Field Notes from Champagne - Exploring Excellence
Forever in search of world class products and experiences, the Forge team finished some client work in Paris and decamped to Epernay in the Champagne region of France. This was the first stop on our Napoleon-themed offsite (more on the rest to come in separate posts). We were there to see how this beverage that the world chooses to accompany its biggest celebrations comes to be, how the businesses that make it work, and how they crafted experiences to accelerate their core business.
Our core finding was that the main players in the industry tell a story of David versus Goliath–small, artisanal producers versus global, industrial giants. But the reality is closer to David and Goliath versus the World. The Big Houses buy grapes from the small Growers, have spent centuries and many billions marketing Champagne as a luxury product, and produce consistently excellent wines by investing in aging and technology. The Growers sell grapes to the Big Houses, use the cash to finance their small-scale, artisanal production and get to freeride on the global brand that the Houses created. Both types of producers create experiences that fit their product, whether opulent and timeless or highly personal and connected to the land. The result is an ecosystem that produces one of the world’s favorite beverages with enough variety to serve all consumers.
One of the many Houses on the Avenue de Champagne in Epernay
Quality by Committee
The first thing we noted is that every producer, whether a Champagne House or Grower, operates in strict accordance with the Champagne Committee and its rules. The Committee is a public-private partnership charged with protecting the Champagne brand worldwide and a key aspect of its job is regulating quality. Things like grape varietals and blends, types of agricultural methods like pruning, production methods such as what types of presses may be used are all subject to strict oversight. The Committee also sets the price of grapes and can curtail production of finished wines to prop up market prices, in effect acting as a cartel.
An Industry Divided
Next we learned there is a what seems to be a clear divide between the traditional Champagne Houses and Grower Champagnes, but in reality the two are interdependent parts of one ecosystem.
The Big Houses
Boizel, a Champagne House founded in 1834
Champagne Houses produce the Champagnes we all know and love–Moet & Chandon, Veuve, Pol Roger, Perrier Jouet. The Houses buy grapes from Growers all over the Champagne region and blend several vintages to achieve a “house style”, which is why every bottle of Moet tastes almost exactly like every other bottle of Moet. They also rely heavily on aging their Champagnes in their extensive caves to impart more yeast characteristics. To customers, the Houses position themselves as the traditional, elegant and timeless option for the highest quality wine to celebrate with. Operationally, the Houses rely on a more capital intensive process and cutting edge technology to achieve more consistent quality. The Houses sell their wine around the world through global distributors and retailers.
Growers
Jerome Portier, a Chamagne Grower and owner of Paul Sadi
Growers on the other hand, are just that, growers of Champagne grapes (Pinot Noir, Chardonnay and Pinot Meunier). They sell a portion of their harvests to the Champagne Houses and keep the best grapes for themselves. The sales to the Houses provide the working capital needed to produce their own wines. These wines are made solely from the grapes on their land, and thus reflect the terroir of the place, rather than a house style. Additionally, due to the cost of holding unfinished wines, they typically age their Champagne for much shorter durations (although still within the Committee minimums). Growers sell their wine predominantly in France and direct to consumers, often through clubs or by individuals stopping by the winery.
The Stories They Tell
Growers position their wines as being of a more artisanal nature that’s higher quality than the Houses and more cost effective because they don’t spend money on marketing. Operationally, they are using a capital light model and betting that they can produce wines with higher quality by using older and more time consuming methods (barreling, corking, manual press) than the large Houses by having total control over the inputs and ability to flex from a house style. The Houses by contrast use vast storage space, working capital, and the ability to drive duration to consistently produce excellent wines year over year that they spend vast marketing budgets to promote as timeless.
Not So Different After All
The approaches while at first seeming in direct opposition are really just two sides of the same coin. The Champagne Houses rely on the Growers to provide the bulk grapes to make their product that they take pains to blend and age. The Houses provide the financing so that Growers can produce their own wines that reflect their land and craftsmanship.
How They Create Experiences
The experiences of visiting large Houses and Growers closely reflected their larger business strategies. Both welcome visitors with the goal of creating new customers or driving additional brand affinity, but how they go about doing so is quite different.
The Grower Experience
We first spent time at Champagne Paul Sadi. Our host was the owner, Jerome Portier, who is a Grower, as were his father and grandfather before him. Jerome walked us through his fields and explained how the stone wall called a clos (more commonly associated with Burgundy) protected the vines and helped produce truly special grapes.
His operation is quite small and he only produces 20,000 bottles of wine a year. Jerome carefully and patiently answered our questions about the economics of being a Grower and even entertained our ideas for starting a mobile grape pressing business.
When we got to the tasting portion of the experience, we sat on folding chairs at a simple table in a humble room, and Jerome walked us through each of his wines and even opened up a few rare bottles all at no extra cost. Like his winemaking, the experience was hands on, detailed and low tech. It focused on creating a personal connection with the land and the winemaker.
The Big House Experience
On the opposite end of the spectrum, we spent time at Moet & Chandon’s headquarters.
It’s a beautiful building with a timeless facade, this statue of Dom Perignon, and a sleek modern interior.
Once inside, we were ushered into a tasting room, sat down upon contemporary furniture beneath crystal chandeliers. We had decided to pass on the tour of the production facility since the team had recently been to another large producer and knew what factories look like. But not to be dismissive, the scale of the production is truly astounding–they produce 28 million bottles per year. (1,400 times the volume Jerome produces.)
We were presented with a lovely menu of different vintages and blends of Moet and Dom Perignon. The only food on the menu was caviar. Our besuited waiter gave us her best advice on which wines to choose.
The experience was opulent, while being reverent. The room was quiet and people spoke in hushed tones. Moet’s approach to the experience reflected how they make wine blending the old with the new (both in terms of wines and technology, spending lots of capital to achieve long term results, and ensuring that their brand is intertwined with timeless luxury.
So what?
All told, the Forge team’s big takeaway was that there are multiple winning and often symbiotic strategies that both deliver excellence within one market. Players within a market frequently exaggerate their differences to help customer decision making, but the reality can be more complicated and leaders must understand their true position in the value chain to produce ongoing success.
Critically, to be most impactful the experiences created around the product must highlight and correspond to your competitive advantages. From a product and experience perspective, the Big Houses cannot claim to be artisanal products, so they use their scale and marketing prowess to shape how the world views champagne and create opulent, if less personal wines and experiences. Conversely, Growers cannot possibly compete with the consistency, aging and industrial scale of the Big Houses, and so of necessity they create highly idiosyncratic products and experiences that reflect the land and the winemaker.
Each side of the industry knows how it can win and then pursues that strategy single mindedly. With excellent results.
