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| October 10th 2007 |
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| Bill Deutsch: The man with the Midas touch |
by Felicity Carter
He's the distributor who launched two of the biggest wine brands ever to hit US shelves; Georges Duboeuf and Yellow Tail. He's also known for his attention-grabbing promotions and his ability to pick winners. Feliciy Carter asks Bill Deutsch how he does it.
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Wine Business: You've been responsible for two of the biggest brands ever seen in the USA: Georges Duboeuf and Yellow Tail. Do you think these wines would have been as successful as they are without such dramatic gestures as hiring armoured cars to make deliveries?
Bill Deutsch: The promotions have been ongoing for a number of years. Duboeuf was launched in the United States back in 1982 and Yellow Tail was launched in 2001. One similarity between the two is that at the time they were introduced their labels were unique. The Duboeuf wines have flowers on them and the Yellow Tail had a kangaroo. The consumer then tasted the wine, liked what they tasted and came back again a second time. As we saw them doing that we began to invest more and more into various aspects of marketing: in store promotions, wine tastings, some advertising, some to the consumer, some to the trade. Even though they're 20 years apart, there are similarities.
Wine Business: How successful is such marketing over the long term?
Bill Deutsch: In the early 1980s when we introduced the Duboeuf wine, we started in November with Nouveau and had some exciting arrival events, letting the consumer know this was a new wine arriving via jet plane on a specific date. This reached the newspaper, radio and TV and to this day, every time the Nouveau arrives, the press is there to cover the story.
Wine Business: What advice about promotions would you give someone looking to enter the US market?
Bill Deutsch: Well it really depends on the resources they have. Are there brands already in the marketplace that are almost identical? The faster they want to replicate the leading brand, the more they're going to have to spend. If their brand is unique, then their amount of money will determine if they have a chance to succeed. I have seen good marketing departments launch new brands and plough millions into the market, and be successful with their wines from Italy but stagnant with their wine from another country, even though they spent similar amounts of money.
Wine Business: And on the other hand, what shouldn't they do?
Bill Deutsch: In 47 years in the business I've seen a lot of successful launches and a lot of people launch the fastest close-out that ever existed. And those close outs wind up in the wine cemetery. When Yellow Tail began to take off, it was because it was at the right place, at the right time, with the right packaging. What Casella put into the bottle over-delivered to the consumer for the price being charged. The marketing we were doing all contributed to the very rapid growth of the brand. Now some other people said 'my God, what's happening? Maybe we have to do the same thing, so let's put a critter on the label, let's make it yellow and black and almost copy their colors but deviate a little bit, and let's |
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see if we can't be as successful as the Deutschs are'. It's now six years later and the wine cemetery is beginning to fill up with critter labels because they didn't do the same things we did. They might have put a nice critter on the label, but the supplier forgot to make as good a wine as Casella made. They forgot to motivate the distributor the way we did to broaden the distribution on Yellow Tail. They forgot to advertise to the consumer in a unique way the way we did with Yellow Tail. They forgot to add additional meaningful SKUs, the way we did with Yellow Tail. Some of these importers burned out very quickly because they thought they could duplicate the success, but they couldn't.
Wine Business: Do you need deep pockets to enter the US market?
Bill Deutsch: When we introduced the first Duboeuf Nouveau in 1982, I recall there being about 20 different branded Nouveaux in the United States. We invested in Nouveau promotions. We asked Georges Duboeuf to come over here on Nouveau day. We hosted a Nouveau luncheon for the wine press every year and at that press luncheon we gave out a Georges Duboeuf book award to an author who wrote the best wine book for the consumer for the year. We prepared a lot of in-store point of sale material announcing the arrival of Nouveau. It's now 25 years later and there are very few Nouveaux coming into the United States. The majority have gone off to the wine cemetery and Duboeuf is the dominant Nouveau bar none. Why? Because he put the right wine in the bottle and labelled it beautifully and we have done a lot of successful promotion. In summary, you have to invest in your brand, but you have to invest intelligently.
Wine Business: You famously only ever work with family businesses. Why?
Bill Deutsch: These families work closely together. They share the good days and the bad days, share each other's problems. You each cultivate the next generation and you are able to make very rapid decisions between two families. In the big corporations it's much different. It usually takes much longer to arrive at decision making and the turnover of people at the top takes place often, so you don't have the continuity of people.
Wine Business: You have an equity sharing deal with the Casellas and Yellow Tail. Do you do equity sharing deals with everyone? Is this arrangement something you would recommend?
Bill Deutsch: You want to make sure that the relationship between the producer and importer is a very tight one. You draft contracts, but they're only as good as the people who sign them. It's good to have equity in the brand just in case circumstances change and the producer or the importer decides to change their MO [modus operandi]. The equity in the brand is only paper equity until such time as something happens, and if nothing happens the paper equity remains as paper equity. I do recommend anybody new |
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starting out with a new brand, who is working with an importer, seriously consider not just a contractual relationship but joint ownership of the brand. As far as Deutsch is concerned we do have joint ownership with some of the suppliers we represent. There are others that we don't have joint ownership. We do not put more emphasis on those we have an equity position in compared to the others, as that would be unfair.
Wine Business: John Soutter, former managing director of Casellas, once described how important it was for Casellas to offer the people who work with them the chance to make a good margin, at every level. In practice, how do you structure pricing so that everyone can get a slice of the cake?
Bill Deutsch: Pricing, which is one of my five Ps, is very important. Everyone involved in the promotion of the brand has to make a fair margin, otherwise they're not going to devote the time and effort. The producer needs a margin. The importer needs a margin if he's going to have a sales force and build a brand. You must give the distributor a fair margin, otherwise it's not going to be an important brand to him. The average retailer is going to want his margin because he has a retail business that is costly to him. The P of pricing is very important, but for a brand to be successful, it needs all five Ps. It has to be the right product. It can't be something the consumer doesn't want. The fifth P is the P of promotion. All five Ps have to be there if the product is going to have the chance to succeed. Take away one and you only have 80%. If it's the wrong product you could have the greatest people in the world, but it's not going to sell. If it's priced improperly, it's not going to work.
Wine Business: How important is price?
Bill Deutsch: There is and there will always be a lot of wine coming from the various wine regions of the world. Just selling on price is not going to make it. In England, the big chains look at low pricing. In the USA it doesn't work that way. People want to pay a fair price for a bottle of wine. They're not looking for the cheapest. More people are drinking wine in the US. It has become part of their lifestyle. They have read the books about wine and health, they have read the medical reports and they have come to recognize that a glass of wine is very healthy. Different people here in America will spend different prices, because the economic levels differ. Some are very happy buying a 5 litre bag in the box, other people would not consider drinking a bottle of wine that cost less than $15, so there are enough people in different socioeconomic levels to take care of wines at all prices. The one thing that people don't want is to be ripped off.
Wine Business: Do you think Yellow Tail can keep its market share long term?
Bill Deutsch: Yellow Tail was first introduced here in the United States. |
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It took off very quickly and the Casellas, with some help from the Deutschs, had to make some substantial investments in order to fill the requirements of wine that were needed based upon growing sales. The Casellas made a decision to pretty much concentrate on the US and not let it run dry. They then began to make more investments in more tanks, more vineyards, more grapes. Then they began to open up other markets around the world, so they really were a Johnny-come-lately. There were competitive brands that had been in the worldwide market long before Casella conceptualised Yellow Tail. Today it's a different story. The brand is very very substantial in Canada. The brand is booming in South East Asia. The brand has taken off in Germany. In Italy where the people are so close to drinking Italian wines, Yellow Tail has become the number one imported wine. Now that's unheard of. In England they are still trying to grow because they had the wrong distributor. The P of people wasn't working. My understanding now is that they have finally gotten a very good, enthusiastic distributor and I believe we're going to see a new result there. When they launched it in the US they never thought about launching it in Australia, but today it's a very important wine with the Australian consumer.
Wine Business: There have been many popular wines that have come and gone. Why would Yellow Tail be any different?
Bill Deutsch: One of the important reasons it continues to grow is the quality doesn't change, regardless of the quantity sold. In most wineries, the quality falls off. John looks for the best grapes around. It's the same with Duboeuf. He constantly strives to find those growers who grow the grapes the way he believes they should be grown and whose vats become filled with the types of wines he wants to buy and blend.
Wine Business: The world of wine is looking to the USA as the Holy Grail that will soak up their excess at a good price. Do you think this is so? And, if so, what are the do's and don'ts of this market?
Bill Deutsch: Wine consumption in the United States has been, and will continue to, grow. Red wine is especially in greater demand because of health and enjoyment. New wines have a chance if they meet the right criteria. If it's a new wine from an existing supplier, it will be that much easier. If it's a brand new supplier who is coming to the USA for the first time, it's going to be a tremendous challenge for that individual. Distributors are consolidating in numbers, their books are getting bigger, there is just so much their sales people can sell and they are very cautious what they add to the portfolio. If they have two or three Beaujolais lines or three or four Pinot Grigio lines they don't need another one. So it is a challenge for someone, for a grower, who has stayed away from the US market to suddenly come here and believe they will be successful. |
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They need deep pockets and a unique concept. It can't be a 'me too' and they need the right method of distribution.
Wine Business: Distribution is clearly essential to market entry. What would a producer have to be able to do to get the attention of a distributor like yourself?
Bill Deutsch: That's very simple. They would have to communicate with us and we would have to be convinced that the five Ps are there. That the people who have come to us are the kind of people that we want to work with. Do we have the same goals? How is their next generation? Where have they been up until now? Are they realistic about the goals they want to achieve? Have they come to us with the right product? Is it unique, is it me too, is it a duplication of what's already here? P of packaging: have they put a very special package together or is something that they believe is gorgeous but is 75 years behind the times? Will the American wine consumer like that package? Is it readable? Is the name pronounceable? Next is the P of pricing: is it priced properly, is there a fair margin for everybody and does the end consumer price make sense predicated upon what is in the bottle? The last P would be promotion. Is this a wine that's going to be very promotable; do we think the press will pick up on it; is there money being invested to launch this brand? Are there upfront investments, or is the supplier saying, 'if you sell a case I'll give you a euro or a dollar and if you sell ten cases I'll give you ten dollars'? That kind of thinking puts wine into the cemetery. If they've been away from the market and want to play catchup football, it's expensive and there are no guarantees.
Wine Business: You also import wines from Spain, Italy, Hungary, NZ and Chile. Do you have any plans to expand that to include other countries?
Bill Deutsch: We would like to add a few more California wines to our portfolio. We have a lot of things on our plate – new items from existing suppliers – so we're not desperate to find new countries and new wines.
Wine Business: Crystal ball time: what big changes in the US market are ahead?
Bill Deutsch: I think wine consumption is going to grow. I think we're going to see distributor consolidations continue. I think we're going to see some more private label brands and I think consumers are going to continue to try and experiment with different wine brands, because there are differences in what they're drinking. They want to try different wines. That's a major change from ten years ago – today the average consumer walks in and buys ten assorted bottles of something.
Wine Business: What's next for W.J. Deutsch & Sons?
Bill Deutsch:We're going to introduce some new wines from Sicily. We will introduce a Yellow Tail sparkling wine, which is a sparkling wine meant to go with food. We're introducing a new brand of wine called HobKnob, with beautiful packaging. We keep trying different things, because consumer habits are changing. It comes from France, but we're not promoting it as a French wine. We think that we want the consumer to guess what it is. They don't necessarily link a wine back to its origins. People are buying labels today.
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