Exploring branding in the wine business
The word branding comes from the old Norse word brandr, meaning "to burn". The practice was burning a name onto something to show the rightful ownership of that object.
In the context of wine, branding has been in use for thousands of years. One of ancient Rome`s most popular and legendary wines by the name of Falernum, is an early reference to the concept of branding. It was often written about in Roman literature and poems, eventually ending up as a cult wine. Today there are mainly two genres of wine brands.
Firstly wine acting as a commodity. Grapes are grown, crushed and made into wine. Consumers treat this as they would any other supermarket product, easy to drink with focus on low prices and dominated by commercial new world brands like Blossom Hill, Barefoot Wines, Yellow Tail and so on.
The other genre is purchased and consumed not because of low price, but because of interest. As written by Jamie Goode, “there exists a diversity of wine types that are each able to express elements of their cultural and geographical origins in the finished product”. Super premium wines like Chateau Lafite Rothschild, Opus One and other high end brands represent this genre. Chateau Lafite Rothschild is currently owned by Baron Eric De Rothschild, and was bought by the Rothschild family in 1866. Ranking #34 in the 2014 issue of The Worlds Most Admired Brands issue by drinks international. The wines are hand crafted and stored several years in oak. The wines can be astringent, and needs time to develop.
The goal of a brand is to build a relationship with the consumer. This can be done in several ways. There are many groups of buyers and consumers to target, and there are several approaches to the marketing and building of a wine brand.
Differentiating and sustaining a brand in the wine industry is not easy, as trends are constantly changing.
But who benefits from wine brands in the end, is it the consumers or the owners?
This article will firstly look at what a wine brand is, and the importance for producers and retailers. Then what successful wine brands have in common, and some of the important marketing tools to ensure the continuing success of such brands. Finally a look at the advantages and disadvantages for consumers.
What is a wine brand?
Professor Phillip Kotler defines a brand in the following way. “A brand is a name, term, symbol, design or a combination of these, intended to identify the goods or services of one seller or group of sellers, and to differentiate them from those of the competitors”
But in the Oxford Companion to Wine, the entry of Brands are defined as “something interpreted strictly as individual products marketed on the basis of their name and image, rather than on their inherent quality, having a much less dominant position in the market for wine than for drinks such as beer or cola, for instance, but thanks to globalisation they are growing in importance”.
There are several definitions of a brand, and people have different opinions of what a brand is. In the context of wine the concept of brands is still very young compared to the rest of the food stuff industry.
It is argued by some that a brand exists strictly in the mind of the consumer, but that doesn't make them any less real.
Earlier it was a terroir like Rioja and a region like Bordeaux, however recent trends have shown that a lot of aspects of wine can be branded.
New Zealand has shown that a grape variety can be a brand by itself.
With 66% of total production and 85% of export, New Zealand has built most of its wine industry around one single varietal, Sauvignon Blanc.
Wines from the old world focus more on the history and quality of the product. It is more product driven. This in contrast to wines from the New World which is more demand driven, targeting the personality and taste of the consumer.
An example of this is the web pages of Chateau Lafite Rothschild and Blossom Hill. The web page of Lafite, a premium wine ranked as number #34 in drinks internationals march 2014 issue of the worlds most admired wine brands indicates a product driven marketing strategy, focusing on history and quality.
While Blossom Hill, one of the worlds most powerful wine brands according to Intangible Business`s yearly marketing report the power 100 The marketing strategy here is demand driven, targeting consumer feelings.
Countries can be a wine brand all by themselves when successfully promoted by Promotional bodies of the country.
Looking at Austrian Wine ,exports hit a new record of €137.5 million in 2013, a 4% rise on 2012’s results. The value has actually risen by over 300% 30 since the 1985 wine scandal.
A brand is a promise to the customer. This promise is delivering the same experience and safety every time.
“Without branding, products would simply become commodities, branding seeks to move a product away from being a commodity to the extent that a consumer will be willing to pay more because they want to buy that specific product”.
Why is branding so important for producers and retailers?
A producer is defined in the english dictionary as “a person, company or country that makes, grows or supplies goods or commodities for sale”.
A retailer is defined as “one who sells goods or commodities directly to the consumer”.
The world production of wine is 270 Million HL pr Year, while the world consumptions is only 240 million HL pr year. This is evidence that the world is in a state of global overproduction. Overproduction has been a problem in the wine market for a long time. One of the earliest protests of overproduction was in 1912 where French producers complained they were unable to sell their wines because of overproduction.
Because of overproduction it is important for producers to differentiate their product from competitors in the market, it is also clear that producers need to put more effort into brand development.
However a lot of considerations need to be taken by the producer when developing the brand name. When it has been developed it becomes the permanent identity of the product, which in return if done right can promote repurchase and aid marketing, but if done wrong can be a disaster.
For a retailer the main importance lies in stock rotation. Well known wine brands give the retailer a higher margin, because of increase in stock rotation.
In stocking well know brands, the retailer is also securing the return of customers.
However the use of private labels, is of equal importance. Private labels are wine brands strictly produced for a store chain. In doing this, the retailer can differentiate themselves from the competition by being the only ones offering a specific brand.
In France, Private labels are now part of supermarkets and account for nearly 80% of wine purchases.
“An important reason for the development of private labels in supermarkets is to increase loyalty to the store and ensure the sustainability of the company”.
What does Successful wine brands have in common?
According to Sebastian Aguire Marketing Director of Concha Y Toro ”In a Competitive market, in order to succeed as a wine brand rather than a label, you have to tell a story”. Successful brands have established a relationship with the consumer, meeting their desires and ultimately becoming trusted by the consumer and creating a positive image in their mind.
A term for this is brand equity.
Brand equity is defined in the business dictionary as “a brands power derived from the goodwill and name recognition that it has earned over time which translate into higher sales volume and higher profit margins against competing brands”.
They have also built consumer loyalty by constantly maintaining the relationship with the consumer, focusing on brand awareness and brand recognition.
As defined by Bern Schmidt, “brand awareness is an important memory-based categorisation task in which a consumer recalls a specific brand name when presented with the category”.
The brand delivers expected experience and safety for the consumer. It identifies with the targeted consumer groups and becomes and extension of their identity and personality which eventually results in brand love.
As defined in the Journal Brand Love “We find that brand love, as experienced by consumers, is best represented as a higher order construct including four multiple cognitions, emotions, and behaviors, which are organized by consumers as a mental prototype”.
Champagne is an example of success and building of brand love. With the recent position as , and with a positive image in the consumers minds connected to celebration, it is a good example of successful branding. Just having the name Champagne on the bottle elevates the prices. The marketing departments of the Champagne houses have also done a great job in building brand recognition. Moet and Dom Perignon are some of the biggest names in the wine industry.
In contrast to Champagne, another success story is of one of the worlds most selling wine brands Yellow Tail. Founded by the Casella family in 2001, Yellow Tails marketing plan was not to compete with premium wines, instead their focus was to create a wine people would purchase because it tastes good. At startup they sold 200 000 cases, by 2013 their global sales was over 83 million litres. Yellow tail has built their successful business around a consumer group with low interest in wine, marketing their brand as something easy.
Adapting to an ever evolving market is also something successful wine brands have in common. One good example of this is the 2008 Vintage of Chateau Lafite.
With the continual rising prices of premium wine from Bordeaux at the start of the twenty- first century many markets lost interest. The Asian market however, with a sudden interest in western culture and premium Bordeaux wine, were gaining interest. With the Chinese focus on gift giving and super premium Bordeaux wines functioning as a status symbol in China, Chateau Lafite quickly established themselves as number one. When they put the Chinese symbolic number eight on the 2008 vintage, their trade price increased with 20% over night.
“Some studied promotion claims that the most successful wine brands of all are the so- called Grande Marque, which translates directly as Big brand”.
What are the marketing tools available to ensure the continuing success of such brands?
The importance of marketing tools is to build brand recognition in the minds of the consumer trough constant focus on maintaining brand awareness.
The goal of brand recognition is for the consumer to signify, connect, experience, integrate and identify with the brand. But it is also important to differentiate the consumer groups by country, especially New World Countries and Old World Countries.
Young consumers from old world countries like France and Italy have grown up with wine as a part of their heritage, and history, and are losing interest. They have different views and needs in contrast to consumers from New World Countries. People growing up in new World countries like USA and North Europe on the other hand look at wine as something trendy and something they can identify with. However in terms of securing future interest and continual success, it is important to use marketing tools aimed at the right consumer groups.
The most important consumer in the global drinks business today goes by the name of Millennials. They are defined as consumers between 20 - 34. There are several reasons for their importance.
Firstly Millennials are the modern consumer group who has grown up in the internet age. Secondly they are a very brand aware generation, living their lives fully integrated in social media.
But the main reason why all companies target them is because they are the core customer of tomorrow. With the millennial consumer group in mind the primary focus would be the use of Internet and Social Media. Websites is a very important tool for a company to communicate important information to the consumer, and for the consumer to interact with their brand. It is also an important tool in ensuring the continual focus on brand awareness.
Trough the means of social media like Facebook and twitter the internet also offers a great opportunity for companies to engage in a direct dialogue with their consumers, gaining valuable feedback and insight to ensure the continuing success of their brand.
It is argued however that advertising in the form of television, radio, newspapers, magazines and posters has equal importance in securing both future and present customers, as it builds brand recognition in the mind of the consumer.
Advertising can also be tricky because countries have different laws and regulations in regards of the marketing of alcoholic beverages.
Another great marketing tool is the use of brand ambassadors. Brand ambassadors are well known in the wine industry and there are three types of ambassadors. The industry expert, the sales expert and the celebrity. Choosing the right ambassador depends on the targeted consumer groups. When targeting young consumers from the new world, the use of celebrities may be a good strategy.
The aim here is that the brand will begin to share the image of its celebrity ambassador. Celebrities are after all trend setters among young consumers, and wine is a trend in the new world.
But for a brand to appear serious and professional, the use of an industry expert is a preferred marketing strategy. When Krug Champagne appointed their first US ambassador in 2012 they used industry expert Master Sommelier Ian Cauble.
There are several other tools available, but the tools discussed are regarded as the most important in the securing of continual success.
Advantages and Disadvantages of wine brands for consumers
Brands are diverse in the way that they offer different benefits, in different ways to different consumers.
One such benefit for consumers is helping them to choose. Well known brands are easier to spot for consumers, this helps non involved consumers save time in the supermarket. But lot of these top selling popular brands are very similar in taste. This gives the consumer less diversity.
However, branded wines have a well integrated control system because of tight government control in regards of production and use of pesticides. This is beneficial as it can give the consumer a safer product.
When choosing a brand, the consumer connects on a personal level, making it an extension and reflection of their personality. This helps the consumer build Self Esteem. Brands can invoke different feelings for engaged consumers.
Anger and sadness is something often felt, when producers and owners try to alter a known brand.
Some consumer groups also benefit from brands as a tool to rise socially.
Wine is at the end of the day a luxury item. According to Pierre Mora “It is a product we consume that does not respond to the logic of need, but that of desire”.
Peoples desire is now heavily focused on one word “easy”. Easy to drink, easy to choose and easy to buy. People are in a hurry, consumers spend an average of less than a minute buying wine in supermarkets.
Wine brands fulfil the needs of the consumers in several ways. They assist them in the search for ease. Many brands are crafted to be easy to drink, supported by evidence that humans instinctively enjoy sweet food and drinks but have to learn how to enjoy the taste of dry products.
We can also conclude that the idea of brands are more effective for young consumers from New World countries where wine production is still very young. This in contrast to consumers from the Old World as they have grown up with the production of wine trough generations, and it is part of their heritage and history. They are clearly showing a loss of interest in wine.
In our pursuit of easiness we are in danger of loosing the diversity in the wine market. Easy drinking wines often ends up being a uniform predictable product, a commodity product showing no identity. Many companies use more money on brand promotion than they do on the quality of the wine itself.
Owners of popular brands are generating huge global sales volumes each year. These popular brands are mostly represented by wines from the new world. These wines also has very similar taste with no diversity.
When demand goes down, a decline in production follows. Resulting in a higher price differentiation between commercially produced wine and estate wine.
It is very possible that future markets will end up with a big gap between the two, with no diversity in the middle. One side with focus on low price with no real consumer interest in quality or identity, and the other side showing premium wines of high quality and diverse personalities but with such a high price differentiation that only the wealthy consumers can afford them.
It is clear that in the end the brand owners are the real winners. They will benefit from the standardisation of wine as a product, both in regards of production cost from the producers side, and the increasing sales of such standardised products from the consumers.
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Marius has worked in several parts of the wine business for the last 16 years. He is currently working as a Category Coordinator for wine and spirits in the Travel Retail business. He is also a part of a tasting panel for the financial newspaper in Norway and writes articles and lectures in his spare time.Marius has a huge passion and dedication for the wine and spirits industry. He is a certified Sommelier and is currently undertaking the WSET Diploma in wines and spirits education.