Contemporary Wine Marketing and Supply Chain Management

The 2008 American movie Bottle Shock offered an interpretation of the now-famous 1976 Paris wine tasting that put California on the international wine map. In that movie, a young wine maker, Gustavo Brambila (played by Freddy Rodriguez), was celebrated. Gustavo was known in the region as an amazing wine maker. By the time we engaged in our project, he had opened his own winery, Gustavo Thrace, and we interviewed him there. He now runs the winery Gustavo Wines with his wife, JoAnn.¹

Ricasoli is “one of the oldest family wineries in the world, dating back to 1142,” we were told as we began our discussion with the marketing director of this medium-sized, innovative Tuscan winery. But he immediately qualified that statement, clarifying that they were “much more busy fighting with Siena at that time than making wine.” Wine production here is more commonly thought of as dating to the late 1800s. At that time, a Ricasoli ancestor began experimenting with wine production and invented Chianti Classico, which is not to be confused with Chianti. Different markets see various varietals differently. For example, Ricasoli knows that in the US markets, no difference is acknowledged between Chianti and Chianti Classico, when in reality there is a significant difference. In part, the difference can be seen in the exclusion of white grapes from Chianti Classico, as well as 80 percent of the wine produced from Sangiovese with the remaining 20 percent allowed to come from other red grapes such as Canaolo or “international varieties” such as Cabernet Sauvignon and Merlot. The point here is not to focus on viticulture but rather that Chianti Classico is unique and special with strict rules associated with its production and labeling. The nature of the product is often related to the markets a winery seeks to sell within.

A winery, like any organization, must have a clear vision of who they are and what they stand for. Leaders ensure this happens in part by instilling a set of core values, a mission statement, and an idea of the culture of the organization.

Gruppo Italiano Vini is the largest wine grower/producer in Italy, with consolidated revenues amounting to €348 million in 2013 (a 3.2 percent increase over the previous year), and it is a global leader in the production and sales of excellent wines. Founded in 1986, the group’s capital consists of 15 historic cellars that are located in their own evocative vineyards and situated in Italy’s most prestigious areas, with their own brands that are distributed worldwide. This company offers a vast selection of Italian wines, and it declares itself “extremely versatile and able to respond to the demands of a constantly changing market.” The particular structure of Gruppo Italiano Vini is a distinct advantage. Their story began with a group of eight cooperative wineries that purchased the totality of the Gruppo Italiano Vini shares from Credito Svizzero, and then transformed the group into a second-level cooperative company. It followed a continuous growth but kept the main focus on growers, and at the same time continued to manage an essentially vertically integrated supply chain while optimizing logistics as well as marketing. In 1987, Gruppo Italiano Vini acquired a foreign marketing company: Carniato SA of Paris. Six years later it took over the American importer Frederick Wildman & Sons Ltd. During the years that followed, the group completed further takeovers and opened foreign agencies: this took the number of group-owned companies—subsidiary and/or associated—to ten, thereby reinforcing its presence in countries where it was already established with its own structure, while creating new structures in countries that revealed high development potential.

A passage from Dr. von Bassermann-Jordan’s website is consistent with what we learned when speaking with the director of this German winery with a rich three-hundred-year history: “With a passion for research and entrepreneurial energy, with a quest for innovation and concern for the preservation of our cultural heritage, we have, for centuries, worked on cultivating methods that increase the quality of our wines.”

Overcorrecting is the downward spiral of conventional farming, according to the winemaker for Misty Morning Winery, a small premium producer in the Napa Valley. Acquired by a French entrepreneur a few decades ago, Misty Morning produces Bordeaux varietals while keeping a focus on sustainability. The winery is part of a large foundation where profitability and growth for the winery are not concerns. The owners “do not need the money”; however, they are interested in the sustainability of the property due to its sentimental value and purpose. Misty Morning is dedicated to environmental stewardship and philanthropy. They adopted organic and biodynamic farming practices for the estate grapes that comprise 100 percent of their supply, and all of the proceeds from wine sales go to the foundation to support research.

Castello Banfi di Montalcino is “unique in the wine world in Tuscany and in Italy,” so we were told by the marketing director. It is a US-owned winery (owned by Banfi Products Corp.) that started in Italy in the late 1970s. Banfi Products was founded in 1919 in New York by John Mariani Sr., and focuses on the production and import of wine, helping to manage the brands of over 30 wineries. Banfi Vintners is the US importer of the Mariani family’s Italian estates and other wineries. The Mariani brothers brought the Banfi name to Italy in 1978. The winery we visited was the first one they opened of several, Castello Banfi di Montalcino. Montalcino in Tuscany is the literal heart of Brunello wine, one of the most elegant and sophisticated of Italian wines, wines that can also be some of the most expensive. Also in the region are Banfi Toscana and Banfi Piedmonte.

Australia Wine Group is a collection of wine companies that has grown organically over the past couple of decades. Wanting to create a family business, the founder acquired four iconic wineries in different regions in Australia over a ten-year period. Many of their grapes are estate grown, although they do purchase 40 percent from other growers to provide stability in vintage variation. Due to the high cost and complexity of shipping to other countries, they opened their own distribution center in eastern Australia to take advantage of shipping large quantities to other countries. This facility added bottling equipment in addition to state-of-the-art storage capabilities, and they now offer bottling and logistics services to other companies as well. Another complexity they faced with respect to shipping to other countries was import regulations; therefore they opened importing offices in the United States to manage imports through New York and California, and a joint venture to handle imports to China. They also employ independent distributors in Australia and the UK to manage relationships with sales outlets. Retail/restaurant sales outlets seem to be the only pieces of the supply chain that are not part of Australia Wine Group.

How do wineries learn about their markets and customers? The answer is through market research. Or at least that is what the answer ought to be. Even informal observation of customers at a wine cellar can serve as part of market research. Unfortunately, for many wineries this is the extent of their entire market research effort, and hardly any data are documented. It resides in senior leaders’ minds alone and is passed on verbally. This may be because wineries are essentially refined and highly specialized farms and product producers. Winery owners and winemakers are often highly trained in viticulture but much less so in marketing and sales. Or it could be simply because of the size of the winery and its niche focus.

This case vignette is starting with the story of two people, Daniel and Florence Cathiard. They are former ski champions and were members of the famous French Olympic team in the sixties. With charismatic personalities and a gold touch in business, they are best actors in a company’s history, so we would like to open this case study telling their stories.

Sandro Boscaini has been the president and managing director of Masi Agricola since 1978, and runs the company together with his daughter, Alessandra, and his son, Raffaele. The company remains strictly family-owned, but its management style is highly professional and open to international influences. Masi’s company history is the history of Boscaini’s family for seven generations. The name of the company derives from “Vaio dei Masi,” a small valley in Valpolicella acquired by this family at the end of the eighteenth century. Now Masi, according to its website “has lands in the best terroir sites of the Venetian regions with vineyards and historic estates.” In 1973, the company started a joint venture with the Conti Serego Alighieri family (descendants of the poet Dante) on their estates in Valpolicella (near Verona). More recently, the Conti Bossi Fedrigotti family (wine producers in Trentino-Alto Adige) started to collaborate with Masi. Both agreements are part of a project aiming to rediscover the farming and wine-making traditions of the nobility from the Venetian area. Masi’s president believes in the “Veneto” (a region in the Venetian area) way of wine making that could be exported abroad, where there are good conditions for viticulture. So he launched a company in Argentina to produce a special wine brand with Argentinian wines made in the Veneto style.

“Ninety percent of our exports are done by ourselves without an agency. I am in close contact with our importers worldwide.” This simple statement gets at the heart of what our sales, marketing, and operations contact at Schloss Vollrads discussed with us. In fact, she is probably so solid at managing the sales side in part because she is a fourth-generation winemaker in her family. It was clear to us that her diverse expertise, which also included wine presentations at the wine shop, export management, marketing, and vineyard management, gave her knowledge that is invaluable in creating meaningful domestic and international trade relationships.

Craft Tasting is a group of seven small producers that collaborate on many of their supply chain processes. They each have their own source of grapes, and they control their individual brand image. Even though they individually manage production of their wines, some of them share facilities for these processes. They all jointly invested in the cellar door for their wines, and collaborate with distributors to represent multiple if not all of their brands. As each has grown, some have taken on some of the supply chain processes themselves; however, the synergies and efficiencies they garner from working together often outweigh any advantage to going it alone. Because each of the producers is so small, their primary goal is to keep their costs as low as possible, and thus they want an efficient supply chain strategy. Working together as if they were a single company with multiple brands is an effective way to achieve this.

How does a winery know where it stands with any of this? There are several common ways practiced within the industry to get a feeling for how well one is doing currently. We discuss some of them here. We also offer a few more ideas of our own.

So here we are at the end of our stories. Our intent was to offer insights into some interesting perspectives and practices in the wine industry as we saw them over the last six years traveling the globe and interviewing winery owners, directors, wine makers, and managers. Our intent was not to provide a comprehensive practical guide to all things wine. We hope the book has opened your eyes to possibilities. If we did our job, you have seen areas where your or someone else’s winery is doing well and other places where opportunities to do better exist. If you are at a winery, ask yourself some honest questions: