The positioning of ultra premiums, luxury wines, cult wines, unobtainables - whatever you want to call them - was the focus of Hanzell Vineyards National Sales Manager Armen Khachaturian today.
His was an interesting talk because of all the presenters so far, his advice on brand positioning and tactics were greeted with the most outright skepticism from the class (and I was one of the skeptics). Hanzell, currently run by President Jean Arnold Sessions (nee Arnold), holds to a few core ideas that Arnold Sessions seems to have forged earlier in her career at Jordan, Chalk Hill and Williams Selyem. To successfully position an ultra premium brand you need to consider:
- Image
- Value
- Targeting the Customer
- Partnership with Distributor
- Communication
- Spend Money
- Press
Within the broad categories given above there was some very interesting information and advice given. For choosing the right distributor for instance, Armen suggested trying to be the biggest fish in a smaller pond by going with smaller high end distributors (if there are any left in your market) where you can be the only wine from your appellation, or the only wine made in a certain style in their portfolio. Other advice included sampling salespeople and wait staff often since luxury brands don’t normally do so (you’ll stand out), to partner with a good distributor that will split the costs with you on sampling at sales calls, and to always send personal handwritten notes to buyers after a call.
Where Armen started to lose the class, and quite frankly me, was when he started discussing the “Spend Money” portion of the brand positioning strategy. He passed around business cards and remarked that they were printed at a cost of $1 per card and that such excess was required in the high end market. He handed out allocation invitations that cost $17 per unit to produce and were sent to mailing list members to promote a limited 100 case old vine Pinot noir offered earlier this year. He talked of flying to Kapalua to attend $450 a plate dinner to be able to spend the evening schmoozing with industry insiders and trendy sommeliers. And while all the suggestions and materials were glorious and certainly appealing, when you are a 4000 case winery like they are it began to be extremely difficult to see how such extravagant expenses could be paid for, even at $87 a bottle.
And there’s the rub. The unvarnished truth is that Hanzell, one of the oldest wineries in Sonoma County - that in fact just celebrated its 52nd birthday - has never once in its history turned a profit.
Never. In 52 years.
This is not business as we know it, it’s aristocratic largess. Armen’s admonitions to “spend money” and “don’t be cheap!!” remind me of something a friend of mine’s mother once told him about finances and running a business. When he related it to me it was with a roll of the eyes and a knowing look. She said, “It was fine for your father to haggle over prices while he was making his fortune, but not for you. You are second generation money. To haggle over prices is inelegant.”
While it is interesting to hear stories about how “they” live and to poke fun at the thinking that is bred by proximity to great sums of money (and Hanzell is indeed owned by a very wealthy family), my main problem with advice like “spend money” and “don’t be cheap” is that unless you are truly, unquestionably, “more money than God” rich, such branding is insultingly inauthentic. Even for Hanzell, since they’ve made no profit, ever, such extravagance rings a little false. If your trappings of success aren’t actually doing their part to breed actual bottom line success, what damn good are they?
In the battle between elegance and authenticity for wine mindshare - retail space in the hedonistic corners of the consumer’s psyche - I’m willing to bet that authenticity wins every time.
A look at our bottom line in a few years will tell the tale.
Tomorrow: Channels of Distribution and a talk on direct shipping with Katie Hoertkorn, President of New Vine Logistics.
Wow. As a potential consumer, it’s one thing to buy a wine that costs $90/bottle because, well, the terroir and the grapes are valuable enough to warrant the cost because they create such good wine. But to pay $90/bottle so some dude at the winery can attend expensive dinners and have flyers printed up that are pretty well pointless…well…that’s enough to make me want to avoid a winery altogether.
A winery that has made no profit in 52 years of operation? I wonder how many other wineries are similarly unprofitable. Maybe it’s a tax shelter for other companies that the owner runs that do make money?
Alex,
Yeah. I completely agree with you about where your dollars are going. I think the winery is run more as a vanity brand rather than a real business. The family that owns it is rich enough not to feel the pain when it doesn’t make money, and so they are content with 52 years of no profitablity. The problem with giving “advice” to other luxury brands that basically says to “follow our lead” is that, well, a lot of us simply don’t have that kind of cash!
Tax shelter or no, its just a very strange, very aristocratic attitude to bring to a business venture.
Not to spark a different kind of discussion, but if you are THAT wealthy, it is financially advantageous to have one company that always loses money because you get a tax break on the companies that you own that do make money. But that’s not related to wine…*)
Why on earth would anyone need business cards that cost $1 each? The people that can afford to buy cases of Hanzell wine wouldn’t be impressed by something like that, and neither would the professional buyers or restaraunteurs who deal with much higher-end clients than Hanzell. Oh well…very interesting comentary, Josh! I wish I had the cash for a vanity brand.