Playing To Win
Commercial Innovation Strategy
The Single Barrel Project at Champagne Paul Launois
Last week, I was touring Champagne with my wife, Marie-Louise, and we visited several champagne houses — big ones, like Veuve Clicquot, and small ones, like Paul Launois. Launois was such a wonderful example of Commercial Innovation, I had to write a piece about it, which I have done in my 30th Year III Playing to Win Practitioner Insights (PTW/PI) piece: Commercial Innovation Strategy: The Single Barrel Project at Champagne Paul Launois. You can find the previous 140 PTW/PI here.
Commercial Innovation
I was introduced to the term Commercial Innovation almost twenty years ago by then P&G marketing executive, Daniel Epstein, who served as P&G’s Commercial Innovation Leader from 2002–2010. It refers to innovation that makes a product (or service) more attractive to customers without a change to the fundamental product. An example is when Coca Cola Company sold Coke featuring a variety of first names on the can. The cola inside was exactly the same. The aluminum can was the same. All it required was a custom paint job. But it was cool. I was certainly happy when a friend gave me a can of Roger Coke.
Another example is American Express Small Business Saturday. The small business sector has become an increasingly important market for Amex, especially since profitability in the credit card business for large corporations has gone to hell-in-a-handbasket. In 2010, Amex created the concept of Small Business Saturday, the one Saturday a year (the Saturday immediately after Thanksgiving) on which consumers are encouraged to support that sector by going out of their way to buy from small businesses. There was no change in the Amex small business offering. But it made all those small businesses that saw an uptick in their business feel more warmly about Amex. The US Senate even officially recognized it in 2011. And it wonderfully reinforced Amex’s branding for the segment: “We help small business do more business.”
I like Commercial Innovation because it offers up the opportunity to be highly creative in accentuating whatever advantage your existing core product/service offering affords you. It can provide productive ways of moving the ball forward between major product/service innovations.
Champagne Daniel Launois
The Launois family had been growing grapes on 15 acres of Champagne land for three generations before Julien Launois, along with his wife Sarah, decided to return from overseas to the village of Le Mesnil-sur-Oger in 2015 to produce champagne instead of selling the grapes to the local cooperative as the family had long done. The young couple choose to name the champagne house after their 9-year-old son — hence Champagne Paul Launois. He would be the winemaker and she, an artist and graphic designer, would oversee graphic identity, including the house logo and the bottle labels. And make no mistake about it, having a graphic designer as a partner in this venture has visible benefits. The labels are a pleasure— beautiful, amusing and enlightening. Seeing a graphic designer take on the boring back-of-the-label information and turn it into a cool infographic was a treat, to be sure.
Julien is an unassuming young man with a giant beard an infectious enthusiasm for his craft. He generously showed my wife and me his vintage basket press in the pressing room adorned with Sarah’s beautiful mural covering an entire wall of the room and illustrating the entire champagne process from grape-picking to finished bottles. He then toured us through the cellar with bottles in riddling racks and barrels suspended on wires not unlike art in a modern gallery. Later Sarah was coaxed out to show us her studio full of large figurative line-drawing canvases — some of which were destined for Launois champagne labels.
Building a new champagne house was not a trivial task. There are over 2000 champagne producers, many with giant scale, including the biggest, Moët & Chandon, producer of 3 million bottles per year and owned by luxury colossus LVMH, and with long-established brand names, like Veuve Clicquot, Perrier-Jouët, and Laurent-Perrier. Theirs was to be a tiny producer — 25,000 bottles per year (a .0083 Relative Market Share!) — with an entirely new brand name.
Still more competitively daunting, they were producing according to a strict set of rules in the ‘champagne appellation d-origine controllée,’ so they had limited degrees of freedom in terms of product innovation to overcome scale and branding disadvantages. They could aim for high artisanal quality with their small production, which could be handcrafted in a way that Moët & Chandon never could. But there were already innumerable high-quality, artisanal champagne producers with far more established brand names.
How was Champagne Paul Launois to create some sort of advantage in this challenging and restrictive competitive environment? Their grapes are from very good plots — classified as Grand Cru, the very highest classification. However, they could sell those to the cooperative for Grand Cru grape prices without all the hassle and expense of turning them into champagne. How could they add a level of value that would justify all the work?
The answer was a super-clever Commercial Innovation gambit. Over and above the quality of the grapes going into the front end of the process, there are three big taste levers to pull. First is to what degree the barrel is toasted — light toasting brings out a more oak-forward flavor in the champagne, heavy toasting produces a mellower result. Second is how much sugar ‘dosage’ (as it is called in Champagne) is added to the wine — seven levels from Brut Nature (no sugar added) to Extra Brut to Brut to Extra Sec to Sec to Demi-Sec to Doux (more than 50 grams of sugar per liter of Champagne). Third is amount of aging, anywhere from the three-year minimum for vintage champagne to ten years for a long-aged result.
To utilize those three levers in a unique way, Launois launched his Single Barrel Project in 2016. He toasted six barrels uniquely in gradations from lightest to heaviest. And he made the still white wine of the first fermentation (the second fermentation that produces the bubbles is done in the bottle) in each of the six barrels. Then customers were offered the chance to visit the winery, taste the wine from the six different toasts (which was reduced to five in the second and subsequent years of the Project), and choose the barrel for which they liked the taste best. The customer would commit to buy the entire barrel (which would generate 216 single bottles of Champagne).
In addition, customers would be able to select their own exact dosage and aging profile (in fact, they could pick multiple aging durations for portions of their 216-bottle allocation), thus creating an entirely customized user experience. (Over time, the level of customization has increased as the barrel customers are able to consult with Launois on other aspects of the champagne-making process).
This shift in the customer experience from ‘I’m buying a terrific Grand Cru Champagne’ to ‘I am working directly with the winemaker to customize a unique-to-me barrel of terrific Grand Cru Champagne’ has afforded Champagne Paul Launois rock-star status in a few short years. The Single Barrel Project needed to be expanded from six barrels in the first year (2016) to 10 in the second (2017) and 20 in the third (2018) just to attempt to keep up with the demand. Approximately 50% of all champagne is consumed in France but in its short life, Launois already exports 90% of its production. This has been helped by to-die-for reviews in the international wine press, plus general readership giants like New York Times.
The Single Barrel Project still accounts for only 20% of production, but it has helped enormously in putting the rest of the house’s production on the global radar screen. It has been an absolutely textbook way to put a new player on the map in an industry that is ancient and tradition laden. And the halo over the other 80% means that the rest of the production doesn’t need this sort of customization. Plus, for an artisanal producer, selling 216 bottles of high-end champagne at a time out of the cellar door has pretty attractive economics. However, sales don’t seem to be a big problem. Julien quietly mentioned that production is already spoken for through 2027!
To be precise, the Single Barrel Project at Champagne Paul Launois arguably isn’t pure Commercial Innovation. There is customization of the product — by toast, dosage, and aging. And there is individual time spent with the Single Barrel Project buyers. But in terms of the deviation from the rest of the economic system (growing and harvesting the grapes, pressing them, first and second fermention in the cellar, marketing and selling them), I would argue that the customization costs are minor in comparison to the monumental benefit in both branding and pricing. That is why it struck me as a beautiful case of a cool strategic concept.
Practitioner Insights
As I have long argued, it is essential for successful strategy to have a unique and compelling WTP/HTW pair — the heart of strategy. But even if you have a great one, don’t stop thinking. More so, if it is solid but not spectacular, you really must keep thinking. Ponder how you can accentuate your advantage with Commercial Innovation. If you are Amex Small Business and already winning in the segment, come up with Small Business Saturday that becomes an institution with which your client base credits you. If you are Julien and Sarah Launois and your core WTP/HTW is solid but facing lots of great competition, you think boldly and knock it out of the park with the Single Barrel Project Commercial Innovation.
How did both do it — and how can you? Hold your core offering largely constant and ask within that constraint is there a way that you could make it substantially more valuable to the customers in your existing WTP? Go deeply into your customers’ heads. How could we create a more meaningful connection with them? In the case of Amex Small Business, it was to drive more business in their customers’ direction. In the case of Launois, it was to customize in a way that made customers feel truly special.
The possibilities are endless, and worth taking the time to probe because it can vary from a nice uplift, as with Amex, to a transformational way to launch your business, as with Champagne Paul Launois.
