INDIAN INSTITUTE OF MANAGEMENT

LUCKNOW
WRITTEN EXECUTIVE COMMUNICATION

Submitted to:
PROFESSOR MEDHA BAKHSHI
Submitted By Group 4:
Disha Shaw PGP38336
Sakshi Yadav PGP38337
Saathwik Godela
PGP38338
Greeshma Sunil
PGP38339
Jagriti Gambhir PGP38340
 Jayanth Babu C
PGP38341

Letter of Transmittal

Giovanni Riccardi
Chianti Classico
Montefioralle, Tuscan Hills
Italy

Guillaume de Sauveterre
Château de Vallois
Bordeaux
France

Dear Mr. Guillaume de Sauveterre,

Within the attached R.O.F decision report, you will find a thorough analysis of the different
courses of action your business can adopt basis our discussion, and the recommendations that
I have provided in relation to the best route you according to my judgement.
My analysis included identifying the most important criteria to weigh the options, and
examining how each of the options would fare on those. The criteria selected were brand
value, affordability and effect on the relationship with negotiants. After studying the situation
and gathering insights, I have come to the conclusion that it is best to preserve the luxury of
the brand, and not introduce a brand extension, which works well on all accounts. I have
attached a report for you to review, illustrating the same.
I thank you for trusting me with this analysis, and hope that I have done justice to it. Kindly
go through it and let me know what you think. If you have any questions, feel free to reach
out to me.

Sincerely,
Giovanni Riccardi

Executive Summary

The issue at hand is to decide between introducing an affordable brand under the de Valois
tag and maintaining status quo. As suggested by Claire, this new brand would help capture
the next generation of customers. It would necessitate local procurement of grapes or new
cultivation in Bordeaux or overseas. However, an affordable brand could have ramifications
on the traditional luxury business. Having evaluated all options considering potential effects
on brand value, partner relationships and their affordability, it is recommended that status quo
be maintained. This option will ensure that brand reputation, partner goodwill, and financial
stability are safeguarded.

Situation Analysis
Bordeaux region has a historical reputation for great wine-tasting tasting culture. Chateau de
Vallois, being one of the finest first-growth wine-producing estates in France had been
profitable since 1855. Vallois had excellent repute, and exclusivity for its wines and with
its own plantation, it commanded the premiums in the market. It sells its signature wine
Grand Vin du for 999 euros and its second wine, the Puine, for 100 euros.
Though expert critics are significantly influencing the prices, the quality of vintage and
strong contracts with negociants helped in creating demand and clearing the inventories even
during the bad market scenario. This led de Vallois to resort its distribution activities to
negociants. Due to its dominant position in the wine market, de Vallois was able to collect an
advance payment that supported its production.
However, as de Vallois is shouldered on negociants for sales of 100% of its production and
willingly accepted to pay extra margins, this dependency might hamper in the future since
there is no contingency plan. And it leaves very less space for exploring new markets as
demand for affordable wine is increasing among the younger population, who wish to have
wine regularly. Selling directly to consumers through websites or other avenues of
distribution is something de Vallois can consider accommodating increasing demand from
visitors.
Other Competitors have already targeted the affordable wine industry by conducting
an extensive market studies and push marketing. For de Vallois to increase its product range
to third wine, requires additional grapes which can be sourced from others. But the concern
continues that consumers might perceive blending other grapes leads to brand dilution.
Another approach is to acquire land in the Bordeaux region which is capital extensive. Also,
negociants are against adding other wines to grands crus classes. Additionally, marketing and
distributing new wine needs a lot of marketing and distributing competence which de Vallois
is lacking at present.
Maintaining brand exclusivity vs seeking new ways to meet the rising demand for affordable
wine through either massive financial investments or the development of new marketing and
distribution channels presents a conundrum.

Options and Criteria

Options:

1. Going forward with Claire’s recommendation

a. Buy grapes to supplement the production
 b. Buy land for production in the country
c. Buy land for production in the US.
2. Not introducing a new extension.
Criteria:

1. Brand Value
2. Affordability (in terms of cost)
3. Effect on the relationship with negociants
Evaluation:

The following is the basis on which the options are evaluated against the criterion decided.

1. Going forward with Claire’s recommendation.

a. Buy additional grapes.
To supplement the additional production of 1 million wine bottles to meet the
demand, additional grapes would be required. One way recommended by Clarie
is to buy the grapes.
I. Brand Value
Consumers buy de Vallois’ wine for the perceived quality and the
value, if they get to know the grapes are not homegrown, it will
seriously tamper the Brand value built over decades.
II. Affordability
Buying grapes is a relatively cheaper option, as it would not require
much investment in terms of land and infrastructure.
III. Effect on the relationship with negociants
Claire recommends selling the product directly to the customers to
subside the low pricing, but this will lead to severing the trust built
with negociants.
b. Buy land for production in the country.
Secondly, Claire suggests supplementing the production with homegrown grapes
by expanding the vineyard
I. Brand Value
This would not affect the brand value as the grapes are homegrown
II. Affordability
 Buying land to expand the vineyard is investment intensive and
would cost de Vallois a fortune.
III. Effect on the relationship with negociants
Claire recommends selling the product directly to the customers to
subside the low pricing, but this will lead to severing the trust built
with negociants.
c. Buy land for production in the US.
I. Brand Value
The perceived quality of the wine is also because of the region in
which the grapes are grown. Therefore, going overseas would
tamper the value perceived.
II. Affordability
Buying land in a different country would be expensive, considering
the added legalities.
III. Effect on the relationship with negociants
Claire recommends selling the product directly to the customers to
subside the low pricing, but this will lead to severing the trust built
with negociants.
2. Not introducing a new extension
a. Brand Value
The perceived value of wine being of the highest quality would stay intact.
b. Affordability
No change in the planned production would keep the profitability the same.
c. Effect on the relationship with negociants
As there is no direct-to-customer selling this would not tamper the relationship
with negociants.

Go with Affordable wine

Buy Buy
No
domes Foreig Buy Avera
Go
tic n Grape ge
Criteria Land Land s
Brand Value 3 1 1 1.67 3
Affordability(
Cost) 1 2 3 2 3
 Relationship
with
Negotiants 1 1 1 1 3

Recommendation
Not introducing a new extension will maintain the brand value of wine intact, profit will be
the same because there will be no change in the production plan, and it will not damage the
connection with negociants.