Friday, January 19, 2018

Luxury wine versus other luxury industries

This week, I was struck by our conversation around the core DBR brand identity as aspirational, highly exclusive, and almost unattainable. I had heard of Domaines Barons de Rothschild before this class and yes had always thought of them as a highly sought-after, high quality, and prohibitively expensive wine (especially the wine of Chateau Lafite). What I didn't know, however, was how broadly DBR has expanded their business into other regions and other labels, in particular the collections. With other luxury brands that have expanded down-market, the quality I perceive in their brand erodes as it becomes more and more accessible. Alternatively, as evidenced by the Starbucks example we discussed in class, I think it's nearly impossible to build a reputation for superior quality if your brand started in the mass-market. So, luxury brands are rather stuck, then, when figuring out how to expand their business while protecting their aspirational brand identity. Certainly, sub-brands are needed so as not to erode the equity of the original heritage brand, but even that may not be enough. At the same time, however, I don't believe that DBR's Bordeaux Chateaux wines suffer from the same risk to their association with aspriational luxury due to DBR's business expansions. So why is that? What do they have that other luxury brands don't? After reflecting on this question, I think it's due to the scarcity of their most precious resource - the Bordeaux estates. Maybe it's the name Lafite that people are shelling out thousands of dollars for, but there's no other brand that is able to provide the same product, because simply no other brand has access to the same resource that produces such an exquisite (not that I've had the good fortune to validate this assumption) wine. I certainly don't mean to downplay the important of the winemaker here, but they do seem to have a good starting place. All this to say, it feels like luxury wine is different from other luxury industries because of this dynamic. I'll be curious to look out for any examples that refute this conclusion - are there luxury wines that made poor strategic decisions and irreparably eroded their brand and their reputation? 

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