So, as a brand you can focus on those different brand drivers to attract different target groups. This
can be seen at the different target groups for the different wines of Chatau Margaux (first growth &
Vintage, second growth etc).
8. 3b. Core components of Chateau Margaux
Brand pyramid
● Attributes: familiar, traditional, bordeaux, quality, age, charm, vintage, exclusivity,
elegance, juicy, expensive, sophisticated, status, image
● Functional benefits: good taste, health benefits ( when not over consuming) &
gaining more knowledge wine
● Emotional rewards: feel good, feel special, contentedness, appreciated, reduce
stress, sociability, cosiness, to get respect, to get status, luxurious
● Values of user: happiness & enjoyment
● Personality: warm, cosiness, sophistication, cultured, charming,confident, trusting,
reliable
● Brand essence: Luxurious and quality feeling when drinking premium wine
Strength of the Brand
- The happiness and enjoyment are positive consequences of the quality, taste, elegance,
status, exclusivity and charm
- Chateau Margaux can be seen as a strong brand because the associations with the brand
are unique and relevant. The attributes and consequences are also congruent with the
values of the brand.
- The high reputation leads to feeling special and getting status. The gained status and good
feeling lead to happiness and enjoyment
9. 4a. What do consumers expect from Chateau Margaux? (Mec analysis)
See appendix
10. 4b. Connoisseurs: Pro’s and cons
Segment 1. (traditional consumers → European markets mainly)
Connoisseurs account for the 80% of the current Chateau Margaux
market.
Pro’s:
- Likely to continue buying and consuming regularly.
- Strong stabilizer.
- Highly involved customers
- Loyal customers (because if “the chinese lose interest these
customers will still buy the wine”),
Cons:
- Connoisseurs segment can be influenced by the strong marketing
actions undertaken from high-quality new branded wine
companies
- Connoisseurs pretend a constant improvement of the product, if
they are not satisfied over time they can lose the interest for the
company
Conclusion: Since they are the most loyal segment Chateau margaux can
not risk to lose them. They work as stabilizers, in a usual high-volatile
industry such as the wine industry they play a crucial role for the
financial status of the estate.
11. 4b. Luxury buyers: Pro’s and cons
Segment 2. (luxury buyers → Focus on Chinese and Russian new
consumers)
→High profitable but riskier segment.
Pro’s (profit):
- High potentially growing segment → Demand can be pushed
upwards and it would allow the company to increase wine
prices.
Cons (risk):
- Volatile customers
- One time buyers
- More subjected to competitors marketing actions
- Influenced by the changes in taste overtime
Conclusion
Even if high subjected to switches in taste and competitors actions
they can end up playing an important role for Chateau Margaux since
they’re supposed to increase in number. It would allow the company to
rise the prices of its wines and gain some extra-profits. This in turn
would allow the firm to continue developing the overall estate current
status and to guarantee an increasing development of its first wine to
keep on satisfying the connoisseurs segment.
12. 5. External analysis: PESTLE
Political Economic Social/cultural
- Stable political
environment
- Good international
relations for trade
- Higher consumption of
cheaper wines
- New markets - US, China,
Russia
- Introduction (1990) of New
World wines → increasingly
gaining bigger market
share
- Long tradition of wine
consumption
- High value of quality
- Part of everyday dining
- Increasing health
awareness → valuing quality
over quantity
Technological Environmental Legal
- New technology for wine
production
- Improved quality control
- Climate change
- Environmental footprint -
large greenhouse gas
emission (CO2)
- Drinking age limit
- Restrictions on the vines
planting
- Local regulations and
restrictions
- EU regulations
- Significant taxes
Insights:
- Industry trend is moving
towards cheaper, branded
wines. Moreover, the New
World wines are becoming
more popular on the market
- New markets are being
explored (US, Russia, China),
especially luxurious
products are highly valued →
niche for Bordeaux first
growths
- Modern technological
development is strongly
exploited by the New World
(California, Australia, South
Africa)→ French vineyards
are changing slowly to
preserve tradition
13. External analysis: Five forces
Threat of new entrants:
- Moderate customer loyalty
(+/-)
- Terroir one of the most
important factors, need a lot of
land (-)
- Big investment and late
returns (vintage wine) (-)
Power of
suppliers:
- Strong
dependence on
vineyards and
specific types of
grapes (+)
- No substitution for
grapes (+)
Competitive rivalry:
- Many producers all around
the world (+)
- Competitors both in lower
and higher quality segments
(+)
Threat of substitutes:
- Many substitutes (beer,
stronger alcoholic beverages,
soft drinks, water) (+)
- Many substitutes are
relatively cheaper (+)
Power of the
buyers:
- Increasing number
of wine drinkers with
specific taste (+)
- Changing trend of
taste among critics
and consumers (+)
- low buyers
switching costs (+)
Insights:
- Big power from the buyers in this industry.
In the case of Chateau Margaux: important to have
a good understanding of the buyers to be able to
fulfill their demands. Currently, Chateau Margaux
has no database, no marketing → lacking
information about their customers
- Power of suppliers, threat of substitutes and
competitive rivalry is high. Since it’s very hard to
enter the market and Chateau Margaux is already
famous (as a well-known brand with a good
reputation) → makes their position strong for now.
However, with the competitive rivalry this can
quickly change.
Wine industry
14. Competitor Analysis
Lower quality Highest quality
Branded
wines
Margaux
Haut
Brion
Lafite-
Rothschild
Latour
Mouton
Rothschild
Haut
Brion
Lafite-
Rothschild
Collaboration with branded wines
Mouton
Rothschild
Collaboration with branded wines
Collaboration with branded wines
Insights:
- Chateau Margaux experiences competition from both cheaper, branded wines that are distributed on the mass market and other first-growths from Bordeaux region 1)
offering high quality, luxurious wines but also 2) tapping on the mass market by introducing cheaper wines for middle-class customers under the châteaux owners’ company
name
- New World by using more modern technology can offer much cheaper wines for the mass market but they lack the traditional aging capabilities
- Pontallier “We can compete against other first growths which belong to the same culture, but not an Australian Shiraz” → New World wines are considered a different
product by traditional French producers. However, the New World is gaining a significant position on the market
15. SWOT
Insights:
- No customer database as
one of the main weaknesses
is also influencing a coming
threat of changing taste
trend as Chateau Margaux is
not prepared to deal with the
shift
- Decreasing consumption of
French wines, connected
with general overproduction
on the wine marker, is
posing a big threat but
there’s an opportunity of
tapping on the new markets
that perceive wine as a
luxury product
- The cheaper competition,
from both New and Old
World, is positing a big
threat for French
winemakers. Although
Chateau Margaux has strong
position on the market, it is
not fully exploiting its
resources
16. 5. Main issues and urgency Insights
We identified the main
and most urgent
Chateau Margaux
problem as the lack of
marketing adaptation.
This problem
represents the central
motive that generates
the issues the
company needs to deal
with in the foreseeable
future. Building an
appropriate
customers’ database,
in our opinion, is the
most relevant
problem, and is in
turn linked with the
other issues found like
losing customers to
New World wine
producers and limited
exploration of new
markets.
17. Option 1: Outstanding third wine
‘Marquant Rouge de Chateau Margaux’
From own resources, the company
should establish an even more exclusive
wine focusing on the luxurious aspects
of their brand.
● Value proposition: best of the
best wine staying true to
tradition and exclusivity.
● Target group: highly luxurious,
exclusive group. age 40-70
Marketing implications
- Sourcing: new resources by
expanded vineyard. Highest
quality grapes
- Pricing: price around 10%
higher than first wine→ create
higher profit margin
- Distribution: Sell directly from
the Chateau via the merchants
- Communication: reach out to
loyal customers to be
ambassadors to create WOM
among high income group to
maintain exclusivity
Option 3: US partnership ‘Maison
Melange’
Establish partnership with US vineyard
and create a third mid-range wine
combining tangible resources from US
(grapes & marketing) and intangible
resources from Chateau Margaux (brand
name)
● Value proposition: Quality wine
made with a recognized
(traditional) know-how with a
modern touch
● Target group: accessible for mid-
and high income group, age 28-70.
Marketing implications
- Sourcing: Using US vineyard for
grapes,
- Pricing: In line with New World
wine prices
- Distribution: Available worldwide
online, in restaurants & in special
US wine boutiques
- Communication: Draw on US
marketing capabilities, wine fairs,
online adds and magazines.
Option 2 : Less premium wine ‘Margaux’
From own resources, the company should
also establish an affordable and therefore
more accessible third wine.
● Value proposition: Quality wine
with a rich history yet accessible
and affordable. Perfect for dinner
parties and intimate moments with
family & friends
● Target group: accessible for
broader income group, age 25-70
Marketing implications
- Sourcing: new resources by
expanded wine yard. Less quality
grapes compared to first two
wines.
- Pricing: lower price than existing
two wines. Price around 30% less
than second wine
- Distribution: available online and in
exclusive liquor stores
- Communication: Online adds about
the ‘new & affordable’ wine from
Chateau Margaux. Promotion in
special liquor stores.
6a. Strategic options for the third wine
18. Option 1. Branded house structure
-Positioning ‘Marquant Rouge de Château Margaux’: is an exclusive, outstanding, best of the best quality
wine sold only to top luxury buyers. The wine is made from the best grapes available. The MEC luxury
buyers allow us to leverage on the luxury buyers’ need of gaining social ranking and recognition. We will
enhance the exclusivity by selling only 100 bottles each year, produced and bottled exclusively in the estate.
Leveraging on this scarcity the bottles could be priced around 20.000€ per bottle. This solution won’t need
a marketing implementation strategy, so the company could increase its business performance through
counting on its existing richest private clients (see slides nr 5)
6b. Positioning options
Option 2. Branded house structure
-Positioning: ‘Margaux’: position it as a cheaper, but quality wine for the middle-class consumers in order
to compete with the New World branded wines. It’s a cheaper alternative but still made with the quality and
excellence of Chateau Margaux. It should reach a broader consumer group and can be seen as a more daily
use wine which your drink at dinner parties. This way customer can show their friends they have high
quality wine but don’t want to show off.
Option 3. Hybrid/blended house structure
-Positioning: ‘Maison melange ’ :position as a newly made wine with the use of the perfect land and
vineyards of California to get a new twist but still with the excellence and expertise from Chateau
Margaux. They will market it namely for the US market. To not attract only vintage wine drinkers in
US, but to attract a new target group (for example: younger people who like quality but don’t have a
lot of money to spend)Also, this collaboration will be an opportunity to gain new customers and
maybe if it is a success, Chateau Margeaux can also work together with New World producers in
countries like South Africa, New Zealand and Australia.
Chateau Margaux itself is the brand,
and its products or services are
subsets of the primary brand→ they
all fall in the scrutiny of existing
branding strategies and standards
A mixture of two or more brands
architectures. It is typically used when a firm
is acquiring existing brands through mergers
or acquisitions.
19. Best option: 3
‘Maison Melange’
Option 1: Outstanding
third wine ‘Marquant
Rouge de Château
Margaux’
Pro’s
- Easy addition to
their already
successful brand
- Highlighting the
exclusivity of the
brand
- Attracting
Con’s
- Large part of the
market still left
untouched by the
company
- Not taking into
account expanding
the brand in a
different direction
- Costs of investing
in new vineyards
Option 2. Branded house
structure ‘Margaux’
Pro’s
- Learn about the
mass market
- Synergy effect, will
attract new
consumers who will
potentially also buy
the more expensive
versions of Chateau
Margaux.
Con’s
- People prefer New
World wines over
‘Margaux’.
- Costs of investing
in new vineyards
- Change of loosing
exclusive brand
image
Option 3: US partnership
‘Maison Melange’
Pro’s
- Possible future
collaborations
- Attract new customer
group
- Possibilities of using
more variety grapes in
the future (more land,
different climates)
- Less risk compared to
when you go for
acquisition, smaller
investment
- Profit from
knowledge/marketing
capabilities etc
- Also possible synergy
effects (different
customers, more assets
and knowledge)
Con’s
- Loses traditional brand
identity
- Lack of control over the
company → need for
compromising
- Dividing profits
20. Operationalization
● Organize wine fairs/tastings and exhibitions abroad, ‘cite des vins’
● Media: social media, specialized magazine in the luxury wine
● Creating modern, appealing labels by working with modern artists
● Really show the collaboration with US (old expertise but new vineyards)
Address main issues:
● Gain back important customers, who were lost due to the high price
practice
● Attract new world customers that are interested in affordable, more
accessible wines
● Introducing the Maison Melange enables Chateau Margaux to increase its
revenues by tapping on the mass market and still preserve its brand image.
● The know-how, marketing strategy, the customer databases and best
possible distribution channels can be obtained from the new partner.
● Leverage on marketing skills of the US winery to get more customer data
6c. Advise: Maison melange (third option)
Future plans
● If collaboration is a success
→ establish new ones with
Australia or Africa
● Gained insights and knowledge
from the partnership can be
later used by Chateau Margaux
to explore other markets.
21. References
- Pellecchia, “Say it isn’t so: Wine is a commodity!”, Forbes, March 2016
- Morgan, N. A. (2012). Marketing and business performance. Journal of the
Academy of Marketing Science, 40(1), 102-119.
- Day, G. S. (2011). Closing the marketing capabilities gap. Journal of marketing,
75(4), 183-195.
- Narver & Slater (1990). The effect of a market orientation on business
profitability, journal of marketing, October 1990
- Fischer, M., Völckner, F., Sattler, H., (2010) How Important Are Brands? A
Cross-Category, Cross-Country Study, pp. 823-839
- Day (1994), The capabilities of market driven organizations, Journal of
Marketing, 58(Oct), p37
