t
os
5 -5 1 5 -0 2 2
AUGUST 28, 2014
rP
TEACHING NOTE
Château Margaux: Launching the Third Wine
Synopsis
yo
Château Margaux, one of only five prestigious estates in the Bordeaux Medoc wine region to have
been classified as a “first-growth” in the famous 1855 classification of Bordeaux wines, is facing a host
of strategic decisions in early 2013. Up until this point the estate had been selling only two red wines,
a first wine (the Grand Vin) whose retail price in recent years often exceeded $1000 a bottle, and a
second wine (Pavillon Rouge) whose retail price in recent years often exceeded $200 a bottle. Owner
Corinne Mentzelopoulos and her management team were now preparing to launch a new third red
op
wine made from the estate’s production not used to make the first two red wines. They had to decide
whether the best go-to-market strategy is to sell the third wine to the local Bordeaux merchants
(called négociants) and relinquish commercialization to them or to devise a complete marketing plan
for the new wine that includes: target market selection, positioning, quantity to release, pricing,
channel structure, communication and brand name. Mentzelopoulos was considering the optimal
marketing for the third wine in light of global trends in the industry, both in the demand and supply
of wines, and the bold moves by other first-growths, such as the purchase of vineyards and bulk wine
tC
in and outside of the Bordeaux region, international expansion and partnerships, and deviation from
the centuries old tradition of selling wine in the futures market. The case is rich with data and
information that allows for a thorough analysis of the unique situation Château Margaux is in
relative to the industry and for assessing the opportunities management is presented with.
Suggested Assignment Questions
No
Corinne Mentzelopoulos owned and presided over Château Margaux, crowned with the Premier
Cru designation in the famous 1855 Bordeaux wine classification. In 2013, the retail price of a bottle of
2009 Château Margaux, the estate’s first wine, was €850. Château Margaux also sold a second red
wine from its prized land, called Pavillon Rouge. Mentzelopoulos was now bringing a third wine to
market from grapes grown on her property but judged not appropriate for her first and second
quality wines.
1. 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
Do
This Teaching Note is authorized for use only by Gillian Yeo, University of Western Australia until October 2016. Copying or posting is an infringement of copyright.
or 617.783.7860.
, 515-022 Teaching Note—Château Margaux: Launching the Third Wine
t
os
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?
2. 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?
rP
3. Who should be the target market for the new wine and how should it be positioned in
light of the other two wines produced by the château?
4. If you were put in charge of launching the third wine, what would your marketing plan
be? Would you use the traditional Bordeaux wine distribution system? How much profit
do you expect to make on the sale of the third wine?
5. The case describes several strategic moves by the other four Bordeaux first-growths, such
yo
as international expansion, the marketing of wines from grapes not grown on their
estates, and withdrawing completely from the sale of wines in the futures market – do any
of these moves make sense for Château Margaux?
6. Optional: Under what conditions would you recommend that Mentzelopoulos consider
increasing the production of the third wine? How do you propose she do so and how
should the economics of such a move be assessed?
op
Objectives
Given the breadth of topics covered in the case, and the types of analyses it affords, it can be used
in a variety of courses. For example, it can be part of a core MBA Marketing course—either in a
module on Product Management/Creating Value (with emphasis on product launch or product line
management) or as a capstone case that integrates marketing strategy (target market selection and
tC
positioning) and marketing planning (with a need to propose a “4 Ps” plan). The case is also relevant
for courses on Brand Management because it requires assessing how the various offerings by a firm
relate to one another in terms of their brand position as well as understanding how to evaluate the
brand equity of various brand tiers (within company and across companies’ offerings). Given that
fine wine is considered by some as a luxury good, the case also fits well with courses that focus on
luxury marketing/branding. The case may also be used as part of a course or module on sustaining
and growing value, taking the vantage point of a company that has been in the business for quite
No
some time but needs to make strategic decisions in light of its evolving customer base, industry
trends and competitors’ moves. Lastly, the channel management issues that the third wine brings up
can potentially be relevant for a course on channels to market.
Specific teaching objectives can include covering/conveying the following themes:
The importance of formulating the strategic role a new product launch can play for a firm
in terms of managing its customer base: serving as a way to increase the fraction of some
customers at the expense of others or to bring in an entirely new set of customers
Do
The need to grapple with brand dilution and brand confusion when going downstream
with a new product/brand in the line
The relevance of unpacking the dynamic relationship between different customer
segments, in this case “quality-discerning” expert consumers and luxury-oriented
consumers: characterizing the nature of interaction between the groups, how each type of
2
This Teaching Note is authorized for use only by Gillian Yeo, University of Western Australia until October 2016. Copying or posting is an infringement of copyright.
or 617.783.7860.
, Teaching Note—Château Margaux: Launching the Third Wine 515-022
t
os
consumer affects the stature of the brand, and the implications for market performance (in
terms of product price and channel relations)
The paramount importance of aligning the marketing strategy and plan in order to
achieve effective commercial outcomes and attain strategic objectives
Quantifying brand equity across various market offerings and assessing the sources of
rP
such equity
The need to manage scenarios where product quality and production capacity may be
linked; with implications for marketing strategy
The implications of trying to change one’s existing channel structure; with lessons related
to the “iron law” of distribution
Recognizing the margin implications on final product price when using various channels
to reach end consumers
yo
The distinction between objective and subjective product quality and the connection to
customer buying behavior
Benchmarking against competitors/industry peers in terms of their moves and
performance relative to one’s own actions and performance
The significance of examining industry trends, such as shifts in customer tastes, economic
conditions, and the competitive landscape, in deciding when and how to change course
op
The possibility of viewing growth opportunities as either intended to target new markets,
offer new value propositions or a combination of the two; and balancing such moves with
a desire to maintain strength with the currently targeted segments and value propositions
offered
Discussion Plan
tC
There are a few ways to teach the case depending on the pedagogical objectives and type of
analyses one wishes to cover. One approach opens the session with students proposing launch plans
for the third wine (for example, which countries to roll out into, what price point the end customer
should be asked to pay and how the château should communicate the availability of the new wine to
consumers). The idea is to have students suggest various elements of the marketing plan as a way to
set the stage for a much deeper analysis of the primary issues that should feed into, and that are
No
critically related to, the third wine opportunity for the château. This fairly brief opening (no more
than 10-15 minutes) exposes the need to: better understand what it is the château is selling in the first
place (a la the first two red wines), delve more deeply into characterizing the consumers of fine wine,
examine the brand architecture and positioning of the château’s wines, as well as other strategic
opportunities the château should consider. With these issues primed, the instructor can then
transition into the following discussion areas:
Main Discussion/Analysis Area 1: The evolving demand for first growth wines in general and for
Château Margaux wines in particular; assessing the meaning and equity of the Château Margaux
Do
brand (about 20-25 minutes)
Main Discussion/Analysis Area 2: Laying out the strategic role(s) the third wine can play for the
château and understanding the implications of each role for target market selection, positioning and
elements of the marketing plan (about 30-35 minutes)
3
This Teaching Note is authorized for use only by Gillian Yeo, University of Western Australia until October 2016. Copying or posting is an infringement of copyright.
or 617.783.7860.
, 515-022 Teaching Note—Château Margaux: Launching the Third Wine
t
os
Main Discussion/Analysis Area 3: Examining the moves by other first-growths, past and recent,
and determining their relevance for Château Margaux (about 15 minutes)
Concluding Discussion Area: Wrap up and optional issues to cover (about 5-10 minutes)
Note that all times are approximate with the ability to spend more or less time in each discussion
rP
area (including the opening) depending on the duration of the session and the pedagogical objectives.
Keeping the key elements of the launch plans proposed during the brief early discussion on a side
board allows returning to them later in the session if desired.
The teaching note presents several areas of quantitative analysis. The class discussion can be run
with any subset of these (or none of them) depending on the objectives and nature of the class and
course. If desired these quantitative analyses can be primed through the preparation questions.
Instructors may also come to class with the analyses of interest prepared on a few slides, show them
yo
in appropriate juncture and solicit reactions.
Evolving Demand for Fine Wine and the Château Margaux Brand
In this discussion area, the first goal is to have students characterize the main consumers for the
château’s existing two red wine offerings, the Grand Vin and Pavillon Rouge. More specifically,
students should flesh out the two primary segments, connoisseurs and luxury buyers, and
op
importantly consider the dynamic interactions between them; as these dynamics have strong
relevance for how to think about the role of the third wine and the marketing strategy that should
guide its launch. The second goal is to ensure students appreciate the meaning and equity of the
Château Margaux brand— in relation to other wines and also differences between its own wine tiers.
Lastly, this discussion area allows assessing the evolving global consumption for wines and the role
of influencers in the category.
tC
One can initiate this discussion area by asking students to explain what someone is getting when
they purchase a 2009 vintage Château Margaux (grand vin) bottle of wine for $1,280 (per case Exhibit
5): Who is the buyer and why is he or she willing to pay so much when one can get a decent bottle of
wine for just $10-$15? When do these buyers drink the wine and with whom? Are they trying to
impress anyone with their wine choices? Who and why do they need to impress? These probing
questions should allow a delineation of the distinctions between the connoisseur and luxury
segments and the value proposition that “ultra-fine” wines provide them with. During this
No
discussion one can encourage students to share personal stories, about themselves or people they
know, regarding wine consumption.
Connoisseurs/Experts
In general, connoisseurs or product experts are consumers that are passionate about exceptional
quality/performance/taste in a given category. If they are able to agree on standards and recognize
those products that deliver strongly on them, then the associated brands become the designated
“high-quality/gold standard” in the category. In the context of wine, the ability to discern the quality
Do
of wines, taking into account vintage and production location, and even rank the wine tasted likely
fulfills a need to feel one has attained a level of high competence in this domain; the availability of so
many good choices in recent years means their expertise is perhaps even more important.
Connoisseurs may listen to authorities in the field that they recognize (like Robert Parker) but are also
wary of these critics pushing their own tastes. In case Exhibit 3 these consumers correspond to the
“Enthusiasts”—hence they typically drink their fine wines at home, perhaps among other discerning
4
This Teaching Note is authorized for use only by Gillian Yeo, University of Western Australia until October 2016. Copying or posting is an infringement of copyright.
or 617.783.7860.
os
5 -5 1 5 -0 2 2
AUGUST 28, 2014
rP
TEACHING NOTE
Château Margaux: Launching the Third Wine
Synopsis
yo
Château Margaux, one of only five prestigious estates in the Bordeaux Medoc wine region to have
been classified as a “first-growth” in the famous 1855 classification of Bordeaux wines, is facing a host
of strategic decisions in early 2013. Up until this point the estate had been selling only two red wines,
a first wine (the Grand Vin) whose retail price in recent years often exceeded $1000 a bottle, and a
second wine (Pavillon Rouge) whose retail price in recent years often exceeded $200 a bottle. Owner
Corinne Mentzelopoulos and her management team were now preparing to launch a new third red
op
wine made from the estate’s production not used to make the first two red wines. They had to decide
whether the best go-to-market strategy is to sell the third wine to the local Bordeaux merchants
(called négociants) and relinquish commercialization to them or to devise a complete marketing plan
for the new wine that includes: target market selection, positioning, quantity to release, pricing,
channel structure, communication and brand name. Mentzelopoulos was considering the optimal
marketing for the third wine in light of global trends in the industry, both in the demand and supply
of wines, and the bold moves by other first-growths, such as the purchase of vineyards and bulk wine
tC
in and outside of the Bordeaux region, international expansion and partnerships, and deviation from
the centuries old tradition of selling wine in the futures market. The case is rich with data and
information that allows for a thorough analysis of the unique situation Château Margaux is in
relative to the industry and for assessing the opportunities management is presented with.
Suggested Assignment Questions
No
Corinne Mentzelopoulos owned and presided over Château Margaux, crowned with the Premier
Cru designation in the famous 1855 Bordeaux wine classification. In 2013, the retail price of a bottle of
2009 Château Margaux, the estate’s first wine, was €850. Château Margaux also sold a second red
wine from its prized land, called Pavillon Rouge. Mentzelopoulos was now bringing a third wine to
market from grapes grown on her property but judged not appropriate for her first and second
quality wines.
1. 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
Do
This Teaching Note is authorized for use only by Gillian Yeo, University of Western Australia until October 2016. Copying or posting is an infringement of copyright.
or 617.783.7860.
, 515-022 Teaching Note—Château Margaux: Launching the Third Wine
t
os
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?
2. 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?
rP
3. Who should be the target market for the new wine and how should it be positioned in
light of the other two wines produced by the château?
4. If you were put in charge of launching the third wine, what would your marketing plan
be? Would you use the traditional Bordeaux wine distribution system? How much profit
do you expect to make on the sale of the third wine?
5. The case describes several strategic moves by the other four Bordeaux first-growths, such
yo
as international expansion, the marketing of wines from grapes not grown on their
estates, and withdrawing completely from the sale of wines in the futures market – do any
of these moves make sense for Château Margaux?
6. Optional: Under what conditions would you recommend that Mentzelopoulos consider
increasing the production of the third wine? How do you propose she do so and how
should the economics of such a move be assessed?
op
Objectives
Given the breadth of topics covered in the case, and the types of analyses it affords, it can be used
in a variety of courses. For example, it can be part of a core MBA Marketing course—either in a
module on Product Management/Creating Value (with emphasis on product launch or product line
management) or as a capstone case that integrates marketing strategy (target market selection and
tC
positioning) and marketing planning (with a need to propose a “4 Ps” plan). The case is also relevant
for courses on Brand Management because it requires assessing how the various offerings by a firm
relate to one another in terms of their brand position as well as understanding how to evaluate the
brand equity of various brand tiers (within company and across companies’ offerings). Given that
fine wine is considered by some as a luxury good, the case also fits well with courses that focus on
luxury marketing/branding. The case may also be used as part of a course or module on sustaining
and growing value, taking the vantage point of a company that has been in the business for quite
No
some time but needs to make strategic decisions in light of its evolving customer base, industry
trends and competitors’ moves. Lastly, the channel management issues that the third wine brings up
can potentially be relevant for a course on channels to market.
Specific teaching objectives can include covering/conveying the following themes:
The importance of formulating the strategic role a new product launch can play for a firm
in terms of managing its customer base: serving as a way to increase the fraction of some
customers at the expense of others or to bring in an entirely new set of customers
Do
The need to grapple with brand dilution and brand confusion when going downstream
with a new product/brand in the line
The relevance of unpacking the dynamic relationship between different customer
segments, in this case “quality-discerning” expert consumers and luxury-oriented
consumers: characterizing the nature of interaction between the groups, how each type of
2
This Teaching Note is authorized for use only by Gillian Yeo, University of Western Australia until October 2016. Copying or posting is an infringement of copyright.
or 617.783.7860.
, Teaching Note—Château Margaux: Launching the Third Wine 515-022
t
os
consumer affects the stature of the brand, and the implications for market performance (in
terms of product price and channel relations)
The paramount importance of aligning the marketing strategy and plan in order to
achieve effective commercial outcomes and attain strategic objectives
Quantifying brand equity across various market offerings and assessing the sources of
rP
such equity
The need to manage scenarios where product quality and production capacity may be
linked; with implications for marketing strategy
The implications of trying to change one’s existing channel structure; with lessons related
to the “iron law” of distribution
Recognizing the margin implications on final product price when using various channels
to reach end consumers
yo
The distinction between objective and subjective product quality and the connection to
customer buying behavior
Benchmarking against competitors/industry peers in terms of their moves and
performance relative to one’s own actions and performance
The significance of examining industry trends, such as shifts in customer tastes, economic
conditions, and the competitive landscape, in deciding when and how to change course
op
The possibility of viewing growth opportunities as either intended to target new markets,
offer new value propositions or a combination of the two; and balancing such moves with
a desire to maintain strength with the currently targeted segments and value propositions
offered
Discussion Plan
tC
There are a few ways to teach the case depending on the pedagogical objectives and type of
analyses one wishes to cover. One approach opens the session with students proposing launch plans
for the third wine (for example, which countries to roll out into, what price point the end customer
should be asked to pay and how the château should communicate the availability of the new wine to
consumers). The idea is to have students suggest various elements of the marketing plan as a way to
set the stage for a much deeper analysis of the primary issues that should feed into, and that are
No
critically related to, the third wine opportunity for the château. This fairly brief opening (no more
than 10-15 minutes) exposes the need to: better understand what it is the château is selling in the first
place (a la the first two red wines), delve more deeply into characterizing the consumers of fine wine,
examine the brand architecture and positioning of the château’s wines, as well as other strategic
opportunities the château should consider. With these issues primed, the instructor can then
transition into the following discussion areas:
Main Discussion/Analysis Area 1: The evolving demand for first growth wines in general and for
Château Margaux wines in particular; assessing the meaning and equity of the Château Margaux
Do
brand (about 20-25 minutes)
Main Discussion/Analysis Area 2: Laying out the strategic role(s) the third wine can play for the
château and understanding the implications of each role for target market selection, positioning and
elements of the marketing plan (about 30-35 minutes)
3
This Teaching Note is authorized for use only by Gillian Yeo, University of Western Australia until October 2016. Copying or posting is an infringement of copyright.
or 617.783.7860.
, 515-022 Teaching Note—Château Margaux: Launching the Third Wine
t
os
Main Discussion/Analysis Area 3: Examining the moves by other first-growths, past and recent,
and determining their relevance for Château Margaux (about 15 minutes)
Concluding Discussion Area: Wrap up and optional issues to cover (about 5-10 minutes)
Note that all times are approximate with the ability to spend more or less time in each discussion
rP
area (including the opening) depending on the duration of the session and the pedagogical objectives.
Keeping the key elements of the launch plans proposed during the brief early discussion on a side
board allows returning to them later in the session if desired.
The teaching note presents several areas of quantitative analysis. The class discussion can be run
with any subset of these (or none of them) depending on the objectives and nature of the class and
course. If desired these quantitative analyses can be primed through the preparation questions.
Instructors may also come to class with the analyses of interest prepared on a few slides, show them
yo
in appropriate juncture and solicit reactions.
Evolving Demand for Fine Wine and the Château Margaux Brand
In this discussion area, the first goal is to have students characterize the main consumers for the
château’s existing two red wine offerings, the Grand Vin and Pavillon Rouge. More specifically,
students should flesh out the two primary segments, connoisseurs and luxury buyers, and
op
importantly consider the dynamic interactions between them; as these dynamics have strong
relevance for how to think about the role of the third wine and the marketing strategy that should
guide its launch. The second goal is to ensure students appreciate the meaning and equity of the
Château Margaux brand— in relation to other wines and also differences between its own wine tiers.
Lastly, this discussion area allows assessing the evolving global consumption for wines and the role
of influencers in the category.
tC
One can initiate this discussion area by asking students to explain what someone is getting when
they purchase a 2009 vintage Château Margaux (grand vin) bottle of wine for $1,280 (per case Exhibit
5): Who is the buyer and why is he or she willing to pay so much when one can get a decent bottle of
wine for just $10-$15? When do these buyers drink the wine and with whom? Are they trying to
impress anyone with their wine choices? Who and why do they need to impress? These probing
questions should allow a delineation of the distinctions between the connoisseur and luxury
segments and the value proposition that “ultra-fine” wines provide them with. During this
No
discussion one can encourage students to share personal stories, about themselves or people they
know, regarding wine consumption.
Connoisseurs/Experts
In general, connoisseurs or product experts are consumers that are passionate about exceptional
quality/performance/taste in a given category. If they are able to agree on standards and recognize
those products that deliver strongly on them, then the associated brands become the designated
“high-quality/gold standard” in the category. In the context of wine, the ability to discern the quality
Do
of wines, taking into account vintage and production location, and even rank the wine tasted likely
fulfills a need to feel one has attained a level of high competence in this domain; the availability of so
many good choices in recent years means their expertise is perhaps even more important.
Connoisseurs may listen to authorities in the field that they recognize (like Robert Parker) but are also
wary of these critics pushing their own tastes. In case Exhibit 3 these consumers correspond to the
“Enthusiasts”—hence they typically drink their fine wines at home, perhaps among other discerning
4
This Teaching Note is authorized for use only by Gillian Yeo, University of Western Australia until October 2016. Copying or posting is an infringement of copyright.
or 617.783.7860.
