The just-drinks interview - Concha y Toro global marketing director
just-drinks speaks to Concha y Toro's Giancarlo Bianchetti
Last month, just-drinks was invited up to Manchester to see Concha y Toro's latest - and most high profile - advertising tie-up at work. Dean Best, who jumped higher than any other at the offer, took the opportunity to grill Giancarlo Bianchetti, global marketing director for Concha y Toro, not only about the marketing deal, but also about the past, present and future for the Chilean wine giant.
It is a wet, dreary Saturday afternoon in the north of England, but the thoughts of Giancarlo Bianchetti are thousands of miles away.
Bianchetti is in Manchester to mark the company's sponsorship deal with football club Manchester United. The three-year deal – the financial details of which remain firmly undisclosed - will see Concha y Toro's name flash up on pitch-side hoardings at Manchester United's Old Trafford stadium and the company's wines served in the ground's lounges, boxes and bars. However, Concha y Toro hopes the agreement will reap international rewards, most notably in Asia. As he speaks to just-drinks, Bianchetti's thoughts drift east as he considers the potential benefits of the deal.
“Although we have an important presence in Asia in terms of distribution,” Bianchetti explains, “we really believe the potential of the Asian market in terms of bigger volumes is very important. Getting together with Manchester United, which is a very powerful brand, will help us to seduce more consumers in Asia to our wines.”
Just 7% of Concha y Toro's export volumes headed to Asia in 2009, but the company has some key markets in the region, particularly Japan and South Korea, and the business has set up a dedicated division for the continent. Nonetheless, Bianchetti believes Concha y Toro needs some fresh impetus in Asia and argues the deal with Manchester United will give its business there a boost.
“We've been working in Asia for a long time but I think we need to really take the next step in developing our business and brands in Asia,” he says. “We're in good places but we need something to really make the next step and I think Manchester United will help us with that.”
Giancarlo Bianchetti, global marketing director at Concha y Toro
Asia is a buoyant market for Concha y Toro and has provided the company with some relief during the downturn. Worldwide, the company's export volumes grew year-on-year in the first half of 2010 from 8.32bn cases during the first six months of 2009 to 9.17bn cases, a creditable performance in tough trading conditions. However, a closer look at the figures shows that Asia accounted for a greater proportion of shipments in the first half of 2010 - up from 8.3% to 11.1% - while export volumes to Europe and the US fell. “In the case of super-premium and icon brands," he says, "I think that Asia has given us a hand with moving some volumes from some key markets that are quite affected by the crisis.”
One key market buffetted by the downturn is the US. Concha y Toro's shipments to the US have slipped from 18% of its total exports in the first half of 2009 to 17.1% between January and June this year. Bianchetti admits lower confidence among US consumers has affected sales but, typically, he is optimistic about Concha y Toro's ability to adapt to any changes in demand.
“What is happening currently in the US is that the consumer is quite afraid of buying really expensive products in general, not just wine. What they are trying to do now is buy more inexpensive wines. They are searching for value. For the really, really expensive wines like [upmarket Concha y Toro brand] Don Melchor, the situation is more difficult. Although [US consumers] are maybe preferring some Californian wine, the market is so big, the US consumer is so open and Chile and Concha y Toro are offering great value. We're doing well.”
Bianchetti lists the UK alongside the US as one of Concha y Toro's key export markets. In the UK, the company has recently decided to move away from the lower end of the market to focus on wines it believes it can sell at higher price-points. Consumer demand may be fragile but the strength of the Chilean peso against currencies like sterling has been difficult to absorb, particularly on wines towards the cheaper end of the category.
“We were facing a weak currency and some cost increases mainly in terms of wine, so we faced some pressure,” Bianchetti says. “You always try to establish medium- and long-term relationships with the customer, but sometimes we cannot sustain some specific efforts for promotion. Instead of saying we won't do anything, what we try to say is: 'Okay, we are having a tough situation so let's be more rational in how we focus these promotions.' We want to maintain relations with key customers but I cannot sell a case on which I am losing money. Sorry about that. Maybe I can do it once for a specific promotion. We want to maintain the relations but at some specific moments. We cannot do miracles.”
For Bianchetti, foreign exchange is a factor that is impossible to manage. In the face of those headwinds, he explains, a company needs to be cost-conscious on the one hand, but on the other it needs to nurture its brands. Bianchetti insists that, excluding the deal with Manchester United, Concha y Toro has "maintained" its marketing investment during the downturn. He admits the company may have "changed the mix" when deciding where to direct its investment - he naturally cites Asia as a focus market - but he also lists the Nordic region, Brazil and Russia as markets that have benefited from the company's “reallocation of resources”.
"In the case of premium brands, something you cannot lose in an economic crisis is your position in the market or in the store. If you say 'No, we are not making any investment because these are tough times', you will lose your position in the store. If you built healthy, strong distribution, that is something you must maintain in the crisis," he says.
The issue on which Bianchetti is most forthright, however, is whether beverage alcohol brands should use sport for marketing. Pernod Ricard is a company that believes the two should not mix but that is not a view endorsed by the Concha y Toro executive. In fact, Bianchetti talks at length about why a link between wine and sport should not be frowned upon. Wine, like exercise, he says, is intrinsic to a healthy lifestyle.
"One of the key elements is that - and this is quite unique from my point of view - there is a difference between the different types of alcohol. There is a difference between spirits and beer and wine. Second, wine as a product is related to a type of food, which is also related to a healthy lifestyle. If you get the chance to experience the lifestyle of the French or the Italians or the Spanish, you will realise they have a healthy lifestyle: Nice food, a little bit of wine, exercise. I do not believe that you can just say: 'I don't want to be with sports' Why? Sport is good for health. And a good diet is part of health. And wine is part of a good diet. We don't want anybody to start binge drinking with our wines but, in the case of wine, something we need to stress is that it is a cultural product. Being together with Manchester United, we discussed this internally and nobody has got any doubt about it. We said: 'What about sport and alcohol?' Worldwide, the majority of fans is of legal drinking age. Let's do it and try to show our values.”
Bianchetti does not stop there. He tells a story about when Concha y Toro and Manchester United were in Mexico to promote their agreement and he vetoed an idea from within the company for a group of deprived local children to meet some of the squad for fear of any perception of a link between alcohol and children. "The key is to be responsible. We want to be responsible. I would never, never, never do something in terms of advertising to kids.”
As we continue our discussion, the weather shows little sign of easing and the conversation turns to whether the worst of the economic storm-clouds have passed. Bianchetti believes economic conditions will improve as we head into 2011 but he argues the recovery will be a slow one.
“2011 will be a better year,” he says. “Consumers will start realising that things will be more stable and consumption will come back.” He does, however, remain cautious about the pace of recovery. “2011 will be a good year although, to recover the previous momentum that we used to have as an industry, I think we will need a couple of years. One extreme is to think we will have another V. I don't think that will happen. We will go up but the recovery will be slow.”
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