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? 

Brand Protection: A Lesson from Target and Neiman Marcus

A striking part of this week's case was the class discussion on brand protection: once you have built a brand, you need to maintain that part of your identity as it is critical to your business. During class, we discussed a number of brands who had established specific reputations that then tried to expand, whether it was Starbucks trying to elevate to higher-end locations or Thomas Keller developing the more affordable Bouchon restaurant. Executed well, these strategies can help to expand a company’s audience but done incorrectly, it can hurt the overall brand.

During my summer internship at Target in 2012, I had the opportunity to see the execution of Target’s collaboration with Neiman Marcus. The value proposition of this initiative seemed so obvious. Place Christmas gifts designed by Neiman Marcus quality designers (e.g., Marc Jacobs) in Target shops so that:

• Neiman Marcus could enjoy the scale of Target’s retail footprint and open itself to a different audience

• Target could bring higher-end products to its customers and differentiate itself from other retailers (e.g., Walmart)

What seemed to be a homerun idea ended up being one of many financial disasters that ultimately led to Target’s public layoffs in 2014. There were a number of key mistakes that were made in this initiative:

• Quality vs. Price: Target and Neiman Marcus emphasized that the success of this initiative would be attributed to the cross-traffic that each retailer would receive from the others’ audiences. Both Target and Neiman Marcus placed the products in its stores to improve each other’s brand recognition but this ultimately ended in failure. Neiman Marcus customers reported seeing the products in-store and noticing the lower quality compared to other Neiman Marcus designer products. Target customers perused the gifts and noted the much higher prices compared to what they would typically allocate to a Target. The mismatch of quality and price resulted in high inventory levels that ended up having to be highly discounted.

• Consumer Needs: In internal discussions, Target and Neiman Marcus mentioned how their customers were similar in both wanting high-quality items. This was an incorrect assumption as even if customers shopped at both locations, the products they were purchasing at each were not the same. Customers shopping at Neiman Marcus for gifts were not also shopping for similar items at Target and this idea of a “common customer” was a key part of the initiative’s downfall.

In relating this to our DBR case, it is critical to keep brand image in mind when executing any type of initiative that is attempting to extend the brand or reach a different target audience. Placing a brand on another product does not translate to success. If the new product is not in the customer’s preferences, this could lead to brand dilution and customer confusion. Although DBR's Collection line is bringing in high revenues for the overall company, this short-term success could come at the cost of a long-term strategy.

Family Business

This post is about a reaction to something that came up for me when our speaker for the class, Christine Wente Von Metsch, came in.

Christine started the class by explaining that she is a part of the 5th generation of the Wente family working on their vineyard. She joked that her business card states just that. 

In light of our conversation around perceived quality as a strategy for DBR, I started wondering why it was that when Christine mentioned "part of the family," I immediately perceived Wente to be of high quality.  As I've reflected on why that is, I've found myself thinking:

Well, if it''s a family business, they must have a secret sauce that's passed down that keeps working. 

or

Well, if it's a family business, each new leader of the company knows their stuff down pat. 

I found, though, that it's not as much a rational reason as it is some association in my head with the idea of a "family business" and trustworthy.

As we continue to discuss players in the industry, I'd like to keep an eye out on family wineries and their competitive advantages -- is perceived quality the common theme?

Biodynamic Wine and Clos de la Coulee de Serrant

I first came across the name Coulee de Serrant in the Wine Bible - it is lauded as one of the pioneers of biodynamic wine-making in the world. I wasn't sure what "biodynamic" means or what biodynamic wines taste like, so I did a little research on biodynamics and Coulee de Serrant.

What does biodynamic mean? 

According to Wine Folly, biodynamic viticulture "is the practice of balancing this resonance between vine, man, earth and stars." Gee, this sounds more like the mantra of a Portlandian Yoga master than a wine-growing technique. After reading through the article and a few more hits from Google, I concluded that biodynamics more closely resembles a philosophy and way of life than a scientific study. Biodynamics practitioners believe that wine growers should coexist harmoniously with the land, the water, and the vines. Any use of artificial chemicals from fertilizing the soil to getting rid of weeds and bugs to increasing the shelf life of wines is strictly prohibited. The grapes should be grown and harvested in the most "natural" way, and made with ultimate care and passion. There is even a "biodynamic calendar" that categorizes days by Fruit, Root, Leaf, and Flower Days, each representing the optimal day to harvest, prune, water, and do nothing in the vineyard. (1)

What is Coulee de Serrant? 

Coulee de Serrant is a vineyard and appellation of its own in Savennieres, which is in turn a region and appellation in the Aujou-Saumur region in Loire Valley, France. The history of Coulee de Serrant goes back to the 12th century, when Cisterian monks first started growing grapes on the picturesque slopes situated by the Loire river. The current owner, Nicolas Joly, took over the vineyard from his family in 1977, and started implementing biodynamic farming in the early 1980s. Since then, no synthetic chemical products or pesticides have ever been used on the property. (2)

Savennieres is known for its zesty and refreshing white wine made from Chenin Blanc, with distinctive notes of honey, white flowers, lime, and a balanced dose of earthiness. Coulee de Serrant is also made with Chenin Blanc, but with a drastically different profile. The grapes are harvested with botrytis infection (a desired fungus that increases sugar concentration in grapes) but fermented in a dry style. Due to Joly's distrust of modern techniques and additives, his wines are made in an "oxidized" style that shows characters such as golden color and jammy fruit flavors. The wines should be decanted or aired extensively (sometimes up to days) for optimal flavor profile. 

So... What does it taste like?

I've never tried a bottle of Coulee de Serrant (it retails at $100+), but I am very much looking forward to. That said, there are clearly lovers as well as opponents of Joly's winemaking style out there. This post from GuildSomm laments the deteriorating quality of Joly's wines and argues that the bottles really should not be worth that much. In the comments section there are several well-argued posts in support of the criticism, although there are also dissenters who enjoyed the wines very much (..."I got a really rich bouquet of bees wax and honey..the next 2 hours lovely lemon zest..." (3)). I guess the jury is still out on biodynamic wines - I'll have to try a bottle some day to be the judge myself! 

Sources:

(1) Wine Folly website, "Getting into Biodynamic Wine" http://winefolly.com/review/biodynamic-wine-guide/

(2) Vineyards of the Coulee de Serrant website, https://coulee-de-serrant.com/en/home/

(3) GuildSomm, "Nicholas Joly and Oxidization as a Winemaking Style", https://www.guildsomm.com/4cb697f52c/discussion_forums/f/general-discussion/1608/nicolas-joly-and-oxidization-as-winemaking-a-style

From Sake to Wine

Last summer, I interned at a Sake company in Japan, helping the company develop marketing strategies for the U.S.. Through this internship, I was fascinated by the intricacies of the alcoholic beverage industry in the U.S., from the ever-changing consumer taste to the three-tiered system, marketers in this industry faced extra challenge, which brought out amazing creativity. That summer, I fell in love with the art of sake, and I decided to learn more about the wine industry in general.

By taking this course, I want to develop a better understanding of all aspects of wine. I want to learn to appreciate wine from a whole new perspective. This means knowing the taste profile of different wines from regions all over the world, understanding the facets of the wine industry, from supply chain, marketing, to long-term trends that brought the bottles to my local grocery stores. The history of wine is almost as old as civilization itself, and learning about wine satisfies my curiosity about this world. Lastly, I made a lot of new friends in Japan through sake, and I hope to connect with more people through wine.

Wine-ing and Dining

I decided to take Global Dynamics of the Wine Industry in order to gain experience that complements my background in food, allows me to gain knowledge and expertise on working in a regulated industry and edifies my personal knowledge on wine. I also love beverages of all kinds, specifically coffee, tea, nut milks, kombucha, sparkling water and wine. I really enjoy the ritual of drinking beverages throughout the day and how drinking a beverage can set the tone for your day (a latte in the morning, an afternoon tea, a La Croix during class, kombucha after a workout, wine with dinner, etc). 

As a professional in the food space I've been consistently interested in understanding the similarities and dissimilarities between the supply chain for a specialty food importer (my last company) versus a wine brand. This stems from an interest and passion for agricultural products and functional foods. Though wine, grapes and raisins are sold and marketed very differently, I am compelled to understand the differences that create distinctly different end products from the same seeds.

From a personal standpoint I have frequently dreamt of playing the role of sommelier to friends and family. I want to be able to pick a nice wine off a list to drink alongside a beautiful dinner and to be the friend that always brings a great bottle of wine to a party. 

Lastly, and perhaps the reason why the class is most appealing to me, I would like to gain a better sense of how to navigate working in an industry that has a lot of regulations. Together, with another MBA 1, I am working on a beverage concept in the cannabis business space. Long term, I believe that the sale of cannabis products will closely resemble alcohol with regard to regulation. As result, I think there is a lot to learn from wine, particularly how it is distributed and marketed that could lend a significant amount of insight into building my business.

Super excited to expand my wine expertise with great people over this quarter!

With Love, Jess

Turning Whiskey Into Wine

I spent the two years between undergrad and GSB working at Kings County Distillery, New York City’s oldest operating distillery. I learned all about malting and mash bills, fermenting and distilling and everything in between. I could wax poetic about moonshine and bourbon, and I gave distillery tours to beginners and professionals alike.

However, I never learned about wine or beer.

Many people were dismayed with my asymmetry of knowledge. How could I easily describe the different geographies of whisk(e)y making, but know next to nothing about other types of alcohol? When it came to wine, in particular, all that I could do was say what I liked and did not like once I tasted it.

From my perspective, the wine world seemed much more challenging to get into than the whiskey//spirits world—there seemed to be an almost exclusive culture about it, which was intimidating, even for someone who worked in the industry. Of course, much of this was in my head, and I’ve resolved to learn much more about wine. It feels like a life skill.

Fluency in any sort of language makes you a more textured character. As an undergrad English major, I have a deep affinity for language, and I’m excited to learn how to put words to what I taste. In particular, I’m highly value precision and accuracy of language, and this class seems like a helpful opportunity to engage in that dynamic.

Plus, this kind of stuff is fun. Why else would I have spent two years being the least cool person in a very cool craft whiskey distillery?