Wine Branding’s Magic Ingredients

Nick UrsiniAmerican Marketing Association

July 21, 2016

Why is Wine Branding ImportantProduction

• 68 nations have 18 million acres of wine grapes – close to the size of South Carolina

• Top 10 nations by acreage account for 68%• Spain, China, France, Italy, Turkey, USA, Argentina, Chile, Iran, Portugal

• 7.4 billion gallons of wine world wide – 294 million (750 ml) bottles

• Top 10 nations by gallons account for 81%• France, Italy, Spain, USA, Argentina, Australia, South Africa, China, Chile,

Germany

• California Produces 85% of USA wine -- # 4 in world• 10,417 USA wineries – 4,285 (41%) in California

Wine is a competitive industry

2014 acreage data from TDA and United Nations Food & Agriculture Organization2014 production data from Trade Data and Analysis (TDA)California data from U.S. Tax and Trade Bureau and the Wine Institute, July 20 2015

Why is Wine Branding Important Consumption

• 186 nations consume wine• Top 10 nations by consumption account for 67%

• USA, France, Italy, Germany, China, UK, Spain, Argentina, Russia, Australia

• 4.4 billion gallons – 172 million (750 ml) bottles

• Consumption is growing fastest in 4 of the top 10• Australia -- 19% (displacing beer)• UK -- 13% (Italian Prosecco & Spanish Cava)• Spain –10% (shift to lower price points)• USA – 3% (Millennials)

• Consumption dropped 1% to 10% in other top 10 nations

Top nations have strong consumer markets making brand

management a success factor

2014 consumption data from Trade Data and Analysis (TDA)

Why is Wine Branding ImportantCalifornia Dreaming

1980 1985 1995 2005 20150

2000

4000

6000

8000

10000

12000

California USATotal

Source: U.S. Tax and Trade Bureau and the Wine Institute, July 20 2015

Why is Wine Branding ImportantWine Fundamentals

Success in the Wine Industry requires competencies in four distinct occupations1. Land selection – elevation, soil, rain, sun exposure,

temperature, appellation

2. Viticulture -- the science, production, and study of grapes -- events that occur in the vineyard

3. Chemical processing -- harvesting, crushing & pressing, alcoholic and malolactic fermentation, clarification, cooperage, aging, and bottling.

4. Consumer marketing skills – Think like P&G

Quality is a function of the winemaker’sskills in all areas -- specialists are often hired. Production volume, quality, and price points are the critical outcomes

Why is Wine Branding Important18 Noble red and white grapes define the complete range of wine flavors

deep, dark red wine to clear, zesty white wine.

Grenache PinotNoir Merlot

MalbecSangiovese Tempranillo Syrah

Cabernet Sauvignon

Semillon Viognier

Riesling

SauvignonBlanc

Chenin Blanc

Moscato

Chardonnay

Gewurztraminer

Noble grapes are also called International Varieties -- grape varieties that are widely planted in most major wine regions and have widespread market appeal.

Why is Wine Branding Important

The 100 most valuable brands in the world are worth $3.3 trillion

Wine starts as a creation, a piece of art, and a gift that can become a brand

A Brief History of Branding Ancient Egyptian brick makers used symbols to mark their products

Medieval European trade guilds created “trademarks” for legal protection and to signify quality

18th Century producers used pictures to strengthen associations with a name

19th Century whiskey producers used perceived associations to create a sense of value – Old Smuggler Scotch in 1835 took advantage of the smuggler’s reputation for being better

Why is Wine Branding Important Brands capture what we want the consumer to remember Brands help manage customer perceptions Innovative products and designs create relationships with consumers and market channels People do not “buy” products they buy “trust”

Smell & flavor excite the taste buds Label design is unique and attractive Bottle is thick and a unique shape for the wine varietal

Cork is firm, clean, and meets perceptions of quality The name conveys a sense of ownership and uniqueness The brand is a reflection of individual self worth

People buy Dom Perignon to show off – they could buy another Champagne that is just as good

or even better for a lower price – Source: Tim Atkin MW, U.K. Wine Critic

This is Brand Power!

Why is Wine Branding Important A brand is a collection of ideas that the consumer consistently

associates with your product

The consumer recognizes the brand through sensory signals

Winery and winemaker’s name

Logo design

Label design and consistency

Packaging – bottles and cartons

Product quality and reputation – publicized points count

Advertising and promotions

Services such as websites, direct shipping, wine clubs, social media and more

Why is Wine Branding ImportantCritical Brand Equity Elements P. 1 Perceptions of Quality

Reason to buy

Helps differentiate and position

Superior value

Price premium expectations

Awareness

Familiarity and liking

Anchors for associations

Driven by purchase and use

Signals substance and commitment

Why is Wine Branding ImportantCritical Brand Equity Elements P. 2 Associations

Helps retrieve information (recall)

Creates positive feelings and attitudes

A reason to buy

Supports differentiation and positioning

Brand Loyalty

Lowers marketing cost

Provides leverage with the trade

Supports new customer acquisition

Increases customer’s perceived switching cost

Why is Wine Branding ImportantCreate a mental image

to connect with consumers on an emotional level

Why is Wine Branding ImportantRich Parducci owns McNab Ridge WineryIn Mendocino, California, north of Sonoma Mendocino land prices Operating expenses Proximity to Pacific Ocean

Nichelini is one of the oldest Napa Wineries started in 1890 Made wine for local miners No distributor relationships Special etched large format bottle no longer produced (collectors)

Build Relationships

Why is Wine Branding Important Movie Bottle Shock dramatized the May 24, 1976

French wine tasting that changed the IndustryRank Wine Vintage Origin

1 Chateau Montelena 1973 USA

2 Meursault Charmes Roulot

1973 France

3 Chalone Vineyard 1974 USA

4 Spring Mountain Vineyard

1973 USA

5 Beaune Cos des Mouches Joseph Drouhin

1973 France

6 Freemark Abbey Winery

1972 USA

7 Batard-Montrachet Ramonet-Prudhon

1973 France

8 Puligny-Montrachet Les Pucelles Domain Leflaive

1972 France

9 Veedercrest Vineyards

1972 USA

10 David Bruce Winery 1973 USA

California Chardonnay vs. French Burgundy Chardonnay

Owner of Chateau Montelena sent skids of the wine to a landfill Brown color from reductionist techniques (low oxygen) Retrieved & color changed Won French Blind Wine tasting

Why is Wine Branding Important Movie Bottle Shock dramatized the May 24, 1976

French wine tasting that changed the IndustryRank Wine Vintage Origin

1 Stag's Leap Wine Cellars

1973 USA

2 Chateau Mouton-Rothschild

1970 France

3 Chateau Montrose 1970 France

4 Chateau Haut-Brion 1970 France

5 Ridge Vineyards Monte Bello

1971 USA

6 Chateau Leoville Las Cases

1971 France

7 Heitz Wine Cellars Martha’s Vineyard

1970 USA

8 Clos Du Val Winery 1972 USA

9 Mayacamas Vineyards

1971 USA

10 Freemark Abbey Winery

1969 USA

California Cabernet Sauvignon vs. French Bordeaux (called Claret in Britain)

French had decades of experience California producers had a few years 1972 was Clos Du Val's first vintageyet performed better than the French

Why is Wine Branding Important Results from the 30th Anniversary in 2006

Rank Wine Vintage Origin

1 Ridge Vineyards Monte Bello

1971 USA

2 Stags Leap Wine Cellars

1973 USA

3 Tie Mayacamas Vineyards 1971 USA

4 Tie Heitz Wine Cellars Martha’s Vineyard

1970 USA

5 Clos du Val Winery 1972 USA

6 Chateau Mouton-Rothschild

1970 France

7 Chateau Montrose 1970 France

8 Chateau Haut-Brion 1970 France

9 Chateau Leoville Las Cases

1971 France

10 Freemark Abbey Winery

1969 USA

California Cabernet Sauvignon vs. French Bordeaux (called Claret in Britain)

Rankings & Ratings drive market perceptions

Why is Wine Branding Important Creating Brand Magic in the Wine Industry

Create a unique attribute of the winery Features such as winery history, size, varietal, vineyard

geography, special harvest (e.g., ice wines) Benefits such as low tannins, alcohol %, avoiding

headaches, fortified dessert wines Application such as food pairings, seasonal treat Target market segments such as baby boomers, millennials, alternative live styles, corporate or special events Category Leadership such as grape varietal,

environmentalist, organic farming, special processing Winemaker’s unique varietal blending Focus on wine tasting awards, but not quality comparisons

Focus on Brand marks such as label design, unique bottle shapes, glass thickness,

cork size–material-logo

Why is Wine Branding Important Creating Brand Magic in the Wine Industry

Create an intimate knowledge of the target market Restaurant patrons retail consumers Relations with trade members’ strategy aligned with the

winery Reach over distributors and retailers shoulders to create

relationship with targeted consumers Tasting room design and management Participate in local wine events Hold private wine tastings and wine pairing dinners Create wine clubs offering special selections, special

pricing, travel programs, winery entertainment