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| October 11th 2006 |
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| Jacques Windepot: Germany´s leading wine retailer |
by Richard Grosche
Each consumer market presents a unique mix of problems. Germany is difficult because of its lack of centralized structures and the low average price paid for a bottle of wine. Richard Grosche spoke to managing director Bernd Hoolmans about...
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... the keys to Jacques Weindepot’s success.
The German wine market is dominated by discounters. Aldi alone sells every fourth bottle of wine in the country. No other group comes close in terms of clout. The specialised trade, by contrast, with the exception of a few high end retailers, is in the midst of a severe crisis. Few are growing their business in volume, fewer still in value. The largest specialised wine trader, Jacques Weindepot, is a giant with more than 30 successful years behind it.
The numbers speak for themselves: 255 outlets, nearly 100 million Euro (128 million Dollars) annual turnover, an average retail price of 6.15 Euro ($ 7.90) – where the German average is a paltry 2.03 ($ 2.60) - and a steady accrual of gross profit on sales since its foundation in 1974. The founders Jacques Héon, whose Christian name has become the group’s mascot, and Dr. Müller-Soppart, both marketing experts who had been consulting for French firms in Germany for years, developed the idea of Jacques Weindepot after a detailed market analysis. The concept prevailed. Six years after its launch, Jacques Weindepot already had stores in every major city, and rapidly rising sales. British American Tobacco, at that time continually searching for innovative marketing concepts, took an interest in the German start up and bought the idea as well as the infrastructure. Their subsidiary Horten became the parent company. Three years later, Horten was sold to the Metro group and in 1998 changed hands again, this time to Germany’s leading mail order wine merchant, Hawesko. Since then, Jacques Weindepot’s growth has continued with unabated momentum.
The concept for success is actually quite simple, based on four trend-setting pillars: a portfolio of personalized estate wines always available for tasting, distribution through an agency system that demands and rewards responsibility from each of the store managers, a low cost structure and a direct marketing approach with individual customer care.
First and foremost is the choice of wines for the portfolio. The founders knew that most Germans preferred to buy their wines directly from the winery, but were unable to do so outside the country. Their idea? Bring the winery to the client. The range now consists of some 250 wines, three quarters of which form a core selection that is sold throughout the year. The rest is a constantly changing repertoire of special offers sent to their customers every two weeks. Jacques Weindepot never uses wines from its core range for these promotions - and never discounts. Instead, there are always new wines, purchased in amounts ranging from 8,000-15,000 bottles, which are introduced to the customer in an informative sales flyer. If the wine does well, chances are good that it will eventually make its way into the core range. With direct online access to the cash register at each individual outlet, it seldom takes managing director Bernd Hoolmans, who has been with |
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the company for almost thirteen years, more than four to five days after a mailing to know whether the wine is a success or failure. This enables the logistic department to time purchases so that Jacques has usually sold a wine long before it needs to be paid for. “We pay no interest at the bank,” adds Hoolmans with a wink of his eye.
At the tasting table
As new promotions are tested every two weeks, fluctuation is rather high, and this continuous process of renewal provides the customer with a steadily changing choice of wines and ensures that the Jacques’ shopper enjoys what he is drinking. After all, his purchases have a direct impact on the wines available through the system. Nearly all of the wines, with of course the exception of a few Bordeaux Cru Classé, are available only at Jacques. At the least, Jacques has an individual bottling with an exclusive label. The minimum turnover from the core range is around 40.000 bottles annually. The best sellers do decisively more. The all time record holders have been with Jacques for more than 30 years and include such wines as Château Bonnet from André Lurton in Entre-deux-Mers. The white is sold for 6.95 Euro ($ 8.90); the red, a generique Bordeaux, is on the shelf at 7.40 ($ 9.50).
For every wine in each of Jacques depots a detailed packet of information on the producer, the region of production, the vintage and more is available to the customer. Jacques Weindepot wants its clients to know as much as possible about what they are drinking so that they identify with the producer. To that end every wine in the range, all of which are purchased and shipped directly from the grower, can be tasted free of charge at every depot. Some Crus Classés are not available each day, of course, but even they may be tasted at special events. The company’s slogan “Probieren wie beim Winzer”, roughly “tasting with the winemaker”, highlights this marketing idea. The opportunity to taste all wines prior to purchase is far from common in Germany. Even a lot of estates often have only a very limited number of wines open for their clients. If this service has a drawback, it is that the wines all have to be ready to drink as soon as the bottle is opened, so one of the main goals of Jacques’ buyers is to find wines that are immediately drinkable.
Before a wine is incorporated into a promotion it is analysed both sensorically and chemically. Buying decisions are never made at the winery, but always in the absolutely neutral atmosphere of the company’s offices in Düsseldorf. Head wine buyer Hervé Robert tastes more than four thousand wines a year that have been selected by his team in their annual peregrinations through the vineyards of the world. These are then vetted in terms of value for money, given a genetic fingerprint by the company’s two trained chemists, and assessed for their unique sales propositions by the marketing department. |
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On average no more than 150 of the samples are chosen for a promotion. Each wine that overcomes that obstacle course, however, has the chance to prove itself on the market, first as a special offer and then, if successful, as a mainstay in the core range.
Since value for money is a major decision-making element for both the retailer and the customer, bag-in-box wines have become an integral part of the Jacques’ range and now account for some ten percent of total sales. This is low compared to Scandinavian markets, but high for Germany where this format is seen as inferior in terms of quality. “Even more than with bottled wines, bag-in-boxes need to be explained”, says Bernd Hoolmans. Costly brochures have been designed to minimize the customer’s hesitation and persuade sceptical German consumers to try this alternative packaging. “At the tasting table”, Hoolmans continues, “the wines are above reproach. It is only the packaging that makes people hesitate.” In order to demystify the cardboard packaging with the plastic inlay, bag-in-box is called “wineskin” in the company’s jargon.
The second pillar of success is the unique system of distribution. With 255 depots the company has a dense retail network with few empty spots on the German map. All Jacques’ depots are run by independent sales representatives. Until 1985 they were all integrated stores that belonged to the company. With the conversion to a form of managed independence came a rapid increase in the number of depots. The choices of location, leasing, furnishing, as well as the supply of wines are still handled by headquarters. The depot owner, however, now receives a commission of 20 percent on his sales and pays an agreed rent for the premises and the services he receives from Jacques. The tenancy is subject to actual sales – the higher the volume, at least up to a certain amount, the higher the rent. Thus, provided a depot turns over at least 250.000 Euro its owner can make a living. The sky, on the other hand, is limitless. The most successful outlet today generates over 1.500.000 Euro in turnover annually.
Keeping the costs down
Many depot owners run their business as a part time job. That is possible because of the short operating hours which are a key part of the third pillar of success for Jacques Weindepot: limiting costs. Most depots are open only 26 hours per week. Analyzing the flow of customers into wine stores, Jacques Héon and Dr. Müller-Soppart noted that few purchases were ever made before noon on a weekday and that most buyers were only active on Fridays and Saturdays. They thus decided to minimize opening hours. Even today most depots are closed on Mondays and don’t open before 3 on the other weekday afternoons. “The highest expense factor in trade are personnel costs, so that’s where we started saving”, Müller-Soppart explains. In order to minimize leasing costs, it has |
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always been Jacques’ philosophy to find unusual premises on the outskirts of town and in the industrial areas of cities with adequate parking. All but five depots have at least one parking space for the customers. In addition to wines, every depot owner can also buy and sell delicatessen items on his own and bank the profit made from them himself.
Direct marketing and intensive customer care is the fourth pillar of success. Up to two million Euros is spent annually on direct marketing, none on advertising. Counting both promotional sales for existing clients and introductory offers to acquire new customers, more than seven million letters are posted each year. While 30-40,000 customers are lost annually, the number of new clients often surpasses 70-80,000 so that an average increase of 30-50,000 customers has been the norm in recent years. Jacques data base now numbers some 500,000 customers whose buying patterns are well-known at company headquarters. An incredibly 92 percent of the total of 2.35 million shopping acts are registered via a personal client card that every Jacques’ customer is given. Statistically, the average purchase consists of eight bottles with a value of 48 Euros ($ 61,50), but each customer can be addressed individually according to his buying patterns. If a customer buys only French wines, he will not regularly receive advertising for Italian or Australian wines. Nor will a customer with an average price per bottle of above ten Euros be specially targeted for new entries in the bag-in-box segment.
Educational Package
Each new customer receives a small wine lexicon as a welcome gift, “The ABC of Wine” by Dagmar Ehrlich. The guide, which is also available at book stores, is printed as a special edition for Jacques Weindepot, listing only the wines available at the individual depots. The novice learns about grape varieties, fermentation and maturation as well as which trends to watch and how to build a personal wine cellar. The education has one main goal: the more a customer knows about wine, the more he wants to taste, the more open he is for new experiences.
Building its future today, Jacques has always sought to have well-trained personnel that can answer questions knowledgably. Therefore, the company has never been tight-fisted when it comes to training their depot owners, most of whom are academics who have studied language, history or sociology and find wine an interesting topic of conversation. They, as well as their employees, are regularly offered seminars on sensory analysis, viticulture, wine regions and other related topics culminating often in a degree from the International Wine and Spirits Education Trust. Work shops on customer retention, consumer promotion, behavioural science and related topics round up the educational package.
What plans and prospects does Germany’s largest specialised wine retailer have for the future? “The expansion will continue at the current pace, with |
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smaller towns and rural areas now targeted,” answers Bernd Hoolmans. “Our current depots target only some 60 percent of the German population. We must now fill in the gaps.” However, expanding abroad is not high on the list of priorities. Currently Jacques Weindepot is only present in one foreign country. “The six stores that we have in Austria have not been really successful,” he notes. “Each market presents its own unique challenges. Our concept works perfectly in Germany because it was specially designed for the individual needs of this country. In order to be successful abroad we must find the right partners and adapt the concept to the market in question.”
The wine range will continue to diversify. New origins have been making their way onto Jacque’s shelves ever since 1985, when the purely French range was complemented first by Italian, then later by Spanish and ultimately both Australian and Chilean wines. Consumers are a lot more open nowadays than in the beginning and dare to taste what is offered even from the most exotic origins. Currently there is hardly a wine region in the world that has not made its way onto Jacques’ shelves. Interestingly enough, though, one of the last entries was German wine, which has nonetheless taken off quickly. In 2005 the volume of German wine sold more than doubled, from 3 to 6 percent, making it the fourth most important origin in Jacques’ range.
Commentary by Richard Grosche
has enjoyed an unrivalled success in Germany over the past decade. No other specialised wine retailer has a better network of stores, a bigger or more precise database of its customers and no other sells more wine – and the average price for a wine sold at Jacques is more than four Euros above the general average for the trade. However, Jacques is only at the top of the specialised wine trade and this is not where large numbers of bottles roll. Aldi, with a quarter of the total market, is Germany’s undisputed number one wine outlet.
This is, of course, no surprising news at headquarters of the Hawesko Holding; but how do you reach discount shoppers? The group recently presented its answer, a new independent chain of stores called “multiwein”. The aim of these markets is to attract those customers who buy wines in the middle price segment of 2.50 to 4.00 Euros. As in Jacques, tasting is an integral part of the new concept. 13 grapes have been attributed three different flavours and all wines in the shop sorted according to their primary aroma. Thus, the customers can choose according to taste and aromatic preference rather than origin or name.
The concept sounds interesting and well designed, but why does a retailer with such a tightly woven net of stores start again at square one? For the next three years, a total of ten stores in metropolitan areas are planned. That is far from the 255 stores that Jacques has built. The Hawesko Holding wants a new chain with a new face for a new clientele; but one question remains: Is the Jacques customer who buys a bag-in-box, after all 10 percent of Jacques turnover, so much different from the shopper targeted by multiwein?
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