Chateau Margaux- Launching the Third Wine Harvard Case Solution & Analysis

Chateau Margaux- Launching the Third Wine Case Study Solution

Abstract

The case illustrates the strategic moves of the company in the recent years 2013, to tap the market with exquisite flavor of wine, also retaining the old customers and attracting the lost customers in US and UK market. Chateau Margaux is one of the most exclusive and well-reputed wine producer of France, operating in Europe and US and have extended the operations to China, where the disposable income is not very high, yet the growth in the market is vigorous, making the market attractive to Chateau. Over the period of time, the company has offered two premium wines in the market, out of which, one received parker ratings of 95 and sells at $1280, while the other that received 93 is sold at $185.

Due to the change in the market trends and the increasing competition from the external market, the company under the leadership of Coniine Mentzelopoulos, has to decide on offering the wine to the lower tier of the market, targeting the youth, who cannot purchase the Chateau Margaux wines due to premium pricing. Though the decision would  allow the company to expand and make profits under mass marketing, however, it will posits the threat to the brand image of the existing wines in the market, creating a conflicted brand image and bard value,leading to the loss of sales and profit.

Keywords:  Brand Image, Marketing Mix, Mass customization, Economies of scale

Analysis

When the idea of a third wine was initially proposed to Mentzelopoulos in 2008 she rejected it: “Moving ‘downstream’ went against everything we had done since my father acquired the château—to relentlessly increase quality and build a reputation for spectacular wines.” What are the arguments for now “going against” her father’s memory and everything done by the family since 1977?

Chateau Margaux initiated the business plan with the clear vision of offering the premium brand to the market. Since it started and tapped the markets of US, Europe, where the customers have high disposable income and market trend to take wine as gifts or regular routines. Also, the wine of Chateau passed the parker ratings who rated the wines on the basis of its taste, maturity and smell, and since the trend in market followed the highest parker ranked wines as premium, Chateau developed its brand image on these rankings.

Over the period of time, the company continued its first and second wine in the market, and selling the remainder wine to the build producers, who could sell it under their own name.However, in the recent years after the great depression and financial crisis, the national income of US and European decreased, and threat of inflation along with unemployment rate increased, which transformed the buying behavior of the customers. In those times, customers tend to spend less in premium wines, and turned to cheap local wines in the region.The change in market effected the sales of the Chateau and also caused it the loss of flight of loyal customers, leading to low profits and the threat to decrease the price. However, even under such circumstances, the company stickled to its brand strategy and continued to sell the product on the smart price, until in late 20’s, when the management of chateau accidently tasted the residual wine of the first and second wine, which tasted good and incorporated high quality.Here,Coniine decided to exploit the opportunity and instead of offering it in bulk, the company should sell it under its own name, slightly cheaper than the existing two wine brand, to capitalize the resources, and also tap the new target market and attract back the old loyal customers who have walked away to other brands due to high prices.

The particular move is though against the parent strategy of the company but since the market trends and customer behavior have changed and that the government regulation have loosen allowing may competitors to enter the market, under-cutting the market share of company. Also, since after the recession and financial crisis, the customer behavior has shifted towards spending less on premium of luxury, thus positing threat of losing the market position in the long run. In addition to this, also the customer market segment has also changed, and there are more millennial and Gen-Y consumers present in the market, that depicts the behavior of saving the disposable income or opting for smart shopping. Under such circumstances, in order to sustain the business, it is important for Chateau Margaux to strategically shift its strategy from exclusivity to Mass Customization, so to gather the profits on economies of scale. Also, it will allow the company to lay these same strategies in all the three markets, saving cost and allowing the company to pursue standardization strategy. The change in strategy will also allow the company to tap into different regions like Asian Region with low initiation cost, sustaining the market position and, market share in the long run.

Chateau Margaux- Launching the Third Wine Harvard Case Solution & Analysis

 

 

What is your assessment of the Château Margaux brand meaning and brand value? How does it compare to other classified growths in the region? To non-Bordeaux wines?

Andre laid down the foundation of the Chateau Margaux, with the clear objective to serve the upper segment of the market, through its strong exclusive offerings.He shaped the brand into a luxury product with a proposed value proposition of exquisite taste with right blend, aroma and design. The company created the brand as the depiction of high taste and class, the wine for those who actually have the taste developed for high premium wine. In doing so, Andre put emphasized on the brand equity and designed categories into two namely First serve and Second serve. Over the period of time, in the reign of building the brand, the company monitored and controlled the back end and front end integration of the supply chain, under its own operations,which resulted in high quality wine, with the perfection in aroma and style. This gave the brand a unique position in the market with the barn image of luxury and sophisticated wine that can also be used for multi-purpose, e.g. as a corporate gift....................

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