Abstract
The case explores the marketing strategy of a German winery with a focus on sales and channel management. Mr. Voss, the CEO of a state-owned winery and the central character of the case has realized a turn-around of the winery in the last ten years. He raised the quality of the wines and increased the productivity of the estate. Saint Bernhard thereby grew in size and wine output with strong extension of the sales channels. Volatility in annual yields, lower yields compared to other wine regions, unforeseeable costs, and disadvantageous regional reputation jeopardized the financial benefits of the restructuring. While direct to consumer sales have been the cornerstone of the business model, decreasing customer loyalty and the need for growth made Mr. Voss turn towards indirect sales channels (B2B), selling via retail partners or restaurants. The expansion secured the sales of additional production of Saint Bernhard’s wines. Apparently, the strategic shift reduced the flexibility of the estate. The indirect sales channels partners required delivery at set prices even in situations where Saint Bernhard suffered from lower yields and therefore less wine availability or higher costs than calculated. As wine sales through B2B channels are realized at lower prices than B2C there is a trade-off between sales and profitability. Although the owners were willing to follow his strategic reorientation and supported his decisions a lack of profitability was a nuisance. Fine-tuning the marketing and sales strategy with focus on channels is needed.
Highlights
In the aftermath of a low grape harvest threatening to meet retail contracts and potentially restricting product availability for private customers, Rainer Hoppe, chief executive officer of Saint Bernhard Winery (SBW) was under pressure from the ownership team to stabilize the business
Private customers complained about shortages of their favorite wines while retailers resisted price increases
Founded by monks in 1138 as part of a Christian monastery, SBW was located in the German wine region of Hessische Bergstrasse (HB), in the state of Hesse
Summary
Förster, and Hoppe all agreed that the German wine market had a great deal of potential. Germany ranked fourth in global wine consumption, with sales of more than two billion liters of wine annually (See Exhibit 3). With annual revenues of more than one million Euros, SBW belonged to the population of larger German wineries. Mr Hoppe, countered that even larger wineries, more than triple the size SBW, were doing that already. Mr Hoppe perceived SBW to be trapped between larger wineries with economies of scale, often organized as cooperatives, and smaller vintners, perceived to be more charming and delivering outstanding terroir-based wines. Indirect sales channels (supermarkets, discount stores, and specialized wine retailers) supplied more than 70 percent of the German wine demand (See Exhibit 5). Because of low prices, discount stores steadily increased their market share of wine sales. Consumer studies (e.g., DWI, GfK ...) forecasted that German consumers further shift from direct purchases at the wineries to indirect provision
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