Preserve the luxury or extend the brand

Preserve the Luxury or Extend The Brand?Based on a HBR Case by Daniela Beyersdorfer and

Vincent Dessain

Should Château de Vallois begin producing a more-affordable wine?

A presentation by Shalvi Rathi MNNIT Allahabad,under

Prof. Sameer Mathur,IIM Lucknow,Marketing Internship 2015

www.IIMInternship.com

This is a story ..

About Gaspard de Sauveterre,the 75 year old owner of

Château de Vallois…

… a famous wine-producing estate in the Bordeaux region of France

In 1855, this estate was allowed to charge top prices for wine and was classified as a Premier Grand Cru Classe

CEO: François de Sauveterre

Estate Manager:Jean-Paul Oudineaux

Owner: Gaspar de Sauveterre

Some important characters of the story:

150,000 bottles of Grand vin du were sold annually

The average US customer paid $999 for a bottle of Grand Vin,of which de Vallois collected between £100-£450

The best of the remaining grape were used to sell 200,000 bottles of Puine

Serving the riches was a success so far!

The quality and the exclusivity of these wines were the reason behind its success

Then came the hero..Claire de Valhubert,

granddaughter of the owner, who wanted to produce a brand of wines which could be afforded by the average

earner as well!

She observed that the younger

drinkers were unable to

afford wine produced by their estate

due to its high price.

She wanted to produce a new range of wine which was between £20-£25.

Now this, was a step towards introducing “affordable luxury”

in contrary to the core idea on which the age old enterprise had been working on so far.

What should Gaspard do?Preserve

or Extend?

Let’s sketch out a logical pros and con map of the new idea!

To capture a new set of customers

Gain their trust until they can

afford the expensive brand

Increase the revenue and

profitsCapitalization

Added flexibility

Building relations with people from

all sets of the social structure

Why should Gaspard accept this new idea ?

Why Gaspard should reject this idea?

Dilution of brand equity

Alienation of core

customers

Added expense

Buying of extra assets

Loss of negociants

Lack of expertise in lowly wines

If you were Gaspard, what would you do?

Insights from this story can be applied to many

brands in the India Market:

Example:

DABUR

Dabur is the fourth largest FMGC in India,with a legacy of 100 years.

It was started by SK Burman in 1885 with the basic motive of manufacturing Ayurvedic drugs.

It expanded its brand production to Dabur Hair oil and Chyawanprash in 1900s.

Then it went on to add oral care products to its product line in the 1970s.

It slowly entered into juice market and packages soups.

In nutshell, It can be extremely beneficial to introduce Brand extensions as long as the new brand sets as a perfect fit with the parent brand and resonates with the customer’s needs.

Thank You!