Meaghan Kilmartin
Professor Robertson
INTB 1203 M,R
November 17, 2013
Case Analysis: Marketing Chateaux Margaux
Chateaux Margaux is a famous first growth winery born in the 15th century and taken over in by the Mentzelopoulos family in 1977. At first when the vineyard changed ownership, the French people of the Bordeaux community were skeptical of a Greek family taking over, but Andre Mentzelopoulos ended up completely transforming Chateaux Margaux for the better by changing the mechanics of the vineyard and even introducing a second wine. After Andre Mentzelopoulos died in 1980 his daughter who was already a manager in the family grocery store business, was fully prepared to inherit the estate and all the responsibilities that came along with managing an esteemed vineyard. Although many people were skeptical of a woman manager at the time, Corinne Mentzelopoulos along with young general manager Paul Pontallier “transformed Chateaux Margaux from the worst to one of the best first growths. The Mentzelopoulos period may be considered on of the biggest achievements in Bordeaux history.”
Over the years the Mentzelopoulos and Pontallier strove to keep improving the quality of the Chateaux Margaux and they did so by refining their selection of grapes. Of course the quality was also improved with some help from many other factors such as more favorable weather conditions, better technical processes to protect the crops from disease and the ability to financially afford better equipment overall. As the quality of wine was upgraded, the prices rose and production was cut in half. Although the prices were rising and revenues remained good over the past 10 years, the price to produce each bottle was also rising and causing the firm to fail to break even.
High-end premium priced wine was what made Chateaux Margaux’s image. Therefore even though it is expensive to produce fine wine the firm felt that in order to keep its consumer base, it must maintain its high-quality image. If the firm was to launch a lower priced wine, consumers might start to wonder about the quality of their product line. Chateaux Margaux’s name and established image may be tarnished if they bring in a lower priced wine. However despite the negatives, they could also have a chance to open up a whole new consumer branch by making this cheaper wine. Philippe Sereys de Rothschild a member of the board of Baron Philippe di Rothschild, a group of successful wine estates in Bordeaux, mentioned the importance of meeting the demands of current consumers. He talked about how consumers these days are changing their tastes and preferences and in order to maintain a balanced distribution, a company must sell a range of different priced wine in order to avoid having “one predominant market.” Another first growth winery in Bordeaux called Haute-Brion capitalized on some of their leftover grapes and launched a cheaper brand called Clarendelle which featured its American born owner on the label. The owner explained “we just need a new more attractive way of presenting our wines to the consumer.” This new cheaper wine was seen as a fresh way to open new consumer markets, not tarnish the age-old elegance of Haut-Brion's original Chateaux Haut-Brion.
Chateaux Margaux’s biggest issue is that they are too set on selling to a market of European loyals, luxury buyers and the wine connoisseurs. Since Chateaux Margaux is still using the old traditional distribution method, they have no idea what the consumer market looks like and how they should tailor their product to fit consumer demand. Instead of giving away their leftover grapes, the company could capitalize and use the leftovers to produce a new wine, just sold at a cheaper price than their original wines. In order to maintain their high-end image, they could sell this cheaper wine with other similarly priced wines from the Bordeaux region. Or they could market the wine as if it were as high quality as the rest of their products, and sell it to consumers who enjoy a fine wine, but don’t want to spend top dollar.
Launching a lower price wine would definitely open up a whole new market for Chateaux Margaux, however there are still other options to implement future growth. As the international wine industry is growing and tastes are changing, New World producers are topping the charts. In an article in Wine Enthusiast Magazine, the editors created a list of the best wines in 2012. Evidently, only one wine from the Bordeaux region is listed in the top ten, and the rest of the best ranks are stolen by Californian, Argentinian and New Zealander vineyards. Another list written by the editors of Wine Spectator in 2011 shows the same trends, with only three French wines coming in the top ten. Clearly new competitors around the world are rising in popularity and stealing the votes of many wine consumers today. Creating joint ventures as a mode of entry into these new foreign markets is one way that Chateaux Margaux can expand. The group Baron Philippe de Rothschild recognized these trends in 1979 before they became popular, and created successful joint ventures with Californian wine maker Robert Mondavi to “produce the first ever Franco-American premium wine, Opus One.” They also made a second joint venture with a Chilean brand to create the first ever “Franco-Chilean wine, Almaviva”. Another way for Chateaux Margaux to boost sales would be to use the leftover grapes as well as potentially bringing in other grapes from another part of the region and creating a whole new wine. If Chateaux Margaux didn’t want to introduce a cheaper wine, they could take on the approach of producing a smaller batch of premium priced wine and market this new wine as a limited edition, “one batch only” specialty wine. If the wine turned out to be successful, then they could continue to sell the new wine and add it to their product line.
An additional option for expansion and growth for Chateaux Margaux would be to get rid of the traditional time-honored distribution methods and enter into the world of direct distribution. This method could turn out to be extremely beneficial for the firm because through direct distribution, they are gaining first hand knowledge on their consumers and what their demand is for each product. When using the merchants, they were able to establish a price based on the amount of demand they saw for the wine. Initially, Chateaux Margaux would have to decide on a price if they wanted to sell directly, but overtime they could adjust that price based on the continued demand. Although direct distribution would be a risk for Chateaux Margaux, if successful, it would be a great way to promote growth and developments for the future of the firm.
Innovative marketing and branding is almost essential nowadays for the success of a product. Although Mentzelopoulos says that “I think that it may be wise after all not to have a marketing function. When you appear to have to push something, it can also be a sign of weakness.” I think that many people today would disagree with this approach. Even though Chateaux Margaux’s main consumers are loyal connoisseurs, it wont hurt to add to the buying experience. Chateaux Mouton-Rothschild produced 200,000 bottles of its first wine and advertised the high quality brand by collaborating with famous artists and have them create original labels for the bottles of wine. If Chateaux Margaux changed up their label to attract and gain appreciation from their consumer market then they could potentially raise revenue. Also, since media is such a huge influence in this time period, Chateaux Margaux could invite prestigious critics to come for a wine tasting on location. If the firm gives the critics a good experience, then they will be more willing to write esteemed reviews about their products. Part of the growth process involves taking chances on new distribution methods, marketing techniques and ways of production. Chateaux Margaux has been a valued premium priced fine wine for ages, but in order to keep competing with today’s competition, they must adjust and make small changes to continue to grow and be successful for years to come.

Appendix:
Exhibit 1

Exhibit 2

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[ 1 ]. Château Margaux audit on communication and image, 213 professionals from France and abroad who are visiting Château Margaux during the future or are other important players in the wine business (half importers, dealers, distributors, half press and wine critics), April 2005.
[ 2 ]. Deighton, John, Vincent Dessain, Leyland Pitt, Daniela Beyersdorfer, and Anders Sjoman. "Marketing Châteaux Margaux." Marketing Châteaux Margaux (2007): 1-15. Harvard Business School. Web. 15 Nov. 2013.
[ 3 ]. Jancis Robinson, “The Grandes Dames Mix with the Lower Orders,” Financial Times, November 26, 2005.
[ 4 ]. http://www.winemag.com/Best-Of-Year-2012/The-Enthusiast-100-of-2012/ Also see Exhibit 2
[ 5 ]. See Exhibit 1
[ 6 ]. Deighton, John, Vincent Dessain, Leyland Pitt, Daniela Beyersdorfer, and Anders Sjoman. "Marketing Châteaux Margaux." Marketing Châteaux Margaux (2007): 1-15. Harvard Business School. Web. 15 Nov. 2013.
[ 7 ]. Deighton, John, Vincent Dessain, Leyland Pitt, Daniela Beyersdorfer, and Anders Sjoman. "Marketing Châteaux Margaux." Marketing Châteaux Margaux (2007): 1-15. Harvard Business School. Web. 15 Nov. 2013.