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Corporate brands vs. Appellations.

Last November Robert Joseph’s closing session at wine2wine started from the consideration that for a winery to operate within an appellation is a limiting factor to develop a strong corporate brand.

It was not a provocation and the reasons given by Robert Joseph in support of this thesis were essentially three:

– Internal competition within the appellation which forces the winery to sell at lower prices than it could obtain. This consequently limits the margins and then the resources to be allocated to the development of one’s brand.

– The “mental laziness” that leads to defining a positioning proposal based on the (common) values of the name and therefore reducing the differentiation of the company brand.

– The limited awareness and relevance of many appellations for the consumer in terms of perceived value.

These are reasons that have a basis on what actually happens, but instinctively the thesis of contrast between company brand and name left me perplexed.

Since it is seldom the case that I am not in line with Robert’s considerations on the wine business, I started to think if my reaction was only due to an iconoclastic vision compared to the status quo to which we are accustomed, or if there are actual vision differences.

After a couple of months, I think I managed to line up the ideas clearly enough to present them in an organic way and, in summary, I confirm that I do not agree with Robert.

Before continuing with the reasoning, it is necessary to clarify what an appellation and the related consortium brand are (or what they should be),.

An appellation serves to recognize the reputation that wines from a specific geographical area have obtained from the market thanks to their differentiating characteristics compared to generic wines or wines from other territories and homogeneous with each other (which does not mean equal).

The raison d’être of an appellation is therefore not to give producers a tool for valorization, but rather to protect consumers from the improper use of the geographical reference. It is from the latter that the valorization tool derives.

The consequence of this nature of the appellation is its automatic (original) relevance for the market, vice versa there should be no appellation.

Final consideration: the elements and dynamics that determine the strength or otherwise of a consortium brand are the same as those found for corporate brands: knowledge and reputation, determined by the intensity and coherence of the strategies.

Belonging to an appellation is not a structural limit for the development of a strong corporate brand.

It is true that the limits indicated by Robert occur in reality, but they are not inherent to the relationship between company brands and appellations. That is, operating within an appellation does not automatically limit the possibility of creating strong corporate brands.

The dynamic between company brand and name is the same as between a line/product brand and the corporate/umbrella brand. For example as in the case of “Tignanello” with “Antinori”.

It is therefore a question of defining the priorities and weights in the relationship between the corporate brand and the consortium brand.

The flattening of a winery’s proposal on the common values and communication styles of the appellation is therefore not a necessary structural choice, but a desired one.

Obviously, a choice of this type becomes particularly negative when the appellation is little known and relevant to the market.

The question of price is more complex because greater substitutability between wines produced by different wineries belonging to the same terroir is intrinsic to the very concept of appellation. And the substitutability will be all the greater the stronger the knowledge and reputation of the consortium brand.

On the other hand, difficult does not mean impossible and the growth of fungibility between goods belonging to the same category, therefore in a broader scope than an appellation of origin, is a characteristic of the turbo competition that is characterizing all markets in the last ten years.

The worsening of price competition is therefore not a specific problem of designations of origin but concerns the general difficulty of creating effective added value.

Belonging to an appellation can encourage the development of a strong corporate brand.

Having said that an appellation is not intrinsically a limit to the development of a strong corporate brand, the question remains whether an appellation is a favorable element for the development of a wine brand.

First of all, it is worth remembering how appellations are among the most well-known and recognized Italian wine brands by consumers, both on the domestic and global markets.

Asti, Chianti, Barolo, Prosecco, Amarone, Brunello di Montalcino, etc… are brands that are recognized with certain characteristics and values. They represent an important tool to allow wineries that do not have the ability or the intention to develop their own strong corporate brand to present themselves on the market in a less anonymous way.

Within the overall wine system, the role that an appellation has in increasing the price paid for grapes and bulk wines, compared to generic wines, cannot be underrated.

This is to remember the role and importance of appellations on both the demand and supply sides, but we have not yet arrived at the answer to whether an appellation favors the development of a strong corporate brand and how.

In my opinion it favors it thanks to the fact that it broadly places the wine in a certain category, allowing the winery to concentrate on its differentiating elements.

There are many examples.

The first that comes to mind is that of champagne where, within a very strong appellation there are numerous equally strong corporate brands, feeding each other in a synergistic process. It should be underlined that in champagne the big brands thrive within the appellation even in the presence of large winegrower cooperatives, without suffering price competition.

In Brunello di Montalcino the “big names” maintain an ultra-premium positioning on the market, together with producers who offer wines that meet the (high) minimum quality standard required by the production specifications at much more competitive prices.

Would Santa Margherita have managed to make its Pinot Grigio one of the strongest wine brands in the world if it had not been presented within a DOC? I believe the appellation played a role in reassuring people in the introduction of a highly innovative wine.

This does not mean that a great wine brand must necessarily have an appellation behind it. This is neither a necessary nor sufficient condition, but it can help as long as you follow the rules for the creation and development of brands in any sector:

– A clear, unique, differentiating and market-relevant proposal (therefore always give priority to the company brand over the appellation in all communication, starting from the label).

– Coherent strategies in bringing the proposal to the market, identifying the categories/types of people who you want to involve, going beyond generational demographic classifications.

– Sufficient resources (people and money) to reach the target markets both in terms of presence (distribution) and perception (communication).

With a particular recommendation for the wine sector (apart from a few iconic wines): when defining the proposal, go beyond the tangible characteristics of the vineyard and the wine because this is how to move from selling a product to develop a brand.

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