Château Margaux: The Third Wine

Problem Statement In the Château Margaux: The Third Wine, the promenade issue in the case is whether to sell the wine from the 2011 third harvest under the Château Margaux brand or to sell the wine to Bordeaux merchants. In selling the wine directly to the consumer, Château Margaux will be able to target particular consumers who have been priced out of the market of the other two wines. Also, Château Margaux will be able to control the price at the point of sale to the consumer. If Château Margaux sells the wine in bulk to merchants than the wine will be sold to consumers who will pay the most for the wine, most likely the Chinese market. What would be the best decision for Château Margaux? Situational Analysis In the Château Margaux case, as stated in the problem statement, the issue was whether or not to sell the third wine under Château Margaux’s own brand or to sell the wine to Bordeaux merchants. The issue that arises here would be how to market the wine because as seen in the case the third wine was seen to age and taste much better than most third wines. At the time of the case the global wine industry was going through changes especially over the past century. Over the past century supply levels have sky rocketed due to new wineries throughout the world particularly in the regions between the 30 and 50 degree latitudes in both the northern and southern hemispheres. Until recently, as seen on page 2 of the case, most wines came from the “Old World”, Europe, however currently wines come from both the Old World and the New World, South America and the United States. Due to this wine supplies have gone up forcing the price of wine down resulting in wineries producing less wine or getting out of the business altogether. The European Union responded strongly with regulating the amount of grapes to be planted in each area and subsidizing the wine industry of Europe to prevent the industry from collapsing. Demand for wine is seen to be uneven around the world, being highest in the Old World however in 2011 the volume of wine consumed in the United States was higher than that in France for the first time. Wine in the Old World is closely tied to traditional family meals while in the New World wine is generally correlated to events and consumed outside of the home. The consumers of wine can also be broken down into 6 segments, as seen on page 3, Traditionalist, Enthusiasts, Image Seekers, Savvy Shoppers, Satisfied Sippers and Overwhelmeds. These consumers purchase wine that ranges from €3 in local French supermarkets to $3000 in high-end Chinese restaurants. The estate of Château Margaux was located left bank of the Gironde estuary and gained its reputation for exceptional wine in the 16 th century. In 1977 the estate was purchased for $16 million by André Mentzelopoulos who abruptly died in 1980 and left the vineyard to his daughter Corinne. The estate consists of 250 hectares however only 80 of which grows red grapes and 12 for white grapes.