Now in its fifth year, Wine2Wine is one of the most interesting wine business conferences on the calendar. Not because it’s glamorous, held as it is in a hall on the outskirts of Verona. But what the event lacks in architecture, it makes up for in content. CEO Stevie Kim brings in speakers who focus on practical aspects of the wine business: how to get into the Chinese market; what works in Sweden; how to communicate effectively to consumers; how to make a pitch to US distributors. The information is both interesting and practical.
The queen of turnaround
Margareth Henriquez, president of Estates & Wines at LVMH, delivered the keynote speech. In 2009 she was appointed president and CEO of the Champagne house Krug, taking on a brand that was historic and famous, but also rundown. Her job was to restore it to profitability. “I was a turnarounder all my life,” she said. “I thought I was quite trained to do this.”
Born in Venezuela, Henriquez spent more than two decades as president of multinational companies in South America, including working in Mexico with Nabisco, which at the time was reportedly losing $24m a year. She returned it to profitability. Krug turned out to be different. “My first year was a real failure,” she said. “I underestimated the problem. We had lost 98% of profit.”
Her solution was to go back to the roots of Krug, to learn why founder Joseph Krug had made the choices he had, particularly on the use of oak, one of Krug’s signatures. “What helps you to evolve is the why: who you are, why we exist.” But going back to basics turned out to be difficult, because “we knew nothing about the founder”.
A treasure hunt ensued, and in 2010, somebody found Krug’s diary. In it he detailed his insistence on focusing on individual plots of Champagne. This is why different parcels were fermented in separate oak barrels – to ensure each individual plot was respected. “Without knowing it, he was creating the category of prestige Champagne,” said Henriquez. “Everything became clear and we understood why we were doing the things we were doing.” As a result of this self-knowledge, Krug has become a much more “coherent house”.
But understanding your own origins isn’t enough, Henriquez added. “I brought a specialist in communications in to transform the communications of the house, to something that could be shared and understood,” she said.
Henriquez did not share details of current finances, but gave the audience to understand that the new strategy had transformed Krug’s fortunes. “Luxury is a word that is mistreated,” she said. “When we go into the essence of it, it’s the light that enlightens the path for others. Whenever you have something – make sure you keep your light.”
Content for China
One of the stars of Wine2Wine was Karla Wang, otherwise known as Lady Penguin, a social media phenomenon in China, with 1.5m followers and a wine show that attracts about 200m views. She’s leveraged her social media following by launching a wine club whose more than 8,000 members receive a monthly allocation of wine. Yet she said the “environment is very hostile for the average wine drinker” in China. That’s because the major internet retailers sell poor-quality, cheap wine while telling consumers that this is what Europeans drink. Meanwhile, the bricks-and-mortar retailers are “very hard liquor and baijiu-focused and wine probably occupies a little section in their store. The salesperson probably has very little knowledge of wine and will just babble words.”
And of course, as Lady Penguin said, young people who might be interested in wine are “not spending much time in a five star hotel getting advice from a sommelier. How do we make wine relatable?”
She has come up with a three-part answer: content, product and community. The content is videos that introduce her products, which are private-label wines aimed at entry-level drinkers. “We have the highest retention of all wine membership programs in China,” she said, and average members’ annual consumption exceeds RMB5,000 ($738.70). As for the third leg, community, she organises “membership tastings in more than 20 cities in China on a monthly basis,” making it “China’s largest tasting network”.
Lady Penguin said she connects to her audience with bite-sized content that’s funny. “I have created more than 100 episodes of video on wine knowledge,” she said. “If you’re trying to explain the price of different appellations, you don’t need to explain the appellations, you can simply tell them: ‘Do you understand house prices in Beijing? The core area is more expensive than the suburbs.’ They will get it instantly.” Using analogies, she finds, works better than traditional wine education. For example, “Chinese girls are fanatic about lipstick colour. We made an analogy between the most popular lipsticks and wine colours. You have to make the wine experience readable and relatable.”
According to Lady Penguin, Penfolds has done an outstanding job of communicating to Chinese consumers. “Penfolds taps into the right occasion,” she said. “If you want to elevate the status of a business dinner, then you have to get a wine that everyone can recognise and get value from. Lafite is great, but way too expensive.” Putting Penfolds 407 on the table gives diners a sense of how prestigious the dinner is, she said.
In 2016 her company launched a private-brand program called Lady Penguin Smart Buy because “there’s a lot of ugly, bad-tasting wine out there. The price is chaotic and confusing for entry-level wines in China, so we try and create consistency – if you’re paying this, you’re getting this type of quality.”
Another issue is bottle size. “Small bottles and mini bottles are a huge thing in China. This is based on a lot of surveys we did with customers,” she said. “Significantly more Chinese are drinking alone and the most asked question is, ‘What do I do with the leftover bottles?’”
Lady Penguin was asked why Italian brands have struggled so much in China. “It’s really due to the awareness of the icon wines of Italy,” she answered. “That’s how new consumers benchmark wines – how expensive is the top wine?” She also advised producers not to be “snobby” and be prepared to go to market with simpler, more understandable wines. “They introduce people to wine.”
The future of wine
One of the most thought-provoking sessions at the conference was presented by the team from Fine Minds 4 Fine Wines (FM4FW), a think-tank cofounded by Nicole Rolet, former banker and now owner of Chêne Bleu in the Rhône Valley. “We are very much affected by the ecosystem around fine wine, and we started by trying to identify the elements of the ecosystem that impacted us the most,” she said. The result was FM4FW, which first came together in June 2017, and which surveys key figures in the wine trade about their thoughts on threats and opportunities.
These findings were summarised by Pauline Vicard, FM4FW’s director of programs. “What keeps me awake is that there is a scenario that in ten years, fine wine is no longer relevant,” she said. “That we no longer associate it with poetry, art and culture as we do today. Young people drink less and less, and it’s just old white people drinking it. We have to ensure that the next generation see fine wine in the same way.”
Vicard went through other threats that FM4FW members had identified. Climate change was first. “How long have we got?” Another issue is social acceptance. “We worked this year with people from the energy industry. There is a real chance that – just as happened for the oil industry – the wine world loses its social licence to operate.”
Other issues include the appellation system, which is “like a monopoly game. You have to be located on the dark blue spots. If you’re on the brown spot, you’re screwed. Nobody wants to buy you.” There are demographics. “Fine wine is ‘whiteness’,” said Vicard.
Then there’s the question of financial sustainability. “We don’t really talk about money in the wine world, yet there are only 15% of wineries in South Africa that are viable and making money,” she said. “We need to make sure that we’ve run the numbers and thought about being financially sustainable.”
But there are bright spots on the horizon as well, including new sources of data – and a new generation, who bring with them an international, inclusive viewpoint.
As for the rest, Vicard and Rolet say more discussion is needed, and they invited the audience to participate in the next FW4FM gathering in Bordeaux in July, 2019.
Plenty of discussion also happened at Wine2Wine of course. Because not only does the conference bring together intelligent, interesting people, but it’s held in a historic city where there are plenty of great places to go after hours to discuss things.