Branding a Winery and Its Wine Is Expensive, Necessary and Benefits the Consumer No Matter the Size
November 22, 2016
A discussion about branding is generally not a conversation anticipated with excitement. If you’re a marketing type it can be characterized as maybe interesting. But, promising most people an indepth discussion on the subject of wine branding; heck, we might have no one accepting an invitation to our dinner party. In reality, creating a brand image for wineries and wines can help the consumer to be smart buyers.
Because margins can be small for producers and a perponderance of producers are small, small margins impact the small producer profoundly. Branding can be expensive. So what can be done to entice consumers to try a brand they have never heard of before? Now we are talking about branding and it can be risky, even with great planning. Further, it is a lot of compromising.
What impact did branding have on the last bottle of wine you bought? Did you buy that wine because you knew some enticing fact about the winery, winemaker or their wine making processes? Did you buy a wine based upon a friend’s recommendation because they knew your preference for a certain varietal? Have your preferences for a wine changed over the past few years? Do you buy your wine based upon a random trial and found you liked that particular wine? Whatever the process you went through in buying a wine you have been impacted, to some degree, by branding. If you simply selected a wine based upon its price or label design, branding was involved.
Recently, I have had discussions concerning the process of business branding from a corporate perspective and a product perspective. Most of the emphases of these discussions have been specific to the value of branding a winery and their wines; predominately with small producers. Like most everything in business, decisions are generally based upon compromises in budgets, approach, etc. Obviously, the product of a winery is bottles of various varietal wines which are a disposable product that is consumed based upon ever changing sensory perceptions–mostly taste. I submit that the juxtaposition in branding a winery and their products makes this discussion difficult. For example, many wines I like and buy frequently, I don’t even know who produces them. Further, winery brands I recognize, some of their wines I don’t like for various subjective reasons.
Point being, in most branding discussions relating to the wine industry become convoluted. Wineries produce multiple labels and these labels are subjected to consumer reviews that are based on innumerable personal influences. With so many variables, the task of presenting a positive image about a corporate winery brand is difficult.
We all are influenced by branding to some degree, even minimally. For example, a few years ago Tide was going to stop sponsoring NASCAR races. Surprisingly, they found that Tide had a rabid and loyal following with female NASCAR fans and Tide is still a sponsor. The brand had made a commitment and now wanted to change it.
Another example of branding impact is Schlitz beer. In the late 1960’s Schlitz decided to change their formula for brewing their beer. Immediately they went from a premier label, ahead of Budweiser, to being virtually extinct. In 2008, they went back to their original formula of the 1960’s, but the damage to a great brand was permanent.
These examples of powerful brands are obvious. In the case of Schlitz it shows how fragile a brand can be if the consumer is betrayed. However, wine is not a mass market product (like beer) that is as ubiquitous as beer or a laundry detergent. Compared to wine, consumers do not build beer cellars in their home and collect beer. So, wine is a very unique product that is expensive to brand on a per customer basis (this is especially true when consumers understand the discounting needed for distributors to sell and promote a label (discounting is part of the branding strategy).
The demographics for the wine market are broken down into 5 segments with some under 21 years old in the millennial category. This is according to a Wines and Vines Newsletter. The largest segment of wine drinkers are the millennia’s and Generation xers making up 70% of the 5 market segments (Baby Boomers included). Wine Business Monthly estimates 1 of 4 drinking consumers do not drink wine but prefer beer or spirits. Of the 130 million adult populations it is estimated 35% drink some wine, according to Live Science. This illustrates the finite size of the market and the precision required in branding to be effective in developing a consumer’s perception of a corporate winery brand.
For this discussion on winery branding, Wines and Vines tells us that the average price of a bottle of wine keeps inching up and is now approximately $12. The real sweet spot is in the $10-15 per bottle range. When a winery looks at the cost of raw materials, marketing, packaging, sales/discounting and facilities and G/A the margins are restrictive when planning a new or improved branding program. Wineries in this position need volume and a 5,000 case run makes branding challenging, but not impossible.
Using the best information available for this discussion, we assume there are about 44% of the populations who do not drink any alcoholic beverages. Based upon population distribution within the 5 demographic segments there are approximately 65 million people who drink some wine at least monthly. We will assume here that they will buy approximately 3-4 bottles of wine per month (probably a generous assumption). This information could account for the purchase of approximately 220 million bottles of wine in the US. These purchaseswould be for home consumption with an additional amount for restaurant sales and meeting/convention sales.
Here is where the branding issues become real. There are 8,500 wineries in the U.S. 80% of these wineries produce 5,000 cases or less of wine. To add perspective, Gallo produces in excess of 80 million cases of wine in a year for worldwide sales. Keeping with the small producer for the moment, this wine is sold via the winery tasting room, winery wine clubs, on-line (Direct to Consumer), retailers (which includes grocery stores) via Three Tier Distribution that requires discounting to the distributors for retailer discounts, sale commissions, promotions and their advertising.
Remember, there has been no discussion of the wines that are imported from Italy, France, Chile, Argentina, Spain, Portugal, South Africa, New Zealand and Australia. This is important because these producers/importers are worried about branding their products also; this causes a lot of clutter in the market.
It is probably apparent there are large producers, from all over the world, selling wine in America. Some wines do enjoy strong brand recognition such as Yellow Tail from Australia or Gallo from Lodi, CA. Beringer, Mondavi, and Coppola in Napa Valley are also high in brand recognition. In Sonoma we have Kendall Jackson and Rodney Strong. Interestingly, it takes strong revenue and profits to build a brand and if you are a small producer the money it takes for consumer branding activities is prohibitive. We need to always remember every brand (corporate or product) must be positioned differently as an image.
We see that sales of 4 or 5 bottles of wine per month to U.S. consumers is a daunting task just to get trials of the product. This is one of several reasons why wineries are spending more on improving direct sales through their tasting rooms, wine clubs, on-line (Direct to Consumer) sales and social media.
Let’s talk about corporate winery branding. The industry needs an honest relationship with consumers. Otherwise the customer belongs to the 3 Tier Distributor or wine store and the sale becomes exponentially expensive going forward. A winery must define their image, product niches, consumer profile and be targeted to the consumer with a message specific to their targeted consumer. Wine Business.com reports that the vast majority of wine consumers buy wine based upon taste. But, taste is only one of the differentiators. Obviously, wineries have to get the taster.
Effective branding is about bringing a corporate name, the company’s products, or the services to be top of mind awareness for the customer. A product may even have more recognition/branding than the company name. For example, Kleenex is more recognized than Kimberly Clark which manufacturers Kleenex. That is fine.
Wine is mostly sold, not by a winery name or a label but first through price. Of the 10,000 plus varietals in the world, California has mostly focused on maybe 25 varietals for wine and wine blending. This fact makes it even harder to brand a winery when people look for price first and varietal in third place according to Dr. Thach and Dr. Chang. Number two is branding.
Now consider the changes impacting the wine business. The industry is now impacted with labels and brands announcing: organic wines, sustainable wines, and bio-dynamic farming wines.These add a new twist to branding considerations. Over the past few years there are some trying to brand lower alcohol levels, and medals. Talk about branding overload.
Wineries must recognize, after the decision is made to add focus to the company and/or its products, the company branding effort must be impacted throughout the organization. It will require constant development, refinement, monitoring, and administration. Finally, a corporate identity must become the culture at the winery. In Dr. Thach and Dr. Chang 2015 survey of: American Wine Consumer Preferences, 61% of their respondents had visited multiple wineries in California alone. This means, if a branding message being put out into the marketplace is not part of the winery culture the brand will be diminished. Consumers will see that culture in action at the winery.
Marketing is not all there is to branding, but it is significantly ahead of number two. Marketing is part of branding because it touches and introduces the brand to consumers, retailers, vendors and the community. There are many large companies that spend vast sums of money on building corporate brand without selling specific products. Boeing is such a company; consumer does not buy $300 million airplanes however they do respond to image.
Finally, companies/brands must protect their image at all costs. Once the Branding Plan (akin to a business plan) is developed, with a good foundation of research and winery metrics, that plan will dictate many things. For example: product launches and new product launches, dictate the messages coming from the company, employee hiring, PR, packaging, and the list encompasses every department is a winery.
Elements to Illustrate Branding Tasks
· Bottle labels and winery logo-Label creativity is still at the mercy of the TTB (Alcohol & TobaccoTax and Trade Bureau) relative to label content. Still it is part of the image that appears to the consumer on the shelf; it’s an identifier.
· Marketing/advertising/sales/collateral materials/PR/Sponsorships are front and center. The consumer facing image is throughout–club, on-line and tasting room sales and mailing list. Give consumers value beyond just the product.
· Training plan-Training must be centric to developing and reinforcing a new branding strategy. Employees at all levels must buy into the corporate and product positioning, not just public contact employees.
· Packaging is an element that ties the label and logo message together. In wine branding even the bottle shape and weight, closures (screw caps/cork/synthetic cork), capsules/foils, all go into the branding perceptions.
· Product consistency-Consumers who eventually accept a brand expect consistency. As the saying implies-If it isn’t broke, don’t fix it.
· Website, blog and social media are major elements to create, reinforce and maintain branding for products and corporate. Customer feedbacks will give almost immediate indications if the brand strategy is generating desired results and achieving benchmarks.
With wineries producing many varietal and blended wines under their corporate brand it is probably more important that the winery brand be face forward. This is a personal opinion and probably will vary based upon ownerships’ strategies for the business. For example, if a winery wanted to position the property for a sale then branding would have a different approach than a launch of a new label.
If you are a wine consumer the branding activity can be entertaining and enlightening. For example, as a consumer we enjoy winery tastings, but the chances of visiting more than a handful of wineries may be out of the question. But with so many wines and so little time, part of the fun is exploring new wines. For a winery, branding really becomes important and especially if your small but want to create a brand that meets your business expectations for a 5, 10 or 20 year time frame.
There are many occasions when I go into a Total Wines or BevMo or our grocery store, just to do fun research. With a note pad and a magnifying glass (required because of age and fine print) I will read labels for information-winery, blending, and a little of the hype. Coming home I will look up the winery website, read about their wines and form an opinion about the brand simply based on the feel of the site, label designs, the winemaker, and past awards (although that is not all that important). If I am interested I sometimes even call a winery to ask questions about the winery, owners and style of winemaking.
Amazingly, the majority of the time the people answering my questions are ill prepared.
Importance of research is not appreciated by consumers and producers. Research focuses on industry matters, winery/winery products and competition concerning the following: image, price, products, promotions, lace, historical data and competition (brands). This data will eventually direct the Branding Plan efforts.
Knowing the consumer, defining the future plans of the winery and product directions, now is the time to get to work on the business of branding. Half of the effort is about where the winery wants to go and how the winery gets there. Research gives a path. A branding without a written plan bought into by employee implementers is called gambling.
For the purpose of discussion we will assume a winery has not really focused on branding and this would be an early effort at branding. Or, maybe the current branding is not generating the desired results; then a change is in order. Sometimes branding is only to build awareness or it is image branding. If a customer can’t tell a winery’s researcher their perceptions/attributes of a wines brand then branding efforts have weaknesses.
Moving forward with the data points from industry research and the research initiated by the winery, a branding plan must be developed that focuses on the corporate brand image as well as the wines (products).
Mission Statement versus Objectives is always confusing. Some companies want a Mission Statement as a starting point of a branding plan. I am the exception to this rule; most Mission Statements I have been involved with are actually too esoteric and enigmatic to be useful throughout the organization. However, most everyone can relate to an “objective” statement as opposed to a “mission”. Here is the Mission Statement from Constellation Brands who owns Robert Mondavi-“Building brands that people love. “Their Vision statement reads-“To elevate life with every glass raised.” Do these statements resonate with you as a wine drinker? (By the way, this is not meant as a slight to Constellation Brands which is a highly successful company that has an impressive portfolio of brands) Answer this question relative to the Vision and Mission statement of any of their brands or the corporate brand image: What is your top of mind awareness of Constellation Brands after reading these statements?
In developing a branding plan objective and strategy, be focused on what the all encompassing goals are so that along the way most employees and consumers understand the message.
If this is the first time to work on a branding plan it might be best to focus on a Corporate/Winery branding strategy and let that strategy support branding objectives for the wine products. Branding is ultimately building the public’s (wine consumers) impression of the winery and the products.
For example, in the 1980’s whenever someone mentioned Robert Mondavi Wines I thought instantly of a winery with community involvement, arts, food, innovation and quality control. I drank a lot of their wines because of that image. After some turmoil, of which I know little about, I started buying other brands because my perception of the image became tarnished (to me). After Mr. Mondavi became distant for the brand it just lost some appeal. Point is a corporate brand built my perception of the wines.
After a Brand Plan objective is determined, based upon research results and the vision of the owners/managers, the specific strategies and plan-of-action items are developed by all winery departments. Think of the Objective as a military operation. Taking a hill is the objective, no more specific than that. Strategies are the options to achieve that objective.
There is always a cost associated with any launch of a branding program or even maintaining a brand. The impetus of the effort is marketing driven as that is the face of the company. Based upon revenues, cost of distribution (wine club, direct to consumer, distributors, on-line, tasting room), and product associated costs, the branding effort will dictated by a series of complex decisions; not all of which will be revenue or profit motivated.
The branding campaign can simply start off by maximizing existing marketing programs to incorporate new branding ideas. For example, add an updated logo to collateral materials or posters or point-of-sale cards. Improve e-mail communications to mail list, club members, retailers and even editors/bloggers at trade publications.
Not that the importance of branding needs further reinforcement, I digress. There was a research study conducted by Dr. Liz Thach and Dr. Kathryn Chang and published in WineBusiness.com. A question in that study ask respondents: When making a decision on which wine to purchase what were the two most important factors? 72% said price was the most important consideration, followed by brand as the second most important consideration at 67%. Interestingly, varietals were about half as important (36%) as price. The most common price range for wine bought for home consumption (32%) was $10-15 with 19% purchasing wine averaging $15 to 20 a bottle. For branding purposes 51% of the wine consuming market is buying wine in the <$20 per bottle. Point is, price is a driver in any branding.
“Wine is regarded as an “experience good (sic)” in that wine purchase of a specific brand is a personal choice and usually made after tasting. However, many consumers do not have the choice and often rely on experts and friends to help decide which wine to purchase, Nowadays, they are more likely to use social media,” as reported by K. Newman in “How Wine Lovers Use Social Media and K. Breslin in Presentation of Constellation Digital Marketing.
Just remember the old axiom-The best laid plans of mice and men often go awry. Here is an example of plans that don’t work out. Reported in Wines and Vines on November 11, 2015, Truett-Hurst Winery posted $800,000 in charges related to its Paper Boy brand, which had sought to use a unique bottle composed of cardboard with a plastic liner. This is the primary reason why making sure progress toward benchmarks are monitored and tested with good research.
Dr.’s Thach and Chang summarize branding precisely, relative to wine:
· Focus branding message on relaxation and social benefits of a brand.
· Adopt social media platforms to interact with consumers and get their feedback. There are conflicting views on the value of social media in marketing wines, but it is probably wise to pay attention to trends and how to use the phenomenon.
· Work with distributors to make sure wines are available in outlets. Distributors need care and attention so they understand the branding direction a winery and enforce a branding strategy with retailers.
· Whatever the price point a winery wants their products to be in, the brand must support that message. The sweet spot is $10-15 but if the cost structure in the product does not allow that pricing then there are obvious choices a winery must make.
· Wine tourism is a great way to brand which spills over into the social media, peer reviews and recommendations and word of mouth promotion.
· Through research, keep abreast of competitive tactics.
Here are some thoughts that pertain to social media branding.
“A lot of mediocre wine is being sold on the basis of a ‘story’.” (Transpose “story” with “branding”.) “That’s a quote from a New York somm, Jason Jacobeit, cited in Lettie Teague’s latest column in the Wall Street Journal,” says Heimoff a wine writer.
The following is another perspective on the value of social media in branding from Steve Heimoff. “I don’t think these top 30 wineries consider social media as the most important of their “how to sell” strategies, rather, they focus on such traditional things as a trained sales force, pricing strategies, paying attention to consumer trends, forging good relationships with distributors and key accounts (on-premise and off-premise), courting wine writers (including bloggers) and a host of other proven best practices that social media has barely any impact on.” The 30 top wineries referred to in Mr. Heimoff’s blog come from Wine Business Monthly. The 30 companies represent nearly 90 percent of the domestic wine sold annually in the U.S. by volume.” In fact, “The top companies themselves represent more than half of U.S. case sales,” notes Wine Business Monthly.
“Mass advertising can help build brands, but authenticity is what makes them last. If people believe they share values with a company, they will stay loyal to the brand.” â€• Howard Schultz. I would add, brands are built from the ground up by all hands being on deck. Recognize that Howard Schultz’s coffee sells at about 5X the price of a gallon of gas. That is great branding.
At the bottom-line, a wine brand is difficult to achieve because of so many variables: cost of the product, cost of marketing/advertising, government restrictions, distribution, and plethora of producers (domestic and import) and producers putting out competing labels under their corporate brand. But, once a brand is built it must be protected and therein lays the real value to consumers and the company.