Jeanjean and Laroche Wines: A successful Strategy is all about Momentum

(More wine news on www.vitabella.fr). In France, Jeanjean (a languedoc based wine group created in 1870) recently took over the control of Laroche wines. In fact, JeanJean will own 49% of a new group called "Advini" - listed on the French stock exchange - a marriage between low priced Languedoc wines and premium Chablis wines. With 1,450 hectares of vineyards, this new Eur190 million revenue generating group Advini will be strong enough to devevelop market shares internationally.
For JeanJean, this operation makes sense. On one hand, Jeanjean generated 64% of its sales in France in 2009, mainly through supermarkets and hypermarkets. On the other hand, 85% of Laroche revenues are made from exports. Recently hurted by a slow demand in UK, Japan and Russia, Laroche may also have suffered from its strategy to get out of supermarkets and focus on hotels/restaurants a few years ago. During that same period of time, Jeanjean went upstream and bought, among others, Ogier in Chateauneuf du Pape and Antoine Moueix with its grands crus from Saint Emilion. With these two important acquisitions, Jeanjean also wanted to increase its market shares outside France. This strategy proved successful as 36% of total sales are now generated by exports compared to 3% a few years ago.
What's next for JeanJean? The management recently presented its strategy for the future including an objective, over the next 5 years, to increase its international activities to more than 50% of total sales. Acquiring Laroche helped the group to go fast in that direction. It also helped the group to get an access to 100 hectares in Chablis appellation. Advini's portfolio now counts among the most reknown appellations in the world: Chateauneuf du pape, Saint Emilion and Chablis are names that ring a bell to most of wine drinkers in the world. This is a very good start but objectives must still be achieved on the operational level. And on the strategical level, the management will have to consider a new issue after this operation with Laroche. Should Advini divest operations in Chile (16 hectares) and in South Africa (70 hectares)? This is an important decision the management should rapidly make. Was it relevant for Laroche to make this investment at the time, is not the question.The question is: To divest or not to divest? Will Chilean and South African wines bring more value to the group and help reach Advini's objectives more rapidly in the future or will it burn cash and waste efforts that could be allocated now elsewhere more efficiently? Considering momentum will be key in this decision. (More news on www.vitabella.fr).


Luxury Bordeaux wines "En primeur": Defining a pricing strategy to sell prestigious Bordeaux 2009 en primeur

(This article is an executive summary from an exclusive 40 page VitaBella Report).(More wine news on www.vitabella.fr).
At the end of March 2010 will be held the official annual Bordeaux "En primeur" tastings. It will be a great opportunity for wine professionals, members of the trade and the media from all over the world, to gather in Bordeaux and taste Bordeaux 2009. And, even if the common thought is that "the ‘market’ dictates what prices the wines sell for", First Growth Chateaux and other prestigious names will have to define a pricing strategy like it happens in any industry where a luxury positioning is at stake.
Mouton Rotschild, Petrus, Lafite Rotschild, Haut Brion...All these great names will announce their release prices after the "en primeur" tastings. Defining a pricing strategy is a complex issue and some points should be considered before taking any decision:
- Chateaux should analyze their release prices' history in order to define a pricing strategy for 2009. Considering (or not) volatility a part of the prices' history at the chateau, owners should be aware that the pricing for this 09' vintage will show a big sign to the market.
- Chateaux should consider the economic situation, not only the economic realities of their own property but also the current situation on international markets.
- Chateaux should anticipate the "appreciation" of the vintage by top international wine critics. This is a very important point which is not made easy after a 2008' campaign which highlighted some divergent positions on wine tasting notes from key critics.
- Chateaux should speak with their customer base (brokers, wine merchants...) and anticipate opportunities that could influence positively the marketing of their wines. Among some opportunities, the "En primeur" on March 2010 may attract for the first time a community of chinese buyers who were more keen, over the last few years, on buying old or recent vintages. Chateaux owners should ask thewselves how these opportunities would impact positively their sales?
- Chateaux should evaluate the potential of their wine over a long-term. In fact, Over the life of a wine, critics make some "tasting reviews" to analyze the initial evaluation they gave during "en primeur". Major critics will review their notes and may give a "Second Life" to the wines.
- Above price, chateaux could decide and define an allocation on what is called the "first tranche": how many cases should the chateau propose for the first "offering". Chateaux are aware that the release price is the one that will be communicated to the world, that journalists will refer to when talking about the price of their 2009. Considering this point is all the more important as a price can rapidly make a positive or negative buzz among brokers and wine merchants.
Defining a successful pricing strategy for "En Primeurs" Bordeaux is not an easy task. A lot of aspects are not directly related to what the chateau actually did in 2009. And this year seems even more impacted by external issues with so much uncertainty still hanging on. In fact, after a tasting of some of the most prestigious Bordeaux 2009, the only certainty we can have is: 2009 is unbelievably spectacular! (More wine news on www.vitabella.fr).


Winter Olympics, Champagne and Ice Wine: and the winner is...

(More wine news on www.vitabella.fr). At a time when Champagne producers expect a high level of consumption of their bubbles during the 2010 Winter Olympics, the greater benefit will certainly be to the Canadian wine industry. Ads and other marketing campaigns make British Columbia wines very attractive to every visitor.
Media tastings hosted by the B.C. Wine Institute in Vancouver and Whistler, promotional displays across Canada,the Inniskillin Ice Gallery (an outdoor tasting bar where the public can sample icewines from both Inniskillin's Okanagan Valley and Niagara Peninsula wineries)...You can not miss the PR campaigns that B.C. wine producers arranged. In a sense, every visitor should feel that a true Olympic menu must go with a B.C. wine. Otherwise it is not. Restaurant owners in British Columbia and particularly in Vancouver and Whistler will benefit from this work.
At this stage, there is no wonder why Vincor Canada (owner of Sumac Ridge, Jackson-Triggs, Nk'Mip, Inniskillin and See Ya Later Ranch...) is the official wine supplier of these Olympic and Paralympic Games. In fact, Jackson-Triggs, one of Canada's leading ice wine producers, is a major player in the province’s vineyards. And Jackson-Triggs Vidal Icewine is marketed as "the wine" to toast victories during the games. A great move as this wine is expensive and is considered by most visitors as a real treat to celebrate a great event. A great move also as it will benefit indirectly to the Corporate cousin Iniskillin ice Wines. Finally a great move as if you do not want a sweet wine, you can go for the "Esprit Chardonnay", Sauvignon Blanc, Merlot or Shiraz, a line of wines Jackson-Triggs created in honour of the games..
A great marketing strategy implemented by Vincor International, the Ontario-based arm of global wine, beer and spirits maker Constellation Brands. And the winner is... (More wine news on www.vitabella.fr).


Hermès and LVMH: Thoughts for Luxury Wine Estates

(More wine news on www.vitabella.fr). Luxury groups Richemont, Hermès amd LVMH recently announced their 2009’ sales figures and presented forecasts for 2010. Figures showed that luxury performed well during fourth quarter but full year was quite difficult. LVMH pointed out that champagne sales had problems but 2010 seems to show a nice start. What should luxury wine estates learn from these big companies?

Presentations made to analysts showed that big luxury groups were reactive enough to achieve good results in a terrible global economic slowdown. In fact, luxury performed well at the end of the year and luxury groups are now quite optimistic about 2010’ forecasts. Nevertheless, this crisis has shown that consumers for luxury items have changed habits in 2009 and might never come back to their previous behaviour.

1) Consumers are looking for authentic and genuine luxury. All over the world, more and more people are attracted by luxury products (perfumes, clothes, bags, wines…) and are still willing to pay high prices to make their dreams come true. But they are more selective and choose the most recognized quality brands. In fact, this trend benefited, and will continue to benefit in the future, strong and well established brands. This means for wine estates that some expensive cuvees might never be as successful as they used to be…
2) Champagne is luxury and most champagne producers struggled on international markets with a lower demand and a strong pressure on prices. LVMH sales, down by 1% in 2009, were mainly impacted by wines and spirits (-12%) with champagne sales down by 16%. Champagne producers had difficulties on some historical markets such as UK but also in US, Spain, Italy, Russia and Japan. These are great markets for luxury wines but they strongly reduced their purchases in 2009. In fact, there was a country in 2009 which was still buying and drinking champagne but many champagne producers and wine estates had forgotten its real power: France. With 181 million bottles sold in 2009, France was key in that difficult year to maintain sales figures for champagne brands. In that sense, figures showed that luxury wine estates should be strong on their national market if they want to maintain a long-term profitable development.
3) In luxury, consumers are looking for an experience, not just a product. At Hermès, sales increased by 16% in proprietary stores while wholesale turnover was down by 17%. Inventory reductions due to a lower level of consumption can explain this decrease but a more important fact should be highlighted: consumers for luxury products want to “feel privileged and get a very special treatment” when they buy an expensive item. Entering a beautiful shop, talking to a staff with a high level of training, buying an item in a beautiful package and at the same time feel privileged to look at very expensive products is very exciting for consumers. For luxury wines, this means that the “new consumers” expect, from now on, a unique experience when they buy a wine. Something special beyond the quality of the wine. (More wine news on www.vitabella.fr).


Bordeaux Grand Cru and US Château & Estate Wines: The Story behind the Story

(This is an executive summary from an exclusive VitaBella Report)(More wine news on www.vitabella.fr).
What is happening in such a world where the biggest US buyer of Bordeaux Grand Cru is jumping its approximately $100 million inventory in the market and, at the same time, a recently sold-out wine auction in Hong Kong of more than 800 lots has seen a 6-liter bottle of Chateau Lafite 1982 reaching HK$363,000 ($46,700), nearly twice its presale high estimate?
It is a strange world we are living in. A strange game "I love you, I hate you" where Bordeaux Grand Cru wines are right at the center. In fact, in the USA, Chateau & Estate Wines, a branch
of Diageo and the biggest distributor of Bordeaux in US since the 1970s, said they no longer will sell Bordeaux. And Decanter magazine recently reported that Vinfolio, the San Francisco-based internet wine retailer and fine wine service provider, has sought protection from bankruptcy. Launched in 2003 by former financier Steve Bachmann, this company had earned a stellar reputation over the past five years.At the same time,demand in Asia for first growth Bordeaux is soaring in the run-up to the celebrations, on 14 February, of the Year of the Tiger. Giving top wines as a gift has become trendy in China particularly at Chinese New Year and Autumn Festival times. In Hong Kong, twin 1.5 liter bottles of Chateau Petrus 1982 reached HK$435,600 and the city is proud of its 14 wine auctions worth almost HK$500 million held last year.
What should the Chateaux in Bordeaux learn from all of this?
1) US are and will continue to be a huge market for Bordeaux fine wines. For sure, the weak American dollar has not helped sales and a good but not great vintage such as 2007 has created little demand. The on premise business has definitely seen a significant decline at the high end and continues to sell through an inventory of slow moving wines. But with the early signs of a recovery in the economy, some restaurants buy again cases to re-build a shortened wine list. And on the long-run, the US market will continue to perform nicely for Bordeaux fine
2) The market for fine wines is global. This means that if some places may be in trouble to buy fine wines, some others may show a huge interest.Since Hong Kong scrapped wine duties in February 2008, demand for luxury wines spurred. I am always amazed to meet so many wine lovers in Asia who are eager to discover the fine wines from Bordeaux. This big community
of wine lovers in Asia already knows everything about the vintages and the terroirs. Europe, Americas and now Asia are the playing fields of Bordeaux Grand Cru wines.
3) In the 21st century, Chateaux should be proactive. The current courtier and négociant system is efficient and successful but chateaux need to be proactive to make sure that such a big announcement from Chateau & Estate Wines does not affect their sales and image. In fact, having your wines sold at a 40% discount does not only affect your sales in a short and medium-term, it will also affect your image on a long-term. Chateaux need to get closer to the market and better know and understand their customers' needs.
To be successful in the future, Châteaux should adapt now. Together with courtiers and negociants, Châteaux should start doing their own marketing to get closer to the regional markets, to their customers, such as distributors and wine merchants. This statement makes sense for any person related to any other industry in the world.The world has changed and habits should change. I am pretty sure that the announcement of Chateaux & Estate Wines will send a signal to the châteaux that it is the right time to define a successful marketing strategy. (More wine news on www.vitabella.fr).


Selling Wine in India: Reality and Strategy

(This is an executive summary from an exclusive VitaBella report)(More wine news on www.vitabella.fr).
The ending of the second edition of the India International Wine Fair made wine producers understand how difficult it was to sell wines in such a big country. For wine estates, making business in India is extremely attractive. China, India, Brazil...these are the big markets
everybody is currently talking about. In fact, taking into consideration the number of unhabitants and year by year growth figures regarding wine consumption (around 20% annual growth rate over the last few years), India is a very attractive market. But reality is much more complicated and Wine estates should be aware it is a matter of time and persistence. To start networking and finding good partners in India, wine estates may consider making contacts through wine trade fairs. First problem: fairs are numerous and choices are not so easy to make.Early December, the 1st International Food & Drink Expo India occured in New Dehli. Mid January, the 8th edition of the India International Food & Wine Show (with a large presence of italian wine producers who want to make it a "Vinitaly bis".). And then, end of january, the second edition of the India International Wine Fair (IIWF) took place in Mumbai. Three wine fairs over 2 months... Second problem: Fairs are all boasting to have great contacts and attract decision makers from Hotels, Restaurants, Resorts, Government Officials, Catering & Technical Institutes, Gourmet Food Importers, Food & Beverage Distributors, Food & Beverage
Retailers, Suppliers of Hospitality, Supermarkets and Others. At this "discovery" stage, wine producers are already a bit confused about where and how to start making the first contacts. When you look at the current situation in India, Wine consumption is still very low given the huge population. With beer and other liquor on top of indian consumption,wine drinkers are negligible minority. Around 1.3 million cases of wine were sold over last year. But the Indian market is growing, expected to double in the next three-four years.The Indian middle class seems hungry for exciting food and drink experiences. So India is definitely a market that wine estates should look at. At such a still early stage, wine producers should consider the right strategy if they want to be successful.
1) India is a continent and focusing efforts on just one city such as New Dehli or Bombay is clearly not enough. Wine producers must travel in different cities in order to meet the right people who will develop sales efficiently. Partnering with multi-estate distributors with a strong local commercial presence is essential. To highlight this point, I would consider Aspri Spirits: leading importers and distributors of premium wines and spirits in India, they developed one of the largest sales and distribution networks. Not only are they active in New Dehli and Bombay but they also cover over 22 major states.
2) Wine shops should not be the major target. Wine producers should focus on the star category hotels, restaurants, bars, up market wine shops and airlines. In fact, there is a strong concentration among the major buyers. A short list of the companies they work for would include The Claridges, Trident, Oberoi, Ashok, Radisson, The Imperial, Aman Resorts, Air India, Reliance, Dominos, Café Coffee Day, Ikea, M&S, Carrefour. Then come some other hotels, restaurants, retailers and institutional caterers. Wine estates should focus on the quality, influential trade professionals from India’s food services and food retailing sectors.
3) Even if Wine consumption may seem low at present given the huge population, competition already exists on the indian market. Wines from France, USA, Chile, Argentina, Australia, Italy, Slovenia, Bulgaria, South Africa and others are already proposed. But, for wine estates, the real threat comes from the national production, the indian wine producers (for example, estates and associations for wines produced in the states of Maharashtra and Karnataka). This competition is made even more difficult when estates discover the retail price of their wines in India. Taxation is a major issue. India imposes customs duties of up to 150 per cent on bottled wines and spirits.
As a conclusion, India is a very attractive market and some great opportunities should now be considered by wine producers. Estates can not ignore a wine producing country with a huge population such as India. But they should define the right strategy to find good partners. If India shows a great potential for the future, reality is still complicated for Wine estates. In fact, it is a matter of time and persistence. (More wine news on www.vitabella.fr).