Many wine producers remain caught in a negative feedback loop of producing commodity products at lower prices in a buyer’s market. Can they learn something from a cardboard box?
A few weeks ago I had the pleasure of giving the keynote speech at Wine & Marketing Summit in Valladolid, Spain. This event provided opportunity for great discussions about on-trend topics such as new consumers, sustainability, social responsibility, online marketing and online retailing.
While I was there, I also had the chance to attend some of the seminars. One of the most interesting talks came from the CEO of TotalSafePack, David Gorgues. His starting point was the revelation that up to one in 10 boxes sent by wine retailers via post are destroyed in transit by careless couriers (a fact confirmed by some retailers I spoke with later). As a result of this poor survival rate, he invented a box that reduces the number of wine casualties to fewer than two in 100 due to its stronger structural integrity and design. This is a great achievement for a box, and saves the retailers the cost of replacing eight in every 100 boxes they send in the post. Naturally, the new box costs more money than the standard cardboard box. But it is clearly worth it.
Such neat cost-benefit case studies are much harder to find in the world of wine marketing. Conversations about doing marketing activities tend to net down to the following: “OK, that´s interesting / exciting, but I have no marketing budget”. An alarming proportion of the wine production industry think their main job is to produce nice wines and secure a competent importer. Perhaps submit their wines to competitions and send them to a journalist or two. Job done.
Good marketing, like the better cardboard box, costs money. But, also like the box, it requires good design: recruiting specific and creative skills, dedicated time to decide a strategy, infrastructure to run effective communications, and a robust leader to prevent its budget being siphoned off when another part of the company needs it.
The majority of wine producers in the world remain stuck in a negative feedback loop. They need to sell the wine they make to empty their tanks and generate cash; without any value-add or distinctiveness (which good marketing might bring) they often don’t sell enough wine at a sensible profit, so discount the rest and sell it at a loss. This leaves them no money in the budget for the following year to create any credible reason to buy, so unless they get very lucky (good harvest for them, poor harvest for everyone else) they have no exit from the loop.
Even when they get lucky, the urge to invest in marketing is easy to resist – much easier, say, than buying a new steel tank or more land. You might be able to get the tank on credit, so you see the benefit of your investment before you even have to pay for it; in land, you generally get access the day your cash is transferred. However marketing investment may take months, or years, to show a return. And if that return is higher sales and profits, there will be plenty of others (sales team, head winemaker, chief executive) claiming credit for the success.
Marketing’s main purpose is to make a brand known to consumers, help them to choose that brand and communicate what it is good for. We know that even in a competitive world – with hundreds of thousands of easy-to-substitute brands – better-known wines are more likely to be chosen by consumers. Not only that, stronger brands are also more resistant to discounts as they have a greater proportion of consumers who are likely to buy them at full price. Why? Because, like the better cardboard box, a well-maintained brand is a risk reducer, a representation of an aspiration, an expression of the purchaser’s cleverness and eye for value.
Author: Juan Park