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| February 7th 2007 |
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| Bordeaux´s Branded Future |
by Hervé Lalau from France
Although the finest châteaux have become brands rivalling Louis Vuitton or Hermès as luxury goods, Bordeaux brands have lost their consumer appeal in many markets. Hervé Lalau spoke with producers, importers and supermarkets about Bordeaux’s branded future.
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Bordeaux is a has-been in terms of quality, packaging and market-ing; it simply missed the boat. It may be the king in luxury wines, but it can’t compete with a Yellow Tail for the average consumer.” The author of these harsh words is not an Australian sales representative or a retail chain buyer in Britain. No, it is Bordeaux wine merchant Jean-François Mau, who adds: “We have given up our fantasy of export-ing the Bordeaux brand everywhere. Instead, we highlight grape varietals, and in certain cases even hide the wines’ origin, which is a handicap in some markets. As we now know that we can only target certain niche markets, we have scaled back our ambitions.”
Other shippers in Bordeaux, however, are increasingly interested in exporting their brand. Given the apathy of sales in France, export is seen not only as a new outlet, but also as a spur for new and better quality. Today, market research is conducted in the UK, the US and in Germany to ensure that these brands are put back on the shelves. Bordeaux does not lack authority or notoriety, but it lacks appeal in the 3-5 Euro category.
No one can say that the Bordelais have not taken the measure of today’s challenges. Bernard Farges, president of the Syndicat des Bordeaux et Bordeaux Superieur, remarks that “Bordeaux is known the world over for its fine châteaux, but younger consumers are particularly sensitive to strong brands, attractive packaging and easy access. Bordeaux cannot remain absent from this channel for growth.” Words like this were seldom heard in Bordeaux in the 80s, when foreign consumers were gullible enough to pay high prices for second-rate wines.
Alain Sichel, the president of the Bordeaux Merchants’ Association, puts this in a broader perspective: “The decline of many European companies can be explained by a lack of market vision and poor organisation. Traditional wine-producing countries should produce wines better adapted to contemporary consumers, improve their marketing skills and obviate difficulties connected with their overly diversified offer. The competition will be fierce”. Sichel is conscious of the size gap between Old and New World operators: “Gallo sells some 700 million bottles a year, which is almost the total production of Bordeaux; the Gallo brand alone represents 200 million bottles, Concha y Toro 135 million, Mondavi 100 million. Not only are these huge volumes, the brands are dynamic and powerful, especially in the USA and the UK, providing a stable reference in taste, price and availability.”
He, however, does not believe that Bordeaux will be able develop brands on such a scale. One of the constraints is related to the segmentation of the vineyard. Although there are large domaines in Bordeaux, they are small when compared with holdings in Australia, Chile or California. Further, given the fact that Bordeaux brands are not the main pillar of the region’s activities, grape farming is |
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viewed with a certain distain.
Of colours and tastes…
Alain Sichel also thinks that the French law limiting residual sugar to 4 grammes per litre makes it difficult to produce wines to please a wider public year in year out. In many countries, consumers find Bordeaux is too “tough” and prefer instead a cabernet from the Languedoc… or Australia. Chamarré has thus been very careful to soften, almost sweeten the tannins in the Bordeaux it launched last year. Other shippers, however, do not share this view.
Guy-Henri Azam of Mouton-Cadet explains that “while there is a trend towards fruitier and rounder Bordeaux, Bordeaux must retain its style.” Azam’s views are shared by his competitor Franck Crouzet from Castel Frères, the owner of Baron de Lestac and Malesan, who adds: “There are enough possibilities within today’s legal framework in terms of techniques, to produce a palatable Bordeaux; and the objective for our brands should not be to imitate their new competitors, but rather to justify Bordeaux’s good reputation by putting consistent quality on the market”. It is interesting to note, though, that Sichel, who understands the New World palate, does well in the British market, in particular with the new Renaissance brand that he launched with the Winery Exchange. Castel, on the other hand, while owning both Nicolas and Oddbins, is struggling.
Crouzet feels there is confusion: “There are few important Bordeaux brands in terms of export. Most have done research about what their foreign consumers might want and taste should not be an issue. A recent survey has shown that most British females under 30 have never tasted Bordeaux. “This is not good news, for sure,” admits Crouzet, “but it has nothing to do with taste or quality. The study says they’ve never tasted our wines. When efforts are made in this direction, they pay off. We’ve launched a modern brand in France and the United Kingdom, Julien-Martin Batiste marketed at £4.99. It has had a positive response from young women.” The crux of the problem is, though, that Bordeaux should have promoted their point of difference when they still had a market. Today they must fight to regain lost market share from international brands that are unlikely to give up their seats without a fight.
The other, mainly technical obstacles that are sometimes evoked as difficulties in the development of international Bordeaux brands hardly seem to matter to most of the major players. Sourcing, for example. Analysts note that the number of scattered holdings needed to ensure enough volume for good blends make it a logistical nightmare. Most Bordelais, on the other hand, respond that the diversity of soils and microclimates is an advantage and helps to counterbalance vintage variation. Long-term contracts with the growers and premiums for quality grapes, they ensure, are the tools that allow brands |
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to ensure consistency. Crouzet comments that “we have contracts with 1,400 growers, so supply is not a problem; and contrary to large wineries overseas that feel compelled to use all of their own production, we can be really demanding about quality”.
Jean-Marie Chadronnier, however, admits that he has problems making Dourthe N°1 into a truly international brand because of difficulties in sourcing sufficient grapes of adequate quality. John Duval, the former winemaker at Penfolds, also sees another major weakness. Whereas wineries in the New World generally source their grapes either from their own vineyards or directly from growers, most brand owners in Bordeaux buy from cooperatives and are thus once removed from the grapes they need. Jean-Claude Rouzaud from Roederer, who has considered introducing a Bordeaux brand, also sees the control of production as a crucial element in establishing consistent quality.
There has also been a call for the use of wood chips, which could help Bordeaux lower production costs and catch up with its competitors in terms of price. However, for most Bordelais, the price issue is not the key. Guy-Henri Azam says: “The prices for generic Bordeaux are very low. The real question is how one can produce and sell at such low prices wines that bear the Bordeaux name?” The general opinion is that Bordeaux must live up to its reputation rather than compete at the lowest price. On the other hand, Azam is not convinced that the new Vin de Pays de la Côte Atlantique, seen by some as a way to siphon off the lower-quality grapes, could improve the quality of branded Bordeaux.
For Azam, the problem lies in the support the brands have to develop their position: “Outside of France, it is often difficult for a Bordeaux brand to exist on the shelf when it is squeezed between prestigious crus used by the retailers for image building and the budget Bordeaux wines they stock to compete at low prices. Retailers thus often prefer to give more shelf space to their private labels, because Bordeaux brands are not always willing or capable of paying the shelf fees the retailers receive from the New World brands”.
Apart from Mouton Cadet, Bordeaux is a relatively newcomer in the big brand game and its trademarks rarely reach the volume levels that would allow them to communicate as consistently as Australian or Californian brands do. So much weighs on the shoulders of often poorly motivated sales force to improve the Bordeaux brands’ distribution. David Bolzan of Cordier takes the Belgian market, where Cordier is the brand leader, as an example. However, even in such a Francophile market, everyone is beginning to feel the competition from the Gallo, Penfolds and Mondavi according to Bolzan: “There are three keys to reinforcing our position. The first is to stimulate distribution in supermarkets and with specialist wholesalers that help us diversify. The second is promotion. As direct selling through supermarkets is |
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not allowed in Belgium, we promote indirectly, mainly through tastings. This gives us the opportunity to talk about products rather than price. The third is segmentation: Cordier covers price segments from 5-15, encouraging different types of purchase.”
Still, in spite of all these efforts, Cordier is not present in all Belgian supermarkets chains, as it is in France. Thus it is more difficult to communicate there than at home, where they have little competition. In fact, this is a problem that most Bordeaux brands have long faced. They saw France as a microcosm of the larger world and overestimated their place in it.
At Dourthe, Patrick Jestin thinks that in competitive markets, like Britain or the US, one has to “concentrate on a limited range with each product giving value-for-money in the heart of the market, which is between £5-10 pounds in the UK. One of these is Dourthe N°1, which is our quintessential, high quality Bordeaux. Two years ago we created Dourthe Barrel Select for the English speaking markets. A simple concept, with a quality wine priced at £5.99 to generate higher volume. To sustain these products, we’ve invested in a London subsidiary. Then we took on an agency to communicate with the press and buyers. In 2006, we have set up a communications campaign on the theme of ´Great values from Bordeaux`. All this work on the product and its promotion has borne fruit. In seven years, the sales of the Dourthe brand have grown from 9,000 to 90,000 cases in Britain - and we aim for 200,000 in 2009.”
Mouton’s Glow
What can Bordeaux brands do to gain better reception abroad? Guy-Henri Azam thinks his brand has done it already: “Mouton Cadet was the first Bordeaux brand in the US. In 1980, it represented 30% of all Bordeaux sales there, with a record of 450,000 cases achieved during that decade, two-thirds of which were white. In the 1990s the French paradox changed the market and sales of white fell sharply. Nonetheless, Mouton Cadet still accounts for 15% of Bordeaux sales there today. After market research, we have just restyled of the brand. Although still clearly a Bordeaux, the new Mouton Cadet is rounder. This new wine profile has been well received – and the price has been repositioned in the premium category at $7.99. Through our importer Constellation brands, we feel that we can move rapidly from 200,000 to 300,000 cases. We devote an annual promotional budget of $3 million to Mouton Cadet in the US alone, which works out to over $1 per bottle.”
Of course, many consumers are convinced that while sipping a glass of Mouton Cadet, they are actually drinking Château Mouton Rothschild. Oddly enough, few other owners have taken advantage of the grand crus’ auras to build Bordeaux brands – maybe for fear of cracking the egg that laid them. Lafite Rothschild has both Saga and Legende R, but these brands were created for the German market and are not widely seen elsewhere. Similarly, although Haut-Brion launched Clarendelle at the last Vinexpo, they have made little visible impact on the market. Jean-Michel Cazes of Lynch-Bages has poured more thought and money into Michel Lynch, but success has also come more slowly than planned. Consumers need good prices, but they also need reliability - and this is what Bordeaux brands should be about.
From Russia with love… and cash
Even if some markets seem bored with Bordeaux as a whole, and Bordeaux brands in particular, some brands have shown a capacity to capitalize on the good image Bordeaux has maintained in emerging markets like Russia, Japan and China. The tension, though, remains. On the one hand are the protagonists of the old guard; on the other are those trying to position Bordeaux in a more New World sense, to attract the customers who normally don’t buy French wines and showing them that they are made from grapes varieties they know.
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