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Case Analysis Preserve the Luxury of Extend the Brand Write Up

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1. Problem Identification: Identify the issue(s) that management or the people involved in the case must address.

2. Issue Analysis: Perform the appropriate analysis and evaluation (e.g., Stakeholder, VRINE, SWOT, PESTLE, and other analyses).

3. Actionable Recommendations: Build a set of actionable strategies, which must be well reasoned, argued and supported with significant evidence.

The Company Background:
Château de Margaux, located in the Bordeaux region of France, has been profitable since the 1980’s. Their brands, current price point for a bottle of Premier Grand Vin is $999 US, and averaging 150,000 bottles sold each year. The remaining grapes are used to make Puiné, their second wine, which is sold for $125-$560, and averages a total sale of 200,000 bottles per year. Any remaining grapes are sold to other producers anonymously and repackaged under other brand names Problem Identification:

As a way to freshen up the traditional brand, gain more exposure and create sustainability within the Wine market, Claire wanted to begin mass marketing a new wine brand. The idea would be to use different, cheaper grapes in order to be more accessible to the younger generation. The target price range would be $25-$30 per bottle. There are a large number of young wine drinkers who cannot afford the high prices of the current Gran Vin brand and are therefore not being attracted to the Château de Margaux vineyards. If these consumers were introduced to an affordable brand of wine from the Margaux estate, then they may be more likely to recognize and trust the brand. That way, when they are looking for a more expensive wine, they will first go to their label of Grand Vin from the Château de Margaux collection. Issue Analysis:

Claire believes that creating and distributing a cheaper-end wine would satisfy the market of young wine enthusiasts whom were priced out of high end French wines in order to sustain profitability. However some of the stockholders such as Francois don’t believe it would be a good idea because it would tarnish the reputation of the high end wine if they were to start creating low-end wines. Also he doesn’t believe in investing in low-end wines due to a high sense of tradition and family pride. Lastly, he doesn’t want to sever their relationships with distributors and negociants by distributing in the Americas Similarly, Jean-Paul doesn’t want to make wine using the other grapes and believes a production of two wines is enough therefore there would be no need for a third wine.

Gaspard possess 50% of the estate is worried about the business sustainability for future generations so is open to new ideas and must make a decision. Ultimately the risk involved in expanding and creating a third wine consists of maintaining the exceptionality of the original brand, ensuring that consumers still feel motivated to pay the higher price point (because the Gran Vin will be associated with distributing a cheaper wine), finding another distributor, marketing team, and having the ability to focus on more than one brand of wine. In this particular case, the Margaux business has a close-tie with the distributorship and marketing of wine, and therefore this is a solution to one of the issues; however there are still several of the other issues that remain. Actionable Recommendation:

I believe that Château de Margaux would profit from branching into the cheaper end branded wines market. Employing a broader range of wines would allow Château de Margaux to dominate the wine market as well as expand their brand. Furthermore by appealing to the young wine enthusiasts Château de Margaux would achieve sustainability in the future. However by expanding, Château de Margaux, runs the risk of losing the exclusivity of the brand and losing customers of the Gran Vin wine because it is associated with the lower quality wine intended for the younger generation. Lastly, producing a third wine would take away from the quality of the production of the first two. In order to counteract such problems, they could hire Claire to oversee production, distribution and the development of the branded wine. Nonetheless the expansion should be run as a branch of Château de Margaux.

This would benefit the sustainability and allow Château de Margaux to tap into a larger market but will only be successful if brand differentiation is executed to ensure appraisal of the Grand Vin. Château de Margaux should purchase inexpensive Bordeaux region land where they can produce bottles to be used to penetrate the European and North American markets. Furthermore, the wine from the new region should have a completely separate Brand name and logo, under the Château de Margaux company name and this new brand would be listed as a subsidiary company.

More importantly, the company would need to utilize current employees and have them cross-train/mentor the new brand so that the brand culture is not lost. The granddaughter will be in complete charge of managing the new brand including the distribution of the wine, but will be overseen by Gaspard. I think that ultimately running the two companies separately but maintaining the same quality for each brand will increase revenue and brand awareness. I also think that high-end clientele will continue to purchase the higher-end brand as they wouldn’t want to switch to the less expensive brand because they may not even be aware of the lower-end, as it is a completely separate brand.

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