Chateau Margaux

We think there is a need for Chateau Margaux to change its distribution system, which is currently handled by specialist merchants. This old and traditional distribution system has been there since 1800’s but this channel needs to be changed according to the modern dynamics of the Wine Industry.

This current distribution system is also limiting the Chateau’s potential for higher profit margins as these specialist Bordeaux merchants act like middlemen between the producers and end users. As seen in Exhibit 3,The Average selling price of en primeur Chateau Margaux in medium vintage increases significantly as it goes on further in the distribution chain. The first tranche is sold at  € 100 at the Chateau and is sold at as high as € 160 by the retailers. Also, the third tranche that is sold for € 240 at the Chateau is sold at € 405 by the retailers.

The traditional distribution system also disables the Chateau to get information about its customer base and is unable to modify its production and marketing to target the specific customer base.

New distribution channels like online sales can also be implemented to increase market share and target a wider customer base including overseas as there is an increasing demand for Wines worldwide but there is stiff competition from new world countries like Australia, South Africa, New Zealand and Argentina. In this case marketing and selling to luxury consumers in Asia and Russia is a good option available to increase market share. The Chateau should develop a specific marketing plan for expansion because ,right now, Marketing is outsourced to Bordeaux Wine Merchants who are still following the old traditional way of marketing to only particular segment of buyers. This is greatly limiting the Chateau’s sales and profits.