MARKETING – BRAND BUILDING: The Warmth of the Sun

The Krug Champagne house has a highly individual brand model, a solar system of bottlings revolving around the iconic Grande Cuvée. Patrick Schmitt reports

Krug facts

• Krug was founded by Johann-Joseph Krug in 1843
• The fifth and six generations of the Krug family are involved in the LVMH-owned company
• The first fermentation of all Krug Champagnes takes place in small oak casks
• Krug Grande Cuvée is aged for at least six years
• Krug’s Clos du Mesnil is 100% Chardonnay from a small walled vineyard
• Krug makes vintages usually three or four times a decade and releases them only when they are ready to drink, not necessarily in chronological order, ie 1989, 1988, 1990
• Vintages are released after ten years’-plus ageing
• Krug uses all three Champagne grape varieties for Krug Grande Cuvée and Krug Vintage
• Forty per cent of grapes for Krug are grown in the house’s own vineyards
• Krug only uses the juice from the first pressing

Krug’s Panos Sarantopoulos shifts in his chair, smiles, before gently interrupting the conversation. The term “straight Krug” has upset him. It was used inadvertently to describe the Champagne house’s Grande Cuvée, but the expression joins a list of unsuitable references used by journalists over the years for this, the core Krug proposition. Anything from “entry-level” to “average” has apparently been used.

Rémi Krug would wince at such a notion, explains Sarantopoulos, who has just taken on the role as president (from MD) of the  Champagne house after Rémi’s recently-announced retirement.

The reason for such sensitivity is down to the positioning of the Champagne: “Krug starts where Champagne ends,” as Sarantopoulos says, admitting these are not his own words.

He is referring to the fact there is nothing in the range below the Grande Cuvée, a prestige cuvée. Further, there is no vertical scale within Krug, a top and a bottom of the range. “Krug is not a triangle on top of the Champagne pyramid [made up of non-vintage, vintage and finally prestige cuvées], Krug is a solar system.”

The Grande Cuvée is at the heart of this – the sun – and the Krug vintage, “Collection”, rosé and single vineyard Clos du Mesnil are like planets in orbit. “One is not better than the other, the difference between them is rarity.”

Unusual model
It is an unusual brand model, until one realises the concept of compromise doesn’t exist within Krug. Sarantopoulos, who joined the house in April last year, still appears genuinely amazed by the care that goes into making the Champagne. “I look at the winemakers in fascination,” he says. “Rémi compares them to French chefs who go to an open market. They pick the finest ingredients and with their own style they create dinner. Similarly the Krug winemaking team will go out to their partners and select the finest lots… And the grape growers take pride in the fact they reserve the heart of their production for Krug.” Sarantopoulos has witnessed this system first-hand, having taken part in the 2006 harvest with his two children, aged six and seven. If the grapes from that year are used to produce a vintage Champagne, Sarantopoulos’s children will be in their first year at university when the product hits the market. “The process is humbling,” he says.

As for how much Krug is produced, owner LVMH is unwilling to give exact figures. Sarantopoulos admits Krug represents around 0.2% of Champagne production, so around 600,000 bottles, and adds that the company “is fortunate that my predecessors laid down plenty of wine through the ’90s.” This has allowed Krug to raise volumes slightly, although such an increase Sarantopoulos describes as a “drop in the ocean” that is the Champagne industry as a whole. “We are maybe up from 0.2% to 0.22% of total production.” So Krug has approximately another 60,000 bottles to play with, and is planning for further growth in the future – the company laid down more wine than it sold in 2006.

Sarantopoulos is also grateful to Mark Cornell, immediate past MD, “who took certain business decisions which allowed us to refocus where we sell the Grande Cuvée. For example, shifting business from the airlines to certain markets”.

Market focus
Nevertheless, Krug “can’t be everywhere”, adds Sarantopoulos. “We have chosen to concentrate our efforts on seven markets: the UK, US, Italy, Japan, Spain, France and Hong Kong.”

The latter, although an emerging market, “acts as a lighthouse” for the Champagne, especially as “China is too big for Krug to open”, according to Sarantopoulos. As for the UK, this market has been a “traditional stronghold for Krug”. The Champagne house has nevertheless been working hard to increase the presence of the product, that is, “in the right places”. This has meant a shift of focus from off- to on-trade, explaining the marked growth in by-the-glass sales of Krug in Britain. “While a year ago there were four or five outlets where Krug was served by the glass, now there are around 30.” There is even “Krug high tea” offered at certain top-end hotels. Then there is the Krug Room concept.

These are Krug-branded chef’s dining rooms and so far the Champagne house has four: one in London’s Dorchester Hotel, one in the Mandarin Oriental in Hong Kong, one in Switzerland in the Lausanne Palace Hotel and one in Tokyo at The Tanga Restaurant.

According to Sarantopoulos, the Krug drinker, or rather the Champagne’s target audience, is the “creative individual”, whereas for other prestige cuvées “audiences tend to be more success-driven, or more bling”.

However, Sarantopoulos doesn’t want the brand associated with any one occasion. “I dislike boxes – for example, you should only drink it by the glass, or bottle, with food or without. Krug is open, it is about throwing back the shoulders and letting the air in. It can work with dinner or as an aperitif.”

Marketing facts

• After several years’ absence, Krug began advertising in consumer print media in 2005 with the No Krug No Thanks creative work developed by Saatchi
• Krug has the same image, price and positioning around the world
• New packaging was developed for Grande Cuvée in 2004 and introduced in 2005
• The new graphics were introduced for Krug Rosé in summer 2005
• Krug 1995 and Krug Clos du Mesnil 1995 were both released with new packaging in 2006
• New packaging for Krug Collection will be introduced with the bottles of 1985 and magnums of 1981 this spring
• Krug Teas are served at the Park Lane Hotel
• Krug Rosé is £60 a flute at London’s Sketch
• Krug half-bottles can be found in rooms in Claridges (rosé), and the Soho Hotel (Grande Cuvée)    

© db February 2007