This article outlines the analysis of wine marketing. I will use as an example product Casillero del Diablo Cabernet Sauvignon. This is from the Central Valley, Chile 2018. Concha Y Toro is the producer.
This is a value wine which aims at a large volume of sales. The production is 22m cases a year. Concha Y Toro are among the ten highest volume producers globally. Cabernet Sauvignon is a very well-known variety. Chile is a very well-known country of production though maybe still slightly exotic and interesting for some consumers.
This wine costs £8 our bottle in Tesco. It is available online at £7.49 plus shipping. The wine is also available at Majestic for £6.99. That suggests that a special deal must have been done. The wine is positioned towards the top of the value end of the price range
The average price per bottle paid in the UK has been increasing slightly. It is a price-sensitive market, but there have been some signs of a trend to premiumisation. In previous decades, supermarkets would move a lot of wine at £5 per bottle, but Millennials are more health conscious. It seems inconsistent to them to go to the gym most days but also consume alcohol every day.
Many older customers would have drunk wine every evening. These customers would not pay £8. Millennials are replacing these consumers. Millennials are more likely to drink only at weekends. They are prepared to trade up.
The price of £8 in Tesco is perfectly positioned. It will hit the bulk of the current market. A Millennial professional picking up a bottle on the way home from work to drink with a meal would be a typical customer. They want to have something which is good value but with some interest to it to go with a meal or prior to going out.
The low-involvement consumer is the primary target demographic. This customer is slightly above the absolute minimum price-sensitive consumer but not willing to pay for additional structure or complexity.
Millennial consumers are likely to be reached by the marketing of this wine. It could sell well on the same basis to similar people in the US and more widely, though probably not in wine producing countries like Spain or France. Here, there will be too much local competition which will be offering fair quality without needing to carry a transport spend and marketing budget.
Wine Marketing: The Place
Ssupermarkets, convenience stores and online are the normal sales channels for a value wine like this.
Deep discounters will not carry this wine normally. They might do so if a special deal is available. This is because deep discounters will not want to pay for the heavy marketing/ad spend of a major brand like this. It is possible that deals can happen in some years though because 2.2m cases is a huge quantity. An economic downswing could cause the producer to be holding large quantities which will not really benefit from bottle ageing. In fact, this wine will likely deteriorate quickly (some commentators recommended drinking the 2018 in 2018 and no later in fact).
In this case, the wine is available in specialist wine retail though that is slightly surprising. It is possible that Majestic have specifically chosen this wine to capture the value-seeking customer. Or they carry it as a response to specific market conditions now. They could be moving very high volumes online to a lower-involvement customer base than would normally be the case.
Majestic could also be using a very good value wine as a hook to lure customers to their online space. They may then well be able to persuade them to trade up, but even if not, a sale is a sale.
Wine Marketing: The Promotion
Amazon describe the wine as the “UK’s No.1 Cabernet Sauvignon.” This is sticking strictly to the facts and is a positive message. People prefer choices already made by others since this seems to reduce risk.
Concha Y Toro make the following remarks on the product.
ORIGIN: Central Valley
SOIL: Mainly alluvial
AGEING: Aged in American oak barrels.
COLOUR: Deep, intense ruby red.
AROMA: The expression of cassis in this wine perfectly represents the Valle Central and its richness in fruit such as cherries and plums. The barrel ageing length thanks to the toast and coffee notes (sic)
PALATE: Medium bodied with silky tannins and long, ripe fruit and berry aftertaste, with impressive balance of fruit and polished tannins.
FOOD PAIRING: Red meats, well-seasoned dishes, and aged cheeses such as Gruyere or blue
There is a deliberate gradient of complexity to this description. The low-involvement consumer receives some information (cassis,richness, cherries) immediately. Low-involvement consumers could be switched off by the mention of tannins.
It is slightly confusing that there seem to be some issues with the English. One would not normally expect this in the wine marketing of a major conglomerate.
The “Story” in Wine Marketing
One of the keys to modern wine marketing is having a good “story.” Here, this means that people can wonder why there is a devil on the bottle. They will be intrigued and look into what the name means: why is it called “The Devil’s Cellar.”
Ladder branding is central to appropriate wine marketing. Yalumba’s wine marketing of Viognier is a good illustration of successful ladder branding. I will explore that in this article.
Yalumba is a successful winery which has occupied the Australian Viognier space. They have done this in a convincing fashion since around 1970.There are strong sales into the UK.The flagship super-premium member is “The Virgilius.”This is a very serious wine. The other members of the ladder gain brand equity from it. One criticism however might be that the ladder can seem to contain quite a lot of members.This could be a symptom of a tendency to overexploit a successful approach to the market.
Ladder Branding: the Members
Entry level — affordable
£11 — £15
Affordable / Stretch
Eden Valley Viognier
Yalumba Virgilius Viognier
£30 — £35
Flagship ladder brand member
Different price levels of Yalumba Viognier wines
The entry-level member Y Series is still not cheap. Certainly, Yalumba wish to avoid the opposite of a ladder brand benefit occurring where a super-premium member would not be credible if the entry-level product shipped at £5.
In addition, Yalumba have included a member (Organic) which could act as a bridge between the entry level Y Series and the pricier Eden Valley.
The ladder brand is co-marketed. Other products feature with it. This runs the risk of reducing the ladder branding effect. The Botrytis Viognier is really a separate product. Technically it is more expensive often than the Virgilius but this is a niche entry with limited supply available only in 375ml format.
There is also a Shiraz/Viognier product range which has only two members. They are also clearly located at distinct price points. Y Series is located at entry level and Hand Picked is located at premium level.
Also, Yalumba offer an Eau de Vie named V de Vie. This product uses Viognier grapes. V de Vie is co-marketed with the ladder brand even though this is really only coincidentally made from Viognier. There will be few varietal characteristics visible in a spirit.
The straight Viognier range does not really include these other products. However, they all go towards giving Yalumba a strong mind share of the Australian Viognier space.
The Eden Valley product is located just south of the premium slot. The name is well-chosen because it emphasises a sense of place but also there are positive associations between “Eden” and quality.
The Virgilius is available in Magnum. It is suitable for ageing. It is one of few Australian wines to be given a flagship location in the main wine displays at 67 Pall Mall, for example. So it has clearly established its premium nature.
Yalumba is not a listed company. It is therefore not required to provide extensive public data on revenue generation.
However, Wine Australia provide some statistics on Australian wine exports generally. Australia’s top five export markets by value as at year ending March 2020 are:
Mainland China (40 per cent of total export value)
United States of America (14 per cent)
United Kingdom (12 per cent)
Canada (6 per cent), and
Hong Kong (4 per cent)
Clearly China is of extreme importance in general. Nevertheless, there may well be an opportunity for Yalumba to move more Viognier there. Wine Searcher lists only one stockist in China. Eden Valley costs £75. This suggests there is effectively no supply and no information available to consumers in China.
The various rungs of the ladder brand are aimed at different consumers.
Above all, the Y Series is appropriately placed at entry level. It is interesting, fresh and approachable with decent levels of complexity without excess complexity. Most importantly, there is no sticker shock.
Consumers who are new to the brand will find nothing to put them off. So they may trade up to the upscale members on an appropriate occasion.
Many novice wine drinkers have moved from casual to serious interest in wine as a result of noticing the unassuming yet defined qualities of Y Series.
Placing a member (Organic) just north of entry level but still reasonably priced enough to be a potential step up is intelligent marketing. The customer is therefore more likely to step up the ladder. This is especially likely perhaps when a consumer has had the entry level product a few times or it is unavailable.
Making this wine organic and being very clear about that feature is also wise since Millennial Treaters will be a key segment here. That’s because the term “Organic” features prominently on their wish-list for products.
The pricing overlaps with the entry level product which again is intelligent because it encourages switching. The entry level product is sometimes available at a discount. Great care should be taken here. One should avoid the discounting of the Organic product so as to maintain its identity as “just slightly premium in a premium range.”
Eden Valley aims at consumers celebrating a special occasion. It is the “stretch” entry within the ladder branding. So customers who would normally stay on the lower rung might be tempted.
The Virgilius is the “aspiration” product within the ladder branding. Serious wine drinkers are the target. It is attractively priced in comparison to Meursault, for example.
The marketing materials include an immediate link to the wine club.
Moreover, there is an effective strapline. “Thoroughly captivated by this elusive, luscious and complex white variety, a visit to Viognier’s spiritual home saw the beginnings of a journey that would define Yalumba’s white winemaking future.”
This provides a strong brand story showing the roots of the product in the past. And the strapline also makes strong and clear statements about the qualities of the varietal. The consumer knows what to expect. The streamline also bootstraps from Old World experience with the variety. Consumers see that the product is made with care and experience.
In sum, we may conclude that Yalumba have very successfully employed ladder branding within their range of Viognier wines.
Wine SWOT analysis proceeds in the same way as in any other sector. This article presents a SWOT analysis for the particular case of Château Musar in Lebanon. See https://chateaumusar.com
Very strong brand story with significant historical underpinning since foundation in 1930s
Good level of brand equity especially among high-involvement consumers
Long history of organic production
Effective cellar door operation which attracts high-spending customers
Great ageing potential
Production can be described as “Bordeaux blend with a twist.” This is a strong combination of an established and well-known pattern but with some extra interest
Some competition but no other serious players in Lebanon currently
Good and reliable sales into France because of historical relationship between the countries
Extremely high quality consistent product
Good local supplies of skilled and unskilled labour
Distance of winery from vineyards causes risk of oxidation damage and heat stress to grapes in transit to winery
Whites are not close in importance to the flagship red blends and there is little serious portfolio diversification
Cellar door sales are somewhat impeded by the distance of Lebanon from western Europe and the US
Online operation exists but does not ship huge volumes for logistical reasons
Large volumes of water needed: not easily sourced
Can reach new consumers who are interested in exploring wines from novel locations. This is a major segment of the high-involvement market.
China has an increasing population in the mid-wealth range. There is though little penetration of premium wine from regions beyond those that are extremely famous such as Bordeaux or Burgundy
Explore movement of product into China via partnerships with apps which are very important in that market
Find ways of improving the logistical bottlenecks to move more product via online channels
Continued political instability in Lebanon
Peg of local currency to USD has broken meaning import costs will increase dramatically
Because of this, increased taxation is likely to result
Intensification of local regional conflict could impede winery and vineyard operations including labour supply and transport of product
Local competition does exist and could gain importance, diluting the position of Musar as the sole well-known producer in Lebanon; moreover if such competitors move product downmarket, this could dilute the soft brand equity of Lebanon
Poor internet bandwidth and consistency of power supply
Conclusions of Wine SWOT Analysis
The overall position revealed by a wine SWOT analysis is clear. Musar is in a very strong position provided the political/security situation remains stable.
This article explores wine online innovation by looking at the successful example of Gusbourne, an English wine producer.
Wine Online Innovation: Wine Clubs
Why might a producer choose to use a wine club and online sales to boost sales? What are the benefits and restrictions of selling wines this way?
A well-run wine club combines several major benefits for producers.
It creates a sense of exclusivity and buzz around flagship product which can optimise price achieved of the flagship product and sales volume throughout the range. Screaming Eagle have had great success with this approach. Their wine club has a long waiting list and is highly prestigious.
The mailing list forms a way of building lasting relationships with customers. They will often introduce family and friends to the brand. A wine club is a variant of a company newsletter but with much higher levels of interest generated among consumers.
Enhancing Customer Relationships
Customer loyalty provides some resilience against natural fluctuation in productions levels.
Customers who have a long-standing relationship will not desert the producer if there are supply issues in particular years. These can be caused by a poor harvest, for example.
Similarly, production may be larger than usual. In these circumstances, the existence of established allocations to customers helps shift a significant slice of product. It can ideally also be leveraged into extra volume at an (ideally minor) discount if this is seen as optimal under the circumstances.
Certainly, the wine club can be a conduit for driving traffic to the cellar door, which is a further useful channel in itself. It also further strengthens client relationships and is a positive advertising vector.
Valuable marketing intel comes for free. The winery can learn about its customers. It will learn their socio-economic breakdown. Market segments to address further will become clear.Which products appeal to which people?
Having the wine club online is a relatively inexpensive way of reaching a very large number of potential clients on a global basis.
Given the current nature of the commercial environment, not having an online presence or worse having an amateur one makes a producer appear extremely backward-looking. We cannot expect a producer with no website to be on top of the latest trends such as organic certification/new varietals post-climate change etc.
Having an online ordering possibility is extremely valuable in the extreme COVID circumstances currently obtaining. Wine writers have commented that small producers with no online presence are struggling enormously under lockdown because they simply have no way to move product.
There are no major disadvantages to having an online presence. Setting up and maintaining a website involves costs. This requires specialist skills. It is very important that the website be reliable and easy-to-navigate.
This includes consideration of how the website will appear on a phone. This is a channel of ever-increasing importance and many website today simply fail to be usable on a phone.
Staff must invest time in maintaining the website and potentially also a social media operation. For example, customers will often use social media to comment and complain about the product. Complaints must be handled on a measured and timely basis.
The entire nature of social media posting is confusing for two reasons. Firstly, one must somehow combine professionalism and informality. Secondly one must stay abreast of an ever-changing landscape of platforms. For example, the median Facebook user in the US is now 41. This may be fine for reaching the established client base but will increasingly miss the future Millennial market base.
Keeping the online stock updated is another task which will involve sustained effort .
Wine Online Innovation at Gusbourne
Gusbourne is a great example producer that is using online innovation to sell their wines.
Gusbourne is a successful producer of English sparkling wines which has an online wine club named “Gusbourne Reserve.”
This is an intelligent choice of name which combines a sense of exclusivity with simplicity and a focus on the brand; it would have been very easy and lazy to call it the “Gusbourne Wine Club” etc
Consumer Touch Points
How does this online presence gives the producer various touch points with the consumer?
The navigation options at the top of the start page of the site reflect the touch points. These are as follows.
TOURS & TASTINGS
TIME WELL SPENT
50% of enquiries die when a question is asked or input is required on a website. It is therefore essential to have as little time/navigation required between arrival on a site and an opportunity to purchase as possible. Therefore, many of the options above lead on to immediate revenue-generation opportunities. The rest offer further information which will ideally retain visitors on the website.
The first four options offer further information. Gusbourne can thus appeal to potential clients who are specifically interested in the location of the vineyards. Clients want to know how the wine is made and what wines are available. The very first option ABOUT US being the default for someone who wants to know more but has no specific direction of enquiry at present.
All of the remaining options are revenue-generation opportunities. Details of where to buy the wine offline are provided. Opportunities to visit the cellar door are promoted. Further details of the wine club are offered. TIME WELL SPENT is a COVID opportunity whereby their sommelier will engage on specific topics of interest such as food matching via bespoke online channels such as Zoom.
The remaining two options BUY and TOURS are placed at the far right. These are repeats of options already available but are basically designed to catch very busy people. If someone only reads one word on this page, it is likely to be one of these two. One offers the chance to buy product and the other offers the chance to book a tour. Both are good revenue opportunities for Gusbourne.
Effective Wine Online Innovation
How effective is Gusbourne’s online strategy?
The online strategy of Gusbourne is extremely effective as a result of various factors. The site has strong design with varied professional photography. It has frequently updated content. The last two posts are from the same day and six days previously. Appealing photographs front both posts. There are nine posts from the current month which is impressive.
The content is fresh and informative. There are discussions on what is happening in the vineyard in spring with a theme of “hope” and renewal. This is particularly valuable and sensitive to current conditions.
There is plenty of food matching advice from chefs as to what can work with the product.
There is a post on the unconventional and interesting background of the founder. He was a surgeon from the noted wine region Stellenbosch in South Africa. This adds human interest which is important to building the brand story.
This is very strong offer with no wasted words. It tells potential members what they are getting and why they should want it. It is good marketing to explain to the customer why the product will give him what he wants and tell him also that he wants it just for the avoidance of doubt.
The website sells an “experience” or how a customer will become more the person he wants to be or to project. “I want to be the kind of person who is in the club.”
“Become a member today to guarantee your allocation of our wines, direct from the cellar, and access to a range of exclusive benefits.”
There is a strong use of consistent livery across the website. This enhances its professional appearance. The front page of the Reserved subsite has very strong and bold graphic design. This is simple and straightforward and emphasises the product.
Text is sparse. This is wise since “busy” websites are extremely off-putting. There are some navigation options and the mission statement below.
Allocation Appeal in Wine Online Innovation
Immediately below the main page of the subsite comes a USP statement as below.
“YOUR ALLOCATION: Two bottles each of Gusbourne Brut Reserve, Rosé and Blanc de Blancs are allocated to each member at cellar release and delivered in two cases of six during the course of the year.”
This tells clients exactly what they are getting but also makes it clear that the initial commitment need not be immense.
The offer continues as below.
“Throughout the year, you can order additional bottles at preferential rates, and you’ll also have the opportunity to order our limited edition, mature and rare wines, which are only available to members”
These exclusive benefits are likely to be extremely appealing to clients. Note also the constant address of the potential client as “you.” This emphasises what it is that YOU are going to get if you join Gusbourne Reserve.
“All orders receive complimentary UK mainland delivery”
This is a way of giving a discount to loyal customers without actually reducing the price of the product. Discounts can have adverse market implications.
Gusbourne is not cheap. This is because low yields in the UK under the current conditions mean the price per bottle will be relatively high at ca. £20 per bottle. The winery has to produce a premium product to be viable at this price.
Social Media Operation
There is a comprehensive social media operation on Facebook, Twitter and Instagram. These have dedicated content tailored to the different platforms. Twitter is less visual than the others; Instagram uses more video than still photography.
The mailing list is easy to join. No commitment to joining Gusbourne Reserve is required. The upgrade/conversion rate will be good given the effectiveness of the site design.
This is such a professional and widely-ranging online operation that it is difficult to suggest any further improvements.
One possibility to explore would be to add more video content. The current site is very text-based. This may gain less traction with younger people now and in the future.
Loss of Wine Production is a difficult problem for a winery. A wine producer may have many loyal customers. Normally, the producer sells all wine produced. Suddenly only a reduced volume of wine can be sold. This could be catastrophic weather destroying much of their grape crop, for example.
In Argentina, hail is a particular threat to winemakers:
In, fact loss of wine production causes $10bn of losses to winemakers every year. If wineries seek to maximise revenue and minimise losing loyal customers, what are some of the tactics they might apply?
It would generally be prudent to store some wine for two reasons. Firstly, the winery could handle production outages such as the above-mentioned circumstances. If any wine can benefit from ageing, then some should be stored in any case. That is because storage will maximise value, though potentially at the cost of some temporary cash-flow issues.
If however, the producer sells all the wine, the problem is more difficult. If the producer sells all the wine every year, then there will be no reserves available.
Using Loyalty as a Metric
“Loyal” customers may receive all the wine. If so, then there is no way of providing the desired amounts of wine to all customers who are loyal. If on the other hand any customers are casual, they should be the first to lose their allocation.
This suggests an approach whereby the winery should rank its customers by loyalty. Loyalty means that a customer has bought a large quantity of wine for many years.
A loyalty figure of merit is calculated by multiplying the number of cases bought and years for which they are purchased. However, the simplest way might be to find the total of cases each customer has bought in the last yen years.
We should also adjust this figure for recency. It would be a mistake to give the same loyalty score to one buyer who took 10,000 cases ten years ago and nothing since and to a second buyer who took 10,000 cases last year and says they will do the same in future. It is easy to do this. Divide the number of cases by the number of years since they were bought.
This algorithm produces a rank order of loyalty which can now feed in to allocation decisions.
Process for handling Loss of Wine Production
The first task is to contact all customers and explain the position in terms of lost production. The initial aim here is to find out if any customers have alternative supplies of a reasonably similar product
The winery should seek to proactively identify alternative suppliers. These could be located in any major global wine location. Those suppliers could have product/excess productavailable. If so, a deal is available.
The winery could open discussions with this other producer about supplying existing customers. However, a major risk here is that customers remain with the alternative supplier in future years. Therefore the winery should consider actually purchasing alternative supplies and thus retaining client contact.
Such an operation need funding. Banks may lend, but if the winery has crop insurance, this is a good application of such receipts.If it does not have crop insurance, it should acquire some unless it is in sufficient funds to self-insure against this risk.
The secondary aim is to “take the temperature” of clients. They may be unhappy about the problem. Or they may be philosophical about it. Agricultural production can not be guaranteed.
Loyal, understanding clients may defer their allocation for this year. This could be on the basis that they will receive bonus allocations next year if they so wish.
Alternative production methods
A specific shock could impair the grape harvest. Hail in the exact vineyards owned/operated by the winery might be the problem. If so, there may still be other grapes available in the region from other producers or specialist growers. Bought in grapes would allow the reinstatement of production. If the adverse conditions affected the entire region, this will not be a solution.
If the adverse factors are different, there are likely to be ways of addressing them, which will cost money. A temporary bottling line can replace a damaged one.
Loss of staff could be the issue. Alternative staff are available from different locations. The vineyard may be suitable for mechanised harvest.
If for example a global pandemic makes it impossible for workers to travel from traditional locations in CEE, then it might be possible to employ workers furloughed from other businesses. Hospitality is one obvious source.
The revenue maximisation question is secondary because revenue is to some extent already maximised. The winery sells all of the wine available.
Some clients may pay more in order to receive an increased allocation. This is risky since it could appear to be price gouging. Clients need transparency here. This should emphasis that the winery has certain fixed costs. It also has a much reduced production this year, so it needs to charge more per bottle in order to survive.
Clients amenable to this could receive discounts or guaranteed priority in future years.
The winery could enter into long term supply contracts with top clients. The clients are guaranteed what production there is in a particular year.
In this article, I provide some suggestions on how there could be improvements to marketing sherry.
Tradition with a future
SHERRY — THE PERFECT APERITIF
A poster should include a website at which people could learn more. In the case of a single producer, this could be their home site. But sherry has a marketing issue as a product. It is extremely unfashionable despite being some of the most complex and interesting wine available at the price point. So the poster should work against prevailing negative impressions.
Amazingly enough, the domain http://www.sherry.com is unoccupied. The Consejo Regulador should address this omission. If it existed, it would be a good candidate to use on a poster. A web address on a poster needs to be unambiguous and impossible to forget. sherry.com fulfils those criteria.
To be fair, http://sherry.wine is in use, so a redirect is all that is needed here. The .wine domain is not well-known.
The major problem for sherry is that it has a brand image which repels younger consumers. Health concerns about alcohol consumption worse this. The proportion of fortified wines sold as a percentage of all wines sold has declined from 4% to 2.5% over approximately the last decade.
Some people see sherry as a very old fashioned drink. One’s grandparents drank it. However, it has a devoted following among critics and high-involvement consumers who see it as providing a very high complexity/price ratio. That makes it a cheap way of enjoying complex flavours and aromas.
Marketing Sherry: Targets
The marketing strategy must focus on younger consumers, but must also rely on the heritage of the product. Sherry has an appealing history with the romance of the Solera system and that gives much to work with. The slogan “Tradition with a future” aims to use the historical foundation but also emphasise that sherry will be something to enjoy for many years to come.
There are many different types of sherry which brings two benefits. Consumers could become “sherry explorers.” Marketing sherry needs to focus on greatly expanding the customer base, rather than trying to sell more to existing consumers.
They could try the various types to see if they prefer dryer styles like fino which have been biologically aged or sweeter styles such as pale cream. There is also the probability that almost everyone could find a style of sherry that they like because of the huge variation between the styles.
Sherry is a tightly controlled product. It may only be produced in a small triangle near Jerez in Spain. Marketing can use this a selling point. Ideally any promotion needs to tie in to the tourism operation into the region.
Marketing Sherry: Products
The essential Spanish identity of the product can also feed into the previous “sherry explorer” idea. It is clear that the styles of sherry which are familiar from the cupboard of the UK grandmother will be likely to be pale cream sweet styles. There is nothing wrong with that. The Bristol blue glass of the iconic Harvey’s brand is a marketing success. However, this style of sherry is not even half of the story. The campaign must emphasise that most of the sherry consumed in Spain is unlike that which has passed through Bristol. There is an entire world to explore.
Palo cortado is a product with a great deal of romance. It is probably the best product to be created by accident in the world of wine. Short form video content showing the “broken stick” being chalked would be useful. Overall, much activity in the bodega is highly visual. Typically Spanish imagery is widely available.
The product for the overall campaign is sherry in general, but it would be valuable to approach producers both major and minor to see what financial and other contributions may be available. The generic sherry campaign can establish marketing livery. This can then be further exploited by individual sherry brands. The overall campaign retaining a central point of control to ensure consistency of appearance and messaging.
The “sherry explorer” theme is important here. Producers can set out their different flagship products under the generic sherry brand. All styles of sherry — fino, amontillado, manzanilla, oloroso, palo cortado, traditional cream types, PX — lack brand identity. The wider public will learn that these are all indeed types of sherry and then told the differences between them.
Two angles successfully used in other spirits are a) use in cocktails and b) use in chilled long-drink formats. Both of these are eminently feasible with sherry. Promotional materials could detail the ingredients and procedures to make sherry cocktails. The campaign could show sherry as a cooling long drink when mixed with soda.
Price is a major advantage for sherry since it simply costs much less than wines of comparable quality and complexity. This is almost an advantage of being unfashionable. Successful marketing could employ this.
The strategy is to leverage off “gateway brands.” This does not mean the traditional cream styles. The houses all have entry-level product as an entry point for new consumers and is very reasonably priced. Giving the impression that sherry is cheap should nevertheless be avoided. The range includes vintage product of very high quality.
The main target group is young consumers. Market research could examine whether any existing consumers will trade up. It appears unlikely that the archetypical grandmother who has been drinking Bristol Cream for a lifetime is suddenly going to branch out into aggressively dry aged fino. However, there may be an opportunity to reach some high- involvement consumers who have hitherto focussed on non-fortified wines.
The target group is younger consumers. The marketing demographic name for them is “Millennial Treaters.” So it is inevitable that social media must play a prominent role. Posters are best placed on bus stop billboards initially. They must be tested for efficiency of spend against social media. The initial aim of the campaign is to drive traffic to sherry.com so it is essential that there is a great deal of engaging and valuable content there.
Driving such traffic is best done with short-form video content in the line of Instagram stories or posts from online influencers. Both will be expensive if effective. Posters are effective in timelines. “See link in bio” is a valuable tag to point consumers to the web page.
Consider approaching US-based hispanic celebrities to market the product in Spanish to the worldwide Spanish speaking community. This largely untouched group which might be amenable to a heritage-based line.
Sherry Marketing: Price Promotion
Price promotions would support the campaign. Since the aim of the campaign is to drive web traffic, one approach might be to offer vouchers on the website. These are redeemable for discounts on a BOGOF or other basis.
The redemption could take place in person, but there is no particular reason why it has to be. Online sales are an increasingly important part of every market and will continue to play a significant role. The website could feature separate areas highlighting the products offered by major producers and allowing a central method of buying the product. Major producers already have a solid web presence. They may want traffic directed back to them. This is not a serious problem.
Something central and online is still available to minor producers who will benefit from a clear and well- known online location offering distribution to end customers. Some major producers have an efficient and reliable web operation. Link swaps between their websites and sherry.com are useful for both. Certainly, major producers who are behind the curve in terms of online presence will learn from best practice.
It will be valuable if the same promotions can be available across a wide selection of producers on the same discount basis, but this may be difficult to negotiate.
Sherry Marketing Through Buy-in
Given the essentially Spanish and indeed regional Spanish nature of the product, it will be useful to promote travel to the region. This can also form the basis of useful promotional spend. The website can run competitions, perhaps on the basis of sherry quizzes or just on the basis of luck, where the prizes will be trips to Jerez including tours of bodegas. Rare bottles make attractive prizes.
There is significant buy-in to the product from major critics such as Jancis Robinson. This is helpful, but it means that it is not easy to say how to improve buy-in further. Obviously the launch of a central website would be a significant event in the wine world and so should generate coverage which is likely to be positive. Steps to encourage the such coverage in the right direction are always useful.
This article illustrates how to create a Wine Brand Story. It uses Château Musar as an example. https://chateaumusar.com. Creation of a story is the most important element of marketing wine.
Marketing A Premium Bordeaux Blend From Lebanon
Suggested strapline: The Most Ancient Region for Winemaking — Begun by the Phoenicians at least 6000 years ago.
We are the most prestigious vineyard in Lebanon, famous since 1930 for producing premium reds. These are based primarily on the equally famed left bank Bordeaux blend of grapes. We lead with Cabernet Sauvignon, supplemented with Carignan and Cinsault. This selection combines French tradition with attention to local conditions. This unique combination of advantages allows us to make wine of the highest quality in global terms and yet with relatively modest pricing.
We have continued to produce wine throughout difficult times in Lebanese history. We produced throughout the second world war and even during the civil war in Lebanon which began in 1975.
Our wines have excellent ageing potential. We are confident that we will be able to celebrate our centenary next decade while looking forward to another 100 years. The spectacular Roman ruins nearby at Baalbek show the depth of history on our doorstep.
Wine Brand Story: Location of Vineyards
The location of the vineyards is already something of a talking point among wine lovers. They are located some distance away from the winery — about a 2.5h drive. People ask why this is. They know that Lebanon is a hot country and grapes can be damaged by heat stress in transit. While we take every precaution to prevent this, including picking in the cool hours of the morning, the question remains as to why the distance between vineyard and winery is relatively large.
The answer to this again lies in history and the difficult history of our land. Our founder was unsure of what the future would bring. He felt confident in siting the winery close to Beirut, near to workers and customers, handy for shipping links and definitely likely to remain Lebanese territory for the foreseeable future. The vineyards are in the agriculturally favoured Bekaa valley.
This area is still in Lebanon today. But no-one knew this at the time.
Wine Brand Story: Vineyards in Harmony with Land and People
Our vineyards are amongst the most spectacular and remote in the world.
They are located in the quiet Bekaa Valley, at around 1000m above sea level. This relatively high altitude offsets what would otherwise be excessive heat for winemaking in the Lebanese climate more generally.
A striking mountain range with snow-topped peaks makes up each flank of the valley. To the east of the valley is the Anti-Lebanon mountains. To the west, Mount Lebanon separates the Bekaa Valley from the Mediterranean Sea. The Bekaa Valley is the north-eastern most part of the Great Rift Valley, which runs from Syria to the Red Sea.
The vineyards see 300 days of sunshine a year making for a leisurely growing season. Fresh mountain breezes from two directions cool the grapes. We have quite a high temperature range despite the mediterranean climate elsewhere in Lebanon: we will often see snow in winter.
The remoteness of the valley has kept it unspoilt and perfect for winemaking in a historical style.
Winemaking: Methods and Philosophy
We aim to be natural and in harmony with nature and people in everything we do. We have a minimal intervention strategy without being afraid of adding value where it helps and does not cause damage to the land, the vines or above all the wine.
Bedouins harvest our grapes between August and October. We choose not to move to mechanised harvesting. This is because we want to continue to do things the way they have always been done. We will not abandon our communities of pickers merely to address the bottom line. Many families depend on us in a region which is short of work.
We use ambient yeasts rather than adding cultured ones which can lead to homogenous wine production. Our winemakers keep sulphur additions to a minimum. We are not afraid to use what is necessary but we do not keep to a pre-set schedule.
We do not make wine in a hurry. The premium red is released after seven years. We ferment relatively cool: below 30C. This gives us gentle yet effective extraction of colours and flavour compounds such as tannins. After six months, we give the wine 12 months of ageing in French oak. There is then some blending and four years of bottle maturation.
Musar was the first vineyard in Lebanon to achieve organic certification (2006). We maintain the organic approach throughout the process: from grape growing to wine making.
Conveying the Wine Brand Story: Marketing
We now outline the principles on which the above marketing piece was constructed.
The marketing leads on history. That emphasises continuity and quality.
The campaign should be highly visual in nature, using such sites as the Baalbek ruins. These are a USP for Musar since the ruins are only reasonably usable by wineries in Lebanon and Musar is easily the wine with the best brand equity in Lebanon.
The marketing focuses on the way the winery has continued to produce despite difficult circumstances. This gives consumers a sense of connection and history stretching forwards into a bright future. The winery also has strong roots in the past. Showing this resilience is especially necessary in the current circumstances.
We bring out the relative good value of the wines. The idea might be Bordeaux quality at Lebanese prices.
The marketing emphasises natural winemaking and environmental strengths. These qualities are highly fashionable and likely to remain so.
All of these factors highlight that Musar is unique. It has unusual grape varieties. The wine comes from a less-well known region. This also represents an opportunity to gain greater exposure for the whites, which use grapes which will be unknown even to many experts.
Avoid Diluting Brand Equity
Brand equity should not be diliuted. This is less likely to be a problem with the Arak, which is high quality and a product with a clear distinction to the flagship premium red blend. This is probably also true of the rosé product, though this is starting to encroach on the central territory. There have been efforts to broaden the appeal of the products to younger consumers by launching easy-drinking ranges of wines (“Musar Jeune”) which have less age and power. This is a highly questionable strategy and if it continues, should not feature heavily in the marketing.
The flagship brand, while relatively inexpensive in comparison to Bordeaux, is still premium in pricing. This means that customers will be high-involvement. They are likely to fall into marketing segments of either “Experienced Explorers” or “Millennial Treaters.” The age of the former means that a social media campaign will likely be ineffective, but this is probably a group which in any case already has good familiarity with the brand. There is an opportunity nevertheless to reach Millennials via social media and a highly visual campaign based on the above parameters is recommended. A wine brand story is especially important for Millennials.
Conveying the Wine Brand Story: Social Media
Short form video on Instagram are the best near term opportunity. Use “Stories” to promote Baalbek and the vineyards. Focus on younger demographics (already partly accomplished by choice of platform) with interest in wine. Emphasise quality and USPs.
Consider joint ventures with bodies promoting tourism to Lebanon. However, one must remain pragmatic since this is not the right time and resources are scarce.
Look at offering free trips to the winery to influencers who will contract to produce Instagram stories in an “organic” way. It will be helpful if at least some of the resulting posts can avoid the “paid post” tag. This should be possible since the actual experience can be documented by the influencer. Not every aspect of it will in fact have been paid for.
Consider chartering private jet for super-influencers. This will be extraordinarily expensive. It will though result in literally millions of page views and will be widely shared by the right influencer. Product placement in the jet is an appealing option. This also adds interest to the region in general and since Musar has a good cellar door operation already. This can benefit from increased high-involvement customer traffic. Again, current circumstances make this operation sadly impossible at present. In addition, there is a risk that the wine brand story starts to look inaccessible to the ordinary customer.
Mergers and Acquisitions in the wine sector are the same as in any other sector. They occur when two companies are combined. Subsequently, all of the operations of both companies are subsumed under a single holding company.
What is the difference between a merger and acquisition
One difference between a merger and an acquisition in lay terms relates to the relative size of the companies involved. If two companies of similar revenues combine, that’s a merger. If one company has much more revenue than the second company, that’s an acquisition.
Formally, a true merger is where the companies cease to exist. Shareholders get new shares in that case. An acquisition is where both companies continue to exist as entities but the target becomes the subsidiary of the other. It’s not really about the relative strength / revenue of the companies. Maybe in practice you will rarely find true mergers between companies who have vastly different revenues. However, that’s a statement about a practical matter not a “definition” of a merger vs an acquisition.
Why do companies do Mergers and Acquisitions?
Obtain synergies. There may be opportunities to reduce overall costs. This could involve eliminating duplicated capacities at the two headquarters. It might get bulk discounts on supplies. The company could eliminate headcount in operations. It could save money by combining IT systems.
Increase negotiating power. The merged entity will be a larger player in all its operations and may be able to drive a harder bargain with suppliers, landlords, distributors, finance providers or retailers. The general aim of M&A activity is to produce a strengthened combined operation. I list ways to do this below.
Expand capacity. The merged entity will have a broader portfolio of capabilities or opportunities. For example, the acquiring entity may gain e.g. vineyards/ grapes/locations. Perhaps the target has a state-of-the-art IT system or difficult-to-find liquor licences. The acquiror could also gain a broad and well-designed distribution network. It could benefit from political connections in an emerging market.
Conduct financial engineering. Often, acquisition targets will be under- geared. This means that they fund their operations more with equity than with debt. That’s inefficient because dividends payable to shareholders are not tax deductible whereas interest payments on debt are by contrast tax-deductible. This angle is often of interest to private equity players.
Enable investment. Frequently, target companies lack sufficient cashflow to develop and enhance their operations and the acquiring company can supply this to allow the combined company to fully exploit its opportunities. Again, this angle is often interesting to private equity.
Add expertise. An acquisition creates the opportunity to attract a best-in-class management talent. In fact, employees at all levels will be easier to find. There will be improvements in training and staff development.
The history of Duckhorn is a good example of how private equity activity has shaped the wine sector.
Duckhorn is based in Napa with 243Ha of vineyard estates in California and in Washington State. Duckhorn had been family-owned and run since inception in 1976.
In 2007, GI Partners acquired Duckhown. GI is a middle-market private equity fund. It originally aimed at providing investment diversification to major Californian pension funds. The purchase price was $300m.
GI worked on developing the management team during its ownership, both via external hires and internal promotions. The product lineup was expanded. Additional focus on the Decoy brand caused it to become “one of the industry’s top luxury wineries.” GI also invested more than $60 million in Duckhorn during their ownership.
This investment achieved the following outcomes.
Add 140Ha of vines, allowing a significant expansion of production under both existing brands and new ones.
Create state-of-the-art winemaking facilities via construction and acquisition.
Introduce Canvasback, a boutique Cabernet Sauvignon from Washington State’s acclaimed Red Mountain.
Expand distribution to a wider base of customers locally and internationally.
Achieve significant industry recognition. Duckhorn now has the premier US luxury wine portfolio.
GI exited the investment in 2016 by selling Duckhorn for $750m to TSG Consumer. TSG is another private equity firm. It focusses on opportunities in the branded consumer sector.
The initial purchase price of $300m and the stated investment was $60m. So the this Wine Sector: Mergers and Acquisition resulted in an attractive IRR of 9.1% for GI. (I assume that the $60m of investment was distributed equally over the eight non-initial and non-final years of ownership.)
How this Wine Sector Mergers and Acquisitions Changed the Broader Wine Industry
The profitable nature of this investment for GI underlined the appeal of this sector to private equity investors more generally. That is underlined by the subsequent exit to a different private equity house.
It also showed that the opportunities to create value in the sector by adding investment and expertise were achievable relatively easily.
Consequently, the deal increased the value of a restricted number of ultra-luxury US wine operations and brands. It also emphasised the importance of some scarce qualities such as quality vineyards in key locations and a brand portfolio which is ripe for expansion. The brand portfolio was further exploitable. However, it was helpful for the purposes of the acquisition that Duckhorn had significant high-end brand identity. It also had wide awareness among high-involvement consumers and specialist industry players.
The deal showed management teams that private equity could be an appropriate steward of assets. The deal added value while not impeding the expression of core values. It also created rather than destroyed employment. Finance of appropriate size and patience was available. Wine Sector Mergers and acquisitions could benefit everyone.
Duckhorn ended its period under GI ownership with greatly expanded distribution in all US states and in 50 countries on five continents. Distribution is improved with private equity ownership and investment.
Further Transactions Stimulated by the Duckhorn Acquisition
The transaction stimulated further transactions in the US luxury wine sector.
In 2018, Duckhorn (still under the ownership of TSG) acquired Kosta Browne Winery. The seller was Boston-based private equity firm JW Childs Associates. Thus Duckhorn has now become almost a private equity player in its own right in the wine industry.
The President of Duckhorn Alex Ryan said “you can’t market your way out of a lower category into a higher one.” Wine sector wisdom generally agrees with this idea, with the caveat that it can be done but it is very difficult.
Ryan’s statement indicates that one motivating factor for the transaction was to expand product availability without dilution of brand identity. It is possible but very difficult to improve brand identity. Symington’s has been attempting to move its Cockburn’s Port brand upmarket through significant and extended investment.
The stated aim of the transaction was to operate Kosta Browne as a separate unit but expand it via both organic growth and acquisitions, thus further underlining the likely future importance of M&A in the sector.
Ryan noted the importance of private equity in the wine sector, stating that it was “good to have scalable, professional investment coming in to the space” which illustrated “maturation.”
We can expect private equity involvement in the wine sector to continue to be of major and growing importance.
Wine Sector Mergers and Acquisitions: Future Developments
A banker involved in the sector commented as follows on the likely effects of further private equity involvement on the sector.
Further consolidation between companies already involved in the sector is likely. There is more focus on capital appreciation under private equity than “lifestyle” under family ownership. This means more focus on expansion of businesses.
There will likely be higher production of existing brands. That may require broader distribution. This in turn may increase compliance issues within the US three-tier market and internationally.
Portfolios of brands will expanded. That means more expenditure on marketing, market research, segmentation analysis and advertising.
One question raised is whether the successful strategy shown in the GI transaction is scalable. Can the Duckhorn approach also work at Kosta Browne? There could be saturation effects at the luxury end of the market.
Are there opportunities at the value end of the market? There may not be if major conglomerates have already exploited them. We may assume they have been running their businesses at maximum efficiency and with no lack of investment capital and management expertise.
Established luxury wine assets will attract high multiples. These assets are sought after by private equity as well as already established family owners and individual wealth family offices.
The wine business is attractive since it is tangible, easy-to-understand and recession-proof. Potentially it also has some lack of correlation to financial markets more generally.
The vineyards are at some distance from the winery for historical reasons. The founder was unsure of the future borders of Lebanon. So the winery is in Beirut. But grapes grow more than 60km away.
The grapes are transported a considerable distance under conditions of some heat. However, there are good supplies of inexpensive labour available and it is possible to harvest in the early morning. Against that, the winery is in a major city so there is good availability of skilled labour where it is required
Red grapes grow in the Bekaa valley as described above. The red grape varieties used are Cabernet Sauvignon, Carignan and Cinsault.
White grapes grow in the foothills of the Anti-Lebanon mountains and on the seaward side of Mount Lebanon. The white grape types are Obaideh and Merwah.
Styles of wines and price point
Musar makes premium or super-premium wine. The house has a very strong historical reputation built up since its foundation in the 1930s. The reds compete with Bordeaux. This means that they can be quite expensive when compared to the median bottle sold. Nevertheless, they can be relatively inexpensive when compared to classified growths.
The house has been carefully expanding its range while aiming to maintain brand identity which would suffer from any decline in quality. The white and rosé production of the house is much less well-known than the flagship red blend, but wine critics have described this as an unfortunate situation. There is therefore an opportunity here.
Marketing: Vinification and Climate
This section describes notable viticultural/vinification practices, climactic factors or location details that are useful in the marketing of wines.
There are no specific vinification practices which are unique to the house. Vinification is done carefully throughout as one would expect from a premium product. All wines are “natural.” A minimum interventionist basis is applied. Grape growing achieved organic certification in 2006. The wines ferment in concrete with some time in French oak (from Nevers). Release is after a generous seven years of maturation.
There are specific climatic factors. The vineyards are located at 34N which would normally be too warm for viniculture. The altitude of the vineyards is 1000m which offsets this. The marketing can note this as an unusual though not unique quality factor/differentiator.
Lebanon Wine Logistics: Location
Musar is not the sole wine producer in Lebanon, but it is clearly the most well-known and has by far the best reputation. This forms the underpinning of the marketing. Consumers at high and moderate levels of expertise are interested in trying wines from new locations and new grapes.
The reds are without doubt the highest quality wines made in Lebanon or indeed the middle east region while the fact that they are basically made from a Bordeaux blend means that they can combine quality and a new experience without being too radical a departure from established premium benchmarks.
The whites benefit from the novel location details and are made from two grapes both of which are likely to be unfamiliar to even quite experienced consumers.
The “brand story” of the wine is extremely strong, being unusual and interesting. For example, the cellars of the house were used as air raid shelters during the civil war in Lebanon between 1975 and 1990 and there was no interruption in wine making during hostilities. The general location has an extraordinary long history of winemaking which may potentially be traced back to the Phoenicians in ca. 4500 BCE.
Lebanon Wine Logistics: Cultural Factors
This section describes and specific social, economic, political or legislative factors that would impede or assist the sale of wine.
The wine is for sale overseas, mostly. While Lebanon has been up until very recently a relatively wealthy country, it has experienced a sovereign debt default in 2020 for the first time in its history. It is a relatively liberal country. However, Muslims make up more than 2/3 of its population and that group consumes less alcohol than other groups. Given these factors, the social, economic, political and legislative factors obtaining in the international arena are of more significance to the fortunes of the house.
Lebanon Wine Logistics: Social factors
No current discussion of social factors can omit the effects of COVID19. While there is no very stringent lockdown in place in Lebanon at present, this could occur at any moment if infection rates become elevated. Such a lockdown would present a significant threat if it took place around the harvest.
Agricultural workers would probably be exempt. Harvesting of grapes for wine production could non-essential in the unique circumstances of Lebanon. (After this piece was written, Lebanon was indeed locked down.)
Similarly, the house relies on transportation via sea from Beirut port. Loading ships is a labour intensive operation. It is also computerised and containerised. The house is therefore relatively optimistic that there are reasonably chances of being able to maintain shipments. Failing that, it would be appropriate to develop financial buffers to weather any income interruptions. The increased average maturity of wine that would be available post-crisis would be valuable. This is a negotiating point in seeking interim credit facilities from banks.
This article was also first drafted prior to the explosion in the port of Beirut. This has eliminated 80% of Lebanon’s import potential. The second line port further north at Tripoli lacks warehouse space. The situation is very difficult and wine exports will not take priority under the circumstances.
Lebanon Wine Logistics: Economic factors
The COVID19 shutdown is the most important economic factor. Lockdown will cause GDP declines of 30% or more in Q2 of 2020 and which could potentially continue into Q3 and beyond. The position of wine as a product which is important to many consumers but nevertheless not essential is a difficult one.
There are no ways for the house to mitigate this. The markets will return and the house will be ready with product when they return. Given the global nature of the crisis, there are no clear new markets to explore. However, the crisis appears to be closest to resolution in China, and there is a burgeoning middle class there. That group is anxious to display its status and wealth. This could be an opportune moment to focus marketing efforts in China.
This approach could further benefit from the 2012 prohibition on “lavish gifting” issued by Xi Jinping. That affected sales of super-premium wines such as premier cru classé Bordeaux. Musar could benefit given its niche as a premium wine in a similar style which is nevertheless perhaps more “under the radar” as far as official perceptions of excessive luxury are concerned. This would require discretion and local expertise.
Lebanon Wine Logistics: Political Factors
Lebanese politics is a source of major instability and this could easily give rise to problems for the house. The political structure is unique — some might say uniquely unstable — with a sectarian basis for political appointments.
There are three major religious groups in Lebanon: Shia, Sunni and Christian. The top three political positions divide accordingly. However, population numbers have changed significantly since this arrangement. Young people had already been protesting the poor economic performance of Lebanon, the concomitant unemployment and corruption.
The recent debt default will likely cause a “doom loop” between the sovereign and local banks. This places the house in an exposed position in terms of being a highly visible generator of cashflow which is not in a position to relocate. There may be instability in the local banking sector. Placing funds overseas solves that. But this presents problems in funding the ongoing operations of the house. All of these factors could present the house with difficulties severe enough to prevent or impede production or sale of wine.
There have been no local legislative threats, but in the context described above, it is clear that the government is desperate for funds. An attempt to place a tax on WhatsApp messaging threatened the survival of the government. It has subsequently fallen in any case. Musar could be an easy target for taxation and other informal methods by which officials seek funding.
Lebanon Wine Logistics: Regional Factors
Lebanon has historically had good relations with most countries and has accordingly not suffered a great deal from trade embargoes or tariffs. There appear to be fair prospects of this continuing. Relations with Saudi Arabia are strained. That country is not a customer for Musar in any case. A resolution of the conflict in Syria appears to be in prospect and this would eliminate a major local source of instability.
The house has historically sold a great deal of wine to France, partly because of the long shared history between the two nations. The Loi Evin in France reduced the allowed advertising of alcohol in 1991. Nevertheless, the house has a strong enough reputation which continues to spread by word of mouth and expert opinion and so has suffered less than it might have done as a result of this factor.
Restrictions on social media are less in evidence currently so this represents an important opportunity to address new consumers. It would be valuable to explore engaging an appropriate celebrity or online influencer. Such an individual must fit with the high quality brand image and add brand awareness in a way which reaches likely new customers. These will need to be relatively affluent groups so some research on where high-earning Millennials are allocating their social media attention will be useful.
Lebanon Wine Logistics: Cost Factors
This section describes costs associated with getting wine to the specific market: packaging, transportation, importation, sales and marketing.
In general, costs within Lebanon are relatively modest since inexpensive labour is widely available.
Packaging costs are relatively high since the house is a premium brand. Sales generated in Lebanon at the cellar door are important and require premium packaging. This consists of branded padded boxes and other branded accoutrements. These high costs are more than offset by the sales revenue however, since the premium nature of the house allows it to command high prices especially for older vintages.
Transportation is relatively problem-free when the port is operating. The winery is next to the major seaport of Beirut. Wine can travel there by road easily. The house is fortunate in that its location in the eastern Mediterranean allows the easy transport by ship to many significant markets such as France, Italy and the UK. The US is more of a challenge, but again since the house is producing premium high priced product, air freight is an option.
The major issue is that the 60km from the vineyard to the winery is time-consuming given the quality of local infrastructure, but this is a fact of life rather than an addressable cost issue.
Importation costs are in-line with market conditions generally. The climate globally has moved in a protectionist direction, partly as a result of the advent of the Trump admininstration and the subsequent US-China trade war. The election in Nov-20 could ease this situation. That requires the incumbent to lose.
Brexit still has extremely unclear outcomes. Lebanon and the UK signed a continuity trade deal in 2019. No new tariffs will be imposed in what is a major market for the house.
Sales costs are in-line with market conditions generally. The cellar door operation is relatively expensive. There are no charges and samples of vintages going back to 1974 are available. However, in a group of 12-15 attendees, on average 3-5 will make purchases. Since these can be in the range of $1,000 to $2,000 — bearing in mind that most attendees will have travelled from Europe to attend the cellar door — this activity is highly viable economically.
Marketing costs have been historically relatively modest because the house has been able to rely on its reputation. However, given the extremely challenging environment described above, this is likely to change. The engagement of a celebrity influencer will be extremely expensive because these individuals are scarce. The house continues to incur expenditure on items such as branded corkscrews but it is unclear how rewarding this is.
This section discusses whether selling wine in the assigned market a valuable business proposition.
Overall, despite the extreme challenges presented by the current environment, there are good prospects that the house will be in a position to continue to thrive. Possibly some positive factors will offset the difficulties of the situation. These include the possibility that people in lockdown will consume more wine.
Restaurants are closed. That improves affordability. This means that consumers will be buying the wine with a typical retail mark-up (ca. 20%) rather than a typical HoReCa mark-up (ca. 66%). The end of lockdown will be greeted with enthusiasm by customers. Wine will play a major part in the celebrations that will doubtless follow. Musar can take advantage of this factor.
The major difficulty is surviving COVID. That challenge faces everyone. But Musar has demonstrated more resilience than most wine producers.