É L É O N O R E M I C H E L

C H L O É M O R V A N T

P A U L I N E V A L L A N Z A S C A

P I E R R E - E M M A N U E L M O R I N E A U

P I E R R E U R I E R - C A T T O I R E

Strategic Marketing 1MiM1 Anglo C01

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Table of contents

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Introduction

I. External diagnosis

II. Internal diagnosis

III. Objectives and strategy

IV. Marketing Mix

V. Budget

Conclusion

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Introduction

I. External diagnosis

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Strong points Weak points

Orientation of Europe toward alcohol consumption

Taxes are lowered inside Europe

Promotion of French culture worldwide (candidate for the UNESCO World Heritage)

Tax on alcohol except on French wine productions

Under-age drinking is prohibited (18 years Fr)

Political campaign against drinking and driving in France

POLITICAL

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Strong points Weak points

Agricultural incentives in Europe to go against “rising” emerging countries

Grants for one-time loss

Easy fluctuations of investments, money and goods within the European Union

Competition from New World wines (California, Australia, Argentina, Japan, Chile)

Black markets in somesouthern countries

Financials buy vineyards and do not pay attention to wine quality

ECONOMICAL

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Strong points Weak points

Glass recycling Legal age: between 18 and 21 years old according to the country

Advertising regulation : loiEvin (1991)

Export travel causespollution

Organic wines Competition but not direct

Legal - Ecology

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Strong points Weak points

Different drinking patterns according to countries

Europe : tradition drinking wine is in culture (heritage, and culinary habits, especially in France)

Faster and more precise machinery in France makes production easier and faster

Young people drink less and less wine

They are not trained to know wines

French people are the mostimportant consumer of French wines

New technologies can deteriorate a wine’s taste

Social - Technological

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II. Internal Environment

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Strengths Weaknesses

Secured and authentic wine

Product full of history

Renowned

1855: official classification as a “first vintage wine”

Luxury wine seen as an exclusive product

Expensive product depends on vintage year

Specific localization and distribution difficult to change

Pavillon Blanc does not take benefit from Margaux’sappellation

Accessible in limited quantity

Product

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Strengths Weaknesses

Loyalty to the brand

Established in Europe (United Kingdom, Germany, etc…)

French attractive product

Ambitions about new markets: Japan, China and Russia

Evolving taste of consumer

Principal customers: connoisseurs

People with high income

Consumers

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French competitors

Latour (350.000 bottles)

Lafite (250.000 bottles)

Haut Brion (153.000 bottles)

Mouton Rotschild (220.000 bottles)

Ausone (20.000 bottles)

Cheval Blanc (150.000 bottles)

Petrus (30.000 bottles)

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Current ranking of wine producers

Production Exportation Country % of the world’sproduction

1 1 Italy 18%

0 3 France 16%

3 2 Spain 13%

4 6 USA 8.6%

5 7 Argentina 5.2%

6 4 Australia 5.1%

7 10 China 5%

8 9 Germany 3.6%

9 8 South Africa 3.5%

10 5 Chili 3%

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New world producer

FROM 1995 up to 2000:

South Africa: +220%

Australia: +125%

Argentina: +73%

Chili: +160%

USA: +96%

SINCE 2000:

Production keep increasing (5 to 20% per year depending on the country) until the crisis

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The French market is changing

Problem :

How can Château Margaux develop it export activity while maintaining its high-end positioning ?

Current product New product

Current market Develop awareness in FranceAim curious people with highincome or connoisseur of otherwines (i.e. Burgundy wine)

Create a new product(entrée de gamme) in France and Europe

New market Use the same product to increase our market place and develop the company in Japon, China and Russia

Create a new product to attract young people and (non connoiseurs) all around the world

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III. Objectives and strategy

Objectives

Hypothesis (p.a.) Inflation: 0,1% Production: +0,01% Same quality as 05

This budget only reflects activity related (directly and indirectly) linked to production and selling of Château Margaux

N+2: Reorganise website

Invite international critics

N+3 - N+5: Annual Programm for our best customers (5/year): domain visit and 3 days in 5 star hotel/at the domain

N+1 - N+5: Tastings in well-known and high-end places worldwide

N+1 - N+5: Japan (closer to our market, aim gastronomy traditions and add "French Touch" - product quality): +0,05% p.a.

N+3 - N+5: Russia and China (aim new "Bling-Bling" market and work on brand image): +0,05% p.a.

N+1; N+3: Formation for negociants with whom we work worldwide

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Development objectives:

Japan

Russia and China

Access new clients: developp openess, product quality as well as brand image

Segmentation

Socio-demographic :

Men and women above 35 years old

Social & Economic :

People with a high level of revenues that allow them to spendmoney in quality product

Connoisseurs of wine products

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Targeting

The people we target are nowadays located in Japan, China and Russia.

In Japan, there is a strong gastronomy culture

In Russia and China it is more « Bling-Bling »

People are interested in expensive products at the expense of quality.

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Positionning

We want to keep the same positionning that Château Margaux has in France.

Quality product => High-end product (haut de gamme)

It is a product that customers buy for their pleasure.

To show-off

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IV. Marketing Mix

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Product

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Price

Vary according to the vintage of the bottles, but always have a high price. Production have been reduced so there are less bottles (scarcity of bottles) but higher prices.

A bottle cost approximately 15 euros to produce, but Château Margauxbenefits thanks to the perceived value approach.

Usually sold between 200 and 1000 euros/bottle (these last years). Besides, it is also sold en-primeur (prices vary a lot between 70 and 300) but it is only between 5 to 15 % of the production.

-> is high and climb a lot but it is justified by its high rank and prestige

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Place

Training for foreign negociants in order to allow them to sell ourproducts properly.

Tastings organised by negociants, with selected people, and productsfrom the terroir

Distribution remains the same: the estate, Château Margaux sell the production to brokers who take 2% margin and then deal withnegociants on the Bordeaux place who take 15 to 20% margin. Thenimporters export the products all over the world.

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Promotion

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V. Budget and follow-up

BudgetN0-N+2

Development of Japanese activity

Frist training sessions

Beginning of tastings in renown places aroundthe world

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Actual

YEAR 0

(2005) Margin Margin

Objectives

Production 150 000 150 150 1,00% 150 300 1,00%

Sales 140 700 000 € 155 074 920 € 0,91% 169 177 849 € 0,92%

COGS/unit 300 € 300 € 1,00% 299 € 1,00%

COGS Total 45 000 938 € 45 000 988 € 1,00% 45 001 036 € 1,00%

Income Statement

Revenues 140 700 000 € 155 074 920 € 0,91% 169 177 849 € 0,92%

COGS 45 000 938 € 45 000 988 € 1,00% 45 001 036 € 1,00%

Gross Profit 95 699 062 € 110 073 932 € 0,87% 124 176 813 € 0,89%

Marketing & Sales 86 667 € 161 667 € 0,54% 86 667 € 1,87%

CRM & Public Relations 16 667 € 91 667 € 0,18% 16 667 € 5,50%

Tastings 50 000 € 50 000 € 1,00% 50 000 € 1,00%

Other 20 000 € 20 000 € 1,00% 20 000 € 1,00%

Reasearch & Development 25 000 € 25 000 € 1,00% 37 000 € 0,68%

Website 12 000 €

General & Administration 125 333 € 130 333 € 0,96% 125 333 € 1,04%

France 125 333 € 125 333 € 1,00% 125 333 € 1,00%

Other regions 5 000 €

Operating Income 95 462 062 € 109 756 932 € 0,87% 123 927 813 € 0,89%

Financial Income 20 000 € 20 000 € 1,00% 20 000 € 1,00%

EBIT 95 482 062 € 109 776 932 € 0,87% 123 947 813 € 0,89%

Interest Expense 750 € 750 € 1,00% 750 € 1,00%

Taxes 31 824 171 € 36 588 652 € 0,87% 41 311 806 € 0,89%

Net Income 63 657 141 € 73 187 531 € 0,87% 82 635 257 € 0,89%

Château Margaux YEAR 1 YEAR 2

Forecasts

Budget N+3-N+5

Reorganise website

Start of Russian and Chinese activities withrepositionning of brand image (more « Bling-Bling »)

New trainings

Start of the « Best customersprogramme »

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Margin Margin Margin

Objectives

Production 150 450 1,00% 150 601 1,00% 150 752 1,00%

Sales 183 459 279 € 0,92% 197 769 103 € 0,93% 212 107 363 € 0,93%

COGS/unit 299 € 1,00% 299 € 1,00% 299 € 1,00%

COGS Total 45 001 084 € 1,00% 45 001 133 € 1,00% 45 001 182 € 1,00%

Income Statement

Revenues 183 459 279 € 0,92% 197 769 103 € 0,93% 212 107 363 € 0,93%

COGS 45 001 084 € 1,00% 45 001 133 € 1,00% 45 001 182 € 1,00%

Gross Profit 138 458 195 € 0,90% 152 767 969 € 0,91% 167 106 181 € 0,91%

Marketing & Sales 296 667 € 0,29% 221 667 € 1,34% 221 667 € 1,00%

CRM & Public Relations 216 667 € 0,08% 141 667 € 1,53% 141 667 € 1,00%

Tastings 50 000 € 1,00% 50 000 € 1,00% 50 000 € 1,00%

Other 30 000 € 0,67% 30 000 € 1,00% 30 000 € 1,00%

Reasearch & Development 25 000 € 1,48% 25 000 € 1,00% 25 000 € 1,00%

Website

General & Administration 140 333 € 0,89% 125 333 € 1,12% 125 333 € 1,00%

France 125 333 € 1,00% 125 333 € 1,00% 125 333 € 1,00%

Other regions 15 000 €

Operating Income 137 996 195 € 0,90% 152 395 969 € 0,91% 166 734 181 € 0,91%

Financial Income 20 000 € 1,00% 20 000 € 1,00% 20 000 € 1,00%

EBIT 138 016 195 € 0,90% 152 415 969 € 0,91% 166 754 181 € 0,91%

Interest Expense 750 € 1,00% 750 € 1,00% 750 € 1,00%

Taxes 46 000 798 € 0,90% 50 800 243 € 0,91% 55 579 168 € 0,91%

Net Income 92 014 647 € 0,90% 101 614 977 € 0,91% 111 174 262 € 0,91%

Château Margaux YEAR 3 YEAR 4 YEAR 5

Forecasts

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Conclusion