Wednesday, October 10, 2012

Castel Group in China: a risky bet on the future

Attracted by the potential of the Chinese market, Castel invested a lot in order to build its brand in China.

In 2006 no Chinese knew about Castel.
Today surprisingly, Castel is know by all as a famous brand, a symbol of french wine.
Thus when you ask a Chinese if he knows french wine he will answer you:
Bordeaux, Margaux, Mouton Cadet, Castel, Provence, Cabernet Sauvignon

  • Castel bottles its wine in mainland China and has no intermediaries in order to offer quality wine at cheaper price
  • In order to be known Castel developped a strategic partnership with Changyu, number 1 in China. Castel benefit from Changyu point of sales.

This is a great victory Castel became in a few years a famous brand known by all Chinese. 

What are the cost of this achievement?

  • Castel invested huge amount of money in order to establish its brand. Until now it didn't win anything it just built brand awareness
  • Today in Changsha almost all small commerce sell Chinese and french wine. All the french wine is Castel... most of it is fake!
Castel face counterfeit wine. It is a very difficult and uncertain fight. As long as counterfeit Castel wine will be sold at low price everywhere in China, Castel can never do well!

Unless Castel manages :

  • to educate customers but this takes decades
  • to establish its own distribution circuit: Castel shop, wine cellar for rich and very rich Chinese.
To my greatest surprise I noticed a Castel shop on Changsa. It was great disappointment! 
See pictures:

There was so little wine choice. The shop was outdated and even dilapidated. I wonder if this shop is really a franchise set up by Castel or another fake shop? 
Still you can see the shop number on the front door. It is common in China for franchise to put up a franchise number. This helps to attract Chinese customers. Chinese customers love large companies: the bigger the better. Let's hope it can change for a more local approach.

Castel doesn't want to use Nicolas in China as the brand is already registered by a Chinese! 
What is more the group is in trial for their own brand (I believe that the Group registered Castel in English but not in Chinese caracters!).

The future of Castel in China is uncertain.

NB: After discussion on facebook I need to add some important facts to this article:

  • I learnt that Castel wine is sold from France at 1,20 to 2,55 euro per bottle! It is a very low price! You should double the price in order to obtain the price at which the wine arrives in China. It means less than 50rmb! Even though Castel wine is sold at least at 120rmb per bottle! There is a big margin!

  • Castel only get a small margin 0,10 to 0,50 euro per bottle but the distributor in China benefits from this important margin! The distributor negociated the exclusivity and in exchange they take care of all the advertisement as well. Less than 10 years ago, Castel negociated an important contrat with a Chinese distributor. This Chinese company managed to make Castel a top brand known in China from all Chinese consumer. It means that Castel didn't pay anything and I was mistaken. Since the margins are so important, the Chinese company makes a fortune!

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