The disadvantages of Chateau de Vallois going into the cheap wine market:
- Launching a new product, and entering a new market will require large investment upfront, for doing research, hiring new staff, acquiring new land.
- It is a risky investment since the new product market is very unfamiliar to the company. The market, competitors, consumer preference, even the climate is unfamiliar for the company.
- The launch of cheap wine may hurt the brand image of the luxury line. Consumers may feel less prestigious if they suspect that the grapes are not attended to as well as before, because the new winery took time away from taking care of the traditional land.
- Consumers may also suspect that the wine is made out of grapes that are used to make cheap wine, thus less willing to buy the expensive wine from the company.
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- Chateau de Vallois can diversify away the financial risk of a bad year for grapes or economics depression, by having a operation in California that is not as elastic as the luxury brand
- With the new cheap brand, Chateau de Vallois will be able to capture a broader base of consumers. The family brand name will occupy a larger share of the wine industry.
- The new cheap brand, if captures the young consumers, when the young look for good wines, they will be more likely to look into Chateau de Vallois’ high price wine.
- Claire is forward looking, profit-driven, and expansionary, while Francois is traditional, reserved, and risk-averse. Gaspard can keep everybody happy by allowing Claire to set up a different brand in California, and leave the France winery to Francois.
The different brand is essential not a part of Chateau de Vallois, thus Francois wouldn’t worry while Claire can still try out her business venture.
Three specific suggestions
- Claire can start from scratch in California, acquire existing winery or start with a joint venture. I suggest an acquisition of existing winery, so Claire will have the expertise of the existing staff members who are familiar with the estate
- Claire must design a new brand and logo separate from Chateau de Vallois, and be listed as a subsidiary, so the new brand enjoys the benefit of the prestigious brand name, but do not necessarily hurt the brand by entering the cheap market
- Claire should bring in staff and experts from France to train the California staff of quality control, procedures and company culture.
It is after all a Chateau de Vallois brand, and what can distinguish this new brand from other wines is its Chateau de Vallois family name. I agree with de Rothschild that the winery could and should expand. I do not see the new expansion as a threat to the image of the older brand, especially if the new brand is well managed with ensured high quality that can even add to the brand prestige.
Johnny Walker didn’t even bother to change the name of the brand, but its colored labels are very successful, catering to a spectrum of consumers. There are many upsides of the expansion. The new brand can capture new consumer segment, the new consumers can transfer to higher end wines, and the higher end buyers might even want to drink the cheaper kind on a more daily basis instead of putting the most expensive into wine cellar.
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