Author

Brand Hubay Hanga Zsuzsanna management in the Submission Department of Retailing, Hungarian Sales and Marketing growing region, Thesis Supervisor Assoz. Univ.- Prof.in Dr.in Katharina -Hegyalja Hofer

March 2018

Master Thesis to obtain the academic degree of JOHANNES KEPLER UNIVERSITY LINZ Altenberger Straße 69, 4040 Linz, Master of Science Austria in the Master’s Program T: +43 732 2468 0 F: +43 732 2468 8822 General Management [email protected]

STATUTORY DECLARATION

I hereby declare that the thesis submitted is my own unaided work, that I have not used other than the sources indicated, and that all direct and indirect sources are acknowledged as references.

This printed thesis is identical with the electronic version submitted.

Linz, March 2018

Hubay Hanga Zsuzsanna

2 ACKNOWLEDGEMENT

Hereby I would like to thank to all the people, who widely supported me in different ways, while I was writing my thesis. My true acknowledgements to my supervisor Assoz. Univ. - Prof.in Dr.in Katharina Hofer for providing help and constructive criticism.

Furthermore, I would like to express my gratitude to o. Univ.-Prof. Dkfm. (t.-o.) Dr. Gerhard A. Wührer, who gave useful advices and provided help during the Master Thesis Seminar.

I would like to say thanks to all interview partners, who agreed to be interviewed and provided expertise, important facts and interesting information during the research study.

I am very grateful to my family, especially to my parents and my brother with all my heart for their understanding, support, help, patience and love during my studies. Without their continuous support my stay in a foreign country would not have been possible.

Finally, a great thank you to my boyfriend for the love, patience, support, advices and motivation, all the time during the way.

3 Table of Content

1. INTRODUCTION ...... 8

1.1. SHORT REVIEW OF THE HISTORY ...... 8

1.1.2. – WINE COUNTRY ...... 9

1.1.3. TOKAJ-HEGYALJA WINE GROWING REGION ...... 10

1.2. BACKGROUND TO THE STUDY AND PROBLEM DEFINITION ...... 17

1.3. RESEARCH OBJECTIVES ...... 18

1.4. SCOPE AND STRUCTURE OF THE STUDY ...... 19

2. THEORETICAL FOUNDATIONS ...... 20

2.1. GENERAL INFORMATION ABOUT BRANDS ...... 20

2.2. PRODUCT AND THE BRAND ...... 22

2.3. WINE BRAND ...... 23

2.4. BRAND MANAGEMENT ...... 23

2.4.1. BRANDING AND INTERNATIONAL BRANDING ...... 24

2.5. CONSUMER-BASED BRAND EQUITY MODEL ...... 25

2.5.1. IDENTIFICATION AND DEVELOPMENT OF BRAND PLANS ...... 26

2.6. BRAND IDENTITY ...... 27

2.7. BRAND AWARENESS ...... 28

4 2.8. BRAND IMAGE ...... 29

2.9. BRAND MEANING ...... 29

2.10. BRAND RESPONSES...... 31

2.11. BRAND RELATIONSHIPS ...... 31

2.12. PCDL MODEL ...... 32

2.13. BRAND GOVERNANCE ...... 35

2.13.1. CHALLENGES AND THREATS OF BRAND EQUITY IN THE FUTURE ...... 36

2.14. HOW TO NAVIGATE THE FUTURE OF BRAND MANAGEMENT...... 39

2.14.1. SIX FACTORS, WHICH HELP MANAGERS TO OPERATE NEW CHALLENGES OF BRAND MANAGEMENT: ...... 39

2.15. BRANDING IN WINE INDUSTRY ...... 42

2.16. MANAGING BRANDING IN THE WINE INDUSTRY ...... 43

2.17. BRAND EQUITY IN THE WINE INDUSTRY ...... 45

2.18. EASTERN EUROPEAN IN WESTERN EUROPE ...... 46

2.19. PLACE-BASED MARKETING ...... 49

2.20. DIMENSIONS OF WINE REGION EQUITY AND THEIR IMPACTS ...... 51

2.21. DRIVERS OF WINE REGIONALITY ...... 52

2.22. STATUS RE-CATEGORIZATION ...... 55

2.23. REBRANDING A WINE REGION ...... 58

3. RESEARCH METHODOLOGY ...... 61

5 3.1. RESEARCH QUESTIONS, AIMS AND OBJECTIVES OF THE STUDY ...... 63

3.2. RESEARCH DESIGN...... 63

3.3. DATA COLLECTION METHOD, INSTRUMENT AND SAMPLING ...... 64

3.3.1. PROFILES OF ...... 64

3.4. DATA ANALYSIS ...... 74

4. FINDINGS OF THE EMPIRICAL STUDY ...... 75

4.1. INDIVIDUAL ANALYSIS ...... 75

4.2. ANALYSIS OF THE INTERVIEWS - SIMILARITIES AND DIFFERENCES ...... 75

4.3. SUMMARY ...... 99

5. CONCLUSION, IMPLICATIONS AND LIMITATIONS ...... 103

5.1. SUMMARY AND CONCLUSION ...... 103

5.2. IMPLICATIONS AND RECOMMENDATIONS ...... 106

5.3. LIMITATIONS OF THE STUDY ...... 109

6. REFERENCES ...... 110

7. APPENDIX ...... 127

7.1. INTERVIEW GUIDELINE FOR INTERVIEW PARTNERS ...... 127

7.2. INTERVIEW QUESTIONS ...... 127

7.3. INTERVIEW PARTNERS - OVERVIEW ...... 130

6 7.4. INTERVIEW TRANSCRIPTS...... 131

7 1. Introduction

1.1. Short review of the Hungarian wine history

The last 50 years Between 1938 – ’48 Hungarian wine production developed rapidly, despite of the war. However, in 1949, everything changed when the country was occupied by the Soviet parties. All were nationalized and mass production took place. The system denied geographical and economic factors, instead they preferred political interests. As a result of political mistakes, more than 40 thousand hectares of grapes died out in the vineyards. Between 1966-1969, large quantity of grapes was produced. In the following years, cooperatives and state economies had the opportunity to develop and wine trade. Quality was deteriorating continuously thanks to the constant wine shortage, low income, low demand and low prices.1

From the middle of 1970, 60% of Hungarian wines were sold in countries of the Soviet Union and only 15% reached Western-European countries. The Russian Empire was a really good market for Hungarian wine, however in these years quantity, alcohol and sugar content were the most important measures of wine. There was no opportunity to trade with high quality wines, therefore producers used them to improve the quality of bad quality wines. The most harmful consequence of this process was that, Hungarian wines’ fame suffered huge loss all over the world. Those consumers, who wanted quality, switched to other wines and they forgot the famous, specially selected Hungarian wines and vineyards. While a large part of the world suffered from overproduction of wine, in Hungary cheap mass wine and the lack of quality wine came to stay. Between 1980-1989, 50 thousand hectares of grapes were planted, however 150 thousand hectares were cut out. Furthermore, 20 thousand hectares of historical vineyards became fallow. In 1982, the successfully functioning Research Institution (of viticulture) was reorganized and was connected to state firms. After the change of the regime, privatisation started and family vineyards and quality oriented firms were established. They had a positive effect on the quality of Hungarian wine, moreover they contributed to the creation of the basis of Hungarian Wine Rights.2

1 Cf. Mészáros et. al, (2012), p. 21. 2 Cf. Mészáros et. al, (2012), p. 22-23.

8 1.1.2. Hungary – wine country The Carpathian Basin gives place for the conscious viticulture and wine production for centuries. Geographical and climatic facilities contribute to the production of high quality wines. There are 22 Hungarian wine growing regions in the Carpathian Basin plus other ones in the surrounding areas. 1. Source: Wine Folly (2016) Unfortunately, size of the vineyards decreased drastically, in 2011 it slightly exceeded 60 thousand hectares. This number was double 10 years ago.3

Regulation of protected origin In 2011 all EU member countries, which produced wine had to set up the rules for their own wine growing regions. In the EU there are wines, which are marked as Protected Designation of Origin (PDO) and Protected Geographical Indications (PGI), furthermore there are wines, which are without Geographical Indications (GI).4 These indications constitute important regulations of the Hungarian wine growing regions as well.

Protected Designation of Origin: It can be a region, defined location or in extreme cases name of a country, which is used for marketing of the wine product; if quality and features of the product is due to basically or solely to the given geographical environment and the related natural and human factors; if grapes used for the production are originated from the given geographical territory; or production is also happening there and it is originated from the species, Vinifera.5

Protected Geographical Indications: It is an indication, which is used for marking a wine product in the matter of a region, defined location or in extreme cases a country, if it has special quality, fame or other

3 Cf. Mészáros et. al, (2012), p. 162-163. 4 Cf. Mészáros et. al, (2012), p. 163. 5 Cf. Mészáros et. al, (2012), p. 163.

9 features which can be connected to this geographical origin; if 85% of grapes used for production is originated from this geographical territory; furthermore it is produced on the given geographical territory and the product is derived from a Vitis Vinifera species or from the cross breeding of species of Vitis Genus.6

Wines without Geographical Indications: Products, which can be produced with the usage of classified grape varieties of any regions. Without any yield control. The producer has to mark on the product the name of the , the brand name, the and the species.7

Terroir can be defined as production site, wine area and wine growing region. Defined production site is a wine producing territory, which has univocal demarcation lines and classified according to professional viewpoints. Its name is also used to mark the PDO (Protected Designation of Origin) of those wines, which are originated from a defined production site. Types of it can be: wine growing region, zone, township, vineyards of township. Wine area is an association of wine growing regions with similar natural endowments and traditions. Wine growing regions are (according to the 2004. Act XVIII. 2§ 4.) production sites, which have similar climate, terrain and physiological abilities; have typical species combinations; have special traditions relating to viticulture and wine production, furthermore have special kinds of products that can be originated from the area. Those townships are classified into a wine growing region, which territory exceeds 7% of the township’s territory used for agricultural purposes or those townships, where wine producing company is operated.8

1.1.3. Tokaj-Hegyalja wine growing region

Most probably Gaelic people were the ones who planted the first vines to the region, therefore it can be said Tokaj-Hegyalja is a wine growing region which was not set up by romans. History of the region closely connected to the history of the country, thus only main points will be mentioned in the historical overview of Hegyalja. In 1241, the Mongol invasion caused huge destruction in grapes plantations. This happened again in the 16-17th century, when the Turkish Empire occupied Hungary. At that time, the country lost its wine producing regions for a long time. However, wine growing regions in Northern-

6 Cf. Mészáros et. al, (2012), p. 163. 7 Cf. Mészáros et. al, (2012), p. 164. 8 Cf. Mészáros et. al, (2012), p. 164.

10 Hungary became more important, which ensured opportunity for Tokaj wines to develop. As I have already mentioned, written documents related to Aszú were found in 16th century, thus production of it started at that time. Primarily Polack tradesmen arrived to the region to buy and transfer the sweet nectar. Controllers worked according to a Latin regulation: “Ut vinum habeat colorem, odorem et saporem.” – “Sparkling, smell and flavour of the wine gives the real beauty to it.”9 In the second half of 16th century, thanks to Polack and Jewish tradesmen, Tokaji Aszú became famous in more and more royal courts. For example, Gustavus I., Swedish king, held 27 kettles, namely 72 litres of Aszú in his cellar.10 From the second half of 18th century, division of , main partner of Hungary in trade, secession of the most important engrossers and custom regulations of the Habsburg Empire highly limited the trade of Tokaj wines. Trade started to decline, however the price of Aszú increased, because it was harder to come at it. Maria Teresa recognized the problem and finally she gave some tax allowance to the producers to balance somehow the damages caused by customs duties. Decline of Tokaj-Hegyalja culminated with the destruction of vine-pest, when almost the whole region died out. Grafts were used to renew plantations. However, struggles didn’t end. After World War I with the peace- treaty Trianon, Hungary lost two third of its territory, moreover huge part of its domestic and foreign markets. After World War II, liquidation of private property started, which pushed quality wine production to the background for a longer time. Takeover of planned economy led to further deterioration, because Eastern market brought the unpretending quantity production, which was unable to progress.11 After the change of the regime, at the beginning of 1990’s, the wine growing region started to develop again, but now producers had to compete with foreign investors. During privatization, plantations of the state company weren’t sold to one big investor, but they were sold separately which contributed to the establishment of lots of wineries. Differences between the wine growing areas gained importance again. Private companies, which were mostly foreign owned, appeared on the domestic market competing with each other and they used their distributional network on the foreign market.12

9 Cf. Haraszti, (2002), p. 12-13. 10 Cf. Haraszti, (2002), p. 14. 11 Cf. Haraszti, (2002), p. 16-17. 12 Cf. Haraszti, (2002), p. 17.

11 Tokaj-Hegyalja wine growing region is located in Northeast-Hungary and its territory is 88.124 hectares consists of 27 settlements. It is a historical wine growing region, which includes the most significant production sites of 9 settlements such as Tokaj, Bodrogkeresztúr, Bodrogkisfalud, Mád, Mezőzombor, Rátka, Szegi, and Tállya. Protection zone of the area has 18 more settlements, which covers all together the 27 townships of the region.13 Territory of wine plantations changed during the years. According to the data of the Hungarian Royal Statistical Office, in 1873 the region had 6500 hectares of production sites.14

2. Source: Bor, Mámor, Bénye

Wine Community had more detailed data relating to the region. As reported by it, in 2013 production sites amounted to 5800 hectares in Tokaj-Hegyalja. It is worthy to note that, since 2006 the size of production sites decreased and nowadays only half of the vineyards are used by producers. 1300 hectares are not used for any purpose. 15 Viticulture and wine production has old traditions in the area. It enjoys protection

13 Cf. Central Statistical Office of Hungary (KSH), (2016), p. 2. 14 Cf. Central Statistical Office of Hungary (KSH), (2016), p. 2. 15 Cf. Central Statistical Office of Hungary (KSH), (2016), p. 4-5.

12 since 1737 as a royal regulation pronounced the region as closed wine growing region.16 It is the only region in Hungary, which enjoys special protection. It is forbidden to process locally produced grapes, grapes juice and wine with other regions’ products. Furthermore, an act defines the types of quality wines, special quality wines, Tokaj wine specialities and their production rules.17 Since 2002 Tokaj-Hegyalja owns World Heritage title given by UNESCO, which based on the following criterions: “ represents a distinct viticultural tradition that has existed for at least a thousand years and which has survived intact up to the present”18, furthermore, “the entire landscape of Tokaj wine region, including both vineyards and long established settlements, vividly illustrates the specialized form of traditional land use that it represents.”19

The region got World Heritage title according to the following values:

- First closed wine growing region of the world (a production site, whose products deserve predestinated protection) - Vitis tokaiensis – home of ancient grapes - Cladosporium cellare – home of noble mould - It is the meeting point of Caucasian and Roman wine culture, heritage of folks and religions and traditions20

Since 2012, World Heritage property and its buffer zone is legally protected as ‘historic landscape’ according to the Act on the Protection of Cultural heritage. The aim of it, is to save historic buildings and the natural environment, help the usage of traditional land and ensure management of the property. “61% of this historic landscape belongs to the Natura 2000 network, hence enjoys EU level protection as a natural site of community importance.”21 The property is owned by private individuals, Churches, the state and by private companies. This diversity causes serious challenge for management. With the World Heritage Act of 2011, new management plan was put into force, which worked as a government decree and is reviewed every 7 years.22

16 Cf. FORSTER, Center of Heritage Protection, (2014) 17 Cf. Haraszti, (2002), p. 9. 18 Cf. UNESCO, Tokaj Wine Region Historic Cultural Landscape, (2017) 19 Cf. UNESCO, Tokaj Wine Region Historic Cultural Landscape, (2017) 20 Cf. Central Statistical Office of Hungary (KSH), (2016), p. 2. 21 Cf. UNESCO, Tokaj Wine Region Historic Cultural Landscape, (2017) 22 Cf. UNESCO, Tokaj Wine Region Historic Cultural Landscape, (2017)

13 Geographical situation: Natural borders of the region is signed by two rivers, Hernád and . Steaming of these two rivers ensure the evolution of the special Tokaj fungus-flora. Territory of Tokaj- Hegyalja run along the Sátor-hill till Sátoraljaújhely. The region has only one wine growing area, which is 11 149 hectares, but only 5658 hectares is the planted terrain.23

Climate: Climate of the region is rather cold then hot, however in case of good vintage it is hotter and is featured by longer autumns than other Hungarian wine growing regions. The Tokaj-hill provide protection for the terroir and contributes to the evolution of the favourable microclimate. Summer is long and sunny, autumn is dry and sunny, which helps the proper ripening of grapes and expansion of Botrytis. The average yearly fall is between 500-700 mm, which ensures steamy weather, that contributes to the of grapes. 24

Rocks: Basic rocks of the region are volcanic tuff and lava rocks. Volcanic activities created various rocks in different types and shapes. All transitions of volcanic rocks can be found in the region, which mainly differs in their silicon contents, namely ripalite with dacit and andesite. Besides lava rocks, volcanic detritus, bombs and tuffs occur as well. Volcanic operation and after-operation, furthermore thermal springs which built lots of trace elements into the rocks ensures high quality for the wines in Tokaj- Hegyalja.25

Grapes: Permitted grapes types in the region are , hárslevelű, sárga muskotály, kövérszőlő, and kabar. Dry wines are characterized by high acidity, complexity and typical aroma. Sometimes they are hard, but elegant and valuable with high potential since decades. They are produced from the abovementioned grapes types. Types of sweet wines are sweet Szamorodni, Aszú, Essence, which are produced from the grapes with noble rot.26 Sweet wines can ensure the biggest enjoyment, due to high sugar- and educts content. selected wines are showing different character according to the soil- content.27

23 Cf. Mészáros et. al, (2012), p. 250. 24 Cf. Mészáros et. al, (2012), p. 251. 25 Cf. Mészáros et. al, (2012), p. 252. 26 Cf. Mészáros et. al, (2012), p. 254. 27 Cf. Mészáros et. al, (2012), p. 253.

14 In general, there are four factors, which define the types and quality of wine28:

- species of the grapes - climate and the soil, namely terroir - knowledge of the wine-producer - vintage

Next to these factors, label, bottle shape and the glass in which the wine is served contributes to the uniqueness of Tokaj wines.

Label: It is not allowed to contain any false or illusive information therefore, it is a warranty card at the same time. According to the Hungarian Wine Act - in accordance with the EU regulations – on the label of quality wines originated from a defined terroir or special quality wines, and on the label of wines with protected origin, the following data has to be listed:

- Name of the wine, brand name - Name of the bottling company, seat, number of Hungarian Wine-Qualification Institute (OBI) - Provenance - Vintage - Designation of wine quality 3. Source: Borászportál - If the product is sold abroad designation of Hungarian origin - Nominal volume of the wine - Alcohol content of the product

Furthermore, after 5 years aging period, national and international awards of wine competitions can be marked as well.29

28 Cf. Haraszti, (2002), p. 21. 29 Cf. Haraszti, (2002), p. 54.

15 Bottle shape: Since 1700, sweet wines such as Aszú and Szamorodni are sold in traditional shaped, typical, colourless bottle. Since 1936, a protected bottle shape exists in Tokaj-Hegyalja for the wine specialities like Aszú, Szamorodni, Eszencia, which are sold only in these bottles.30Dry and semi-sweet wines are sold in the so-called rhine bottle, which can be white or green coloured too. The previously mentioned examples show 4. Source: A Borrajongó that, producers were using a variety of bottles.31 Whereas other wine growing regions like Bordeaux, Burgundy and Champaigne had their own bottle shape, Tokaj-Hegyalja didn’t have a unique and elegant bottle shape for the dry wine which could have represented the region appropriately on the market. Therefore, the members of a local association, called Wine Association Mád, worked out a plan about the design of the bottle. In 2012, the plan was implemented and the new bottle was born. It was similar to the Aszú bottle, because they wanted to follow the traditions, only the size changed, it became bigger. The aim of this initiative was to put an end to the release of dry wine of the region in ten different types of bottles, hereby to ensure a unique appearance to the wine-producers. Thanks to this event, something new started in the region and hopefully more and more producers will get wise to the fact, bottle shape is also important part of 5. Source: HG.hu the product and they are going to switch from the old to the new.32

30 Cf. Borország (2017) 31 Cf. Haraszti, (2002), p. 22. 32 Cf. Borsod Online (2012)

16 Glass: During the consumption, has an important role. It’s not only a communication tool, but also a marketing tool.33 The most famous wine producing countries designed their own glass for their wines to ensure the proper experience for consumers. Therefore, after the bottle shape the next initiative in the region was the design of a glass for Furmint. The glass was made by the famous Austrian manufacturer, Georg Riedel, who focused 6. Source: Tokaji Ősz the design on the types of the grapes and wines, moreover, on the diverse soil condition of Tokaj-Hegyalja. The strength of the glass is that, it cooperates in a really good way with all types of Furmints, such as dry, semi-dry and sweet. Size of the glass is bigger compared to an average wine glass, its wall closes inward, which contributes to saving the special smell of the Tokaji Furmint.34

1.2. Background to the study and problem definition

Under the communist regime’s control, wine producing culture changed totally in Hungary. The focus was on mass production, which meant primarily quantity and secondary quality. All of the grapes plantations were owned by the state. Finally, the result of this state activity was that, the brand Tokaji lost its fame and position in the foreign market. A huge decline started. After the change of the regime, the biggest task was to rebuild the brand Tokaji and get back to the foreign market. This renovation process started almost 30 years ago, but it hasn’t been finished yet. Local wine growers aim is to build a unique brand, which ensures quality for the customers all over the world.

As Tokaj-Hegyalja is a closed wine growing region since 1737 and owns World Heritage title given by UNESCO, examination of the above-mentioned problem is significant. The region has a colourful history with ups and downs, which strongly influenced the life cycle of the brand. The wine which gave fame to the country abroad is a sweet wine, called Aszú. However nowadays next to difficulties to raise the Aszú again and place it to the prestige level, the new challenge for producers is to make dry wine of the region

33 Cf. HVG (2016) 34 Cf. HVG (2016)

17 popular as well. Wines are produced with the traditional technique, but special selection and soil condition makes the product extraordinary. Now we are in 2018 and most of the wine producers realized that, they have to form a group where they can cooperate with each other and find a common solution for building a unique brand. The mentioned problem is meaningful, because fixing procedure started almost 30 years ago and it needs at least 30 more years to a successful result, namely a unique, worldwide known brand.

1.3. Research objectives

Brands are major players of today’s modern society, they have multiple meaning therefore, it is very difficult to find one perfect definition for them. Brands brought nice amount of benefits for organizations during the centuries, therefore it is sure they are going to rise further in the future. They ensure risk reduction and greater satisfaction to consumers and make decision making process simpler. However, management of brands is still a difficult task as the marketing environment changed rapidly over the last few decades. Customers of all kinds became more powerful and open-minded. Market conditions changed with the entrance of global firms and mega-brands and competition became more intense. Moreover, the appearance of technological developments had an effect on consumers in a way how they learn about and shop for brands.

To successfully manage a brand, today’s marketers need to have broad knowledge regarding marketing fundamentals and information technology. Furthermore, they must have cultural skills to understand the different kinds of new consumers more easily. With these requirements marketers have to face important challenges, but they also get the opportunity to “adopt higher standards in brand management excellence.”35

After the explanation of the main points of brand management, the worldwide famous wine growing region of Hungary, Tokaj-Hegyalja is in the centre. Main objectives of the study are to introduce the brand building process of wineries, how the worldwide famous brand, Tokaji survived hard times of history, started to renew, got the opportunity to rebuild and become famous as high quality brand on the foreign market. Furthermore, showing whether it is able to turn into a unified brand in the future. The first objective determines how properties and wine production were reorganized after the change of the

35 Cf. Keller, (2011), p. 8.

18 Communist regime. The second objective focuses on how local wineries built up their brand and started to manage them, furthermore what kind of strategies they used to become a successful member of the market. Finally, the third objective targets opportunities in the future and the question if a unified brand Tokaji will be achieved and if it will be able to get back to the world wine map. The topic is an important are of research, because building and rebuilding of the brand Tokaji happens currently, in the present.

1.4. Scope and structure of the study

The theoretical scope of the study mainly focuses on major factors and strategies of building a successful brand and on the importance of branding in wine industry, followed up by country and region of origin. As a region, Tokaj-Hegyalja, is examined, investigation of regionality is significant as well. Theoretical findings are analysed according to qualitative research method. Wineries are interviewed with the aim to get a proper insight and new information related to the topic.

Structure of the study is the following:

- In the first part, aims, problem definition and objectives of the thesis are discussed. - In the second part, literature in relation to the objective of the study is examined. - The third part deals with the research methodology, including research design, data collection method and data analysis. - The fourth part provides information regarding empirical findings and analysis of the generated data. - The fifth part describes conclusion and recommendations.

19 2. Theoretical foundations

2.1. General information about brands

Brands are major players of today’s modern society, determination of their meaning is multiple, it moves on a wide scale. Therefore, it is very difficult to find one perfect definition for them.

„...a brand encapsulates in its name and its visual symbol all the goodwill created by the positive experiences of the clients or prospects with the organisation, its products, its channels, its stores, its communication and its people.”36

This means that, there is a necessity to maintain these connection points in a focused way. Nowadays clients are very powerful, which resulted the end of average brands. Only those brands that are able to maximize the customer’s satisfaction can survive. There are two paradigms which determine the definition of a brand. One is customer-based with the focus on the relationship between customers and the brand. The other one’s target is producing measures in dollars, euros or yen.37

The customer-based definition measures the brand value by separating the net additional cash flows generated by the brand. It says, it is originated “from the greater confidence that consumers place in a brand than they do in its competitors. This confidence translates into consumers’ loyalty and their willingness to pay a premium price for the brand.”38 Moreover, brands create assets in the minds and hearts of the customers, which ensures financial value for them. These assets are brand awareness, beliefs of exclusivity and superiority of some valued benefits and emotional bonding.39

„...a brand is a set of mental associations, held by the consumer, which add to the perceived value of a product or service.”40

These associations need to be unique, strong and positive. In this case, the product is not part of the definition, which maintains focus on cognitions (mental associations). However, these associations are not

36 Cf. Kapferer, (2008), p. 19. 37 Cf. Kapferer, (2008), p. 19-26. 38 Cf. Lassar et.al, (1995), p. 11. 39 Cf. Kapferer, (2008), p. 27. 40 Cf. Keller, (1998)

20 enough, intense emotional components are required too.41

Meaning of brands can be examined by financial and legal perspective too. From a financial perspective, they are intangible and conditional assets.

“...because in order to deliver their benefits, their financial value, they need to work in conjunction with other material assets, such as production facilities.”42

From a legal perspective, they are “a name, term, design, symbol, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from competitors.”43 Furthermore, brand is a “legal statement of ownership”44 and also a “mark to designate the ownership.”45 They are also “a particular sort or class of goods, as indicated by the trade mark on them.”46 Key points of the definitions are that, trademarks after registration become a property and they have to be protected against infringements and counterfeiting, additionally it’s a favourable approach to prevent the company from copying its product.47

Generally, a brand is a name, which is powerful enough to influence buyers. The factors, which really makes a name to become a brand are saliency, differentiability, intensity and trust.48 Usually customers cannot choose the right product or service because they lack the time or they are not sure which one should they choose. In general, brands are time and risk reducers and they must bring trust. To influence buyers, brand power relies on representations and relationships, which are namely brand image (system of mental associations), power of the name (including the emotional relationship it develops) and designs, patents or rights (which develop competitive advantage).49 A brand exists only in those cases where it has acquired enough power to influence the market. This acquisition takes a long time. The brand can lose this power, if it is mismanaged relative to the competition. A name will acquire the power of a brand based on the product/service, people at points of contact with the market, price, place and communication.

41 Cf. Kapferer, (2008), p. 27. 42 Cf. Kapferer, (2008), p. 27. 43 Cf. American Marketing Association 44 Cf. Crainer (1995) 45 Cf. Broadbent &Cooper (1987), p. 3-9. 46 Cf. Gordon et. al, (2016), p. 49. 47 Cf. Simonson et. al, (1994), p. 181-199. 48 Cf. Kapferer, (2008), p. 28. 49 Cf. Kapferer, (2008), p. 28.

21 Therefore, brands should be identified as a living system, including three poles such as concept (includes unique set of attributes, which establishes the value proposition of the brand), name symbols and product/service.50 All in all, “brand management is about gaining power by making the brand concept more known, more bought, more shared.”51

In the following section, value creation of brands for the customer and for the company will be discussed. If the risk recognized by the buyer disappears, the brand cannot realize any benefits in the future. Perceived risk is greater when unit price is high.52 Brand awareness is a really important driver for the creation of value for customers as it correlates with aspects like high quality, trust, reliability, closeness to people, good quality price ratio, accessibility, traditional styling.53 Companies with strong brands are less risky. Strong brands enjoy benefits from high degree of loyalty to stability of future sales. Furthermore, they are attractive, have good reputation, represent quality and added value.54

Major source of brand’s value is the Halo effect. The term says if customers know the name of the brand, it influences their perception of the advantages of the product. There are some intangible associations, which branch from the brand’s value, vision, philosophy, its typical buyer, brand personality and attached to the brand. These associations are “the source of emotional ties beyond product satisfaction.”55

2.2. Product and the brand

The brand has a double nature, which means that people buy branded products or services, but marketing cannot be replaced by branding. Both product and brand are needed. The aim of marketing is to forecast the needs of specific consumer segments and run the organization to fit products and services to these needs. The willingness to pay is based on personal ties with the brand.56 Two models are mentioned for building a brand, one from product advantage to intangible values, the other from values to product. Most of the brands are only names on a product or service and after a while name acquires awareness, status, trust, respect or liking. Some of the brands start as a concept or idea. It is important to integrate the higher

50 Cf. Kapferer, (2008), p. 29-30. 51 Cf. Kapferer, (2008), p. 29-30. 52 Cf. Bauer (1960), p. 389-398. 53 Cf. Kapferer, (2008), p. 37-38. 54 Cf. Kapferer, (2008), p. 37-38. 55 Cf. Kapferer, (2008), p. 58. 56 Cf. Kapferer, (2008), p. 56-58.

22 levels of meaning at the beginning, which are going to link to the brand in the long run. This process should be planned and incorporated at the birth, during this procedure products become brands. However, having an attractive product is not enough. Brands should take into consideration the functional realities of products as well.57

2.3. Wine brand

Wine brand is acknowledged as “a cluster of attributes which defines the identity of the wine in the eyes of the buyer.”58 Nowadays wine consumers are not the same like in the past. They expect the same enjoyment in the taste each time they consume a wine.59 Expectations of the consumers can be satisfied by the following factors: mass distribution in quantity, fruity, easy to drink flavour, sustain the taste of the wine from year to year, ensure low production costs, invest in the brand, not in the region, logical grape variety, invest in communication tools, provide regular innovation, use labels written in English.60 The most important condition of a brand is that, production capacity has to meet with the expectations of the mass distribution.61

2.4. Brand management

Brand management is built up on two paradigms. One is positivistic and the other one is constructivist. According to the first approach, “brand is owned by a marketer, who controls the communication to a passive recipient/consumer.”62 Furthermore, brand equity is created by the marketer and brand is a “manipulable lifeless artefact, that can be positioned, segmented and used to create an image.”63 The second approach follows the nature of the brand and the value of brand equity. It states something is set up during the interaction between marketers and consumers. Positivistic paradigm focuses on the brand from a functionalistic perspective, while constructivist paradigm is interpretive and targeting how the brand should be managed.64

57 Cf. Kapferer, (2008), p. 72-73. 58 Cf. Lockshin (2004), p. 210. 59 Cf. Lockshin (2003) 60 Cf. Kapferer, (2008), p. 124. 61 Cf. Kapferer, (2008), p. 124. 62 Cf. Heding et al., (2009), p. 21. 63 Cf. Hanby, (1999), p. 12. 64 Cf. Heding et al., (2009), p. 21-22.

23 2.4.1. Branding and international branding

„...the literature on branding in an international context is somewhat sparse.”65 Although branding is not listed as an analysed article topic, “special issues of academic journals in the fields shows that, the topic is receiving increased attention.”66 This is surprising, especially because branding is a major part of a firm’s marketing strategy. The same is expected regarding international branding, namely it has a significant position in international marketing. But this is not the case. Examining major works, there is no deliberation about that, where the terms ‘branding’ and ‘international branding’ refer to. Moreover, no efforts are taken to clearly define the two domains within marketing and international marketing. As a consequence, “international branding co-exists with the international marketing literature rather than finding a place within it.”67 The research shows that, the majority of the articles in the topic of international branding were published in the USA and the second most important journal is European, which shows that they contribute to the development of the field in high degree. According to the findings, dominance of authors in the European and North-American region is drastic. Asia-Pacific region and Africa provides four authors. While Latin America has no contribution to the research. As only minority of authors work outside of the USA and Europe, it is obvious, future research is needed to incorporate various research traditions into the international branding field. Moreover, broadening of the field of international branding knowledge is required with the focus on future research of under-, and un-researched regions of the world.68

During the examination of global brands, two definitions are compared: Firstly, “global brands are those that use the same marketing strategy or mix in all target markets.”69 Secondly, “global brand is one that consumers can find under the same name in multiple countries with generally similar and centrally coordinated marketing activities.”70

The difference between the two definitions results in the conclusion that, there are different views related to the meaning of a global brand in terms of degree, but not in principle. This means that, there will be different views in the future in regard to the ‘degree of globalness’ a brand has to present, but the

65 Cf. Alashban et. al., (2002), p. 38. 66 Cf. Journal of International Marketing, (2002), p. 2. 67 Cf. Whitelock, et. al., (2007), p. 253. 68 Cf. Whitelock, et. al., (2007), p. 256-262. 69 Cf. Schuiling et.al., (2004), p. 98-99. 70 Cf. Steenkamp, et. al., (2003), p. 53.

24 definition of the term global brand may not need further research. The second issue is the concept of international branding. According to the analysis, no studies define branding at international levels, however it would be important from a research point of view. In the opinion of the researchers, those aspects of a brand are important, that make international branding special in the field of marketing, therefore they formulated the following definition for international branding: “International branding is a field within international marketing concerned with the challenges that companies face when their brands cross national borders. These challenges relate to the essence of the brand in terms of brand name, brand visual, sound element and brand personality.”71 All in all, international branding is worth future research, such as industrial/B2B products and services, branding standardisation and profitability, global versus local brands and brand equity.72

2.5. Consumer-based brand equity model

Brand equity constitutes an important element of brand management. It is the “differential effect of brand knowledge on consumer response to the marketing of the brand. Thus, brand equity is conceptualized from the perspective of the individual consumer and consumer-based brand equity occurs when the consumer is familiar with the brand and holds strong and unique brand associations in the memory.”73 The design and implementation of marketing programs and activities are part of brand management to build, measure and manage brand equity. There are four steps which determine the brand management process: identifying and developing brand plans, designing and implementing brand marketing programs, measuring and interpreting brand performance moreover, growing and sustaining brand equity.74

71 Cf. Whitelock, et. al., (2007), p. 265-266. 72 Cf. Whitelock, et. al., (2007), p. 267. 73 Cf. Kamakura et. al, (1991) 74 Cf. Keller, (2013), p. 58-60.

25 2.5.1. Identification and development of brand plans

The first step in the brand management process is to understand what the brand represents and how it is positioned regarding competitors. Brand planning uses different models, such as positioning, brand resonance and brand value chain model. The positioning model focuses on how to maximize competitive advantage, the resonance model shows how to create a loyal relationship with customers and the value chain model deals with the value creation process for brands.75

Design and implementation of brand marketing programs: In case of building brand equity, proper positioning of the brand in the minds of the customers and the achievement of as much brand resonance as possible is crucial.76

Measurement and interpretation of brand performance: For the profitable management of brands a successfully designed and implemented brand equity system is needed. It consists of different procedures, which are designed to provide detailed and actionable information to marketers. Thanks to the useful information, they can make the best tactical decision in the short run and the best strategic decision in the long run.77

Growth and sustainability of brand equity: It is quite challenging to maintain and expand on brand equity. Brand architecture provides guidelines for branding strategy and is defined by two concepts, namely brand portfolio and brand hierarchy. Brand portfolio involves different brands, which are offered for sale to the buyers. Brand hierarchy “is a means of summarizing the branding strategy by displaying the number and nature of common and distinctive brand elements across the firm’s product, revealing the explicit ordering of the brand elements. Furthermore, it is based on the realization that a product can be branded in different ways depending on how many new and existing brand elements are used and how they are combined for any one product”78 To ensure effectiveness in brand management, long-term view of marketing decisions is required. Success of future marketing programs is affected by any changes in the supporting marketing program. Managing brand equity over geographic boundaries, cultures and market segments contributes to the expansion of

75 Cf. Keller, (2013), p. 58. 76 Cf. Keller, (2013), p. 58-59. 77 Cf. Keller, (2013), p. 60. 78 Cf. MBA Knowledge Base

26 brand equity as well. Recognizing different types of consumers in branding and marketing programs is important. In these decisions, international aspects and global branding strategies are meaningful. As it was already mentioned, expansion of brand equity is very challenging for managers. If they want to build equity they have to rely on the knowledge about experience and behaviour of the various market segments.79

In more details the steps of building a strong brand are the following: establish brand identity, establish brand awareness, create brand image through strong brand associations, achieve positive brand responses, ensure brand relationship with customers, which based on loyalty. To achieve these steps the establishment of building blocks is needed: brand salience, brand performance, brand imagery, brand judgements, brand feelings and brand resonance.80 If the customer is aware of and familiar with the brand on a high level and holds strong, favourable and unique brand associations in memory, customer-based equity occurs. There are some cases where brand awareness is enough to create positive consumer response, however in other cases often strength and uniqueness of brand associations have a critical role in defining the distinctive response that build brand equity.81

2.6. Brand identity

Brand identity is a “unique set of brand associations implying a promise to customers and includes a core and extended identity.”82 In the opinion of Upshaw (1995), brand identity depends on the personality of the consumers, who they are, on the environment they live in and on the sign sent by the brand.83 To achieve brand identity, creation of brand salience is required. It presents the aspects of customer awareness of the brand. Awareness makes sure that, customers understand the product or service category in which the brand competes and ensures that, customers know which of their needs the brand is designed to satisfy.84

79 Cf. Keller, (2013), p. 60. 80 Cf. Keller, (2013), p. 108. 81 Cf. Keller, (2013), p. 107-120. 82 Cf. Ghodeswar, (2008), p. 5. 83 Cf. Upshaw, (1995), p. 13. 84 Cf. Keller, (2013), p. 108.

27 Brand awareness can be examined by two dimensions which shows if the customers can easily recall or recognize the brand and the purchase as well as consumption situations during which brand comes to mind.85 If a brand is highly salient, it enjoys both dimension.86 The result is, customers make satisfactory purchases, furthermore they always think of the brand in a way it can be employed or consumed. There are three questions which need to be asked relating to brands: “where do customers think of the brand, when do they think of the brand, how easily and often do they think of the brand.”87 Raise of brand salience can be an effective step, which contributes to increased consumption and sales volume. 88

2.7. Brand awareness

Brand awareness is an “extent to which a brand is recognized by potential customers, and is correctly associated with a particular product.”89 As it was already mentioned before, it consists of recognition and brand recall performance. Brand recognition is “consumers’ ability to confirm prior exposure to the brand when given the brand as a cue.”90 It examines whether customers will recognize the brand they have already been exposed to when they go to a store. The decision is made at the point of purchase, where the brand name will be visible and physically present. Brand recall is “consumers’ ability to retrieve the brand from memory when given the product category, the needs fulfilled by the category or a purchase or usage situation as a cue”.91 Although brand recall is less important at the point of purchase, the evaluation and choices of consumer’s brand often depends on “what else they recall about the brand given that they are able to recognize it there.”92 With the relevant information in our mind, in most of the cases we recognize the brand then recall it.

85 Cf. Romaniuk et. al, (2004) 86 Cf. Laurent et. al, (1995) 87 Cf. Keller, (2001), p. 9. 88 Cf. Keller, (2001), p. 8. 89 Cf. Business Dictionary 90 Cf. Keller, (1993), p. 3. 91 Cf. Keller, (1993), p. 3. 92 Cf. Keller, (2013), p. 74.

28 2.8. Brand image

Communication of brand image to the target customers has always been an ‘important marketing activity’.93 A well-communicated image should “help establish a brand’s position, insulate the brand from competition”94 and therefore “enhance the brand’s market performance.”95 Establishing brand awareness means “increasing the familiarity of the brand through repeated exposure”96 (it is more effective for brand recognition than brand recall). In other words, the more experiences (see, hear, think about it) the consumer has in relation to the product, the bigger the opportunity he or she registers the brand in memory. Consumers can experience one of the brand’s elements by any cause, which increase the familiarity and awareness of that brand element. Recognisability is the result of repetition. Improving brand recall also requires some linkages in memory to product categories or other purchase and consumption cues. As marketers connect the brand and its product category (e.g: with an advertising slogan) contributes to determine the product category links. If the brand is in the competitive market or if it is new to the category, it is essential to highlight category links in the marketing program. Over time strong links between the brand and the category can become important if a brand extension, merger or acquisition changes the product meaning of the brand.97

2.9. Brand meaning

With the creation of brand meaning, brand image is established. Brand meaning is “what the brand is characterized by and should stand for, in the mind of customers.”98 It can be divided into functional, performance related considerations vs. abstract, imagery-related considerations. If these brand associations help the customers to form their own experiences and make a connection with the brand, they are formed directly. But if they are formed indirectly, brand is represented in advertising or by word of mouth. There are two types of brand meaning: brand performance and brand imagery.99

93 Cf. Gardner et. al, (1955), p. 33-39. 94 Cf. Oxenfeldt et. al, (1964) 95 Cf. Shocker et. al, (1979), p. 159-180. 96 Cf. Keller, (2013), p. 76. 97 Cf. Keller, (2013), p. 74-77. 98 Cf. Keller, (2001), p. 9. 99 Cf. Keller, (2001), p. 9-10.

29 Brand performance Performance of the brand “points out how successful a brand is in the market and aims to evaluate the strategic successes of a brand"100 According to some researchers, there are two types of brand performance: ‘brand market performance’ and ‘brand profitability performance’. They acknowledge that brand profitability performance is an index of the financial share of a brand in relation with the retailing profits and is evaluated using the profit and the margin of profit.101 At the same time, brand market performance considers the market demands and evaluates the indices such as sale levels and market share.102 Aaker (1996) found some indicators for the evaluation of brand performance, namely ‘market share’, ‘price’ and ‘distribution coverage’. He also identified that market share “provides a widespread and sensible reflection of the condition of a brand or its customers…market share or the sale related information is widely affected by distribution coverage”.103 With other words, brand performance shows the degree of customers’ satisfaction with the brand in regard to their needs and wants in its product or service category. The product is a very important component of the brand equity as it is the primary control of what consumers’ experience with the brand. If product experiences of consumers’ meet their expectations, they create brand loyalty and resonance. Brand performance relates to actions, where the product and service try to meet with functional needs of the customers’.104

Brand imagery Focus on the extrinsic qualities of the product or service. It is an “impression in the consumers’ mind of a brand’s total personality (real and imaginary qualities).”105 Deals more with the intangible aspects of the brand. Brand associations, which formulate brand image and meaning, are defined by three dimensions: “strength, which refers to how strongly the brand is identified with a brand association, favourability, which shows how important or valuable is the brand association to customers and uniqueness, which presents how separately is the brand identified with the brand”.106 These dimensions are essential for the creation of brand equity. A unique brand association is not enough in itself, customers’ favourable evaluation of association is needed. It is not easy to crate strong, favourable and unique associations, but it is crucial to build customer-based brand equity.107

100 Cf. Ho Y. W. et. al, (2008), p. 375. 101 Cf. Baldauf et. al, (2003), p. 224 102 Cf. Lassar (1998), p. 65-75. 103 Cf. Aaker, (1996) 104 Cf. Keller, (2001), p. 10. 105 Cf. Business Dictionary 106 Cf. Keller, (2001), p. 12. 107 Cf. Keller, (2001), p. 12-13.

30 2.10. Brand responses

Express customers’ response to the brand, to its marketing activities and also what customers feel or think about the brand. Brand responses are categorized by brand judgments (arising from the ‘head’) and brand feelings (‘heart’). Brand judgments are focusing on the personal opinion and evaluation of customers about the brand.108 “The customers make the judgement about the product by consolidating its several performances and the imagery associations with the brand.”109 Four types of brand judgments can be distinguished: brand quality, brand credibility (if perceived expertise, trustworthiness, likability is ensured), brand consideration (brands are included in the set of brands they buy or use by the customers, it is important how customers find the brand – until the brand receives serious attention and is significant, customers will always hold a distance with the brand), brand-superiority (customers see the brand better than other ones)110 and finally brand feeling refers to “what customers feel for the product or how the customer is emotionally attached to the product.”111 As stated in Keller’s brand equity model, there are six positive feelings what customers can have in relation to the brand: warmth, fun, excitement, social approval and self-respect.112

2.11. Brand relationships

Targeting the relationship that the customer has with the brand. In other worlds, brand resonance, which “refers to the nature of relationship that customers have with the brand and the extent to which they feel that they are ‘in synch’ with the brand”.113 There are several advantages of brand relationships, such as reduced marketing costs, ease of access, new customers, brand equity and more profit.114 Earlier brands invested more money into the acquisition of new customers than to strengthen relationship with the existing ones, however nowadays it changed completely, making relationships with customers is in the focus.115 Brand relationships have four categories: behavioural loyalty, which is ”the form of customer loyalty that consists in the mere repetition of a purchase behaviour, without any mental or psychological considerations justifying such behaviour and no clear preference for the purchased object.”116; additional

108 Cf. Keller, (2001), p. 13. 109 Cf. Business Jargons 110 Cf. Keller, (2001), p. 13. 111 Cf. Business Jargons 112 Cf. MindTools 113 Cf. Keller, (2001), p. 15. 114 Cf. Dowling et. al, (2002), p. 87-89. 115 Cf. Peelen, (2003) 116 Cf. IGI Global

31 attachment (strong personal attachment to the brand); sense of community that is a “social phenomenon whereby customers feel a kinship or affiliation with other people associated with the brand”117 and active engagement, which is the “strongest affirmation of brand loyalty that occurs when customers are willing to invest time, energy, money or other sources into the brand beyond those expended during purchase or consumption of a brand.”118 Brand relationships can be described by intensity and activity. Intensity “refers to the strength of the attitudinal attachment and sense of community, how deeply the loyalty is felt.”119 While activity “refers to how frequently the consumer buys and use the brand.”120

2.12. PCDL Model

It is a model for building brands, which has four elements: positioning the brand, communicating the brand message, delivering the brand performance, leveraging the brand equity.

- Brand positioning Brand positioning is about how customers recognize the brand, how they differentiate it from their competitors and how the brand satisfies customers’ needs. “Brand marketers’ major objective should be to create the desired perception in the target consumer’s mind.”121 It is the part of brand identity and value proposition, which is told to the target audience and ensures advantage over competing brands. If a brand is well-positioned, it has favourable competitive position with strong associations. Nowadays understanding the consumer behavioural effects of linking brands to another entity, is essential. “Marketers must be able to understand how various entities should best be combined from a consumer brand-knowledge perspective to create the optimal positioning in the minds of consumers.”122 Focus should be on psychological values added to products and services, to companies but in the form of intangible benefits. Intangible benefits are emotional associations, such as beliefs, values, feelings, which people usually connect to the brand. Successful brands develop high-quality relationship with customers, which ensures belonging and engagement towards the brand. Brand preference is the “measure of brand loyalty

117 Cf. Keller, (2001), p. 15. 118 Cf. Keller, (2001), p. 15. 119 Cf. Keller, (2001), p. 16. 120 Cf. Keller, (2001), p. 16. 121 Cf. Ghodeswar, (2008), p. 6. 122 Cf. Ghodeswar, (2008), p. 6.

32 in which a consumer will choose a particular brand in presence of competing brands, but will accept substitutes if that brand is not available.”123 Brand is strongly separated by emotional associations in customers’ mind, in comparison with competitors’ offerings. In case of a stable brand, brand equity is linked to the actual quality of the product or service and to numerous intangible factors. “Brands that are well positioned occupy particular niches in consumers’ minds.”124

- Communicating brand message To identify the brand by its target audience, a vision for the brand is required. Brand positioning helps to arrange the focus of brand identity and communication, which encourage the company to forward communication objectives, like type of the message, themes claimed to the target customers and achieve brand differentiation. Advertising is the tool, which helps the company to build a strong impact in the target market. Companies face with various challenges during the process of brand building: “to be noticed, to be remembered, to change perceptions, to reinforce attitudes, and to create deep customer relationships.”125 A brand image, which is ‘ownable’ and separated, is able to build an emotional and rational link from the viewpoint of customers, to a company, a product and a service. The main communication channels, which help consumers to position the brand in their mind are advertising, direct marketing, sales promotion, sponsorship, endorsement, public relations and Internet. The repetition of themes in various media results in a successful brand. If emotions are used in advertising, it reaches the hearts and minds of the people, which leads to an emotional relationship with the customers. The key for a successful brand is to keep up with competitors, trying to create parity on the fields, where competitors have advantages and at the same time trying to find some differences, which can ensure an advantage in other areas against competitors. Long-term integrated communication strategies are needed to be developed and implemented to determine the brand’s value to the target audience. A company with a strong brand can position and extend its brand more easily and has bigger influence on purchase decisions.126

123 Cf. Business Dictionary 124 Cf. Upshaw (1995), p. 13. 125 Cf. Aaker et. al, (2000), p. 13. 126 Cf. Ghodeswar (2008), p. 6-7.

33 - Delivering the brand performance Companies to protect their brands from the effects of competition have to check how their brands are doing in the marketplace and what impacts market interventions will have on brand equity. “This approach will enable brand marketers to assess the effect of the marketing campaign in influencing the target consumers which in turn leads to measure the brand strength.”127 With transaction analysis, the company selects team members to experience all the steps the customers go through. This helps to understand how the customers feel. In product-driven companies, service has a great importance as it shows the brand’s whole relationship with the customer. Existing brands of manufacturer are very sensitive to the successful new brands of competitors. Therefore, it is very important to enhance their performance. The best solution for upgrading performance is to implement a Regular Blind Product Test against the competitors’ brand. This approach ensures protection for the brand against the competitors’ successful new brands, moreover it achieves brand loyalty. Brand loyalty is seen as a “link in the chain of effects that indirectly connects brand trust and brand affect with the market performance aspects of brand equity.”128 According to Aaker, brand loyalty measures the connection between the brand and the customer and examines the possibility of switching to another brand because of any change in price or product features. “Brand loyalty represents a favourable attitude towards a brand resulting in consistent purchase of the brand over time and it is the result of consumers’ learning that one brand can satisfy their needs.”129 “Brand loyalty represents the commitment of a customer to rebuy the company’s product consistently in future. Customer retention can be achieved only through fostering premium loyalty by establishing an emotional as well as a normative attachment between the brand and the consumer.”130 These loyal buyers insure a positive word of mouth communication to the brand.131

- Leveraging the brand equity Tie the brand to another entity, which creates new associations to the entity and affect the existing ones. Companies use different strategies to leverage their brand especially through line and brand extensions or ingredient and co-branding. In ingredient branding key attributes of the brand is

127 Cf. Ghodeswar, (2008), p. 7. 128 Cf. Chaudhuri et. al, (2001), p. 81. 129 Cf. Assael H., (2001) 130 Cf. Gaunaris et. al, (2004), p. 283-306. 131 Cf. Ghodeswar, (2008), p. 7.

34 integrated to other brand, which increase popularity in markets. “The ingredient branding enhances the differentiation of the host brand from competition by characterizing the ingredient attribute in the host brand more specifically.”132 It results the creation of brand alliances between firms. In case of brand extension, “the parent brand experience appears to have little impact on long-term repeat purchasing of an extension across a range of cases in which perceived similarity between the parent and extension categories varied considerably.”133 If it fails, it causes harm for brand equity of the parent brand through producing negative reciprocal effects. Parent brand experience has impact on extension but no impact on repeat purchase. “The advertising of brand extensions produces significant reciprocal spillover that favourably affects the choice of parent brand. If the brand name is used on more products, which are separately advertised, spillover effect becomes significant.”134

The model helps managers to the build identity of their brands. Competition is more and more intense, managers have to satisfy changed expectations of their customers, moreover place their own brands in their customers’ mind. Even during hard times, companies have to insure, that the brand will remain strong and provide value, which is conformable with the promise of the brand. Four phases of the PCDL model, helps the company to build a strong brand.135

2.13. Brand governance

During the decades, brands became the most valuable assets of organisations on the corporate and product level as well. The awareness of brands’ value increased a lot, which led to some consumer goods companies to handle the equity held in their brands more carefully. As it is mentioned often, strong brands set up sustainable superior value and competitive advantage.136 If the brand is managed properly, it can constitute the long-term source of future value. Creating, building and valuing brand equity is discussed in many academic theories. However, there is a new component, which was not explained before. It’s “growing realisation, which forms an ever-increasing proportion of many companies’ balance sheets, stock

132 Cf. Desai et. al, (2002), p. 73-93. 133 Cf. Swaminathan et. al, (2001), p. 1-15. 134 Cf. Subramanian et. al, (2003), p. 4-13. 135 Cf. Ghodeswar, (2008), p. 7-8. 136 Cf. Jones et. al, (2010), p. 545.

35 market worth and is a prime source of tomorrow’s cashflow, increasingly needs to be safeguarded and secured against risk.”137

2.13.1. Challenges and threats of brand equity in the future

Main reasons, which shows the growing challenges and threats of brand equity in the future are the following:

- “More uncertain and fiercely competitive industry environments”138 Last years were strongly marked by ‘overcapacity’, increasing ‘market uncertainty’ and ‘hyper- competition’, which became a continuing trend. This was the result of globalisation, new technologies, which reduced entry barriers, ongoing deregulation and privatisation of some sectors.139 As industries’ brand status started to decline their major purpose became to generate customers, as most of the consumers they could rely on in less competitive periods were seduced away. They tried to find a solution for the problem how they can compete in turbulent markets. They started to use their brand to establish relationships with customers, which resulted in increased attention on “quality of customer brand experience as a source of value”.140

- “Ever more empowered consumers”141 Consumers are becoming more and more intolerant if their experience is different from that, the brand promises. Thanks to the new and modern distribution and communication channels, especially to the Internet, buyers, stakeholders and customers are better informed, they have more product choice and they have more brand experiences than before. It has one disadvantage, which is a threat to brand equity, customers are less loyal so if they are not satisfied with the brand experience they can switch easily between the brands without any costs. The ‘postmodern’ consumers are very difficult to reach therefore, brands should

137 Cf. Jones et. al, (2010), p. 545. 138 Cf. Jones et. al, (2010), p. 545. 139 Cf. Jones et. al, (2010), p. 545. 140 Cf. Jones et. al, (2010), p. 545-546. 141 Cf. Jones et. al, (2010), p. 546.

36 constantly distribute what they promise, otherwise they won’t be able to achieve these consumers’ loyalty easily.142

In the model customer value, cost, convenience and communication is discussed: The first element is targeting customers’ needs and wants, furthermore, brings and creates value to them. Customer value is very important factor, as it determines the company’s place in the market. To successfully provide value for the customer, wine producers have to minimize the costs for them. They also have to generate income, appreciate loyal customers and accept positive as well as negative feedbacks. If companies are smart they can learn from these comments and improve their business. Cost plays a significant role too. The price is the amount the producer sets for the product, what customers will pay, therefore wineries have to satisfy their needs. The third element is convenience, which shows how and where the customer wants to purchase the product. Success is guaranteed for the producers, if they make purchase procedure easy, simple and fast for the customers. Besides they can reward the loyal ones. This will make customers satisfied and feel good about the product and the brand. The last point in the marketing term is communication, which means interaction between the customers and the company. Communication has great importance in building relationships with customers. Nowadays, wineries can use not only personal communication, but also social media, internet and websites.143 In conclusion, in these modern days the focus is not on the business, but on the customer. Connecting with them on personal level is crucial. Major goal of wine producers has to be that, to satisfy their customers through interactive communication, which will bring the opportunity to increase customer value at lower cost.144

- “Line and brand extension proliferation”145 Brand often serves a single product line in a single category. Nowadays lots of brands act as an umbrella for proliferation of line and extension of brand, often in different, unrelated areas.

142 Cf. Shocker et. al, (1994), p. 149-150. 143 Cf. Marketing mix.co.uk 144 Cf. Marketing mix.co.uk 145 Cf. Jones et. al, (2010), p. 546.

37 It is not an easy task to manage the arrangement and distribution of “promised quality of brand experience across so many variants”.146

- “A growing number of distribution and communication touchpoints”147 Experience, which is promised by the brand, is connected to a wide range of product lines and categories. Moreover, it is extended through a complex distribution network and communication channel. Consistency of brand experience is really important for consumers from the first brand awareness, through trial to the repetition of the purchase. Henceforward, in the fast-developing environment, it gets more and more difficult to bring consistent brand experience.148

- “Increased use of strategic partnerships in delivering brands to consumers”149 The other aspect which makes the management of the promised experience delivery more complicated, is the “increasing use by brand owners of various forms of strategic partnerships such as subcontracting, licensing, franchising or joint ownership in all the stages of creating and delivering the experience to final customers.”150 These adjustments deliver ‘dangers of complexity’, ‘lack of control and conflict’ to the brand delivery process, which means another risk is brought on to equity.151

- “The risks of using social media”152 Social media offers wide range of opportunities to brand marketers. However, it can happen they do not spread only good news about the brand, but bad news as well. Today the spread of bad news can be very fast and can move on a wide range, which damages brand reputation and equity easily.153

146 Cf. Jones et. al, (2010), p. 546. 147 Cf. Jones et. al, (2010), p. 546. 148 Cf. Shocker et. al, (1994), p. 152-153. 149 Cf. Jones et. al, (2010), p. 546. 150 Cf. Jones et. al, (2010), p. 546. 151 Cf. Jones et. al, (2010), p. 546-547. 152 Cf. Jones et. al, (2010), p. 547. 153 Cf. Kohli et.al., (2015), 37-38.

38 If the equity is the primary source of the firm’s value, these are factors which need to be taken into consideration by managers and brand marketers to create and sustain long-term value. Although brand equity is crucial for the organisation’s future value creation, it is becoming more and more weak. “The risks to brand equity of being damaged or dissipated are rising as the potential hazards inherent in managing brands and brand experience multiply. All this has prompted the attention now being paid to the role of Brand Governance.”154

2.14. How to navigate the future of brand management

Brands brought nice amount of benefits for organizations during the centuries, therefore it is sure they are going to rise further in the future. They ensure risk reduction and greater satisfaction to consumers and make decision making process simpler. However, management of brands is still a difficult task as in the past decades marketing environment changed rapidly. Customers became more powerful and open- minded. Market conditions also changed with the entrance of global firms and mega-brands, intense competition started. Moreover, the appearance of technological developments had an effect on consumers as well, in a way how they learn about and shop for brands.155

2.14.1. Six factors, which help managers to operate new challenges of brand management:

“Fully and accurately factor the consumer into the branding equation: Engage in participation marketing by establishing what consumers know and don’t know, and what they want and don’t want from brands.”156

The most important rule of branding is the consumer controls the brand. Examining from a managerial perspective, the voice of the consumer has to be integrated in all branding decision. Every brand’s customer group is very colourful, therefore a multicultural viewpoint in branding is crucial. The multicultural perspectives make it easier for marketers to focus on brands and to make significance to different segments of the target market. With the emergence of the Internet and social media, customers became more empowered. These tools provided the opportunity for them to search for information about the products, services and brands like never before. Marketers have to take into consideration, any actions

154 Cf. Jones et. al, (2010), p. 547. 155 Cf. Keller, (2011), p. 37. 156 Cf. Keller, (2011), p. 38

39 or steps they take can be checked immediately. This transparency leads to that, customers can be engaged in brands’ life more actively. The fact is that usually consumers want to be involved with those brands only, which they use. However, it can happen some consumers maybe want to be involved more deeply. For them, marketers have to do everything to inspire them with marketing tools. There are some consumers too, who don’t want to be involved with brands. In this case marketers have to find out how to best market a brand. There is a possibility for that, consumers who are engaged with a brand on a high level have difficult to express, undefined, or conflicting preferences. In this regard marketers need to apply ‘participation marketing’, which ensures common work between marketers and consumers with the aim to find how the brand can satisfy consumers’ needs and wants.157

“Go beyond product performance and rational benefits: Craft well-designed products and services that provide a full set of rational and emotional benefits.”158

Usually the heart of a brand is a product or service. For today’s companies, design of the product or service is a very important element of value proposition. To produce products and provide services with a better design, proper and up to date understanding of consumers is required. Specially, what kind of purchase habits they have, how they use products and services and what they think or feel related to the brand. Product design covers not only how the product works, but how it looks, feels, sounds and smells. Furthermore, service design expresses everything what the consumer experiences with the brand. Designing products and services still plays a very important role in to achieve competitive advantage.159

“Make the whole of the marketing program greater than the sum of its parts: Develop fully integrated channel and communication strategies that optimally blend their strengths and weaknesses.”160

In the last years, communication about selling products and services to consumers shows a growing tendency. Marketers can use push-and-pull distribution strategies, which consist of “trade shows, showrooms, getting retailers to stock a product and creating a supply chain to facilitate distribution, furthermore it includes media, advertising, customer relationship management and promotions.”161 For

157 Cf. Keller, (2011), p. 38. 158 Cf. Keller, (2011), p. 38. 159 Cf. Keller, (2011), p. 38-39. 160 Cf. Keller, (2011), p. 39. 161 Cf. Boundless

40 successful communication programs, marketers have to incorporate online/interactive communications, real-world/experiential communications and traditional mass-media communications.162 The biggest challenge for marketers in bringing together the best communication options, is sales maximization in the short-run and brand equity in the long-run. To build brand equity, marketers should be ‘media neutral’ and assess all communication options in accordance with effectiveness principles and efficiency viewpoint. As all consumers use the Internet, usage of interactive communications is essential to influence them in all stages of their decision making. Interactive communications can be a well-designed website, emails, electronic ads and social media. Social media is the most challenging as it covers online communities, forums, blogs, Facebook and YouTube. They ensure active engagement with consumers in a way, they recommend information, experience and different platforms for brands, moreover marketers can give advice to consumers how to learn from brands and teach other consumers about a brand. Unfortunately, consumers’ engagement with social media can be disadvantageous for marketers and can cause harms for the brand. The only way to handle negative feedbacks or unfavourable outcomes is active participation on the online platform and presentation of the brand point of view.163

“Understand where you can take a brand and how: Design and implement a new product development and brand architecture strategy to maximize long-term growth across product offerings, customer segments and geographical markets.”164 For long-term financial growth, design and launch of new products and services and access of existing products and services to the new markets and segments have a great importance.165

To successfully manage a brand, today’ marketers need to have broad knowledge relating to marketing fundamentals and information technology, furthermore they must have cultural skills to understand the different kinds of new consumers more easily. With these requirements marketers have to face with important challenges, but they also get the opportunity to “adopt higher standards in brand management excellence.”166

162 Cf. Keller, (2011), p. 39. 163 Cf. Keller, (2011), p. 39-40. 164 Cf. Keller, (2011), p. 40. 165 Cf. Keller, (2011), p. 41. 166 Cf. Keller, (2011), p. 43.

41 2.15. Branding in wine industry

“A brand is a combination of elements that uniquely identifies a product produced by one particular manufacturer and thereby distinguish it from competitors’ products. Branding consists of a particular name, logo and symbol or design, which the customer links with a particular manufacturer.167 Examining Kotler’s opinion, “a brand is essentially a seller’s promise to consistently deliver a specific set of features, benefits and services to buyers. Further, a brand represents promises about what a product, a service or company can deliver. In addition, a successful brand is an identifiable product, service, person or place, augmented in such a way that the buyer or user perceives relevant unique added values that match their needs most closely.”168 American Marketing Association (AMA) has a proper definition for the meaning of brand as well. “A brand is a name, term, sign, symbol, or design, or combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of the competition.”169

A wine brand can achieve global market share and maintain its position over time if it has consistent quality and flavour. The key ingredient of wine, is grapes, however its flavour depends on the territory they were grown. In case of a global , a bigger quantity of grapes is required over many regions. Some countries such as , regulate wine producers from “drawing grapes and bulk wine from multiple regions for use in a single brand.”170 “The wine industry is extremely fragmented and has myriad brands which creates a problem in brand recognition and complicates the sales process.”171 With the strengthening of the industry, margins and sales of the dominant companies increased. However, at the same time the number of manageable brands also increased. As Wine Business Monthly mentions, “it is considerably more difficult for a sales team to push 20 different brands (each consisting of multiple varietals) into the distribution network than ten or five.”172

Nowadays this procedure becomes more and more challenging as companies want to avoid ‘cannibalisation’ among the brands produced and distributed by them. Branding has a great importance in every industry, company or product. Therefore, it is essential for wineries and wine industries to

167 Cf. Vrontis et. al, (2007), p. 161. 168 Cf. Kotler (2000), p. 188. 169 Cf. American Marketing Association 170 Cf. Vrontis et. al, (2007), p. 161. 171 Cf. Andrew, (2002) 172 Cf. Wine Business Monthly

42 recognize value of branding as strong brands will continue to enjoy more growth. Building a brand in the wine industry is very difficult, but necessary. If a brand is recognizable for the customer, it means a relationship was built between them, the whole decision making process during the wine purchase will be easier and simpler.173

2.16. Managing branding in the wine industry

Among the management of wine brand, there are two aspects of wine which is examined: tangible features such as quality, type, grape varieties, bottling, labelling and intangible features like country of origin, image, mental and affective associations and history. The sum of these features will contribute to the success in target markets.174

Key aspects of wine brand management: - “Consumer behaviour”:175 In case of wine, buyers’ choice is special as it depends on images, beliefs and associations with strong socio-cultural aspects. Therefore, it has a great importance to enhance branding strategies.176

- “Small wine business strategic options”177: They are lack of resources, which leads to some limitations. Although the perfect branding strategy relies on consumer perception management, it cannot be implemented on international level. At the same time, it is noticeable that, small local wine producers who get financial support from the government and collaborate with other industries can achieve significant results. This is the reason why collaboration is crucial. It can happen on practical, production or distribution level. Some wineries already created their own distribution system with the aim to gain power not only in the local market but the international market as well.178

173 Cf. Vrontis et. al, (2007), p. 161. 174 Cf. Romanazzi et. al, (2008), p. 3. 175 Cf. Vrontis, (2014), p. 167. 176 Cf. Vrontis, (2014), p. 167. 177 Cf. Vrontis, (2014), p. 167. 178 Cf. Vrontis, (2014), p. 167-168.

43 - “Targeting of country visitors”179: Their treatment should be difference. They are more like an audience than consumers. The most important point regarding tourists is not to consume as much wine as possible, but to get a knowledge about it and establish an emotional connection, such as love with local wine brands. The term love focuses on building an affection-based relationship between the product and the target consumers. The current mood state is an important aspect regarding the positive first evaluation of products. Positive evaluation of wines widely depends on if consumers taste it during their holiday. Usually tourists are in a better mood when they are on holiday, therefore they evaluate positively both local and international products. If the perception management strategic branding strategy is well structured, it will connect the product with the holiday experience. “The achieved association between wine and the overall experience of the country/locality will intensify the affective bond between consumer and the country/brand image and will make visitors actively seek the country/brand in their home country.”180

- “Relates to the need of wine branding to be associated with more than just the quality of the product itself”181: In developed countries, products are assessed not according to their physical quality but rather their intangible ones, like images, associations, lifestyle. To positively attract minds and hearts of international markets and exploit the advantages of branding to their benefit, wine producers across the globe should determine their historical, cultural and lifestyle elements.182

- “It is useful for wine marketers to understand the competitive environment and to identify who are the true competitors”183: The assumption, other wine makers are competitors is very outmoded. According to a true competitive analysis, a clear difference between local and foreign wines is important. Competition with other alcoholic drinks should be handled by a separate branding strategy with the focus on norms, habits and cultural behaviour. Non-alcoholic drinks presented as healthy products are not competitors of wines, as they can also be measured as part

179 Cf. Vrontis, (2014), p. 168. 180 Cf. Vrontis, (2014), p. 168. 181 Cf. Vrontis, (2014), p. 168. 182 Cf. Vrontis, (2014), p. 168. 183 Cf. Vrontis, (2014), p. 168.

44 of a healthy lifestyle. With the clear understanding of competition further ‘strategic marketing options’ and ‘branding directions’ will be implemented.184

- Some branding options, which are applicable for small businesses as well, demonstrate “political, social and economic factors in the country of purchase and general image are essentially beyond the individual influence of small wine businesses.”185 These macro environmental factors should be often checked by the businesses and their understanding should be used to make marketing actions. If small wine businesses have available resources, they will have more available options in relation to stereotypes, target market knowledge and experience. Political and cultural relationship between country of origin and country of purchase cannot be controlled by small firms. With the proper examination of external environment, “quick response to country to country relationship changes for maximum benefit”186 can be granted. Such changes will be periodical, however sustained conditions may lead to permanent changes in consumer perception. Strategic marketing collaboration between small wine businesses is needed to develop parallel brand image.187

Branding cannot be managed without a proper marketing strategy. In case of wine industry, the situation is the same, therefore incorporation of the above-mentioned aspects into the strategy is crucial.188

2.17. Brand equity in the wine industry

“I think, in general in the wine business, people don’t understand the need to build brands. That will become more and more of a problem among mid-sized wineries.”189- David Higgins, Brown-Forman Beverages Worldwide Wine Group President.

According to the article of The Press Democrat, most of the wineries are not participating actively on the market, but some of them are still rising. “Those who don’t have strong brand names …seem to be immune

184 Cf. Vrontis, (2014), p. 168-169. 185 Cf. Vrontis, (2014), p. 169. 186 Cf. Vrontis, (2014), p. 169. 187 Cf. Vrontis, (2014), p. 169. 188 Cf. International Wine Research Database, interview by Walker Larry 189 Cf. Westling, (2001), p. 1.

45 to the sagging economy, and prices are continuing to go up for some coveted wine.”190 Strong brands are experiencing continuous powerful growth. Furthermore, “customers are still lining up on waiting lists for a chance to buy the latest release…”.191 This situation shows the power of branding.

While a brand is not simply a name, but “what the consumer perceives it to be”, brand equity is exactly what the name means – “value of the brand”.192 “Brand equity is related to the brand-name recognition, perceived brand quality, strong mental and emotional associations, and other assets such as patents, trademarks and channel relationships.”193 High brand equity provides competitive advantages for the company, such as reduced marketing costs thanks to the consumers’ brand awareness and loyalty, and more power in bargaining with distributors and retailers. Moreover, the company has the opportunity to sell its product at a higher price than its competitors as the product represents high quality. The brand name brings high credibility therefore, it is easier to expand the product. Finally, the brand ensures protection against price competition.194

Concluding the above-mentioned words, “brand will allow a company large margins because the consumer is less price conscious, reduce expenses through cost effective marketing activity, and generate revenue through increased sales and higher price margins, all the while strengthening the brand’s competitive position by building the consumer’s positive perception of the brand.”195

2.18. Eastern European wines in Western Europe

Under the Soviet-system the importance of the wine sector increased largely. Wine producing countries had to ensure supplies for the Union of Soviet Socialist Republics and other Republics of the Eastern-block. The sector had strategic importance, therefore it emerged, even though the focus was on quantity production instead of quality. After the communist system, the “privatisation process gave an atomisation of the agricultural and industrial sector, leading to an inefficient agro-industrial system.”196 Unfortunately, this system wasn’t able to compete with the wines coming from more competitive producers. The Eastern

190 Cf. Appel, T., The Press Democrat, (2001), p. A1 191 Cf. Cf. Appel, T., The Press Democrat, (2001), p. A1 192 Cf. Westling, (2001), p. 1. 193 Cf. Aaker, (1995) 194 Cf. Westling, (2001), p. 2. 195 Cf. Westling, (2001), p. 2. 196 Cf. Panzone, (2011), p. 1061.

46 European wine sectors were totally restructured, which gave the opportunity to raise production and improve quality supported by the European Customs Union.197

Eastern European wine sector After the fall of the communist regime, a restructuring process started in Eastern Europe, which meant a transition to market economy. Its cause was that, all economies of Eastern European countries had to face with market forces. As wine sector always served an important source of income for households in Eastern Europe, they had to start an adjustment phase to conform to the changing economic environment.198

“Wine sectors … were collectivised under communism, with state farms producing almost the total national production. The agricultural production was collected by a monopsony, responsible for the production and for the placement of wine in the national market. The monopsony was responsible also for allocating inputs, directing grape varieties, planning assortments and pricing outputs.”199 At the same time, monopolists were responsible for ensuring the foreign trade of the area by managing and placing national products abroad. Furthermore, control of the foreign wine’s import was also the task of a monopolist.200

Some Eastern European countries could establish stable quality management, which contributed to the acceptance of attractiveness of final products in Western European countries.201 Unfortunately, there were countries which couldn’t follow the reforms in a proper speed. Owners of small plots were unable to handle restructuring of vineyards and ensure a standardised output for winemakers. This led to a damaged image for the whole sector.202

Privatisation procedure was carried also in the processing part of the wine chain with the aim to achieve internal competition. However, the lack of capital and long reform procedures ended in the decline of yields and quality management. Consequently, exporting winemakers started to compete on price

197 Cf. Panzone, (2011), p. 1060-1061. 198 Cf. Panzone, (2011), p. 1061. 199 Cf. Zaharieva et. al, (2004), p. 229. 200 Cf. Zaharieva et. al, (2004), p. 229. 201 Cf. Bainbridge (1999), p. 409-15. 202 Cf. Felzensztein et. al, 2004), p. 73-84.

47 variables of the marketing mix, which embodied the only competitive advantage they could bet on. Low- price strategy is not so favourable in the sense of gaining popularity in developed wine importing countries, where price is a significant tool for consumers to evaluate quality. There were some difficulties, like decrease in the quality of wine and fluctuating tastes, Eastern European countries had to face with during the process of transition.203

Examining if prices successfully represent the quality of the product, two different levels are investigated.204 Firstly, according to Akerlof, “high quality wines are more expensive to supply from producers, and the existence of a market premium for quality acts as strong incentive for high quality suppliers to provide high quality products.”205 Secondly, according to Rao and Monroe, “prices possess an important ability to convey information about the quality of the product to consumers and the failure of price to be informative can lead potential buyers to prefer more information efficient substitutes.”206

The most significant conclusion is that, the price doesn’t give any information about the quality of the wine, these two are not correlated. The lack of correlation, doesn’t mean that quality is not important, but that good quality and low quality wines are priced similarly. The main thing, Eastern European wine producers should pay attention on, is improving the quality level of their production and try to hold this level on a constant base. There is one problem which arises from ineffective marketing strategies, which is too much focus on price variable. Producers sell high quality wines on a low price, however they would sell more with appropriate pricing. The biggest mistake of producers is that, they try to communicate quality through price, which leads to ‘future instability’ as to ensure the same quality requires a premium. During the communist era, no marketing know-how was worked out, therefore firms needed to make steps to reconsider price based strategies, divide the production into segments, focus on labelling of the product to give proper information for uninformed customers. According to taste analysis, customers went to the direction of fruity flavoured not so acid white and red wines. All in all, if customers have some knowledge regarding ‘what best accompanies with the wine’, if the product ‘considered good value of money’, synergy is ensured.207

203 Cf. Zaharieva et. al, (2004), p. 229. 204 Cf. Panzone, (2011), p. 1061-1063. 205 Cf. Akerlof (1970), p. 488-500. 206 Cf. Rao et. al, (2005), p. 401. 207 Cf. Panzone, (2011), p. 1074.

48 2.19. Place-based marketing

The wine market is saturated with lots of brands, therefore the consumers are overwhelmed by many choices. Despite the wine industry is highly fragmented, it tries to build strong brands, in which the consumer can identify and trust. “Wine was one of the first products of an agricultural origin to develop a close and distinct relationship with its geographic place of origin originally in European countries.”208

Place-based branding is a serious topic nowadays in the world, so it is important to notice every place has an image. It was found out, the country of origin (COO) has a significant effect on brand equity and its dimensions. “…the factor that motivates consumers to buy domestic products is ethnocentrism”209 and this, “manifests itself in the positive effect that country of origin has in consumer wine choice.”210 Some consumers use COO to evaluate the quality of the wine, whereas other consumers, who are less involved, do not deal with issues associated with the place of origin.211

Consumers are searching for information about the product before they purchase it. Although the wine market is complex in regard to decision making of the consumer, differentiation is getting more and more important. The two main strategies of differentiation are region of origin and place-based marketing. Wine is a product, which is greatly information demanding, moreover, has potential for high involvement, therefore it is a product with which consumers can form a personal connection. The level of involvement depends on personal importance. If consumers find the product personally relevant, there is more chance they will be involved in collection of information about the product. First and last, “high involvement purchases are very important to the consumer, while low involvement purchases are not very important.”212 Low involvement products are “frequently purchased, widely distributed, low-priced consumer non-durables.”213 However, high involvement products are “not technologically complex, high- priced, consumer durables” and they are connected to hedonism. “Consumers with a high level of involvement with region of origin branded wine are likely to consume more of this type of wine and place

208 Cf. Bruwer et. al, (2010), p. 5. 209 Cf. Bernabe’u et. al, (2008), p. 175. 210 Cf. Keown et. al, (1995), p. 17-20. 211 Cf. Bruwer et. al, (2010), p. 5-6. 212 Cf. Schiffman et. al, (2006), p. 220. 213 Cf. Bruwer et. al, (2010), p. 6.

49 greater importance on the product information on the label.”214 “All wineries regardless of size or location use labels to communicate to consumers.”215

The effect of time and purchases depend on the knowledge of the consumers related to the wine. There are three categories according to which product knowledge can be measured: self-reported knowledge, the knowledge of the consumer in his/her mind about the products and the experiences related to the product (consumption, purchase). It was found by researchers, that consumers’ involvement level has an impact on how they see the quality of the product. “Due to the experiential nature of the wine product, consumers get most of their quality cues from the extrinsic cues such as the packaging and specifically from the label of the wine.”216, it should be notices “that regional or specialty products like wine often share a collective reputation based on aggregate quality and if the collective reputation of the product is good, the designation will be a powerful tool to signal quality.”217 In California, wine producers used geographic branding as a strategy to sell their products. However, according to Thakor and Lavack (2003), the place where the product is made is not important but where consumers think it was made is important.218 There are three types of places that can be determined under the place-based marketing concept: actual, generic and fictional places. Because wine originates from an actual place with a registered name, the idea of Thakor and Lavack (2003) is “too broad to generalisation.”219

Examining the theory of Dimara and Skuras (2005), they say, “consumers are increasingly anxious to know where products come from.”220 According to the study, “region of origin is more important for wine consumers who are high in product involvement.”221 “The effect of combining place names on a wine label is not equivalent and it is therefore not a guarantee of raising quality expectations.”222 The result of the study shows that, wineries should start “utilizing the brand power of the larger regions available to them when those regions have a positive brand image.”223 Finally, COO represents power in a brand’s image. It has a significant role in the marketing of wine as well. Consumers have to face with a wide range of brands

214 Cf. Santos et. al, (2008), p. 300-12 215 Cf. Bruwer et. al, (2010), p. 6. 216 Cf. Gergaud et. al, (2007), p. 1-22. 217 Cf. Winfree et. al, (2005), p 206. 218 Cf. Thakor et. al, (2003), p. 394. 219 Cf. Bruwer et. al, (2010), p. 7. 220 Cf. Dimara et. al, (2005), p. 91. 221 Cf. Hollebeek et. al, (2007), p. 1044. 222 Cf. Bruwer et. al, (2010), p. 10. 223 Cf. Bruwer et. al, (2010), p. 12.

50 on the market, therefore COO is a key differentiator, which has a positive impact on the brand’s equity. In some countries, region of origin started to get more importance than COO. Those consumers who are interested in some information about the wine, such as vintage year, maturation or region of origin, consume bigger quantity of wine. These consumers are highly involved, therefore the information contained on the label will be more significant. When we are talking about wine, it is a “category where product quality has a considerable impact on consumer behaviour.”224 Quality cues are transferred through packaging and label. Moreover, the origin of the brand is recognized as the key indicator of quality by the consumers. In conclusion, if the geographical area has a positive reputation, it will ensure quality alone to many consumers.225

2.20. Dimensions of wine region equity and their impacts

“In Europe, the European Commission has acknowledged the importance of geographic product origin as a source of competitive advantage by issuing trademark-style protection.”226 In particular, protected designations of origin (PDO) and protected geographical indication (PGI) is defined. According to some researchers, consumers rely on the origin of the product to presume its quality. It is also proven, representatives of science are focusing on ‘cognitive processes’ barely and usually don’t pay attention on the emotional decision making of consumers. Moreover, Von Alvensleben (2000) suggests that “emotions consumers associate with product origins outperform the quality aspects generated through cognitive paths.”227 Various studies support his opinion as they say, consumers develop emotional, economic, and social value from the origin of the product. In the wine industry, product quality became the most important factor, which helps to increase competitiveness of companies. Therefore, quality wines turned into the ruler of the market. It is very easy for consumers to switch between wines, whose main message represents high quality. The origin of the wine is usually important for those consumers, who may not be so familiar with brand names and appreciate origin more than the brand.228

224 Cf. Bruwer et. al, (2010), p. 16. 225 Cf. Bruwer et. al, (2010), p. 15-16. 226 Cf. Orth et.al, (2005), p. 89. 227 Cf. Von Alvensleben, (2000), p. 399-402. 228 Cf. Orth et.al, (2005), p. 89.

51 - “Place/region equity”229 Countries, regions, places and other geographical entities are more and more accepted to operate like brands. Furthermore, the value of branding places has a better understanding nowadays. Studies also approved that, “national and other place images are powerful stereotypes that influence behaviour in all types of target markets.”230 Wine marketers also started to understand the importance of taking advantage of the origin.231

- “Consumer lifestyle”232 “Assuming that dimensions of wine region equity can be identified, the question arises as to how to communicate selected benefits to consumers persuasively. Consumer lifestyle is valuable for predicting and profiling natural segments of users for a number of products and services.”233

2.21. Drivers of wine regionality

Regonality is “the reputation a wine region has for producing wines with a recognised and appreciated style.”234 The main importance of regionality is to create strong regional brands, which are acknowledged as a basic factor for the expansion of brand salience. Regionality is about individual , which has unique characteristics that cannot be transferred to other regions with the same grape variety. Regions of the European Union has to follow strict guidelines relating to the methods and procedures that can be applied within all areas of . If the region fails to fulfil the expectations, it can result in exclusion or loss of certification. Earlier, as the result of local wine sale, brand loyalty was high. With the growth of local and international wine consumption, export of the produced wines increased, which brought status and pleasure in emerging markets. It meant an expansion in the ‘perceived value’ of the region. Regionality thrives if uniqueness and scarcity is present and efforts are being taken to set up perceived quality over time. Nowadays, a huge number of the wines are sold in supermarkets, which creates a fast-moving

229 Cf. Orth et.al, (2005), p. 90. 230 Cf. Papadopoulos et. al., (2002), p. 294-314. 231 Cf. Orth et.al, (2005), p. 90. 232 Cf. Orth et.al, (2005), p. 90. 233 Cf. Fournier et. al., (1992), p. 329-337. 234 Cf. Easingwood et. al, (2011), p. 19.

52 consumer good, thus wine regions without regionality will be made to compete on price. In today’s world (New World) regionality has great importance in protection and promotion of wine producing regions.235

Drivers of regionality

- “Discriminating between high and low regionality”236 Drivers are higher for regions, which are rated as high regionality than low regionality. This creates discrimination between wine regions, which have strong regional identity and those which have low levels of regional identity. The final outcome is that, not all of the drivers arise for all wine regions, which have strong regionality.237

- “Specialisation”238 If the region specialises in a wine style, it means that, the region focuses only on one wine style. If it wants to build a strong regionality profile, it has to focus on one or small number of wine styles. If only one or two other notable wine styles are made in the region, it supports the appreciation of the wine, but only if a limited number of different style wines are produced. Young wine regions use this strategy to see which varieties will ensure success and they also try to help to establish regional identity.239

- “Volume production”240 If significant amounts are produced with a certain size and critical mass, formation of reputation is easier. Critical mass contributes to recognition and brings shelf space. Opinion formation is the second aspect, which helps to achieve recognition.241

235 Cf. Easingwood et. al, (2011), p. 19-21. 236 Cf. Easingwood et. al, (2011), p. 25. 237 Cf. Easingwood et. al, (2011), p. 25-26. 238 Cf. Easingwood et. al, (2011), p. 26. 239 Cf. Easingwood et. al, (2011), p. 26. 240 Cf. Easingwood et. al, (2011), p. 26-27. 241 Cf. Easingwood et. al, (2011), p. 26-27.

53 - “Quality”242 High average quality is essential for building regional identity. Highly admired wines of a region can increase the reputation of the whole region, even if the average quality of wines is not so high. Regionality can be build easier in those regions, where the life of the wines is longer. Wines, which has a nice age usually go to auction, where they can benefit from their age, set high prices and build reputation for themselves and the region.243

- “Heritage”244 Building regionality is not an easy task. Those regions, which inherited value are more stable and secure than other regions without heritage. It is also advantageous, if the style of the wine is known for a long time (for decades), which ensures reputation and makes it more difficult to copy.245

- “Distinctive”246 Wine style, which is special and acknowledged, contributes to build regional-identity. It is very important to have a clearly explained taste profile, which has to be special at the same time. If the region has a wine with a special style, it helps to create regional identity. It is also favourable if few other wine regions in the world are acting in the same way. This provides ‘exclusive brand property.’247

- “Terroir”248 If the wine is produced on a particular terroir, other regions cannot reproduce the same wine easily. Naturally, it is not a simple task to find a region anywhere in the world with unique geology and climate, which makes the style of wine extraordinary.249

242 Cf. Easingwood et. al, (2011), p. 27-28. 243 Cf. Easingwood et. al, (2011), p. 27 244 Cf. Easingwood et. al, (2011), p. 28. 245 Cf. Easingwood et. al, (2011), p. 28. 246 Cf. Easingwood et. al, (2011), p. 28. 247 Cf. Easingwood et. al, (2011), p. 28. 248 Cf. Easingwood et. al, (2011), p. 29. 249 Cf. Easingwood et. al, (2011), p. 29.

54 Discriminating between high and low regionality Those wine regions which gain from one or a very small number of wine styles with special taste profile are supposed to count well on regionality. Achieving a strong regionality profile for wineries is crucial. The three most important drivers of regionality are ‘Specialisation’, ‘Opinion Formation’ and ‘Distinctiveness’. The first factor to get in to the discriminant function is specialization, which has the highest discriminating power. Enlargements are made by large investors whose aim is to plant grapes which will ensure the best performance with the local conditions. Moreover, they are interested in international sales, which is supported by strong regionality profile. Specialization brings the well-determined taste profile. Next to the regional specialization, terroir and the way wines are produced play an important role in identifying the style. Later taste profile can be evaluated by wine writers and buyers as well. Opinion formation is the tool, which helps to get to know the specialized style through advertising and promotion. There are some wine regions mainly in Europe, which are specialized in a particular grape or few grapes which fit well to the conditions of the region and have a clear style. If these special grapes are not communicated to the customers by wine writers or the media, consumer won’t have any information about them and they won’t pay attention to the region. The following characteristics demonstrate why it is important to be a region with high regionality: specialise in a wine style, produce significant amounts, discussed by opinion formers, produce quality wines, have a wine heritage, produce distinctive wines not made elsewhere, produce a wine that is made possible by the region’s particular terroir.250

2.22. Status re-categorization

“Categories are socially constructed labels that differentiate object, people, practices and even time and space.”251 They make complex situations simpler by demarcating selection and understanding of information.252 According to the organization theory, categorization is built upon prototype theory, which says, “elements that entities hold in common with one or more others constitute category prototypes for audiences.”253 Holding more of these elements, categorization of an entity happens in more security in the given category.254 In this case, “categories provide cognitive boundaries around and between clusters of

250 Cf. Easingwood et. al, (2011), p. 29-30. 251 Cf. Lamont et. al, (2002), p. 168. 252 Cf. Lounsbury et. al, (2004), p. 969-970 253 Cf. Rosch et. al, (1981), p. 115 254 Cf. Durand et. al, (2013), p. 1102-1103

55 social objects that share a family resemblance.”255 In line with the institutional understanding, it “sees categories as an ongoing display for increasing abstraction, whereby a category grows horizontally to encompass new sets of situations and acquires different meanings reflected and reproduced through socio-cultural practices.”256 Category change is more difficult to achieve, if boundaries between categories are strongly determined.257

Status orders Practices are connected not only with categories, which are in their horizontal extensions, but they also “contribute to the social valuation of a category within a vertically ordered social space.”258 Categories are not only horizontally created within the classification systems, but they are also vertically related through status orders (hierarchies). It is quite difficult to change status orders, “not only because of their underpinning cognitive and cultural imperatives, but because status maintenance concerns are central to organizations and markets.”259 “Once a status hierarchy is established, it tends to remain and be self- sustaining.”260

All in all, status re-categorization is a “process by which a social category is reclassified into a new or different class and its scope extended to encompass a higher range of status positions for members of the category.”261 In other words, it is about how a low status category can change its meaning and achieve high status.

Three mechanism of status change Status change can be effected by three mechanisms: ‘category detachment’, ‘category emulation’ and ‘category sublimation’. These mechanisms establish ‘theorization by allusion’, which is applicable for changes, that associate status. Category detachment is the “distancing of a social object from its existing category… moreover, it is the presentation and signalling of an object in such a way that audiences have serious difficulty associating it with the meanings and practices of the undesired category.”262 Category

255 Cf. Rosch et. al, (1975), p. 573-605. 256 Cf. Hofstadter et. al, (2013) 257 Cf. Hannan et. al, (2007) 258 Cf. Lamont, (2012), p. 21.6-21.7 259 Cf. Malter, (2014), p. 271-300. 260 Cf. Chen et. al, (2012), p. 302. 261 Cf. Delmestri et. al, (2015), p. 40- 41. 262 Cf. Delmestri et. al, (2015), p. 30.

56 emulation is the “presentation of a social object so that it hints at the practices of a different high status category. Emulation signals the status being sought and by implication the status that is being claimed.”263 Category sublimation is the “shift from local, field-specific references to broader, societal level frames. It is the process by which re-categorization incorporates wider cultural material”264 and “connect to broader legitimating narratives in order to enhance the likelihood of sustained change.”265

Theorization by allusion Delmestri and Greenwood (2015) recommend that, the mechanism of category detachment, category emulation and category sublimation creates a unique form of theorization, which is identified as theorization by allusion. Furthermore, it is significant for re- categorization efforts associated with moves from low to high status.266 According to Washington and Zajac (2005), status is a “socially constructed attribute that draws heavily upon the legitimacy of relationships and the reciprocation of claims to category membership.”267 Claims can be refused more easily if they are considered too fanciful and they are lacking of credibility.268 Theorization by allusion is special, because it “avoids or minimizes the brute clash of interests and the noisy, contested process previously observed.”269 Moreover, it “builds on a capacity of visual to objectify social arrangements by distinguishing itself as information, rather than argument.”270

Combination of the three mechanisms provide theorization by allusion. All three mechanisms are required and significant as they produce crucial parts of success. Category detachment puts attention on how a phenomenon cannot fit into the existing category. Generally, it creates a problem, however “the cognitive difficulty in assigning the product to a predetermined status position may become an opportunity, if it is accompanied by category emulation.”271 Category emulation provides solution. Thus, the two together reduces the risk of social punishments: “detachment frees the product from the grip of its low status category, emulation anchors it analogically to proximate higher status world and the practices that

263 Cf. Malter, (2014), p. 271-300. 264 Cf. Meyer, (2010), p. 3-4. 265 Cf. Delmestri et. al, (2015), p. 34. 266 Cf. Delmestri et. al, (2015), p. 36. 267 Cf. Washington et. al, (2005), p. 282-296. 268 Cf. Delmestri et. al, (2015), p. 36. 269 Cf. King et. al, (2010), p. 249-267. 270 Cf. Meyer et. al, (2013), p. 518. 271 Cf. Delmestri et. al, (2015), p. 38.

57 characterize it.”272 Unfortunately, this is not enough, because status classifications cannot be changed easily and re-categorization is feasible only if the claim is recognized as reasonable. Detachment without the other two mechanisms, make the observer confused, while emulation and sublimation without detachment would be acknowledged too fanciful. In conclusion, “theorization by allusion is used to sustain a category extension claim in two complementary directions. The claim to vertical extension is for a higher status position of the category within the class to which it belongs.”273 “Vertical extension cannot be reached without a corresponding horizontal extension encompassing social practices that can be associated with the sought after higher status position.”274 High quality products won’t be recognized, if they are associated with low status category and vice versa.275

2.23. Rebranding a wine region

The main question, which arises regarding rebranding is, how the wine region can make a decision about its branding and positioning strategy to “raise the profile of the region and build wine consumers’ share of mind”276. It is common that, in the wine sector, well-known regions had the opportunity to develop over a longer period of time. They produced grapes and wines, which brought reputation among wine drinkers and writers. These regions are also linked with specific terroir and grape varieties. Life of new regions or regions which produce generic wines is more difficult, as they have to face with the dilemma if they should focus on a specific grapes variety, use the name of the region or tourist related attractions as promotion tools.277

In the following section, the importance of country of origin, region of origin and branding is going to be examined: “Country image is the overall perception consumers form of products from a particular country, based on their prior perceptions of the country’s production and marketing strengths and weaknesses.”278 According to the research, the wine region of origin gives extra value to the product in the eyes of the consumers.279 Furthermore, it has a significant role during the choice, for which customers are ready to

272 Cf. Delmestri et. al, (2015), p. 38. 273 Cf. Hofstadter et. al, (2013) 274 Cf. Delmestri et. al, (2015), p. 39. 275 Cf. Delmestri et. al, (2015), p. 40. 276 Cf. Remaud et. al., (2008), p. 2. 277 Cf. Remaud et. al, (2008), p. 3. 278 Cf. Roth et. al, (1992), p. 480. 279 Cf. Lockshin et. al, (2006), p. 167.

58 pay.280 Tustin et. al (2001) says, there is a significant cooperation between price and the region, but not between region of origin and brand.281 In Europe, country of origin is primary during consumers’ purchase decision282, moreover, following the quality, customers focus on individual firm reputation and collective or group reputation factors. 283

As it was already mentioned, wine industry is extremely fragmented and there is a strong competition between wine brands. Customers have limitless opportunities to choose a product from several brands, so usually most of them are not loyal only to one brand. “Wine consumers will purchase a brand depending on multiple factors due to the type of store, circumstances of purchase situation, occasion of consumption and their wine involvement.”284 It is really important to raise consumers’ attention during the shopping experience, however it is a very difficult task. Positioning of a wine has no meaning, if it doesn’t make any sense in people’s mind. “Developing the number and the intensity of connections that will link a particular brand or wine with a wine consumer’s shopping trip is therefore the relationship that any winery should focus on. This relationship is encapsulated into the concept of brand salience.”285 Product or brand salience “is the propensity of the product or brand to be noticed or thought of in buying situations. It covers the memory associations that a consumer will have for a product or a brand at one specific point in time during his or her buying trip.”286 The biggest challenge for brands is to be thought in as many situations as possible. If it is thought of, thus customers are conscious about the attributes associated with the product, there is a bigger chance to be chosen. “As greater salience leads to greater likelihood of retrieving the cue in a purchase situation, researchers assume that wine regions with greater salience are more likely to be chosen.”287 This is very challenging for all wineries, which compete worldwide. “Due to the number of regions competing on the market and due to the tiny set of brands a consumer could have in mind, it sounds evident that the bigger the wine region, the greater the chance to build its salience and thus, the greater the chance of the region to be thought about and purchased.”288 Small wineries cannot afford big advertising and promotion budgets therefore, they are unable to compete with the big ones. A solution

280 Cf. Schamel et. al, (2003), p. 358. 281 Cf. Tustin et. al, (2001), p. 139-143. 282 Cf. Skuras et. al, (2002), p. 901-904. 283 Cf. Landon et. al, (1998), p. 631-634. 284 Cf. Lockhsin et.al, (2001), p. 223-236. 285 Cf. Sharp (2006) 286 Cf. Romaniuk et. al, (2004), p. 329. 287 Cf. Romaniuk et. al, (2002) 288 Cf. Remaud et. al, (2008), p. 5.

59 for this problem could be the cooperation within the wine region.289 Moreover, the increase of salience of the wine region would insure a “greater chance for all the wines of this region to be thought of in the purchase situation.”290 To create awareness and share of mind, usage of grape variety can be a tool, but not for a long time, as it is really easy to copy and another wine region may be well-known for that grape variety as well. In the last few years, wine tourism helped wine regions to build image and salience, which promoted not only the wine, but the region too. 291

All in all, education of wine drinkers (consumers) would be important. The education process should take part in the form of linking grapes and the region together. It could be a long-term option. Furthermore, the geographical name or region of origin should be used during the process of branding the product and if it makes sense for the customer. New wine regions should take into consideration their positioning and competitive advantage by expanding their regional branding strategy, e.g.: not using only wine related cues, but other linkages too, such as tourism. If we examine the competition of the regional brands, the key to success is to be recognized by their wine quality. As a conclusion, the geographical name is not enough to represent the brand and promote the region, however other important features need to be added to the region, which makes the choice of a wine easier for the consumer.292

289 Cf. Ling et. al, (2003), p. 20-21 290 Cf. Remaud et. al, (2008), p. 5. 291 Cf. Remaud et. al, (2008), p. 6. 292 Cf. Remaud et. al, (2008), p. 13-14.

60 3. Research methodology

In the research part of the thesis qualitative content analysis is going to be applied. The main idea of this type of analysis, is to “preserve the advantages of quantitative content analysis as developed within communication science and to transfer and further develop them to qualitative interpretative steps of analysis.”293 The body of qualitative content analysis is all kinds of ‘recorded communication’, such as interview transcripts, protocols, video tapes and documents. Content analysis inserts the text into a communication model, within which the aim of the analysis is determined as well.294 According to Krippendorff (1969), content analysis is the “use of replicable and valid method for making specific inferences from text to other states or properties of its source.”295 Examining qualitative content analysis, it is an “approach of empirical, methodological controlled analysis of texts within their context of communication following content analytical rules and step by step models, without rash qualification.”296

During qualitative content analysis, two approaches are investigated: inductive category development and deductive category application.297 Within the framework of these approaches, it would be of great importance to process the aspects of interpretation and categories near to the material, to state them ‘in terms of the material’. From this viewpoint, procedures of inductive category development were established, which are “oriented to the reductive processes formulated within the psychology of text processing.”298 The main point of inductive category development approach is to develop a ‘criterion of definition’ originated from theoretical background and research questions, which defines the aspects of text elements taken into consideration. Following the criterion, the material is reworked, categories are unsettled and deducted step by step. “Within the feedback loop those categories are revised, eventually reduced to main categories and checked in respect of their reliability. Deductive category application “works with prior formulated, theoretical derived aspects of analysis, bringing them in connection with the text. The qualitative step of the analysis consists of a methodological controlled assignment of the category to a passage of text.”299 The main point of this approach is to provide precise definition, examples and coding rules for each ‘deductive category’. Moreover, to define under what circumstances the text

293 Cf. Mayring (2000), p. 1. 294 Cf. Mayring (2000), p. 2. 295 Cf. Krippendorff (1969), p. 103. 296 Cf. Mayring (2000), p. 2. 297 Cf. Mayring (2000), p. 3. 298 Cf. Ballstaedt et. al, (1981) 299 Cf. Mayring (2000), p. 4.

61 can be coded with a category. Determination of categories happen within a coding agenda.300 With the qualitative content analysis, ‘procedures of systematic text analysis’ are discussed. It tries to keep the strengths of content analysis in communication, with the aim to establish qualitative procedures that are methodologically controlled. In conclusion, research questions and characteristics of the material have to be primary in the decision-making process about the adapted methods. According to Mayring (2000), questions related to methods in the field of ‘specific content areas, emotion research’ need to be examined and after that comparison of the different approaches are required.301

Interview research design is going to follow inductive approach, which focuses on developing new theory on the basis of the data. It uses research questions to extend the scope of the study. Its aim is to search for new phenomena or examine an old one from a different viewpoint.302 Regarding inductive approach, grounded theory by Glaser and Strauss303 needs to be investigated. The theory says, researchers begin the research with an open mind without having any ideas what they will find. The aim is to generate a completely new theory on the basis of the data. In the analysis phase, selective coding will be applied during which researchers formulate and incorporate all categories and subjects in a way that gives a proper understanding or generate a theory for the study.304 After data analysis is done, researchers have to check existing theories to position their new ones into the discipline. Grounded theory suits well because no phenomena were investigated previously relating to the thesis’s topic.305 Interviews will contain a fixed questionnaire. Furthermore, organizations and respondents will be selected clearly. These kinds of standardized interviews will ensure the comparability of the data.306

300 Cf. Mayring (2000), p. 5. 301 Cf. Mayring (2000), p. 8. 302 Cf. Thomas (2006), p. 238. 303 Cf. Glaser et. al, (1967) 304 Cf. Robert Wood Johnson Project (2008) 305 Cf. Gabriel (2013) 306 Cf. Folkestad (2008), p. 10.

62 3.1. Research questions, aims and objectives of the study

Taking into consideration the effects of the communist regime on the wine production in Tokaj-Hegyalja wine growing region: - How did reorganization of properties and the whole wine production happen? - How did producers build their companies’ brand and start managing it? - What kind of strategies the wineries use to become successful player of the market? - What are the opportunities of wine producers in the future? How can they achieve their main aim to unify the whole region, make the brand Tokaji unique and get back to the world wine map?

In this paper, I put the emphasis on brand management in the wine making industry, specifically focusing on the main factors of building a brand successfully. Later on, the theoretical findings will be connected with the practical findings, showing an example through the Hungarian wine growing region, Tokaj- Hegyalja. The aim is to introduce the brand building process, how the worldwide famous brand, Tokaji survived hard times of history, started to renew, got the opportunity to rebuild and become famous as a high-quality brand on the foreign market. Furthermore, showing whether it is able to turn into a unique brand in the future. The topic is really interesting, because building and at the same time rebuilding of the brand Tokaji happens nowadays, in the present, therefore it is an important area of research.

3.2. Research design

Multiple data sources were used to collect proper data for the topic. Firstly, for the theoretical part secondary data were gathered through academic journals, books and websites. Secondly, qualitative research method, namely in-depth face-to-face and Skype interviews were conducted to get the necessary and relevant primary data for the thesis. Answers of individuals were processed after the interview and then they were analysed. Data gathered firstly were evaluated individually and after that similarities and differences were examined to formulate a conclusion.

63 3.3. Data collection method, instrument and sampling

Potential interview partners, who fulfil requirements related to the topic of the thesis (wineries in Tokaj- Hegyalja, who are building their brand to support the rise of the region again) were chosen according to personal knowledge and internet research. After that, they were contacted through e-mail. As a result, six managers or leaders of the wineries were interviewed. Before the date of the interview, interview partners received interview guidelines to prepare themselves. In the following part, important information regarding wineries are mentioned.

3.3.1. Profiles of wineries

Szent Tamás (location: Mád) Since 1700s vineyard classification, their lands are kept count of the best production sites in the region. Primarily, they are working with furmint, which is one of the white grapes species, that has the biggest potential all over the world. Leader of Szent Tamás, is Jr. István Szepsy, 18. generation wine producer.307 7. Source: Szent Tamás official homepage

The winery was founded in 2009. The founders’ aim was to make unique wines originated from the vineyards, which introduces trustworthily the production sites in Mád and around Mád. In 2011, the first dry wine was born on settlement level, called MÁD Furmint. The product was produced as the result of the Mád integration. The main aim of the winery, was to get a wine, which is easy to consume, has high quality and is produced in a bigger quantity for a wider target group, moreover, which helps to get to know the endowments of Mád.308

307 Cf. Szent Tamás official homepage 308 Cf. Szent Tamás official homepage

64 Nowadays, they select furmint grapes from 26 vineyards to ensure the minerality, which is typical in the region. Vineyard selected wines are produced with the aim to express the unique characters of historical vineyards. Soil overwrites everything in flavour and smell. Therefore, the wine producing technique shouldn’t affect the style. Vineyards of the winery are mainly in Mád, but also in Tarcal, Rátka, Tállya. The overall aim is to produce wines, which express the special capabilities of the production sites. With this consistency and size of the property, they can produce high quality and unique wines. To achieve this, they need 20-25 years old grapevines, which are in good condition. The winery is producing wine in three categories: dry, aszú and cluster progression with high inner content aszú. They started to produce as well, but it will take years to find out if the results will be worth it. The winery is member of the Wine Association Mád and it follows the rules and regulations of it. The following vineyards owned by the winery got high-toned qualification in 1732: Szent Tamás, Percze, Nyúlászó, Kővágó, Betsek, Király and Dongó. As well as accentuated properties, such as Birsalmás, Teleki and Szilvás. It is very important for the winery to show unique flavours of vineyards, whose soil is structured variously. Within the vineyards, there are special parcels with the usage of which, they would like to produce wines with outstanding quality, but in small quantity. The winery can be found around the world, in countries like, , Austria, Belgium, , Denmark, Finland, The Netherlands, Hong Kong, Japan, Canada, China, Poland, Latvia, United Kingdom, Germany, Norway, , Romania, Spain, Switzerland, Sweden, , Taiwan and the USA.309

Additional information • Awards and international wine competitions310 • Innovation Award for MÁD brand (2016)

The aim of setting up of the brand, MÁD, was to create a new wine category, a wine on settlement level. The product is made from high quality Botrytis free grapes with reductive technology. The main characteristics of furmint and unique geology of the production site appears in the flavour of the product significantly. The award was given by the Hungarian government to a company, which achieved the most important innovation in the last years, moreover, which brought nice amount of profit, showed economic advantage and represented something useful for the society.

309 Cf. Szent Tamás official homepage 310 Cf. Szent Tamás official homepage

65 • World Wide Awards (2016) – Szent Tamás 2012 – Platina – Best Hungarian • Decanter World Wide Awards (2016) – Dongó Szamorodni 2013 - Gold • Decanter Asia Wine Awards (2016) – 3909 2011 – Platina – Best Sweet Tokaji • Vinagora (2016) – Dongó Szamorodni 2013 – Médaille d’Or • Vinagora (2016) – Nyúlászó Szamorodni 2013 – Grande Medaille d’Or • Korea Wine Challenge (2016) – MÁD Furmint 2015 – Gold • Decanter Wold Wide Awards (2015) – Dongó 2013 – Regional trophy – Gold • Prestige Reserve Award Competition – Dongó 2013 and Percze 2013 – Best wines – Caprice Diamond Award

Valuation of the winery according to the press:311 • Blue Lifestyle Magazine (2017) – 92 points for MÁD Furmint 2015 “Lush and silky with rich, juicy and fresh fruit, clean, racy and mouth-filling, generous, bright and long.”312 • Decanter Magazine (2015) – offers MÁD Furmint with points 90+

Further success in the life of the winery:313 • Szepsy 100 (December 2016) The most expensive white wine of Hungary. The wine is a milestone, which is the symbol of the extraordinary domestic and international success of Furmint. The number 100 means, the two famous wine producers of the region, István Szepsy (65) and 8. Source: Szent Tamás official homepage his son, Jr. István Szepsy (35) are 100 years old together.

• Tokaj Masterclass in Switzerland Masterclass about Tokaj, including lectures about the dynamic developments of the region in the last centuries, putting focus especially on the international success of the dry furmint.

311 Cf. Szent Tamás official homepage 312 Cf. Blue Lifestyle Magazine (2017) 313 Cf. Szent Tamás official homepage

66 • ProWein 2016 ‘ProWein’, is the world’s leading trade fair for wine and spirits, the largest industry meeting for professionals from viticulture, production, trade and gastronomy.”314 The winery continued to negotiate with existing partners and made relationships with new ones. MÁD Furmint 2015 was introduced on this event, according to the feedbacks of professionals, wines of the winery are standing before big international success.

• Participation on The Oscars with the wine MÁD Furmint 2015 • Furmint February Szent Tamás and Szepsy wineries took part together in showing values of the historically significant Úrágya vineyard.

• Masterclass in Geisenheim Leader of Weinakademie Österreich, Josef Schuller Master of Wine invited Jr. István Szepsy to hold a lecture about furmint.

• International Curriculum Court of Master and Weinakademie Österreich are offering more elements of the Hungarian dry furmint portfolio. Not only MÁD Furmint, but vineyard selected wines are going to be part of the curriculum.

• Gordon Ramsay sells dry furmint in his restaurant • Wine Auction 2015 Nyúlászó 1 Sweet Szamorodni 2013 is sold for 4.000.000 HUF (13.300 EUR) “The wine is a real head-turner”315. – Ronn Wiegand, Master of Wine

314 Cf. ProWein official homepage 315 Cf. Szent Tamás official homepage

67 Zsirai (location: Mád) “We aim to contribute to the fame of the Hungarian wine by reviving our traditions and producing unique wines.”316

The winery has properties not only in Tokaj- Hegyalja, but in other Hungarian wine growing regions as well, such as Villány and Somló. The owners are two young women, who are focusing 9. Source: Tokaji Borlovagrend on production of Hungaricum. All wine growing regions, where they are present, have native grapes types. They are trying to work with these ones, with a special focus on tradition. They have production plants in Mád, Tarcal, Tállya, Rátka and their vineyards are located in Betsek, Középhegy, Holdvölgy, Úrágya, Bohomály, Patócs, Előhegy, Padihegy and Teleki. They are producing wine specialities, like Aszú, Fordítás and Szamorodni, late wines, like Hárslevelű, Házasítás, Furmint and Sárgamuskotály, furthermore, wines of special species such as Sárgamuskotály, Hárslevelű and Furmint. They are participating on competitions and they already won some awards with their wines.317

Awards and wine competitions318 • Wine&Delicacies Prague (2015) – Champion Award • Prestige Reserve (2014) – Signum Vinum Naturalis • Vinalies Internationales Paris (2014) – Tokaji Aszú 6 puttonyos 2008 - Gold • László Gazdag Remebrance Competition (2013) – Tokaji Sárgamuskotály 2011, Tokaji Aszú 5 puttonyos 2007 – Gold • László Gazdag Remebrance Competition (2012) – Tokaji Máslás 2008, Tokaji Furmint Középhegy 2009, Tokaji Sárgamuskotály 2007 – Gold • Vinagora (2012) – Tokaji Sárgamuskotály 2007 – Gold • Local competition Mád (2010) – Tokaji Fordítás 2007 – Gold

316 Cf. Zsirai official homepage 317 Cf. Zsirai official homepage 318 Cf. Zsirai official homepage

68 The winery is member of the Tokaj Y Generation, which is a group of young wine producers, whose aim is to be part of the wine growing region as members of the new Tokaj-Hegyalja wine producer generation, moreover, participate in the local co-operations.319

10. Source: Tokaj Y Generation Facebook page

Szepsy (location: Mád) The Szepsy winery is a family business, which produces wine in Tokaj-Hegyalja since 1500s. Production of aszú started at that time too, therefore history of the family and the wine is inseparable from each other. The wine producer of the winery is István Szepsy, whose ancestors were also important members of the wine 11. Source: A Borrajongó producing culture. After he acquired enough knowledge abroad, he came back to Tokaj-Hegyalja and started to work on his dreams as private entrepreneur. From 1975, he was continuously buying lands, which he immediately planted with grapes. In 1987, his first wine was born. In 1989-’90, the family owned 4.2 hectares of production sites. He trusted foreign investors, who came to the country after the change of the communist regime, therefore he offered his property for purchase. This process gave him the opportunity to get those vineyards, which

319 Cf. Tokaj Y Generation Facebook page

69 ensures high quality for the wine. From 1992, he started to buy lands again, despite of his low income. In 1995, he achieved to increase the size of his property to 5 hectares. At that time, he undertook the build- up of a joint venture, called Királyudvar. From this point, he was managing his own business and the new one parallel. He thought the owner of the joint venture will bring foreign markets in the Far East or in the USA, but this didn’t happen. He realized that, there is no market for a product, which doesn’t even exist and he cannot gain connections with others if he is not in the activity deeply. Finally, he recognized, if the winery wants to develop the brand, technology won’t be enough, but production site will be what is going to distinguish it from other brands. He started to learn more about the 500 years old classification system of the region, what it means exactly. In 1995, his Aszú wine, which was made in 1989, was a great success. It was sold in the foreign market as well, in countries, such as Austria, United Kingdom and Switzerland. After eight , aszú oversaturated on the market, therefore he launched a new product, which had a new style, pleasing, easy to drink. This was the Szepsy Cuvée from 1999. He introduced it in the Master of Wine Institute in 2000. It got outstanding qualification. However, he felt that, something is still missing, so he re-created the furmint, which became a full wine with more unique taste. In 2003, first Szepsy dry wines were born. One of the wines, which originated from the Szent Tamás vineyard was rated 96 points by the circle of Wine Writers in 2004. In the same year, sweet szamorodni turned into the leading product as it was lighter and cheaper, so restaurants could work easily with it. In 2005, he finished the co-operation with Királyudvar and he founded the Szepsy Limited Liability Company. In 2007, he terminated the production of Cuvée because of Szamorodni. He was building his own brand successfully and finally he achieved to be present in more foreign countries, like the USA, Hong Kong and Sweden. In 2013, he participated on an event in Italy, called Villa D’Este Wine Symposium, which is organized with the aim to bring members of the global wine industry together to discuss and argue in the interest of the peak- wines.320 In 2015-’16, he decided vineyard and parcel selected aszús and dry wines are going to be produced from 100% furmint. Moreover, he is going to sell some wines only on wine auctions. The winery is not participating on competitions and exhibitions so often and they are not advertising, but they welcome those sommeliers, academicians, master of wines, restaurants, wine lovers and wine collectors from all over the world, who are interested in their wines.321

Their main aim is to produce grapes with the best quality without any compromise. This is the reason why they chose vineyards, which are located high, have rocky soil, steep and furthermore, have old vine-stock

320 Cf. HVG (2013) 321 Cf. Szepsy official homepage

70 (average age: above 40). They select furmint with small loose clusters, mainly in the territory of Mád. Moreover, the wish to recognize the production site encourages them to explore further areas in Tarcal, Mezőzombor, Rátka, Tállya as well. Currently, they have 52 hectares of land in 6 settlements and 72 vineyards in the center of Mád. They produce yearly, average 3800 bottles of dry wine, 7000 bottles of aszú and 12000 bottles of szamorodni type wines. Soil of vineyards are rich in zeolite, quartz, earthen- minerals and it is weathered volcanic liparite-tuff. The main types of the grapes are furmint, 20% hárslevelű and 6% muscatel. Nowadays, the company is selling its products almost all over the world.322

All in all, István Szepsy is struggling for more than 20 years to reposition Hungarian wines from Tokaj-Hegyalja wine growing region to the place, where they should be today and build a luxury brand. He is working on this goal with great passion.

Samuel Tinon (location: Olaszliszka) A producer, who was born next to Bordeaux. Firstly, he was producing wine in France, after that he was working in Chile, Australia, Italy and Texas. But finally, he chose Tokaj as his second home. According to him, there are two outstanding wine growing regions in the world, which are Bordeaux and Tokaj. His aim is to bring back the fame of Tokaji, therefore he is working on that, more and more people get to know and love it, and 12. Source: Tokaji borlovagrend to be part of the world’s gastronomy more intensively. He has 5 hectares of lands in Olaszliszka, on which he is producing wines according to traditional techniques. His products are long matured, complex, elegant and light Aszú and Szamorodni, which are sold mainly in France (10000 bottles yearly). He produces dry wine as well, which originate from the so- called vineyards, Birtok, Szent Tamás, Határi, Kásás and Megyer. Samuel Tinon has been participating on wine auction since 2013, where his products are enjoying fame.323

322 Cf. Szepsy official homepage 323 Cf. Samual Tinon official homepage

71 Disznókő (location: Mezőzombor) The company was set up in 1413. In 1732, Disznókő vineyards are declared the first growth in the classification of Tokaj. Since 1992, the estate has been under the leadership of AXA Millésimes, whose experience and knowhow helped Disznókő to be recognized today as being in the 13. Source: Disznókő official homepage forefront of the renaissance of the truly great Tokaj wines. In 1994, replantation started, density was low therefore the company decided to replant two-third of the estate. Work began in 1995 with the aim of producing the highest quality grapes. In 2005, Disznókő got Winery of the year status by the National Council of Wine Communities, Hungarian Wine Academy and Federation of Hungarian Vine and Wine Producers. The terroir of the winery is unique and coherent with noble grapes species, mainly furmint. However, the most extraordinary production site settles with aszú. The winery’s main products are sweet wines as they say, “Disznókő has crafted its own style of Tokaji wines, the legendary sweet white wines of Hungary. Disznókő Tokaji Aszús are contemporary noble wines with perfect balance between the purity of the fruit, the freshness of the grape varieties and the complexity of Botrytis.”324 Since 1732, territories of Disznókő are classified as vineyards in the region. It has one big production site, which is 150 hectares, from which 104 hectares are vineyards. Grape types are 60% furmint, 30% hárslevelű, 9% zéta and 1% sárgamuskotály.325

The winery’s aim is to make wines, that are harmonious and perfectly-balanced expression of their great terroir. In other words, as Christian Seely, managing director of the company would say: “Our duty is to produce great wines for today and decades to come, then to pass on the vineyards in the best possible condition to future generations. This long-term vision is a commitment to the vineyard. Our ultimate goal is to produce wines that express the unique characteristics of their terroir and that will provide pleasure for wine lovers all over the world.”326

324 Cf. Disznókő official homepage 325 Cf. Disznókő official homepage 326 Cf. Christian Seely, Managing Director of Disznókő

72 Hétszőlő (location: Tokaj) Tokaj Hétszőlő was always owned by kings and emperors during history. Since 1502, the best production sites and the most beautiful vineyards are located here, on the southern part of Tokaj hill. The owner was the Garai family, who chose the two best vineyards in

14. Source: Tokaj turizmus the region. Later it became the property of the famous Rákóczi family, however, finally Habsburgs enjoyed the ownership. From 1711, it is considered as a production site of the Emperor and it stayed under the control of Austrian-Hungarian crown for two decades. In 2009, Hétszőlő joined to Cos d'Estournel (Saint-Estèphe), Château-Marbuzet and Goulée (Médoc) vineyards, which are owned by Michel Reybier.327

Between 1950 and the change of the communist regime, on the territory of Hétszőlő there wasn’t any viticulture, therefore it was free from any chemicals. This established a good base for the reconstruction of Hétszőlő in 1991. A new philosophy was born, namely natural viticulture and wine production, which led to organic thinking. Leaders of the winery had serious foreign (French, German and Swiss) experiences in production, which provided help in the implementation of organic plan. The conversion to organic production officially started in 2009. From 2014, the whole winery was operated organically. In 2016, they got the official organic signal for the whole territory of Hétszőlő. In 2015, they started to produce organic dry Furmint in small quantity, which is in experimental phase at the moment.328

Terroir of Hétszőlő was already classified as first-rated in the time, when it was owned by the Austrian- Hungarian Monarchy. The property is 55 hectares, it has volcanic base and located on the southern side, which helps grapes to get enough sunlight for growing. The microclimate is ideal, which contributes to the evolution of noble rot, called . There are different types of grapes produced by the winery: 73% furmint, 18% hárslevelű, 5% kövérszőlő and 2% sárgamuskotály. Products of the winery are Furmint selection, late harvest wines, Tokaji Aszú and Eszencia.329

327 Cf. Hétszőlő official homepage 328 Cf. Hétszőlő official homepage 329 Cf. Hétszőlő official homepage

73

The long-term plan is that, all dry wines should be produced organically, moreover, late harvest wines and aszús should be made in the same way. In 2016, all their grapes got the organic authentication, therefore, their further plan is to get this title for their wines too. Their biggest aim is currently to appear with serious quantities of organic dry Furmint in the market.330

3.4. Data analysis

Data analysis was conducted according to Miles’s and Huberman’s (1994) three processes: data reduction, data display and conclusion. Data reduction starts with the original research phase, where concepts and methods are developed and subjects are selected. Data display search for meaning of the data. Moreover, diagrams and summaries are made. Finally, conclusion takes place, where data are compared.331

330 Cf. Hétszőlő official homepage 331 Cf. Miles et. al, (1994), p. 10-11.

74 4. Findings of the empirical study

4.1. Individual analysis

This chapter describes the main findings, which are generated from the data, that were collected through six expert interviews. All interviewed companies are operating in the wine industry. The age and experience of the interviewed persons varies. Building a brand in the wine industry is quite complicated, but interviewed wine producers of Tokaj- Hegyalja know that brand has a great significance during the purchase decision of customers. Mostly it has different meanings for them. Common opinion is that a brand based on trust and ensures success. The major aim of wineries is to satisfy their customers by providing unforgettable experience during events. In their strategies, wineries focus on the perfection of their products to build trustworthy relationships with customers and expand on foreign markets. Interviewed producers also recognized the importance of terroir in the region, and they believe that their products are special because of the extraordinary geographical locations. From day to day, they have to face with challenges, such as changing weather conditions, financial problems, wine counterfeiting, but the biggest problem that needs to be solved is how to raise Tokaj-Hegyalja and get back to the world’s wine map. In the following sections, all important points of the interviews are going to be discussed.

4.2. Analysis of the interviews - similarities and differences

After analysing the interviews separately, similarities and differences will be determined following the literature and the conducted data.

4.2.1. Brand building The brand All in all, it is not an easy task to build a brand in the wine industry, however all the interviewed wineries in the region know that building a brand has a great significance. All producers have their own interpretation what brand means for them, but it is equally important for all of them. Nowadays customers are lack of time during the purchase process, or they don’t know which product to choose. Brands help customers to choose easier, furthermore they make the purchasing process faster and simpler. Wine producers of the region see it too, their brands are powerful enough to influence customers and if they position their brands well, they can gain competitive advantage.

75 After examining, what kind of meaning brands have for the interview partners, the results are the following: “Brand is such a phrasing of a product, behind which, guarantees can be lined up and this represents and ranks the product within the product palette.”332 Brand guarantee for Szent Tamás Winery is the wine, which is made once a year. However, it is very difficult to produce the same quality every year, therefore it is not an easy task to build a brand in the wine industry. Brand of the winery is relatively new, furthermore it has special brand building strategy and it is geographically located. There is a geographical name, which in itself represents a brand within which the company can build a brand. The message of the product builds upon the values of the production site and the type of grapes. However, the main message is that, Tokaj is unique and extraordinary within which Mád represents the same values. Although, the brand is on the market only for 5 years, judgement of it is good. The company is continuously building the brand, at the moment it is in an intense phase. 333

“Brand is a concept, which captures people, who are loyal to the brand and are going to search for it. We also have the aim, to find out something to which customers can attach.”334 The major aim of Zsirai Winery is to familiarize their products with more and more people. Furthermore, to show them, although demand is increasing for wines made with reductive technology, wines made with the traditional process have high quality too.335

“Brand is a tool to sell my products. Later, according to the continuous result and experience, I can shape the brand more properly.”336 In the opinion of Samuel Tinon, using only one brand name to market family wine, handmade in Tokaj, is not relevant for two reasons. Firstly, there is no volume to allow any marketing charge on the price of the bottle. Secondly, producing wine in Tokaj must include Tokaj as first or second brand name joined. All in all, it should be mentioned, nobody succeeded only with one brand name, without using Tokaj, thus it doesn’t work. According to the wine producer, his brand is a double brand. There is nothing to do with a producer’s name without Tokaj, as it has no values by itself. He means the aforementioned in a way, there is a big brand, which is Tokaij and all producers have their own brand within this name (Tokaji should work as an umbrella brand). Some examples show that, those who thought the brand Tokaji is weak and tried to get to the market with their own brand couldn’t reach success. His

332 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 333 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 334 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 335 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 336 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II.

76 experiences abroad showed that, the brand name and message of the brand should be one. Two brands cannot be managed in parallel. Therefore, his brand name is Samuel Tinon Tokaj. The reason as he says: “Nothing can be built without Tokaj.”337 His main aim within managing the brand is the identification of his winery in the Top 5, inside the big Tokaji brand name. The message that he wants to convey to the whole world is that, his products are produced in the most extraordinary wine growing region Toka- Hegyalja. He wants to show, wines produced here are special because of the rich terroir, therefore his products can be important elements of peak gastronomy. 338

“Brand building comes before everything.”339 The most important goal for Szepsy Winery was always to raise the brand Szepsy. However, nowadays, management of the vineyards and the settlement, Mád, became more significant. The aim is not to stop as the winery got to know expansively the production sites. Researches are going further and in between, furmint selection is happening to find the answer what type of furmint is needed to get the best wine and the best qualification. The major goal is to push the brand to a higher level. The message of the winery’s brand is that, Tokaj-Hegyalja is special and extraordinary and its products are originated from the greatest production sites of the world. 340

“It is difficult to find the proper answer of what the brand really means for us, for Tokaj-Hétszőlő Winery. However, I try to identify myself with the brand, put some personal feeling to it. Trust and experience are very important components of the brand as well. We have to ensure that, consumers will always get the same quality, therefore they can trust the brand and the product.”341 The winery positions itself to high- quality, which is the result of the qualitative wine making technique, the work, the production of bio grapes and usage of only first class fruit in the production of wine. The message of the brand is purity, fairness, history, naturalism and trust. The winery wants to provide an unforgettable experience for their customers.342

Brand and brand building based on trust, if it is affordable and ensures the same quality over time, is going to be a successful member of the market. Disznókő is the most outstanding top category estate, which

337 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II. 338 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II. 339 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 340 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 341 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI. 342 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI.

77 possesses the highest knowledge and quality. The sales director of the winery says, it is a “wine expert company.”343 Disznókő is a vineyard and a brand at the same time. The message of Disznókő is that, it is a brand with trustable, pure, good, elegant, stylish and unique wines. It communicates, Tokaj-Hegyalja is a treasure, it is special with lots of opportunities, therefore products produced here are extraordinary. The message of the brand is “pleasure of purity”.344 The company has very elegant, clear wines, which are trustworthy and have a good style. Andrea Hanyecz says, “our company was born to make the best quality sweet wines.”345

Four of the interviewed wineries were set up directly after the change of the communist regime and some of them later, after the year 2000. Those, which are on the market for a longer time, are more experienced, see things from a different perspective, they have better insight, reliable ideas and strategies, which are working. Newly formed wineries are not experienced enough, they have to face with more challenges and find the proper strategy to manage their business, but it doesn’t mean that, they are less successful. What is common in them is the way of thinking about Tokaj-Hegyalja and the geologically important production sites, furthermore the common aim is to be an important member of the foreign market and to build prestige for the wine growing region. Their message to the world is that the region is unique and extraordinary. Luckily more and more wineries are on the same opinion about the brand building and management of the region. A nice number of experienced wineries cooperate with each other and with newly established ones to ensure high quality products and remove cheap products from the market, which have a bad influence on the operation of the whole region.

Customers The Szent Tamás Winery targets more customer groups. The product MÁD Furmint, which is produced in the biggest quantity, addresses consumers between the age of 25 and 50, who don’t stick to classical things, but are open for something new. Classical wine consumers do not accept Tokaji dry furmint, because they think it is something too modern from the 21. century, that throws off traditions. The winery tries to reach those people, who are doing gastro-tourism and who can be open for the product, MÁD Furmint. Wines in a high price category are mainly vineyards selected, with bigger inner content and produced for consumers above the age of 40, who have high living standard. István Szepsy Jr. says, “our

343 Cf. Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V. 344 Cf. Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V. 345 Cf. Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V.

78 customers are satisfied, if we can ensure the same high quality of our product from year to year. Insurance of the same flavour and price-value balance is required as well.”346 In his opinion, customers have nice feelings related to the product, as the winery tries to serve their needs in every vintage and also, it tries to provide unforgettable experience for them during wine tastings. The company participates on several events and competitions, furthermore, it organizes wine tasting dinners and it is present on social media as well, this is how it tries to help their customers to recall the brand.347 The owner of Grands Vins de Tokaj, Samuel Tinon has a similar opinion. He says, the main target groups of the products are gourmands, who are open minded and independent customers. What he thinks, how customers’ needs can be satisfied, is through the tasting procedure. During which customers get lots of information about the products and the viewpoint of the winery, what it represents and about the region as well. In his opinion, customers see that, “my products are very special with a high quality and they have outstanding experiences related to them.”348 The best solution is to provide a positive tasting experience for the customers, which will help them to recall the brand easily from their mind.349

Zsirai Winery follows a strategy, where there is no specific target consumer group in focus, which means that, it tries to reach everybody including older and younger consumers as well. The main goal is to find those customers, who are interested in the products of the winery. In Kata Zsirai’s opinion, customers can be satisfied, if they get what they paid for. Products are identified by customers according to the clear label on the bottles and the special traditional technique used for production. What customers experience when they taste the wine is tradition and modernity at the same time. The winery participates on several events and connects the wine tasting experience with gastronomy, which provides help for the customers in brand recall.350

Tokaj-Hétszőlő Winery’s target consumers are those people, who understand and know values of the winery, what the company represents. Moreover, those who are searching for high standards and are coming back to buy the products, because they got an unforgettable life-long experience. The company puts the major focus on welcoming people in Tokaj and ensure personal experience for them, which helps to bring reputation for the brand. The winery finds tasting significant, because if a customer tastes its

346 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 347 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 348 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II. 349 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II. 350 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV.

79 product and get a nice experience, that person comes back and brings more potential customers. “We have high prices, own style and we are trustworthy, pure and memorable. This is how customers can recall our brand.”351 Sales director of Disznókő Winery explains a similar view. Target customers are over 30 years old, sophisticated, like gastronomy and fine dining restaurants and they are in a good financial situation, moreover, who understand the wine and have some knowledge regarding it. According to the sales director, it is really important that customers understand what the brand represents. This is possible only for those, who are more into the world of wines. The winery represents “an elite style, high quality and a prestige product.”352 It also focuses on the design and packaging of the product by finding the balance inside and outside of the bottle. The brand is elegant and communicative, which helps customers to recall the brand.353

From all the interviewed wineries, there is one, which follows a special strategy regarding customers. Target consumer groups of Szepsy winery are wine bars and restaurants, including Michelin starred restaurants as well, moreover sommeliers, academics, Master of Wines and wine collectors. The company doesn’t compete, doesn’t go after the customers, because it wants to reach the highest position, that exists on the market. The owner calls it a pretending strategy, according to which the winery behaves as it already reached the highest level. Of course, the company wants to satisfy its customers, therefore they do lots of research and development to find the perfect material and technology to provide the peak product for them. Those people, who visit the winery, “get lots of information about our work, our products and about my faith”354- says István Szepsy. As he explains, customers leave satisfied after their visits and usually they understand his point of view about Tokaj-Hegyalja. The special experience during the visit provides an opportunity for customers to recall our brand.355

According to the interviews, target consumer groups of the products are widespread, but mainly focusing on those who are open for something new, still value tradition, are financially stable, understand and know values of the winery and like gastronomy. Wineries believe that, it is very important to provide nice, unforgettable and unique experience for the customers during every occasion they meet with producers’ products. Examining all the answers, Szepsy Winery is an exception with its pretending strategy. As it wants

351 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI. 352 Cf. Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V. 353 Cf. Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V. 354 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 355 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III.

80 to reach the highest position, it doesn’t search for customers, only wants to reach the higher needs. Zsirai Winery is also an interesting example, as it tries to reach everybody, older and younger people as well. The reason behind this strategy could be that, the company is very young and it doesn’t have a clear plan which customer segment should be targeted. On the other hand, it is the only winery, which focuses on young customers too. Owners of the interviewed wineries are aware of that, customers became very powerful, therefore they try to satisfy them as much as possible, because they know if customers trust in their brand, they will be loyal to it and will have a wish to pay a higher price for the product.

Strategy The strategy of the Szent Tamás winery is about building a strong brand. Unfortunately, there are wine producers in the region, who think that, production of more cheap wine is needed, therefore there are huge amounts of them on the market under the name Tokaji Aszú or Szamorodni. As it is more difficult to build a new brand regarding a cheap product, the company decided it will build a brand, which has its roots, can be connected to the region and nobody knows it. This was the dry furmint, which wasn’t popular in the region, but it could be absolutely connected to the idea. The region has specific endowments, which originated from its geology, therefore a special type of wine can be produced, which is impossible to be copied. In the opinion of Jr. István Szepsy, the Tokaj-Hegyalja wine growing region is going to be famous and rise thanks to sweet wine with Botrytis content. However, at the moment there are lots of cheap products on the market, thus the winery has to find another way, until these products get out of the market.356

Detailed strategy for removing cheap products from the market is the following: create a brand in the dry wine category from furmint, the authentic Tokaji grapes type. The result of this step is the creation of MÁD Furmint. The second step is that, after the company is on the foreign market with big amounts of MÁD Furmints, it goes further with selected furmints. The procedure raises consumers’ attention, as according to recent tendencies, 5-10% of customers, who are consuming furmint start to be interested in more valuable, limited and more expensive products. With the success of vineyard selected furmints, more and more vineyards will become a brand name and are going to represent brand value, dry furmint is going to have a bigger market than today. As a result, nobody is going to produce aszú and szamorodni types of wines, because production of furmint is going to be cheaper. As a consequence, the quantity of the sweet stock is going to be limited, which will lead to a shortage. With the shortage, prestige is born, prices will

356 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I.

81 rise and aszú and szamorodni can get back to their proper level, but only as a vineyard selected products.357

According to Kata Zsirai, personal presence is the most important point in her company’s strategy, therefore she participates on events, such as festivals, professional programs, wine dinners and wine tastings. As the winery is quite young, there is a need for introducing the brand for the people and strengthen them in the existence of the brand. Accordingly, the first thing that appears on the label is the origin of the given wine. The winery tries to participate on different events such as wine-dinners, where the main aim is to make Hungarian wine more well-known for people around the world. In the opinion of the owner the biggest advantage of the winery against competitors is good price-quantity ratio.358

Samuel Tinon wants to give ‘outstanding’ experience to his consumers, which guarantees high emotions through wine tasting events. Moreover, to build personal relationships with them. To be more well-known on the market, the company uses free social media opportunities and professional support. Abroad, the brand is present in 10-15 countries, but the owner says that, there is an opportunity to every country in the world, it just needs time to build connections. The main aim in the future is to expand all over the world, open for new markets and build more and more connections with other countries. 359

The brand building strategy of Tokaj-Hétszőlő is to build an image, according to which customers see products of the company belong to a high-toned category, but they are not luxury products. The company wants to produce a product, which is elegant, but affordable. It plans to sell more products within the country and abroad as well.360

The main point of Disznókő Winery’s strategy is to build more connections with sommeliers, restaurants and press representatives. It is also important for the winery to be professional and educate people who are selling and dealing with wines of Disznókő from day to day. The winery brings journalists to the vineyard and educate them, show them the important things, the origin of the product, so they can write proper articles about the company, which leads to a good reputation for the brand. The aim is to prove to them that the winery’s advertising strategy is true and reliable, which helps to build the trust. The brand

357 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 358 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 359 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II 360 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI.

82 is the most well-known brand with the highest quality, so all in all it is successful, but the plan is to develop further step by step.361

Again, Szepsy Winery is the one, which follows its own individual strategy. As it was already mentioned, the strategy of Szepsy is pretending that, the company is already at the right place, thus it reached the highest level. With domestic exhibitions and wine tastings, professional presence of the company is 400 occasions in a year. The main viewpoint is not on the wine-tasting, but on the re-meeting, conversations, vineyard exploration and understanding of the processing of the grapes. The plan is to get across the point to wine experts, traders and restaurants, that Aszú is the world’s primary product. Interpretation and production of natural sweet wine totally stopped during the years, the only solution to save it, is to position it above everybody in the world. This procedure started few years ago and “it won’t stop until we achieve the goal.”362 The winery doesn’t deal with tourism, which means that, it doesn’t receive customers. However, there are some events, where customers can have a direct connection with the brand, Szepsy. Articles and movies, which were written and made about the wine producer are not for potential customers. However, these strategic steps which create some kind of mystery, are part of the future plan, that will help the products to be the first all over the world. Thus, the strategy of Szepsy is very special, as it pretends that, it always existed and it was always the most well-known brand. The main message, what the company wants to convey is, its products originated from the greatest production sites in the world. The winery is planning to make changes in its foreign strategy. There will be products, which are going to be introduced only abroad, but only to those customers, who apply for them by themselves. These products are going to be the most expensive ones. István Szepsy sees lots of opportunities in conquering those markets, where the winery hasn’t participated yet, particularly on the highest category markets, such as Far-East, Russia and China. This can be achieved only with representatives, who can speak for the winery properly. 363

The strategies of the examined wineries are not the same, but quite similar. They strongly focus on the product to satisfy the customers as much as possible and expand on the foreign market. The Szent Tamás Winery started to deal with a crucial issue and worked out a plan how to remove cheap products from the market, which generates strong competition between low quality and high quality wines in the region.

361 Cf. Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V. 362 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 363 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III.

83 Marketing mix (4Ps) In most of the cases, interviewed wineries have related pricing, promotion, communication and distribution strategy, however, they also have something extra, which makes them special in the region and in the world. In the following paragraph, the main factors of marketing mix will be examined.

Product Szent Tamás Winery position its product according to the price, which is very important for the company. Major aim is to reach foreign markets all over the world with all the products. The biggest differentiator of products is the special terroir. “Mád Furmint is the key for the entrance to the foreign market. It is crucial, because we can raise the world’s attention with it.”364 – says István Szepsy Jr. Later the winery plans to put a tone on aszú as well. During the design, the shape of the bottle played an important role. Dry wines didn’t have a special bottle and it was impossible to build a strong brand until the company creates its own design. Therefore, the decision was made about making a new bottle. It followed the 600 years old bottle shape, that is used for aszú and szamorodni, but it was made to have a bigger size. “In case of vineyard selected products, customers already know, according to price segment, the origin of the wine and the type of grapes from which it was produced. They inquire about vintages thus, we have to list some information on the bottle.”365 What should be in the middle of attention is written with big letters on the label. For example, in case of Percze, the important thing is the origin not the grapes type. In case of MÁD Furmint the origin is Mád and regarding vineyard selected product the origin is the production site. The product Mád Furmint is not as informative as vineyard selected wines.366

The Zsirai winery produces its products in a natural way, respecting traditions, which shows clear elegance in its appearance. The primary issue in the strategy of the company, as it is a young business, is to visualize the brand and the bottle including the cork and label too. All the products have similar packaging, but the winery uses different bottle shapes. Regarding the label, it is almost the same for every product. The first thing what is visible on the label is the origin of the product. The main aim of the winery is to strengthen their existence in people’s mind. Therefore, their logo is ‘ZS,’ first letter of their surname Zsirai. “The main differentiator of our product is the way how it had been produced (special selection and traditional technique).”367

364 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 365 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 366 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 367 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV.

84

Products of Samuel Tinon show original and classical signs, which convey the message to Central Europe ‘visit Hungary’. The main feature that differentiates his products is simply Tokaj. His aim is to target the top segments, as all the products represent high quality. “The bottle, label and the cork are the most important elements of the packaging of my product. I am focusing on that, the product has to have a style, it shouldn’t be too classical, not too modern, but it is significant to have a movement in it. It has to represent the value, but not luxury. Luxury has to be presented in the price.”368 There are two major groups according to which he differentiates his products from each other. He has products with Botrytis and without Botrytis. Wines containing no Botrytis are dry furmints and wines with Botrytis are sweet. This is the reason he has different designs for the label. Dry wines focus on the vineyards, thus the origin of the product. Therefore, the label illustrates in a modern way, the different production sites, on which the product was produced. In case of sweet wines (szamorodni and aszú), the design is shiny, he used golden and silver letters on the label to “express the greatness and value of our sweet products.”369

The main features that differentiate Szepsy’s products from others are the high quality and the speciality of production sites. There is only compulsory information written on the product. The label is simple with the logo Szepsy and the name of the production site, which also shows the importance of terroir. The design of the label was created before the establishment of the company, in 1995, at the time, when Szepsy started to sell his aszú wine, that he made in the previous years. Today, the label is almost the same, only few changes were implemented on it. “I decided I won’t have new labels in the future, Szepsy will be a standardized brand, we won’t have cheap or low category wines. This helps us to differentiate our products from other products on the market. In our strategy, we pretend that, Szepsy always existed and it was the most recognized brand of all time. The message of our product is, it is originated from the greatest production sites of the world.”370 At the moment, the owner is working on the creation of a peak product, therefore determination of the production details took place. The peak product can originate only from Mád, it has to be parcel selected and produced from furmint type of grapes. The brand Szepsy and the region can be developed further only with the creation of the peak product. According to the owner, Szent Tamás 03 Furmint Essence has to be the most expensive product of the winery in the future

368 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II. 369 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II. 370 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III.

85 and after that, Aszú and Furmint should follow. These products will contribute to reach the owner’s biggest wish, to be once the most well-known all over the world.371

Wines of Tokaj-Hétszőlő are produced from bio grapes, classified as first class fruit. Products are positioned in the middle and upper segments. What differentiate the winery from others is historical vineyards and the terroir. The terroir contains yellow soil, which has extremely big value. Products of the winery are organic, they are softer, which adapt to customers’ new taste and can help brand building in the future. Labels of the products are new, clear and modern with the Tokaj-Hétszőlő property on it. It is the logo of the company. By sweet wines the winery uses the old label, which is very elegant and also shows the picture of the property. According to the opinion of the marketing director, “differentiation of products from other low quality products is important. Using the name ‘Superior’ and ‘Grand Superior’ is crucial, as it ensures clear communication about that, these products are higher quality wines.”372

Although, products of Disznókő Winery have high quality, it is not unreachable, which makes customers to be interested in it and purchase it. The company is able to produce the same high quality every year, furthermore they are trustworthy and elegant, which helps to make a difference with other products. The product and the packaging is in balance, they communicate values of Disznókő. “Regarding packaging, we wanted to put a tone on the origin, therefore we put the picture of our estate on the label. We used golden and blue colours, which expresses the elegance and style of the product.”373

All wine producers are working on creating perfect products. They recognized the importance of terroir and they believe that, their products are special because of the extraordinary geographical locations. They have different design, label and packaging, but what is common is that they focus on where the products were produced, thus on the origin of the product. Of course, the logo of the brand is significant too, which is mainly expressed by a symbol or the picture of the property.

Price Prices range between 5€ and 150€. The product MÁD Furmint is in the category of 10-20€, which is a difficult category for the winery, but ensures opportunities. To be able to stay in the price segment, proper

371 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 372 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI. 373 Cf. Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V.

86 quality grapes are needed, which can guarantee the same quality every year, and good technology, which is simple, fast and requires less energy. The pricing strategy is based on costs and its aim is to have a leading product quality. The company established the prices in a way it can step further. Its goal is to develop dynamically on the foreign market and own lots of brand guarantees. Thus, it wants to generate a demand, which makes it possible to increase the price. The region won’t be able to hold up, if prices won’t be increased. Tokaj can participate on such a market, where other participants’ price is not important, but the brand value of the region is significant. However, the product has to be more expensive than average, because the region cannot produce the same amount like others in the world.374 –says Jr. Szepsy.

“Establishing the price is the most difficult task, as the style and the quality that the company wants to represent cannot cover the price.”375 At the moment, Zsirai Winery is in the midline in pricing, their vineyard selected products are those ones, which represent higher quality, therefore they are more expensive. Pricing is based on the acceptance of market and customers, not on the costs. They tried to set the prices by examining their competitors’ prices and how much their customers are willing to pay. The reason behind the pricing strategy is that, the winery wants to find its target consumers, who will be acquainted later with the brand and will accept it.376

“According to the prices my brand is a luxury brand. But in general, it is not. It is neither luxury and nor low category.”377 – says Samuel Tinon. Usually producers have to build their pricing strategy step by step: they produce something and hey have a target market they want to reach. But the problem is that, when producers of Tokaj-Hegyalja gets to this point selling prices are very low, especially from the viewpoint of the winery. With his pricing strategy, Samuel Tinon tries to ensure stability and secure value. In his opinion, price will rise only according to the demand. “My personal experiences are that, till now in Tokaj-Hegyalja we don’t have a successful price positioning strategy. The people, who buy good wines do not follow high prices. Those people who were willing to pay high prices for Tokaj wines left long time ago, because of the abuse of poor quality producers.”378

374 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 375 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 376 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 377 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II 378 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II

87 Pricing strategy of the Szepsy Winery happens according to a calculation, prices are set taking into consideration how much the customers want to pay for the product within a given period of time. It is an important point of the strategy to raise the prices. Therefore, the winery focuses on the production and sale of parcel selected products, which can be sold on a higher price. “I think if a product has high quality and produced on a special terroir like our products, it has to have a higher price.” – explains István Szepsy. The biggest price increase can be done by the aszú, as there is a reduced supply for it, because of the crisis.379

Tokaj-Hétszőlő doesn’t want to compete with the low segment. Prices of the products are high, but they don’t fit to luxury category. The major aim is to show to the customers even though the brand is elegant and has high standards, it is affordable. This is the most important point of pricing that the marketing director wants to hold and develop further to a little bit of luxury. “We have higher costs because we work with our high quality own grapes and bio grapes, which increases our costs. We don’t want to be extreme, therefore we position ourselves in the medium and high segment.”380

Prices of wines are high in The Disznókő Winery. The main reason behind this, is that, the company wants to reach Michelin starred restaurants and those wine bars, where customers are searching for special wines. Under 30-40€, the winery doesn’t want to sell its products. It aims to have its products in the premium category, not only abroad, but within Hungary as well.381

Wineries pricing strategies are diverse, but they have common goals with it. Their main aim is to ensure leading quality and increase prices over the average, because at the moment they are really low, which can result in the decline of the region. The major reason behind the price increase is that, the region cannot produce the same amount as others, therefore it is difficult to compete with them. Some of the producers set high prices to show quality or luxury, on the other hand, they pay attention on that, the product has to be reachable and affordable for the customers.382 There is one winery, which can be an exception, namely Zsirai. As Zsirai is a young company, it has to visualize the brand first and then set the prices, which is not an easy task. Its pricing is based on the acceptance of the market and the customers with the main

379 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 380 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI. 381 Cf. Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V. 382 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II

88 aim to find their target consumers.383 The aforementioned facts can be contradictory, as low prices are explained and high priced luxury products are mentioned. However, if prices of these high-quality products are compared with other products originated from other countries, the result shows that, prices of the high-quality products in Tokaj-Hegyalja are still much lower than other countries products. Thus, problems related to prices need to be solved, otherwise the region will start to decline.

Place The Szent Tamás Winery is working with distributors, who are trustworthy, have great knowledge about the market and have valuable relationship network. Mainly they are trading partners, who ensure long- term representation and with whom the company shares its strategy and prepare them for the common work. “We are satisfied with the current situation, but it is always good to be open and expand our distribution options.”384

“It is really complicated to insure high quality and variegation in every year, therefore distribution of the products, happens through the company itself.”385 – says Kata Zsirai. This means that, the winery sells wines directly without having connections with any distributors. The major foreign destination of the products is Poland, where personal presence and connection network helps the work of the winery. In Germany, Belgium and England, a partner is responsible to deal with the sale of the products. The owner hopes, the company will have more opportunities in Norway and Sweden, as they are working on this project at the moment. Furthermore, current selling numbers will progress thanks to reputation. She thinks the primary challenge is to find the trend and style, which can be presented in every vintage and to ensure continuous quality.386

The main distributors of Samuel Tinon’s products are restaurants and sommeliers. These are the channel through which customers can reach the product. “My distribution channel is an innovative channel, which works properly, but I am always thinking about the extension of it. The relationship with channel members is human based and very rich.”387 – explains the owner. The winery is not present in supermarkets, because they are unable to create value. Abroad the brand is present in 10-15 countries and wants to expand

383 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 384 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 385 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 386 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 387 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II

89 further as Samuel Tinon thinks that, it is possible to be on every market all over the world, only connections are needed.388

Szepsy Winery doesn’t really do anything to search for distributors, it focuses on product research and development and welcome important visitors, such as sommeliers, academics and master of wines. The reason behind this behaviour is, the winery wants to reach the highest position on the market that exists, therefore it pretends that, it is already there. “I don’t think the wine tasting has significance, but re- meeting, conversation and re-visiting of vineyards do.”389 – says the owner. He thinks, his strategy can work with those, who understand what he represents.390

The most important element of the distribution channel for Tokaj-Hétszőlő Winery is the local cellar in Tokaj, where next to the wine, customers get a nice experience as well. After this, the second element is interior and the final is abroad, where wine bars, wine traders and restaurants can represent the winery properly. 60-70% of the products are sold abroad e.g.: in Scandinavia, Benelux countreis, UK, USA, , France and China. The reason why they sell more in abroad is that, the competition with cheap products is really intense at home. However, they want to change this percentage to 50-50%, which means an increase in sale within the country and locally from the cellar of the winery. The company seeks for a good relationship and personal presence with distributors, who speak for them. The marketing director thinks, small orders are as important as big ones.391

The Disznókő WInery sells its products within the country and abroad. Abroad, it has connections with importers, but it doesn’t have a direct relationship with restaurants or wholesalers. In one country, it works with one importer only, who organizes the whole distribution process. In Hungary, the company has connections with more traders, namely wholesalers and retailers. If someone comes to the winery directly, it delivers the product to the customer. As it is visible, the distribution channel is widespread therefore, there is no need for enlargement.392

388 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II 389 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 390 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 391 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI. 392 Cf, Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V.

90 Wineries are participating on the domestic and foreign markets as well. There are companies, which rely on their own power and presence and solve selling of their products by themselves. Others choose distributors who are trustworthy, educated, have wide knowledge about the market and have valuable trading relationships. They are usually fine dining or Michelin-starred restaurants, bars, wine experts, sommeliers, gourmands and traders. Wineries believe that, personal appearance and good relationship with distributors is very significant. They have the same opinion regarding customers, therefore, they want to build fruitful relationships and trust with their customers and provide an unforgettable wine tasting experience through different channels, such as events, festivals, wine tastings, which guarantees high emotions for customers.

Promotion “Our promotional strategy depends on the country, where we are promoting our products.”393 In Hungary personal appearance is a very important point of our strategy, as it is the most effective there. The Szent Tamás Winery uses social media too. It happens, if in one country Facebook is a strong promotional tool, it is in other countries as well. In Canada, media helps the promotion, in the USA a marketing company and in Norway bloggers make fame for the products. The company also has a webpage, where customers can get information about the brand and the products. Furthermore, they can check the important events and book an appointment for wine tasting. To get more attention, the winery participates on events, such as Szepsy 100, Furmint festival, competitions and Pro Wein meetings. It was also present on the Oscar ceremony 2016. Furthermore, it organizes occasions where distributors are hosted and where wine tasting experience of customers is connected to gastronomy.394 “Our main aim is to satisfy customers and to convey our message to them, namely wines of Szent Tamás are produced on special terroir in an extraordinary wine growing region.”395

“We try to be natural and convey our values with personal appearance.”396 Zsirai Winery participates on festivals, competitions and professional events, moreover, on wine tasting events and dinners. For them the most important point of promotional strategy is personal appearance, but they also have a homepage

393 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, Interview I. 394 Cf. Szent Tamás Winery official homepage 395 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, Interview I. 396 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV.

91 and social media surface, where they can reach their customers. “We want to convey our existence to the people, it is very significant to us to become well known in the future.”- says Kata Zsirai.397

The main point of promotion for Samuel Tinon is to build personal relationships with customers and ensure a wine experience for them which guarantee high emotions. To be more well-known on the market, the company uses free social media (Twitter) opportunities and its own homepage, where all required information can be found about the winery and its products. The owner changed the concept of the website a few months ago, because as he says “we have to follow the changes and the trend.”398 “I communicate not because I want to, but because the product requires communication. Mainly I am interested in the amount of wines I sold at the end of the month.”399 – explains the owner. He finds that personal relationship with distributors is significant, therefore he invites sommeliers, who can spend one day on the grapes plantation, which contributes to get to know the products and work with them easily. “My main aim is to guarantee high emotions. I don’t use any marketing tools, which are common, because there is no quantity in the background. We don’t have money for marketing. Instead as I have already mentioned, we try to focus on the personal appearance, which helps us to represent our brand.”400- says Samuel Tinon.

István Szepsy uses Facebook and its own homepage to convey information about the winery and his faith, however there is no clear promotional strategy what he applies. He doesn’t receive customers, sometimes only those who return, but in this case wine tasting is for free. Maybe this can be a hidden strategical point. There are some events, where people who are interested, can get in touch with the winery, for example on auctions or on the event Szepsy 100. In this case, “I do everything to make them understand what I represent and what is the concept of our company. There are articles and movies about me, but they weren’t made for potential customers. They are all part of the future mystery and legend, Tokaj has to have. Otherwise, introduction of the world’s number one product cannot happen.”401

Tokaj-Hétszőlő finds communication very significant in its strategy. “We want to prove that through our communication, we are an available, pure and good brand on the market. History is very important for us,

397 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 398 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II 399 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II 400 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II 401 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III.

92 what we also try to communicate to our customers.”402 – explains marketing director of the company. The winery wants to show that to the customers, its products are available, trustworthy and they have a special style. The company’s aim is to work personally with the customers. “We also have a website, commercials and articles, but we find personal contact, such as tasting and experiencing, is the most important.”403 – says Tamás Oroszlán.

The Disznókő Winery uses Facebook, its website and the press to communicate its message to the customers. Furthermore, it put a big focus on the packaging and design of the product as well. As other interviewed wineries, Disznókő also invites important persons to spend few days on the winery’s estate. During these meetings, guests get opportunity to show how the winery works and they can also taste its products. “The major aim is to show everyone what we represent is true and to make our customers to understand it. Building trust with them is crucial for us.”404

Interviewed wineries have similar strategies for the promotion of their products, they use their own homepage, Facebook or the help of marketing agencies to inform customers, but still personal presence is the most important point of their strategy. They participate on events, competitions and auctions, which positively contribute to their reputation. Moreover, they organize special events, where they can get closer to their customers. Foreign owned companies have a stable financial situation and plenty of opportunities for using marketing tools, which make promotion more successful. Other smaller family owned companies lack the money, but they can apply more social media tools to advertise themselves. Nowadays, these surfaces have very big power, which can contribute properly to the wineries operation.

Product origin The origin of the product plays a major role in the strategy of the wineries, as it is a crucial viewpoint for the customer during the purchase of the product. If customers find the product personally relevant, they search for some information about the product (wine) before they purchase it. Interviewed wine producers share a similar opinion, thus “origin of the product is very important for demanding customers, it is in the first three aspects what they check during their purchase”405 or “product origin is a fundamental

402 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI. 403 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI. 404 Cf, Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V. 405 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, Interview I.

93 aspect for the customers during their purchase decision.”406 Owner of Zsirai Winery “is fully concerned about that too, origin of the product is very important viewpoint for the customer, therefore the first thing what is visible on our product is the origin.”407 Sales director of Disznókő Winery is a little bit uncertain if the origin of the product plays a significant role during purchase decision of customers. She says, “I really hope the origin of the product is important for the customers. Our brand, Disznókő, is the origin itself. This is very important for us, so I think it is significant for our customers too.”408 Finally, István Szepsy highlights a new tendency, according to his experiences “customers are interested in not only the region where the product was produced, but nowadays in the production site too.”409

Regionality, region of origin In Hungary, wine producing areas are classified into regions. Therefore, regionality itself and products’ region of origin have great significance. Local wine producers share common opinions about what regionality exactly means for them. István Szepsy Jr. thinks that, it “ensures differentiation from other regions.”410 If strong brands are created within the region, they can ensure support and be the driver of regionality. Furthermore, “if we focus on the greatness of our terroirs they can ensure uniqueness for our region and it can lead to a strong regional profile.”411 Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery and Kata Zsirai, owner of Zsirai Winery have the same viewpoint. “I think the main driver of regionality, is terroir.”412 Tokaj-Hegyalja is a wine growing region, which is very special and has lots of potential. However, the region cannot take an advantage of what it owns. Big price pressures, market destroying effects and lobby interests make it difficult to move further and be a successful member of the market.413 Kata Zsirai thinks, regionality ensures reputation for the wines produced in the given area. Moreover, she agrees, “in case of regionality, terroir has a great importance, as it ensures the uniqueness of the product produced there.”414 If the region wants to build a strong profile, sharp differentiation between high quality and low quality products is needed.415 For István Szepsy regionality is “the reputation

406 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II 407 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 408 Cf, Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V. 409 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 410 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, Interview I. 411 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, Interview I. 412 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI. 413 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI. 414 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 415 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV.

94 that Tokaj-Hegyalja has”416, with the main drivers, such as “great terroirs, inherited value and grapes with Botrytis, from which we make the best quality aszú.”417 Opinion of Samule Tinon is a bit different, “what comes to my mind when I hear the world, regionality, is that the brand name Tokaji is not a regional product. It is the first closed wine in the world, for the world.”418 For sales director of Disznókő Winery, regionality means Tokaj-Hegyalja itself. She thinks, locals have to cooperate to build prestige for the region, which she considers as the best wine growing region.419

In conclusion, the Tokaj-Hegyalja region is specialized in particular grapes, such as furmint and aszú that fit properly to the conditions of the region. Producers work with smaller number of wine styles, which has special taste. Furthermore, they plant grapes, which insures the best performance under local conditions. They put a tone on the terroir and the way wines are produced, which identifies the style and later the taste profile. Following these steps help to create reputation for the region, which increases sales based on region of origin.

Challenges Common challenges of wine producers are widespread. Firstly, the always changing weather condition has a negative effect on the operation as well as on the financial situation of the wineries. It is very difficult to insure the same high quality every year; with bad weather condition it is more complicated.420 Secondly, wine counterfeiting is a serious problem too, “in 2017 wine counterfeiting doesn’t mean that, the wine is not produced from grapes, but it means, it is not originated from the named production site.”421 Thirdly, there are diseases nowadays, which cannot be treated properly with modern techniques.422 Fourthly, wineries have to invest lots of money into research and development and to modern technologies, which can ensure success for them in the future, however it also causes financial problems.423 Fifthly, price competition with other foreign owned companies and producers, who hold prices very low and sell products cheaply. Furthermore, competition with low quality products424, positioning the product in the

416 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 417 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 418 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II 419 Cf, Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V. 420 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II 421 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 422 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, InterviewI I. 423 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 424 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI.

95 world425 and always changing wine trends426 also cause difficulties. All in all, it can be concluded, foreign owned companies have less problems and are more satisfied with their current status, while other wineries have to face more difficulties in their everyday life. Moreover, the current challenge of raising Tokaj-Hegyalja is important only for a small group, as reforms hurt economic and political interests. Therefore, implementation of their plans, are very complicated. Tokaj-Hegyalja has lots of potential, but unfortunately wineries are still in a bad position. Politics makes it even more difficult, at the same time producers of the region are making new plans, building better strategical steps, focusing on future opportunities and trying to expand in more foreign countries, thus the whole world can get to know high quality Hungarian wines.

Rebranding the wine growing region In the wine sector, well-known regions had the opportunity to develop over longer period of time, they produced grapes and wines, which brought reputation among wine drinkers and writers. These regions are also linked with specific terroir and grape varieties. Tokaj-Hegyalja had the same privilege. It is true, the fame of Hungarian wine was destroyed all over the world, but as the region has long roots in history, there is a chance for rebuilding the brand.

The owner of Szent Tamás Winery sees that, furmint can be the new dry wine of the world in the future as professional interest already showed up in relation to it. His personal opinion is that, Tokaji cannot be a unified brand because of its heterogeneity. A good example, which explains this perfectly is the case of Riedel glass. Other producers share similar opinions, it is a very difficult task to establish a unique brand in the Tokaj-Hegyalja region. There are lots of wineries in this territory with different size, conception and values. It cannot really be reformed. “I don’t think within such a small wine growing region, we should establish a totally unified thing. However, we, local wine producers have to agree on that, what we want in the region.”427 - explains Kata Zsirai. As Samuel Tinon thinks, regarding unique Tokaji, the only way how it would work is to agree on the ownership of the brand Tokaji, furthermore ensure variegation in wines, but determination in bottle shape and packaging. There is a need for regulation in relation to production including major issues, what should be done with the brand Tokaji. If rules and regulations are revised all the time, it is harmful for Tokaj-Hegyalja, as it leads to reduction in prices. To increase prices, rules and regulations need severeness. As the wine growing region is very complex and no one can see it as a whole,

425 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II 426 Cf, Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V. 427 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV.

96 there is a special need for phrasing. It is also important not to have any mass production, but luxury production.428 Regarding the issue of unique Tokaji, István Szepsy explains, the government wanted to represent the concept, namely the close-up of whole Tokaj-Hegyalja, usage of unified processing techniques, marketing tools and insurance of market opportunities. This is the dream of the region however, only half of the production sites are in good property, there is no plan for the other half. According to Szepsy, Tokaj can be united only, if the government removes itself from the project. It can happen only, if there will be successful wine brands and vineyards, that can start the development, which will pull the whole wine growing region with themselves. It doesn’t work what worked in Austria for example, that all wineries are developing by unified principles.429

Jr. István Szepsy says, prestige of the wine growing region has to be built from smaller geographical units. He thinks that, if a Mád, Tarcal etc. unit can deploy, the performance of them will make Tokaj great again. Furthermore, to achieve this goal, strict production rules and origin protection are needed.

The owner of Zsirai Winery has different standpoint regarding rules and regulations. “Formation of a unit is needed, but I don’t think it is good if we force strict rules and regulations on people, as the speciality of Tokaj is that, it includes lots of small wineries and everybody has their own style.”430 According to her, this value could help to raise and reach prices, which make further operation of the region possible. The main breaking point could be the furmint. However, the region has to work a lot to make it well-known abroad as well. “There is no purpose to think that Hungarian wine is known abroad. Since the communist era, the country is not on the world’s wine map.”431 Mainly sweet wines are known and consumed by foreign customers. She thinks, to make Tokaji known worldwide, basic rules need to be laid. She doesn’t believe in unification, but she says common communication and conception is required. All wine producers have to accept in the region, main grapes type is the furmint moreover, there are vineyard selected wines, which gives us the opportunity to step on a higher level.432

The marketing director of Tokaj-Hétszőlő finds that, to make Tokaj known worldwide, financial support of the government (for marketing, development of wine tourism, opening of restaurants) is required.

428 Cf. Samuel Tinon, owner of Grands Vins de Tokaj, 6th February 2017, Interview II 429 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 430 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 431 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV. 432 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV.

97 Regarding Tokaji as a unique brand, the following points should be done: every settlement should produce a regional wine, which should be a basic furmint, such as MÁD Furmint. After that, the wine palette should be followed by vineyard selections and aszú. These three types of products are the key to raise the brand Tokaji again. Mád already started the process, other settlements are following it, but still differentiation and strict regulations are needed regarding the content of the bottle. Another important thing is to set the price, and when it happens, communication can work properly.433

Sales director of Disznókő Winery shares the opinion, that Tokaj-Hegyalja has to work on its prestige. This could come true with an alliance between local wineries. Prices of Tokaj wines are too low, they are cheap, which is not good. Regarding the unique brand Tokaji, it is important, but all local wine producers should agree. There are not enough professionals in the region. Really good, expert wineries should take the lead and make a plan to achieve this goal. Management of the region is needed in high degree.434

Unfortunately, these objectives are important only for a narrow producer circle as reforms harm political and economic interest. – says István Szepsy Jr. Unique brand could be built by the state company, in a way it integrates the whole region, however this is not going to happen as all the government’s trials failed related to this issue. Young wine producer of Szent Tamás Winery, sees the only solution is his company’s strategy. As Mád became the centre of Tokaj-Hegyalja during the last few years, thanks to investors who came to the village, there is an opportunity to strengthen Mád as a brand. It is sure the company can establish separate origin for the territory of Mád without Tokaj region. It could be solved economically and politically as well. From this point the first protected origin will be born, which will bring market position for Mád. The consequence of it is going to be that, other geographical units will copy this procedure. However, this will mean that, Tokaj cannot be a separate brand anymore, because Mád already exists. Maybe this is not the best strategy for Tokaj-Hegyalja to get back to the world’s wine map, but it is the only logical plan, as there is no detailed, useable strategy neither from the leader of the region nor from the government. - explains Jr. István Szepsy.435

The most experienced wine producer of the region, István Szepsy is on the same opinion with his son, thus the solution can be, Mád as a settlement becomes successful with its brands as soon as possible, strong

433 Cf. Tamás Oroszlán, marketing director of Tokaj-Hétszőlő Winery, 21th June 2017, Interview VI. 434 Cf. Andrea Hanyecz, sales director of Disznókő Winery, 14th June 2017, Interview V. 435 Cf. Jr. István Szepsy, owner and wine producer of Szent Tamás Winery, 6th Februrary 2017, Interview I.

98 vineyards and a strong settlement are born, which later transforms to a separate protected-origin territory. And other settlements in the region should follow it and copy it. Peak products could be produced only by a small group of wineries. On lower levels, the state company should lead the production, as it can ensure millions of bottles volume. The lack of capital and state marketing encumbers this process in a high degree. In the opinion of Szepsy, it is very important to narrow the product palette, specify the production technology and designation of the grapes types of the peak products. In this procedure Mád would be the leader. Three main points are needed to achieve the unique Tokaji: special vineyard above everything, make furmint the king and total protection of aszú. Aszú needs to be placed into the prestige segment and shouldn’t be allowed to tremble in any case.436 With these points all interviewed wine producers agree and they have the same product palette. At the moment, there are no reforms in the region related to the issue, reforms are only In Mád. That is why, if the unified brand will be born it will be set up by Mád and after that the rest of Tokaj-Hegyalja can follow it, which creates the opportunity for a united brand, Tokaji.437 Samuel Tinon is not so optimistic about the establishment of unified brand, but he sees more opportunities for it than 20 years ago. While Kata Zsirai says, “there are lots of questions in this topic, which need to be discussed, but at least the region should agree on the basics.”438

4.3. Summary

Examining the interviews and the discussed literature, it can be concluded final results provide support for theoretical foundations. Results are showing that, brand building has great importance in the life of interviewed wineries. In today’s modern society, customers are busy, they don’t have time for long purchase procedures, furthermore the increased variety of products make customers’ decision making more complicated. Brands make the purchasing process simpler for customers by reducing purchasing time and risk for them. They also bring trust. Customers are getting more powerful therefore, brands need to have power to influence them. Wine producers of Tokaj-Hegyalja try to build a strong brand, through representation of the product, focusing on the design, label, packaging and product origin.

To have a successful brand, companies follow PCDL model, thus they position their brand regarding competitors, communicate the message through the mostly used communication channels, they check

436 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 437 Cf. István Szepsy, owner of Szepsy Winery, 7th February 2017, Interview III. 438 Cf. Kata Zsirai, owner of Zsirai Winery, 8th February 2017, Interview IV.

99 how their brand perform in the market and finally, create new associations by linking the brand to other entity. Those brands, which are strong, have reputation, represent quality and value, moreover they are attractive to customers, which ensures loyalty to the brand and also originates future sales.

Building a wine brand in the wine industry is difficult, but if a good relationship was built between the customer and the brand, the purchase process will be simpler and easier. As it is written in the literature, customers have big expectations regarding wineries. Local wine producers are conscious about this fact therefore, they try to satisfy customers’ expectations by producing fruity ad easy to drink wine, ensuring the same high quality and variegation every year, furthermore using more types of communication tools. Wineries also take actions to help customers to recognize the brand by making a positive impression and after that, to recall it. In most of the cases, it is significant too how customers feel and think about the product. Long-term, fruitful relationship is built with them. Interviewed wineries aimed to build a strong relationship with customers, because if they are familiar with the brand and associate it as unique, brand equity is built, which is a major element of brand management.

With the usage of marketing mix, a proper analysis of product, price, place, promotion of wineries took place. As a conclusion, product plays a crucial role in building a strong brand. If customers are satisfied by high quality and design, they may pay higher price for the product. In Tokaj-Hegyalja, a clear product portfolio is needed, because at the moment there are too many products on the market, which doesn’t ensure transparent product palette. Regarding prices, balance has to be found. Too low or too high prices don’t support the operation of the winery. Prices shouldn’t be set beyond the acceptance of customers to avoid getting into the zone of rejection. Setting high prices should be avoided too, as maybe they provide profitability in the short-run, but in the long-run it lowers sales and profit. Distribution channels take long time to form and difficult to change them. They are external sources, which provide information about the product. In case of wineries of Tokaj-Hegyalja, they are fine dining, Michelin-starred restaurants, wine bars, wine experts, master of wines, traders and sommeliers, who are trustworthy, have wide knowledge about the market and valuable relationships. The final factor is promotion, which has effect on the emotions, thinking and decision making of customers. Wineries strongest promotional tool is personal appearance, but they use advertising and social media as well. As promotion encourages customers to take actions, wineries should expand their communication tools and turn more to the direction of modernity.

100 Product origin is important element of further analysis, as it plays an important role in the strategy of wine producing companies and it has a significant viewpoint for customers too. Customers are searching for information about the product, if it is relevant for them. Furthermore, they use origin to evaluate the quality of the product. As Bruwer et. al (2010) says, the level of involvement depends on personal importance.439 If customers are highly involved with an origin branded wine, they will consume more of this type of product and they will “place a greater importance on the information on the label.”440 In Tokaj- Hegyalja, regionality has great significance. It is described as, terroirs with unique characteristics that cannot be transferred to other regions with the same grapes variety. Wineries are going to the right direction to reach reputation for the region again by following main drivers of regionality. They started to work with smaller number of wine style to ensure perfect performance within the local conditions. They planted special grapes types and also turned to international sales. The focus is not only on the terroir, but on the wine producing technique as well, which helps in the identification of style and taste profile. Moreover, attention was raised on specialized style through advertising and promotion.

Management of brands is complicated nowadays, because of the always changing environment and market conditions. The appearance of global firms and mega brands cause intense competition. The challenges, wineries have to face with, are widespread, such as bad weather conditions, wine counterfeiting, especially aszú, financial problems, ensuring high quality and variegation every year and position the product in the world. But the biggest challenge is to raise Tokaj-Hegyalja and get back to the world’s wine map. Interviewed producers have wide knowledge regarding the current situation on the region, therefore they see clearly what the opportunities are. It seems there is a big chance for that, the settlement, Mád, will be the new Tokaj. Owner of Szepsy Winery also finds it significant, small group pf wineries should produce peak products and on lower levels, state company should produce, as it can ensure lower prices and huge quantities. With the broadening of the product palette, specification of the production technique and designation of the grapes types of the peak products, a well working system could be established. Examining the interviewed companies, Szent Tamás, Szepsy and Hétszőlő are mainly on the same opinion in relation to the three major points to achieve a unified Tokaj-Hegyalja: every settlement should produce a regional wine, which would be a basic furmint, after that production of vineyard selected wines should follow and finally the raise of aszú, which is a major mission for Disznókő Winery as well. They also share the same opinion: special vineyards are above everything. More and more

439 Cf. Bruwer et. al, (2010), p. 5-6. 440 Cf. Santos et. al, (2008), p. 300-312

101 wineries are trying to follow these points, but building prestige for the aszú requires more time.

Finally, in most of the cases, opinions are similar, all interviewed wine producers think that, most of the locals should agree on the basics, what they exactly want to achieve in the region, furthermore mass production should be finished totally and prices should be increased. Another significant point is to make furmint accepted as major grapes type and vineyard selected wines as opportunity to step to a higher level, with those wineries and locals, who ignore the new approach. Unfortunately, the number of professionals in the area is low, therefore expert wineries should take the lead to manage the region. The aforementioned steps were already put into use, which will hopefully bring the expected prestige for Tokaj-Hegyalja.

102 5. Conclusion, implications and limitations

5.1. Summary and conclusion

The communist regime had very bad effect on the wine production of Tokaj-Hegyalja. During the system, low quality mass production was present, which destroyed the fame of Hungarian wine. As a result, Hungarian products lost their position on the foreign market. Tokaj-Hegyalja had to face with the same consequences, which started the decline of the region. Not only the quality of the products, but knowledge of producers and customers stayed on a low level. After the change of the regime, as no-one was able to compete with other more competitive producers, the whole wine sector had to be restructured to raise production and improve quality. It wasn’t an easy task for wine producers, they had to adapt to the changing economic environment and changing taste of customers. In Tokaj-Hegyalja after the fall of the communist regime, privatisation process started. Investment packages were provided to foreign wine investors, who came mainly from France. Local wine producers, who had small properties also got the opportunity to develop their own businesses. Thanks to this change, brand building, furthermore skilled and high-quality production started in the region. Nowadays, brand building became very important part of companies’ strategies. Building a brand in the wine industry is not an easy task. Customers have big expectations, which can be satisfied only, if wine producers produce fruity and easy to drink wines and they can insure the same quality from years to years. As customers are more and more powerful, if they are not satisfied with the brand, they can switch easily to another. This means that, they are less loyal, which harms brand equity. However, it is true as well, brand are time and risk reducers, thus they help customers to choose the product they need. In case of wine, representation of the product, its name or design can influence the customers. In Tokaj-Hegyalja not all wine producers see the importance of brand building, therefore it is crucial to integrate them to the system and teach them to follow main steps of building a brand. With positioning the brand, communicating the message, delivering brand performance and leveraging brand equity, identity will be built for wine producers’ brand. Moreover, it will help to satisfy customers’ expectations. With this step, the region will be more unified that would help to get closer to build an umbrella brand for Tokaj-Hegyalja. Management of brands is difficult, because business environment and market conditions are changing rapidly with the entrance of global firms and mega brands. The only thing what producers can do to overcome these challenges is to focus on customers and integrate them to all branding decisions.

103 Interviewed wineries were established directly after the change of the communist regime or after the year 2008, so they are quite different in knowledge and experiences. But what is common, all of them wants to raise Tokaj-Hegyalja again, get back to the world’s wine map and build prestige for the aszú. They want to convey the message: the region is unique and extraordinary. Wineries put a focus on their customers in their strategy. Their major aim is to satisfy customers, build strong connections with them and provide an unforgettable and unique experience, when they meet with the product. In relation to customers, examination of 4Cs brings important points. The model helps marketers to think in a different way, focusing on customers’ interest more than their own, which brings customer satisfaction. Further major elements of the strategy were discussed according to the marketing mix. Wine producers have to focus more on their product regarding quality, design and packaging. Price of the products are low in the region compared to others on the market, therefore main aim of the wineries is to increase price over average and ensure leading quality. The best way to solve this problem, to find the balance in the pricing, as too high and too low prices are both harmful for the business, they don’t generate profit. If customers get what they expected for their money, they return to the product and the brand. This fact is an evidence, customers purchase products according to price. Distribution channel is also significant factor of the strategy, as it ensures customers to meet with the product. Wine producers know that, building a reliable distribution channel takes a long time and it is difficult to change it. Thus, they have distributors, who are trustworthy, educated and have valuable trading relationships. Moreover, they find personal appearance important too, during which they can build good relationships and trust with customers. Finally, promotional strategy is crucial as well, it influence purchase decisions of customers, furthermore their emotions and thinking. Wine producers of the region use free social media opportunities besides personal attendance.

Consumers are more and more conscious where products come from, during their purchase decision, origin of the product plays a major role. As Santos et. al. says, “consumers with a high level of involvement with region of origin branded wine are likely to consume more of this type of wine and place greater importance on product information on the label.”441 In Hungary and Tokaj-Hegyalja regionality plays an important role too, as it is about individual terroirs with unique characteristics, which cannot be transferred to other regions. It creates strong local brands moreover, protects and promotes the wine growing region. Wineries work with smaller number of wine styles that has special taste, they plant grapes, which insure the best performance with local conditions and they aim international sales. Furthermore,

441 Cf. Santos et. al, (2008), p. 300-312

104 they highlight the terroir and the way wines are produced which identifies the style and taste profile. To bring reputation for the region, wine producers try to inform consumers, wine writers and the media about special grapes (aszú, furmint).

Wine producers of Tokaj-Hegyalja have to face with challenges, such as changing weather conditions, diseases, wine counterfeiting, price competition with foreign owned companies and with low priced products. They are working on differentiating low quality and high quality products, with which they can generate higher profit. All in all, the biggest challenge is to ensure high quality and variegation from year to year and position the product in the world.

Main question which arises in the future according to the literature is, how the region can make decisions about its branding and positioning strategy to raise the “profile of the region and build wine consumers’ share of mind.”442 All producers of Tokaj-Hegyalja have their own perspective how they see the future, but it cannot be differentiated sharply from each other. Common points of their plan, make furmint the new dry wine of the world, increase of prices and improvement of selling numbers, expansion in abroad, open for new markets, build connections and make the region and aszú famous again. All wine producers agree on that, the region is very heterogeneous, therefore unification of it, is complicated. However, success of the region is important for them, thus a detailed plan was worked out by the young and talented producer, Jr. István Szepsy. In his opinion, prestige of the region could be built from small geographical units, as they would increase performance. He also finds that, protected origin and production rules are significant, majority of the wineries share the same opinion. Succes and reborn of Tokaj-Hegyalja hurts economic and political interests, therefore achieving the mission is crucial only for a small group. Some of the producers think, state could help to build a unique brand by integrating the whole region. Unfortunately, all trials of the state failed. The most successful producer of the region, senior István Szepsy explains, only successful brands and vineyards are able to pull the whole region. It seems, the only solution is to strengthen the thriving Mád as a brand, establish separate origin for it, which will establish the first protected origin. This step would bring market position for the settlement Mád, which other ones could copy. As a result, Tokaji cannot be a single brand anymore, because Mád already exists.

How senior Szepsy sees, small group of wineries should produce peak products and on lower levels state company should produce, as it can insure lower prices and huge quantities. With the broadening of the

442 Cf. Remaud et. al., (2008), p. 2.

105 product palette, specification of production techniques and designation of the grapes types of the peak products, a well working system could be established. Examining the interviews, local producers recognized the problem in the region, they have wishes and ideas to solve it, but nobody takes a concrete step to really solve the issue. It can be concluded, leader, in solving the problems of Tokaj-Hegyalja, is the Szepsy family. Tokaj-Hétszőlő Winery shares the same opinion with them about how to achieve a unified wine growing region: every settlement should produce regional wine, that could be a basic furmint, after that vineyard selected wines should follow and finally the raise of aszú. The project of building prestige for the aszú is supported by Disznókő Winery too. More and more wineries are trying to follow these steps.

As a conclusion, local wine producers have to agree on the basics, what they want to achieve in the region, furthermore mass production has to be finished totally and prices have to be increased. It is also significant to make furmint accepted as a major grapes type and show to local producers, vineyard selected wines are an opportunity to step to a higher level. In my opinion, expert wineries started to take the lead in the region, thus now the period of implementing the plan comes, which will show if their initiative was successful and they will be able to build the expected prestige for Tokaj-Hegyalja.

5.2. Implications and recommendations

Based on the findings of the article ‘From a Cinderella to a queen: Radical status re-categorization and on the findings of the study, the following recommendations are significant.

As it was mentioned earlier, status change can be affected by three mechanisms, namely ‘category detachment’, ‘category emulation’ and ‘category sublimation’.443

Wineries can achieve category detachment in four ways. Firstly, focusing on the material appearance of the product. Persuasive visual detachment can be accomplished not only through aesthetic arrangements like label, bottle design, use of colors, but through the physical object itself such as bottle size into a new high status socio cultural practices e.g.: after dinner tasting rituals in restaurants or private homes. Secondly, targeting the price. “Price signals are not simply an economic act, they are a known mechanism for signaling a category’s meaning and by which a category’s identity and value institutionalized.”444 Price increase happens with the aim to educate audiences on the relevant value of the product and “a statement

443 Cf. Delmestri et. al, (2015), p. 30. 444 Cf. Kahire et. al, (2015), p. 1295.

106 of status aspiration.”445 However, wineries shouldn’t set prices far beyond the consumers’ acceptance, they should do the price increase step by step to avoid the ‘zone of rejection’. Thirdly, paying attention on that, category detachment reaches the product, the producer and its relationships in the ‘undesired market and organization category’. Distance from other producers and traditional negative image, this is the pattern of behavior, which is called the ‘concept of leakage’ by Podolny (2005).446 It says “high-status organization risks status reduction if they are associated with low-status ones.”447 The opposite is true as well, “low-status organizations that aspire to a higher status position have to avoid being associated with fellow low-status category members.”448 And finally, wineries should be aware of the conditions of previous failures and learn from them. All in all, all companies in the wine growing region should put a tone on category detachment as it is “not a strategy for hiding an object…it is the deliberate appeal for attention, a frontal call for publicity in the attempt to signal difference for a derided category.”449

Category emulation can be done in two ways, by “mimicking the visual appearance and practices of an alternative high-status category and by engaging the market infrastructure of that alternative category.”450 In practice, it means visual signaling e.g.: usage of a single varietal grape, highlighting the name of the product and labelling, which disclose the region of origin, furthermore, turning to sommeliers, elite restaurants and sales agents. As researchers say “status shifts in mature industries depend upon the engagement and endorsement of audiences for whom potential proximity between categories make the drawing of comparisons meaningful. That proximity enables comparison.”451 Examining category detachment and emulation together, “detachment involves the heightening of the difference of an object from its previous cognitive location, on the other hand category emulation points to the claimed status by appealing to a nearby location and its social practices.”452

Category sublimation can be completed by the wineries in two ways. Firstly, taking part in the emerging re-evaluation of the importance and meaning of tradition, that links the ‘narrative of tradition’ to a ‘new narrative of modernity’. Secondly, connecting their name to wider ‘socio-cultural practices’, for example

445 Cf. Kodeih et. al, (2014), p. 34. 446 Cf. Podolny, (2005) 447 Cf. Podolny, (2005) 448 Cf. Delmestri et. al, (2015), p. 32. 449 Cf. Delmestri et. al, (2015), p. 32. 450 Cf. Delmestri et. al, (2015), p. 33. 451 Cf. Delmestri et. al, (2015), p. 33. 452 Cf. Delmestri et. al, (2015), p. 34.

107 to award ceremonies.453

Taking into consideration the results of the interviews, further recommendations are needed. As major problem of the region arises from the lack of education, there is a huge need for proper education in the field of and viticulture. From the generation of the communist regime, only small number of wine producers are educated and open-minded. To insure a brighter future for Tokaj-Hegyalja, young people need to be supported and educated, as they are always open for new challenges, such as collecting knowledge and experiences abroad and using them later to achieve success in the region. In the field of production, following traditions is an important point, but incorporating new and modern techniques and technologies are even more significant. They contribute to the production in a positive way, e.g.: insuring the same quality over years. Strong focus should be on the presentation of the product, because usually “people want to drink branded drinks produced with specific grapes from a specific area.”454 Those products, which represent quality should be sharply separated from other low quality products by its region of origin and by the name of the winery. Appearance and opening of the product is relevant too, thus it needs attention. The opening process requires care, it is “predisposed to careful tasting and appreciation.”455 Furthermore, pricing of the product requires attention as well. As Panzone (2011) explains, price of the product doesn’t give any information about the quality of the product, these two are not correlated. This doesn’t mean that quality is not important, but that, “good quality and low quality wines are priced similarly.”456 What would be very important from the point of view of Eastern European wine producers, is to improve quality level of their production and hold it on a constant base. Companies should use marketing strategies well and price high quality wines appropriately, not on low prices. If wineries continue to communicate quality through price, they will have ‘future instability’ problems, as ensuring the same quality requires premium.457 However, the major issue from all the points mentioned above is to decide and agree what the wine growing region wants exactly, what kind of aims and vision it has for the future. In my opinion, this problem can be solved only, if locals elect an experienced, educated and open-minded leader or group of leaders without any political ties, who can represent the whole region properly.

453 Cf. Delmestri et. al, (2015), p. 34. 454 Cf. Turani, (1985) 455 Cf. Delmestri et. al, (2015), p. 21. 456 Cf. Panzone, (2011), p. 1074. 457 Cf. Panzone, (2011), p. 1074.

108 Luckily, there are some strategical steps, which had already been taken by local wineries. Visits of important foreign wine experts are prevalent in the region. During their visit, they can get to know Tokaj- Hegyalja, local wine producers and their products better, which has a positive effect on the future plan of the region. As wineries want to be well-known, not only in the country, but abroad too, they put focus on visiting restaurants, sommeliers, wine agents and building tight and fruitful relationship with them. As well as, they “seek for access to the social practices of the social elite.”458 Besides, wineries of the region participate on more and more competitions with their products, which bring awards for them, that helps Tokaj-Hegyalja to become more famous and get closer to worldwide success.

5.3. Limitations of the study

Several points needed to be considered during the evaluation of the study. Firstly, the small sample size (six interview partners) didn’t make it possible to have general conclusions. Despite of the big amount of trials, it wasn’t easy to find interview partners. Some of the managers of the wineries found that, interview questions are going too deep, therefore they didn’t provide any opportunity to have greater insight to the topic. An interview with a state-owned winery would have contributed to the research. Secondly, the examined problem is a recent issue, which makes the research and the analysis more complicated. Finally, finding a real solution, which can be used in everyday life is difficult, because of economic and political reasons.

109 6. References

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126 7. Appendix

7.1. Interview guideline for interview partners

I. Situation after the change of the communist regime - How did the reorganization of properties and wine production happen? - How did you rebuild your brand and start managing it?

II. Brand building - What is a brand for you? - What kind of message would you like to deliver with your brand? - What is your branding strategy? - What are your activities regarding the implementation, i.e: 4Ps? - How does your brand perform in the market? - What does regionality mean to you? - What do you think about the initiative of rebuilding the brand Tokaji? - In which markets do you sell your product in the world? - What are the new challenges of brand management in the wine industry?

III. Future - What kind of opportunities do you see in the future? - What was the biggest challenge in the past and what it is today?

7.2. Interview questions

- After the failure of the communist regime, how did the reorganization of properties and wine production happen?

- How did changes in Tokaj-Hegyalja affect your company’s brand?

- How did you rebuild your brand and start managing it?

127 - What is a brand for you?

- What is the importance of brand management in your company?

- What does a brand represent for you? • How would you describe your company’s brand? • How is it positioned regarding competitors?

- What kind of message would you like to deliver with your brand? Please let me now ask some questions related to the market and the customers. In which markets is your company active? • What is the target group of your product? • How would you describe your customers? • What do you think, how the expectations of customers could be satisfied? • What is your opinion, how customers identify your brand and your product? What do they have in their mind and what they feel and experience with your brand and product? • What steps do you take to help customers in brand recall? (the way they recognize the brand) • How is the product positioned according to the customers? • Do you think origin of the product is important aspect for the customers?

- What is your branding strategy?

- Please describe your activities regarding the implementation, i.e. the 4Ps (Product, Price, Place, Promotion)?

▪ Product/service positioning • What are the features that differentiate your product? • What are the segments you target? • How would you describe the packaging of your product? What kind of message stands behind the design? What is the visual appearance of the brand, e.g. Logo?

128

▪ Price positioning • What is your pricing strategy? • What is the main aim of your pricing policy? (survival, present profit maximization, present revenue maximization, turnover maximization, market decantation or top product quality) • Producers try to communicate quality through price. Do you agree with this statement? What are your personal experiences?

▪ Distribution channel • How does your product reach your target consumers? • Do you have established distribution network or do you need to extend your distribution option? • Which distribution channels do your competitors use? • How does the cooperation with other channel members or intermediaries work?

▪ Promotion • Please describe your communication strategy? How does it support the brand? • What do you want people to think, feel or do about your brand? • What kind of communication tools you use to make your brand well-known?

- How does your brand perform in the market? How do you evaluate the performance?

- What kind of attributes determine your brand’s performance?

- What does regionality mean to you? • What are the drivers of regionality according to your opinion? • How does the region build a strong regionality profile? • What do you think about the initiative of rebuilding the brand Tokaji?

129 - What are the new challenges of brand management in the wine growing industry? What kind of difficulties do you have to face with nowadays?

- In which markets do you sell your product in the world? Do you use different branding strategies on the foreign market?

- What kind of opportunities do you see in the future?

- What was the biggest challenge in the past and what it is today?

7.3. Interview partners - overview Winery Interview Job position of Type of Duration of Date of partner respondent interview interview interview Szent Tamás Jr. István One of the Face to face 50 minutes 02.06.2017 Szepsy owners, major wine producer Samuel Tinon Samuel Tinon Owner Skype 48 minutes 02.06.2017 Grands Vins de interview Tokaj Szepsy István Szepsy Owner Face to face 1,5 hour 02.07.2017 Zsirai Kata Zsirai Owner Face to face 18 minutes 02.08.2017 Disznókő Andrea Sales director Skype 1 hour 06.14.2017 Hanyecz interview 20 minutes Tokaj- Tamás Marketing Skype 1 hour 06.21.2017 Hétszőlő Oroszlán director interview

130

7.4. Interview transcripts

Interview I.

Interviewer: Hubay Hanga Zsuzsanna

Interviewee: István Szepsy Jr., wine producer and joint-owner of Szent Tamás Winery

Date: 06 February 2017

Place: Szent Tamás Winery, Mád, Hungary

Type of the interview: Face to face interview

Persons present: István Szepsy Jr. – I. Sz. Jr. Hubay Hanga Zsuzsanna – H. H. Zs.

As the company was founded in 2009, it couldn’t provide any data regarding the situation after the change of the communist regime, therefore the interview started with the questions related to the brand.

H. H. Zs.: What is a brand for you? I. SZ. Jr.: Brand is such a phrasing of a product, behind which, guarantees can be lined up and this represents and ranks the product within the product palette. Brand guarantee for us is the wine, which is made once a year. It is very difficult to produce the same quality every year therefore, it is not an easy task to build a brand in the wine industry.

H. H. Zs.: What is the importance of brand management in your company? I. SZ. Jr.: With the creation of a strong brand, raise the region, get back to foreign markets again and set up a prestige wine growing region from Tokaj-Hegyalja.

H. H. Zs.: What does a brand represent for you? • How would you describe your company’s brand? • How is it positioned regarding competitors?

131 I. SZ. Jr.: Our own brand is relative new, we have special brand building strategy and the product attached to geographical location. Within this geographical location, we can build our brand. It has a more than 100 years old tradition. Our brand has a good judgment, though it is on the market only for 5 years. We build the brand continuously, at the moment we are in the first stage, which is a quite intensive phase. In the wine industry, it is very complicated to build up a brand, because as I mentioned already brand guarantees are needed to a brand. Our brand guarantee is our product, the wine, which is produced once a year. It is very difficult to ensure the same quality from year to year because of the influential factors of the vintage. According to the feedback and the valuation, our brand is a good brand compared to others. Our competitors in the region didn’t really recognize the importance of bottle shape, which provides advantage for us. Moreover, lots of wine producers are self-conceited regarding their own brand and they think, the name of the company is more significant to be present on the packaging than the brand name of the product, even in case of a cheap product. Thus, they do not separate the name of the company and the brand name.

H. H. Zs.: What kind of message would you like to deliver with your brand? Please let me now ask some questions related to the market and the customers. • In which markets is your company active? • What is the target group of your product? • How would you describe your customers? • What do you think, how the expectations of customers could be satisfied? • What is your opinion, how customers identify your brand and your product? • What do they have in their mind and what they feel and experience with your brand and product?

• What steps do you take to help customers in brand recall? (the way they recognize the brand) • How is the product positioned according to the customers? • Do you think origin of the product is important aspect for the customers?

I. SZ. Jr.: Message of the brand build upon the values of the production sites. Primary message is that, Tokaj is unique and within this, the settlement Mád is extraordinary. Besides, furmint is also part of the team, thus the team includes the production site, the species and us. We target a wide range of customers.

132 The product produced in the highest quantity called Mád Furmint. This wine is for customers between 25 and 50 years, these people are open for the new, and they don’t stick to classical and traditional things. Classical wine consumers do not accept Tokaji dry furmint, because they think that, it is something new from the 21. century and it throws off tradition. On the other hand, there are customers, who are very exciting about the new product. We try to reach those people with Mád Furmint, who deal with gastro- tourism and we also use these communication channels. Products, which are priced more expensively, are vineyard selected dry furmints. They have bigger inner content and lower average yield. We want to reach those customers with these type of wines, who have high existence and are over 40 years. I think our customers are satisfied, if we can ensure the same high quality of our product from year to year. Insurance of the same flavour and price-value balance is required as well. In my opinion our customers have nice feelings related to the product, as we try to serve their needs in every vintage and also, we try provide unforgettable experience for them during wine tastings. We participate on several events and competitions, furthermore, we provide wine tasting dinners and we are present on social media as well, this is how we try to help our customers to recall our brand. In my opinion, origin of the product is very important for demanding customers, it is in the first three aspects what they check during their purchase.

H. H. Zs.: What is your branding strategy? I. SZ. Jr.: Our strategy is about to build a strong brand. Most of the locals didn’t recognize what we did, therefore they think, more cheap wine should be produced in the region. As a consequence, there are big amounts of cheap wine in the market with the name Tokaji aszú or Szamorodni. In my opinion, the region can be famous again with Botrytis content wines. At the moment, too many cheap products are on the market, we have to wait for them to disappear. The main point of our branding strategy is to build prestige wine growing region from Tokaj-Hegyalja. The region has special endowments, which come from its geology. It helps us to produce wines, which cannot be copied by anyone. We cannot compete with those companies, who sell products on low prices, but can ensure quality. We have to position ourselves in the third price category, which allows us to sell Mád Furmint for 10-20€. It is a difficult category what we chose, but there are lots of opportunities in it. Our major goal was that, we make our product in this price category. To achieve our plan, we had to find the material for it. Finally, we found those primary producers, who produced quality fruits for us, which works 10 times from 10 vintages. We had to put a technology behind it, which saves energy and makes the production simple and fast. Detailed strategy regarding the product is that, we create a brand from the first authentic grapes type (furmint) in dry wine category. We need the Mád Furmint for this. When we are on the foreign market with Mád Furmint in big quantities,

133 we can go further with vineyard selected furmints. According to the current tendency, customers are interested in more expensive and limited products, thus furmint selection can successfully get into the market. When vineyards represent brand value and we reach the point we have more brand names like this, dry furmint will have a bigger market than it has today. As a consequence, nobody from the wine producers want to produce aszú and szamorodni, because producing furmint is cheaper and simpler. Quantity of the sweet stock will decrease, there will be a shortage, which will lead to the born of prestige and good price level. This is the way how aszú and szamorodni can get back to their proper level, but only as vineyard selected products.

H. H. Zs.: Please describe your activities regarding the implementation, i.e. the 4 Ps (Product, Price, Place, Promotion)?

• Product/service positioning - What are the features that differentiate your product? - What are the segments you target? - How would you describe the packaging of your product? What kind of message stands behind the design? What is the visual appearance of the brand, e.g. Logo?

I. SZ. Jr.: We position our product according to the price, which is the most important for our company. With all our products, we want to reach foreign markets, all over the world. What differentiates our products, is the special terroir. Mád Furmint is the key for the entrance to the foreign market, it is crucial, because we can raise the world’s attention with it. Later we want to put a tone on aszú as well. During the design, shape of the bottle played an important role, it was the primary objective. Dry wines didn’t have a special bottle and we couldn’t build a strong brand until we have our own design. Therefore, we decided we will make a new bottle. It followed the 600 years old bottle shape, what we used for aszú and szamorodni. We just made it bigger. In case of vineyard selected products, customers already know, according to price segment, the origin of the wine and the type of grapes from which it was produced. They inquire about vintages thus, we have to list some information on the bottle. On the label, we write with the biggest letters on which we want to put the greatest focus. For example, in case of Percze, the important thing is not that, the product is from furmint but the origin of it. It is from Mád, from Percze vineyard. Our Mád furmint product is not as informative as our vineyard selected wines.

134

• Price positioning - What is your pricing strategy? - What is the main aim of your pricing policy? (survival, present profit maximization, present revenue maximization, turnover maximization, market decantation or top product quality) - Producers try to communicate quality through price. Do you agree with this statement? What are your personal experiences?

I. SZ. Jr.: Our pricing policy based on costs. Major aim is to have a leading product quality. We formed the prices in a way, we can step further. We want to develop dynamically on the foreign market, therefore we need lots of brand guarantees. We want to generate a demand, what we don’t have at the moment, but it makes possible to raise the price. Increase of prices is very important, as producers in the region produce two times more quantity in every year than they can sell. It appears as cheap product and it leads to overproduction. The wine growing region cannot operate further in the future, if producers cannot increase the price. Tokaj-Hegyalja can participate on a market, where the brand value connected to the region is significant. We have to be more expensive than the average, because we cannot produce as much quantity as others. It means, every product has to be 100-200€. Price of the Mád Furmint won’t change, it will stay 10-15€. There is a huge opportunity in Tokaj-Hegyalja, but we have to think in a different way to be successful embers of the foreign market.

• Distribution channel - How does your product reach your target consumers? - Do you have established distribution network or do you need to extend your distribution option? - Which distribution channels do your competitors use? - How does the cooperation with other channel members or intermediaries work?

I. SZ. Jr.: Our primary strategy to find those on the given market who are trustworthy, has wide knowledge about the market and have a very good relationship network. Thus, we are searching for distributors, trading partners, who can ensure us long-term representation. We discuss our strategy with them in advance and after we start to train them. We are satisfied with the current situation, but it is always good to be open and expand our distribution options.

135 • Promotion - Please describe your communication strategy? How does it support the brand? - What do you want people to think, feel or do about your brand? - What kind of communication tools you use to make your brand well-known?

I. SZ. Jr.: Our promotional strategy depends on the country, where we are promoting our products. We have lots of personal appearance in Hungary, this is the most efficient. We are using social media, such as Facebook too. It happens if Facebook is a strong promotional tool in one country, it is in other countries as well. In the USA, we have a contract with a marketing company, which has very good media and press network. They are specifically dealing with wine branding. We were present with our products on the Oscar 2016. In Norway, there is a state monopoly, which controls the sales, therefore in this country we can concentrate only on bloggers, they help us in promotion. We also have a webpage, where customers can get information about the brand and the products. Our main aim is to satisfy customers and to convey our message to them, namely wines of Szent Tamás are produced on special terroir in an extraordinary wine growing region.

H. H. Zs.: How does your brand perform in the market? How do you evaluate the performance? What kind of attributes determine your brand’s performance? I. SZ. Jr.: I would say, our performance is good, in 2011 we produced 25.000 bottles of Mád furmint and till now in every year we could double the sold quantity.

H. H. Zs.: What does regionality mean to you? • What are the drivers of regionality according to your opinion? • How does the region build a strong regionality profile? • What do you think about the initiative of rebuilding the brand Tokaji?

I. SZ. Jr.: I think regonality is very important, as it ensures differentiation from other regions. The driver of regionality can be a strong brand. In my opinion, if we focus on the greatness of our terroirs they can ensure uniqueness for our region and it can lead to a strong regional profile. I don’t agree with the initiative of rebuilding the brand Tokaji. Tokaji cannot be a unified brand, because its product portfolio is too heterogeneous. The evidence for it, is what happened when investors asked for a furmint glass from the famous Austrian manufacturer, Georg Riedel. As Riedel requested, the best wine producers travelled to

136 Austria to show their best products, and their glasses, they use for wine tasting. After he tasted all the wines, he said all the wines are very good, but we should go home and decide what we want exactly in the region, because it is impossible to design a glass for different kinds of wines. The best brands were present in Riedel’s manufactory, who sell their products in the best restaurants and on the highest prices, but their wines move on a wide range, such as low or high alcohol content, using traditional technology or reductive, someone makes wine from fruits with Botrytis, others not, thus it is very different. This is the reason, why Tokaj cannot be defined as a wine growing region as a whole. Prestige of the region has to be built from small geographical units. In my opinion, if these small units can deploy to a high level, performance of them will result greatness of Tokaj. Hungarian government had trials to establish the brand unified Tokaji, but they failed. It could work only, if the state company operated as an integrator in the region. It could be the strongest member of the market, but not because it wants to show its political power, but it has the most opportunities in the market. Our only chance for having a unified brand is the strategy what I have already mentioned to you. Thus, the first in the product palette is the dry furmint, then vineyard selected wines, szamorodni and finally aszú. However, we have to build these products independently. If sub-regions strengthen themselves it can refer to only the wine community. But if we want to strengthen Mád as a brand, we can establish a separate protected origin for the territory of it, without the Tokaj region. From this point, Mád will be the first settlement, which has protected origin. It will bring market position, which will result that other settlements in the region will copy Mád. In this case, Tokaj cannot be a substantive brand anymore, because Mád already exists. Tokaj can only come after Mád. Maybe this is not the best solution for raising the region and build prestige for it, but we don’t have another alternative. We didn’t choose this strategy, because we wanted to make a strategy for ourselves, but the leader of the region is unable to plan any strategy and see the importance of it. Nobody wants to have a strategy, 10 from 10 wineries don’t even know why they established their company. There is no proper intellectual level.

H. H. Zs.: What are the new challenges of brand management in the wine growing industry? What kind of difficulties do you have to face with nowadays? What was the biggest challenge in the past and what it is today? I. SZ. Jr.: Wine counterfeiting means a serious problem, in 2017 wine counterfeiting doesn’t mean that, the wine is not produced from grapes, but it means, it is not originated from the named production site. From Italy and Macedonia huge quantities of wines are imported to Hungary without any control. Secondly, there are diseases nowadays, which cannot be treated with the modern tools, we have. Thirdly,

137 we have to invest lots of money into research and development to insure a bright future for us. In the past, the biggest challenge was that, we had to launch a totally new brand and a product, furthermore we had to pass it in the circle of local producers. We tried to convey a new approach, which was a big challenge for us, as wine producers of the region were not open-minded. We also had difficulties to ensure proper quantity of fruits for the production of the new product, therefore we started the production with some trusted partners. Today, we can afford to buy fruits from other producers in the region, but under strict circumstances. Another challenge nowadays is that, raising Tokaj-Hegyalja again is important only for a small group, as reforms hurt economic and political interests. Unfortunately, because of this, implementation of our plans is very difficult.

H.H. Zs.: In which markets do you sell your product in the world? Do you use different branding strategies on the foreign market? I. SZ. Jr.: We sell our products all over the world and we use different strategy everywhere. We started in European countries and after we had more experiences and trustworthy connections we turned to the direction of USA. We don’t sell only there, where we want to, for example in Spain and Denmark we didn’t take any steps, still these countries visited us and asked for our products. We experienced the opposite as well, we invested lots of efforts to introduce our products, but our trial wasn’t successful in some countries. We have different strategy in every country, because making plans is very important. Implementation is the other significant thing and all of this has a budget. When we are in Europe, distances are not the same like in the USA, markets influence each other. Therefore, it changes every year. In the strategy, we can focus on maximum two countries at the same time. We can build and successfully implement a marketing strategy in the shortest time approximately in 1,5 or 2 years.

H. H. Zs.: What kind of opportunities do you see in the future? I. SZ. Jr.: I see opportunities for serious development everywhere. Furmint will be for sure the first dry wine of the world like and conquered the world. This is a very long process and other wine growing regions should start the plantation of it as well. Luckily, there is a professional interest regarding furmint, therefore there are some countries where despite we are not present and we don’t take any steps, they visit us and they want to trade with our products.

138 Interview II

Interviewer: Hubay Hanga Zsuzsanna

Interviewee: Samuel Tinon, owner of Grands Vins de Tokaj

Date: 06 February 2017

Place: Szerencs, Hungary

Type of the interview: Skype interview

Persons present: Samuel Tinon – S. T. Hubay Hanga Zsuzsanna – H. H. Zs.

H. H. Zs.: After the failure of the communist regime, how did the reorganization of properties and wine production happen? S.T.: Privatisation was the route chosen by the government in 1991. Seventeen proposal packaged “estate” were offered for sale to global wine investor, mainly focused from France origin. On the side of this actions, two independent companies were established mainly from cooperative assets. All small producers of the region were allowed to develop their own business on a very free-market understanding.

H. H. Zs.: How did changes in Tokaj-Hegyalja affect your company’s brand? S.T.: I use my own name for branding my wine. I started my production after these changes.

H. H. Zs.: How did you rebuild your brand and start managing it? S.T: In the area, the phrase rebuilding a brand does not exist, all were destroyed forever.

H. H. Zs.: What is a brand for you? S.T.: For me, brand is a tool to sell my products. After, according to the continuous result and experience, I can shape the brand more properly. I think using only one brand name to market family wine, handmade in Tokaj is not relevant for two reasons. Firstly, there is no volume to allow any marketing charge on the price of the bottle. Secondly, producing wine in Tokaj must include Tokaj as first or second brand name joined. No winery succeeded to be successful player of the market only with its own brand name without using Tokaj. Nothing can be built without Tokaj.

139

H. H. Zs.: What is the importance of brand management in your company? S.T.: Identification of my winery has to be in the Top 5 within the big Tokaji brand name.

H. H. Zs.: What does a brand represent for you? • How would you describe your company’s brand? • How is it positioned regarding competitors?

S. T.: My brand is a double brand. In most of the cases, local producers put their name on the label. Their name is the brand however, these brands have no value without Tokaj. My brand Samuel Tinon doesn’t have any value by itself. I mean this whole thing in a way, there has to be a big brand, such as Tokaj and within it local producers’ own brands are lined up. In my opinion Tokaj has to work as an umbrella brand. Wine producers of the region had more trials to break into the foreign market. They thought that, Tokaj by itself is weak, therefore they used only their own brand, which didn’t show any successful results. According to my experiences in abroad, a brand and a message can be only one. Two brands cannot work parallel. Therefore, my brand is Samuel Tinon Tokaj. Without Tokaj, it is impossible to build anything. I don’t think we have competitors, because the wine growing region is very small, therefore there is only a little competition between producers. Everyone has their own channels. There is concurrency only in that, if we are producing or selling. In this case, my brand is above any other competitors.

H. H. Zs.: What kind of message would you like to deliver with your brand? Please let me now ask some questions related to the market and the customers. • In which markets is your company active? • What is the target group of your product? • How would you describe your customers? • What do you think, how the expectations of customers could be satisfied? • What is your opinion, how customers identify your brand and your product? • What do they have in their mind and what they feel and experience with your brand and product? • What steps do you take to help customers in brand recall? (the way they recognize the brand)

140 • How is the product positioned according to the customers? • Do you think origin of the product is important aspect for the customers?

S.T.: The message what I want to convey to the whole world is that, my products were produced in the most extraordinary wine growing region Toka-Hegyalja. I want to show, wines produced here are special because of the rich terroir, therefore our products can be important elements of peak gastronomy. I am active on all the markets worldwide and the target groups of my products are Michelin starred restaurants and gourmands. My customers are open minded and independent. What I think how customers’ needs can be satisfied, is only tasting. In my opinion customers see that, our products are very special with a high quality and they have out of understanding experiences related to them. The best solution is to provide tasting experience for the customers, which will help them to recall the brand easily from their mind. They can connect our brand with a positive feeling. My opinion about the origin of the product is that, it is fundamental aspect for the customers during their purchase decision.

H. H. Zs.: What is your branding strategy? S.T: My main strategy is to ensure proper logistics, because the most important thing is how customers get the product. Nowadays it is very difficult to move the wine in the world. I want to be always better, reach higher levels step by step.

H. H. Zs.: Please describe your activities regarding the implementation, i.e. the 4 Ps (Product, Price, Place, Promotion)?

• Product/service positioning - What are the features that differentiate your product? - What are the segments you target? - How would you describe the packaging of your product? What kind of message stands behind the design? What is the visual appearance of the brand, e.g. Logo?

S. T.: The main feature what differentiates my product is simply, Tokaj. I want to target the top segments, as my products represent high quality. The bottle, label and the cork is the most important element of the packaging of my product. I am focusing on that, the product has to have a style, it shouldn’t be too classical,

141 not too modern, but it is significant to have a movement in it. It has to represent the value, but not luxury. Luxury has to be presented in price. Mainly there are two major groups according to which I differentiate my products from each other. I have products with Botrytis and without Botrytis. Wines containing no Botrytis are dry furmints and wines with Botrytis are sweet. Therefore, the design of the label is different. Dry wines focus on the origin of the product, thus the vineyards, therefore the label illustrates in a modern way the different production sites the product was produced. In case of sweet wines (szamorodni and aszú), the design is shiny, we used golden and silver letters on the label to express the greatness and value of our sweet products. The main message I want to convey is come and visit Tokaj-Hegyalja from Central Europe.

• Price positioning - What is your pricing strategy? - What is the main aim of your pricing policy? (survival, present profit maximization, present revenue maximization, turnover maximization, market decantation or top product quality) - Producers try to communicate quality through price. Do you agree with this statement? What are your personal experiences?

S. T.: According to the prices my brand is a luxury brand. But in general, it is not. It is neither luxury and nor low category. If it was a luxury product, the price would range between 200-500€. The situation is that, I have to build from step to step my strategy. I am producing something, I have a target market I want to reach. The problem is that, when Tokaj gets to this point, the selling price is very low, especially from the viewpoint of the winery. With my pricing strategy, I try to ensure stability and secure value. I think it is very stupid to communicate quality through price. The success has to come from the quality of the product. The price will rise only according to the demand. My personal experiences are that, till now in Tokaj- Hegyalja we don’t have a successful price positioning strategy. The people, who buy good wines do not follow high prices. Those people who were willing to pay high prices for Tokaj wine left long time ago, because of the abuse of poor quality producers.

• Distribution channel - How does your product reach your target consumers? - Do you have established distribution network or do you need to extend your distribution option? - Which distribution channels do your competitors use?

142 - How does the cooperation with other channel members or intermediaries work?

S.T.: The products reach my customers through restaurants and sommeliers. My distribution channel is an innovative channel, which works properly, but I am always thinking about the extension of it. The relationship with channel members is human based and very rich. I don’t use supermarket for distribution as they are unable to create value.

• Promotion - Please describe your communication strategy? How does it support the brand? - What do you want people to think, feel or do about your brand? - What kind of communication tools you use to make your brand well-known?

S.T: We use social media tool like Twitter to promote our products, moreover we have a website where customers can find all the important information about our winery and the products. We changed the concept of our webpage few months ago, because I felt that it is in a bad condition, not so communicative and we have to follow the changes and the trend. I communicate not because I want to, but because the product requires communication. Mainly I am interested in the amount of wines I sold at the end of the month. I find personal relationships important, therefore I usually invite sommeliers, who spend a day in the grapes plantation, which helps them to get to know the products. As a consequence, they can work with the wines in a better way. My main aim is to guarantee high emotions. I don’t use any marketing tools, which are common, because there is no quantity in the background. We don’t have money for marketing. Instead as I have already mentioned, we try to focus on the personal appearance, which helps us to represent our brand.

H. H. Zs.: How does your brand perform in the market? How do you evaluate the performance? What kind of attributes determine your brand’s performance? S. T.: If we don’t have problems in logistics, everything goes well and I am satisfied with the performance of the winery. However, problems with the delivery can cause us big troubles. The attributes of brand performance are unusual.

143 H. H. Zs.: What does regionality mean to you? • What are the drivers of regionality according to your opinion? • How does the region build a strong regionality profile? • What do you think about the initiative of rebuilding the brand Tokaji?

S. T: What comes to my mind when I hear the world regionality is, brand name Tokaji is not a regional product. It is the first closed wine appellation in the world, for the world. At the moment, the region is building a profile very poorly. Before everything, it is necessary to agree on the ownership of the brand Tokaji. This is not clear currently. Tokaji as a unified brand has to ensure variegation in wines, but uniformity in bottle shape and packaging. Furthermore, strict rules and regulations are needed for production and the producers of the region has to agree on that, what they want. If we modify the acts all the time in Tokaj-Hegyalja we will be more and more weak. As a result, price will go down therefore we have to make regulations very strict. The region is very complex, nobody can see it as a whole, phasing is required. Mass production has to be ended and we have to turn to the direction of producing luxury products. I am not so optimistic in relation to the rebranding of Tokaji. I feel that we are in a wheel, which never ends. However, market results are positive and they show that, the region is progressing.

H. H. Zs.: What are the new challenges of brand management in the wine growing industry? What kind of difficulties do you have to face with nowadays? What was the biggest challenge in the past and what it is today? S. T.: The biggest challenge is that, we are working hard all year long, but if the weather is not good, all our grapes can go wrong. It causes us huge problems, because the result is that, we cannot provide good quality products, thus we cannot sell anything. Positioning the product in the world also means a huge challenge for us. Furthermore, when we want to create a new product we have to do lots of research, which requires time. In the past, we had some problems regarding the product, essence. It was very challenging for me to find the perfect message and packaging for it. Our daily problems relate to technology, we have to search for the proper way, how we can develop and progress with the always changing modern technology.

144 H.H. Zs.: In which markets do you sell your product in the world? Do you use different branding strategies on the foreign market? S. T.: I sell my products mainly in abroad. The major destination is France, as I am originated from this country, but I am also present in approximately 10-15 other countries. For me the company is important with which I am in contact, not the country itself, where I am selling. I always use the same approach everywhere.

H. H. Zs.: What kind of opportunities do you see in the future? S. T.: I think there is an opportunity in the future for that, we sell our products in every country all over the world, we just need time for building relationships with them. For example, wines are not imported in France. For me this is not the case, because of my origin, but for other producers of the region it is a problem. Thus, building connections with France and also with other countries can be a good option for wineries later. According to my experiences, the world is open for wines from Tokaj-Hegyalja, therefor it is worth a trial.

145 Interview III.

Interviewer: Hubay Hanga Zsuzsanna

Interviewee: István Szepsy, owner of Szepsy Winery

Date: 07 February 2017

Place: Szepsy Winery, Mád, Hungary

Type of the interview: Face to face interview

Persons present: István Szepsy – I. Sz. Hubay Hanga Zsuzsanna – H. H. Zs.

H. H. Zs.: After the failure of the communist regime, how did the reorganization of properties and wine production happen? I. Sz.: There was no reorganization, because there was nothing to reorganize as only poor people were living in the region. Rich people disappeared. At this time, I thought, the solution is in the transformation to foreign joint ventures. Investors came to Tokaj-Hegyalja, so people who still had their property offered the part of it for sale. I did the same. When a positive change took place, majority of the producers left joint ventures and they started their own business. In 1997, I took over the set-up of a foreign joint venture, called Királyudvar. However, during this time, I dealt with my own business too and I achieved success in it. In 2005, I finally finished the cooperation with others and set up my own company. I had vineyards, which were the property of my family, but I knew that I need more to build a successful winery. It was clear for me as well, if once I want to develop the brand further, technology won’t be enough, but production site will be the differentiator. There was a 500 years old classification system and I started to investigate the meaning of it exactly. I achieved some results, but the building of the estate is still happening.

H. H. Zs.: How did changes in Tokaj-Hegyalja affect your company’s brand? I. Sz.: I started my own brand in 2005, therefore the changes directly after the failure of the communist era didn’t really influence my brand.

146 H. H. Zs.: How did you rebuild your brand and start managing it? I. Sz.: I didn’t have to rebuild my brand. It was created in the year 2005. It was very difficult to manage it, as I often had financial problems. Building a strong brand requires lots of money. Finally, I slowly succeeded to buy more and more production sites, thus I had nice grapes plantations from which I could start producing quality product according to my wishes.

H. H. Zs.: What is a brand for you? I. Sz.: Brand is the most important in a company’s life. Brand building is above everything.

H. H. Zs.: What is the importance of brand management in your company? I. Sz.: With the management of my brand I can ensure bigger success for my products. In my strategy, the main differentiator from other brands is not only the technology, but production sites as well.

H. H. Zs.: What does a brand represent for you? • How would you describe your company’s brand? • How is it positioned regarding competitors?

I. Sz.: Luckily, we were never in a situation, when we had to make decisions which had a negative effect on our brand. Our main goal was always to raise the Szepsy brand. Nowadays there is a little change in this, because production sites are getting more and more significant. We started the management of production sites, in which Wine Association Mád is a great partner. We also started to manage the settlement Mád with those producers, who understand this process can have a very positive outcome. Furthermore, we started the establishment of the protected origin rules of Mád. There were yield limitations till now, that the settlement had to follow, but the most important is the adaptation and communication of it. We decided on the parameters of the peak product, which can be originated only from Mád, parcel selected and furmint. The brand can be developed further only, if we follow these points. Our most expensive product has to be the Szent Tamás 03 Furmint Essence in the future and after Aszú and Furmint should come in the row. These three wines have to be the peak products and later the most well-known brand all over the world. Thus, our major aim is, to continue the research and furmint selection we started on production sites, to get the best furmint and the best qualification. The most significant thing is to push the brand further. It is a slow process, but once we will find the special ‘ingredient’ for the peak product, which can bring our brand Szepsy to higher levels. We don’t really have competitors,

147 everyone has their own problems. Our problem was that, we had to start everything from zero, without money, but we have an incredible endowment and tradition what we have to believe. We have to use the best techniques to produce the greatest quality. In abroad, lots of winery switched to technological production, because they cannot do it naturally. As a result, there is no balance in their sweet wines, they cannot provide the same harmony, what Tokaji can. However, these countries are richer, they can spend lots of money on marketing, thus they have bigger reputation and more opportunities. We don’t think about them as competitors, because the quantity of sweet and dry wines in Tokaj is so little, it cannot be a problem to position them in the world market. What can cause problems in the future is that, in case of peak products we will have to attract customers from other foreign producers.

H. H. Zs.: What kind of message would you like to deliver with your brand? Please let me now ask some questions related to the market and the customers. • In which markets is your company active? • What is the target group of your product? • How would you describe your customers? • What do you think, how the expectations of customers could be satisfied? • What is your opinion, how customers identify your brand and your product? • What do they have in their mind and what they feel and experience with your brand and product? • What steps do you take to help customers in brand recall? (the way they recognize the brand) • How is the product positioned according to the customers? • Do you think origin of the product is important aspect for the customers?

I. Sz.: The message of our brand is that, Tokaj-Hegyalja is special and extraordinary and our products are originated from the greatest production sites of the world. Luckily, we are active on domestic and foreign markets at the same time. Our customers are mainly wine shops, Michelin-starred restaurants, sommeliers, academics, Master of Wines, wine lovers or wine collectors. Thanks to these customer groups our sales numbers went to the good direction and our product portfolio reached 4 categories, namely, dry furmint, sweet cuvee, aszú and essence. We have a special pretending strategy thus, we don’t go after the customers, because we want to reach the highest position exists. Of course, we want to satisfy them, therefore we are making lots of research and development to find the perfect material and technology to

148 provide the peak product for them. Those people, who visit our company, they get lots of information about our work, our products and about my faith. They leave satisfied and usually they understand my point of view about Tokaj-Hegyalja. I think customers can recall my brand according to the special experience I provide them during their visit. I think origin of the product is an important aspect of the customers. According to my experiences, they are interested in not only the region where the product was produced, but nowadays in the production site too.

H. H. Zs.: What is your branding strategy? I. Sz.: Main point of my branding is, to create a wine in Tokaj-Hegyalja, which can be the number one peak product of the world. I also want to build my brand further, to make it more and more successful, therefore I started the production of vineyard selected and parcel selected wines. Moreover, I am providing unforgettable experience for experts of wine industry, who can help me to bring the reputation of Tokaj- Hegyalja in the world. And I am also working on raising aszú again, because interpretation and production of natural sweet wine stopped totally. The only way to position it above other products in the world. This procedure started years ago and it won’t stop until we achieve the goal.

H. H. Zs.: Please describe your activities regarding the implementation, i.e. the 4 Ps (Product, Price, Place, Promotion)?

• Product/service positioning - What are the features that differentiate your product? - What are the segments you target? - How would you describe the packaging of your product? What kind of message stands behind the design? What is the visual appearance of the brand, e.g. Logo?

I. Sz.: Main features what differentiate my products from others, is high quality and the speciality of our production sites. There is only compulsory information on the product. The label is simple with the logo Szepsy and the name of the production site. The design of the label was created before the establishment of my company, as in 1995 I started to sell my aszú wine, what I made in the previous years. Today, the label is almost the same, we implemented only few changes on it. I decided I won’t have new labels in the future, Szepsy will be a standardized brand, we won’t have cheap or low category wines. This helps us to differentiate our products from other products on the market. In our strategy, we pretend that, Szepsy

149 always existed and it was the most recognized brand of all time. The message of our product is, it is originated from the greatest production sites of the world.

• Price positioning - What is your pricing strategy? - What is the main aim of your pricing policy? (survival, present profit maximization, present revenue maximization, turnover maximization, market decantation or top product quality) - Producers try to communicate quality through price. Do you agree with this statement? What are your personal experiences?

I. Sz.: We set the prices of the products according to a calculation. We focus on prices which customers will pay for sure within a given period of time. If the vintage is good, we try to increase the price. Our main aim is to have top product quality. It is important as well, to raise the prices of our products, this is the reason why we are focusing on parcel selected products. We can sell them on a higher price. I think if a product has high quality and produced on a special terroir like our products, it has to have a higher price. All in all, it is true, producers try to communicate quality through price nowadays. In most of the cases quality and price are proportional.

• Distribution channel - How does your product reach your target consumers? - Do you have established distribution network or do you need to extend your distribution option? - Which distribution channels do your competitors use? - How does the cooperation with other channel members or intermediaries work?

I. Sz.: We don’t take any steps to the direction of distributors. We make research and developments regarding our products and we welcome our visitors, but that’s all. We do not compete, we do not go after the customer, because we want to reach the highest position which exists. We have to pretend that, we are already there. I don’t think the wine tasting has significance, but re-meeting, conversation and re- visiting of vineyards. Thus, those who don’t come to Tokaj-Hegyalja and don’t visit our winery, don’t understand our point. And by those qualified professionals and traders, who understand us, our strategy will work.

150 • Promotion - Please describe your communication strategy? How does it support the brand? - What do you want people to think, feel or do about your brand? - What kind of communication tools you use to make your brand well-known?

I. Sz.: There is no tourism, I don’t receive customers, but sometimes it happens I receive old customers. Usually I offer these wine tastings for free. There are events, where customers can get in touch with us, for example on auctions or on the event Szepsy 100. In this case, I do everything to make them understand what I represent and what is the concept of our company. There are articles and movies about me, but they weren’t made for potential customers. They are all part of the future mystery and legend, Tokaj has to have. Otherwise, introduction of the world’s number one product cannot happen. I use Facebook and my own website to convey information about the winery and my faith.

H. H. Zs.: How does your brand perform in the market? How do you evaluate the performance? What kind of attributes determine your brand’s performance? I. Sz.: I think our brand performs well in the market. We started to produce parcel selected wines, their prices can be increased without any problems. Without developing the prices of our brand cannot go further in the future. We also do lots of research to make our products more and more perfect.

H. H. Zs.: What does regionality mean to you? • What are the drivers of regionality according to your opinion? • How does the region build a strong regionality profile? • What do you think about the initiative of rebuilding the brand Tokaji?

I. Sz.: Regionality for me is the reputation what Tokaj-Hegyalja has. The drivers of it, are great terroirs, inherited value and grapes with Botrytis, from which we make the best quality aszú. A unified brand would be our dream, but at the moment the situation is that, half of the wine growing region has plans, there is no concept for the other half. The Hungarian government had a trial, their plan contained the close-up of the whole region, unified processing system, market opportunities and marketing tools. However, they gave up soon because of the lack of expertise and money. I really want it to happen, but I think at the moment it can happen only if the government removes itself the project. There is a chance for rebuilding the Tokaji, if there will be successful wine brands and production sites, which can start the raise of the

151 whole region. It cannot work, what worked in Austria, that the development happens according to unified principles. But it can work for us, if we become successful on very high level in a short time with our brands and as a result, strong production sites are created, Mád transforms to protected origin territory and other settlements do the same. Local producers didn’t realize the chance, because it didn’t bring them big amount of money. They have to see the opportunities, what our new concept provides for them. In tourism, there is no chance for stepping forward in the future. In my opinion, wine producers of the region have to narrow the product palette and we have to decide about the production of peak product, which grapes type, what technique we should use and with what designation they can be produced. In this project Mád is the leader. There are three main points: special production site above everything, absolute peak can be only one, we have to recognize which one and start the plantation. Furthermore, furmint has to be the king and we have to focus on the protection of aszú. Let me show an example, it happens quite often a serious and successful company which sells its aszú for 70-80€, sells the same product in the supermarket for 10€. This is a suicidal market policy. We have to put aszú into prestige segment. We have to take a stand and work hard to achieve our goals. At the moment, there are no reforms on the region, only in Mád. If there will be a unified brand in the future, Mád will be the one, who starts it and other settlements will follow it.

H. H. Zs.: What are the new challenges of brand management in the wine growing industry? What kind of difficulties do you have to face with nowadays? What was the biggest challenge in the past and what it is today? I. Sz.: Financial problems caused the main challenges in the past and today too. We have to use the most modern and best equipment for the successful production of our wines. Furthermore, we have to increase the salary of our employees. We also have to build our showroom, start replantation of furmint on some production sites and build proper technology in our processing house.

H.H. Zs.: In which markets do you sell your product in the world? Do you use different branding strategies on the foreign market? I. Sz.: We are present all over the world. Our strategies are the same in all the countries. There will be a little change in our branding strategy, namely there will be products, which won’t be available in Hungary at all, as well as in abroad only for those, who are applying for them. These products will represent the most expensive wines.

152 H. H. Zs.: What kind of opportunities do you see in the future? I. Sz.: I want to get to the markets, where we weren’t present in the last few years. I think mainly about China, Far-East and Russia, which represent the highest categories. It can be possible only, if we find representatives, who can convey our brand, products and concept. However, this will cost a lot of money for the winery. It is very important as well, to create the peak product and become part of the peak market, however for this we need perfect circumstances, such as weather, technology, grapes type. Moreover, to achieve this goal, the lower categories in the region has to be built up. I mean it in a way, state owned company can produce huge quantities thus, it can serve the needs of lower segments and few producers can represent the high quality and very high quality sections.

153 Interview IV.

Interviewer: Hubay Hanga Zsuzsanna

Interviewee: Kata Zsirai, owner of Zsirai Winery

Date: 08 February 2017

Place: Zsirai Winery, Mád, Hungary

Type of the interview: Face to face interview

Persons present: Kata Zsirai – K. Zs. Hubay Hanga Zsuzsanna – H. H. Zs.

As the company was founded in 2005, it couldn’t provide any data regarding the situation after the change of the communist regime, therefore the interview started with the questions related to the brand.

H. H. Zs.: What is a brand for you? K. Zs.: Brand is a concept, which captures people, who are loyal to the brand and are going to search for it. We also have the aim, to find out something to which customers can attach. As a result, they will be loyal to the brand and they will search for it. The winery’s main aim is to create something to which people can connect.

H. H. Zs.: What is the importance of brand management in your company? K. Zs.: I think that, our winery is a brand, therefore we focus on the proper management of our company. Within the management of the brand, the most important thing is to follow the traditions and produce high quality wine, which can satisfy customers expectations.

H. H. Zs.: What does a brand represent for you? • How would you describe your company’s brand? • How is it positioned regarding competitors?

K. Zs.: We make wines with traditional techniques in a natural way. The product shows clear elegance in its appearance. We tried to create a good price-value ratio, which helps us to be successful player of the market.

154 H. H. Zs.: What kind of message would you like to deliver with your brand? Please let me now ask some questions related to the market and the customers. • In which markets is your company active? • What is the target group of your product? • How would you describe your customers? • What do you think, how the expectations of customers could be satisfied? • What is your opinion, how customers identify your brand and your product? • What do they have in their mind and what they feel and experience with your brand and product? • What steps do you take to help customers in brand recall? (the way they recognize the brand) • How is the product positioned according to the customers? • Do you think origin of the product is important aspect for the customers?

K. Zs.: Our major goal is to acquaint our wines with customers. Most of the producers make their wine with a reductive technique for which there is a great demand. However, we would like to show that, high quality wines can be produced with traditional technique too. Our company is active in the domestic and in the foreign market as well. Regarding customers, we are not focusing on a target group. It is not easy, but we are trying to participate everywhere, targeting older and younger customers at the same time. It is very important for us to find those customers, who are interested in our wines. In our opinion customers can be satisfied, if they get high quality products for good prices. Furthermore, connecting their wine tasting to a gastronomic experience can help to provide them proper services. I think, our products are identified by customers according to the clear label on our bottles and the special traditional technique we use for producing our wines. Their experience with the brand is that, even though the products are produced in a traditional way, they also represent modernity. We are trying to help customers to recall the brand by participating on several events and connecting wine tastings experience with gastronomy. I am fully concerned about that, origin of the product is very important aspect for the customer, therefore the first thing what is visible on our product is the origin.

H. H. Zs.: What is your branding strategy? K. Zs.: The primary objective is to make the brand and the bottle visible. We put lots of effort into the design of the cork and the label.

155

H. H. Zs.: Please describe your activities regarding the implementation, i.e. the 4 Ps (Product, Price, Place, Promotion)?

• Product/service positioning - What are the features that differentiate your product? - What are the segments you target? - How would you describe the packaging of your product? What kind of message stands behind the design? What is the visual appearance of the brand, e.g. Logo?

K. Zs.: All our products have similar packaging. We use different bottle shapes, but the label is almost the same for every product. The main differentiator of our product is the way how it produced (special selection and traditional technique). The first thing what is visible on the label is the origin of the product. Our aim is to strengthen in people our existence, thus our logo is the first letter of our surname Zsirai.

• Price positioning - What is your pricing strategy? - What is the main aim of your pricing policy? (survival, present profit maximization, present revenue maximization, turnover maximization, market decantation or top product quality) - Producers try to communicate quality through price. Do you agree with this statement? What are your personal experiences?

K. Zs.: Setting the prices is the most difficult task, because the style itself and the quality we want to present cannot cover the costs. At the moment, we are in the middle section, but vineyard selected wines, which have higher quality are more expensive. Prices depend on the acceptance of the customers, not on the costs. We tried to fit our products to several segments according to our wishes. We checked the list, how other wine producers rank same quality products. We also put our wines into segments. We are mainly focusing on customers and competitors in our budget. Our main aim is to find our customers, make them to get to know the brand and accept it. In the region there are some producers, who try to communicate quality through price. In our strategy, we try to provide high quality products for our customers, but on an affordable price.

156 • Distribution channel - How does your product reach your target consumers? - Do you have established distribution network or do you need to extend your distribution option? - Which distribution channels do your competitors use? - How does the cooperation with other channel members or intermediaries work?

K. Zs.: Ensuring high quality and variegation is insecure in every year. It means that we cannot have the same production numbers from year to year, therefore distribution of products happens through us. We have direct sales, within Hungary we don’t work with wholesalers. Our products reach the sales points through our work. Our most important foreign partner is Poland, because it is a neighbouring country and knows the wines of the region well. We also sell wine in Germany and England, where we are represented through personal relationship (friends). Distribution channels of our competitors are diversified, such as restaurants, traders, bars, sommeliers and agents.

• Promotion - Please describe your communication strategy? How does it support the brand? - What do you want people to think, feel or do about your brand? - What kind of communication tools you use to make your brand well-known?

K. Zs.: We try to be natural and convey our values with personal appearance. We participate on festivals, competitions and professional events, moreover, on wine tasting events and dinners. For us the most important form of communication strategy is personal appearance, but we also use our own homepage and social media like Facebook to reach our customers. We want to convey our existence to the people, it is very significant to us to become well known in the future.

H. H. Zs.: How does your brand perform in the market? How do you evaluate the performance? What kind of attributes determine your brand’s performance? K. Zs.: It shows a changing tendency every year. Sometimes customers like sweet wines more and other times they like vineyard selected wines. I would say the tendency is good, but it could be better.

157 H. H. Zs.: What does regionality mean to you? • What are the drivers of regionality according to your opinion? • How does the region build a strong regionality profile? • What do you think about the initiative of rebuilding the brand Tokaji?

K. Zs.: I think regionality ensures reputation for the wines produced in the area. In my opinion in case of regionality, terroir has a great importance, as it ensures the uniqueness of the product produced there. Also, differentiation between low and high quality products make sense in building a strong regional profile. I think building a unified brand within the region is almost impossible to achieve. There are lots of wineries with very different sizes, ideas and values. This cannot really be solved by reforms. I don’t think within a really small region, like Tokaj-Hegyalja, we have to create something unified. But it is sure, we have to agree on that, what we want to do with the region. For example, if furmint should be our leader wine type or if we should focus on dry wines as well or only on aszú and late harvest. In this issue, we have to formulate a unity, but I don’t agree with that, we force locals to follow strict rules and regulations. Our region is special, because it has lots of small wineries and everyone has its own style. In my opinion we could raise with these attributes and reach the prices we wish, for further operation. Moreover, we have to work a lot to make Hungarian wines well known in abroad again. We think that, foreign people know our products from Tokaj-Hegyalja, but it is not true. Since the communist regime, we are not on the world’s wine map. Maybe aszú and sweet wines are known within the country, but people in abroad are not well informed. To get to know Tokaji abroad, rules need to be established. I don’t think unification is required, but common thoughts and communication, yes. All local producers have to accept, our main grapes type is furmint, furthermore, vineyard selected wines are the one, which can provide opportunity to step to a higher level. We have lots of problems and questions, which have to be solved. We don’t have to create a unique brand, but on the basics, we should agree.

H. H. Zs.: What are the new challenges of brand management in the wine growing industry? What kind of difficulties do you have to face with nowadays? What was the biggest challenge in the past and what it is today? K. Zs.: Last year finally we succeeded to form a style, what we can ensure in every vintage. Nowadays, producing the same quality is the biggest challenge in the wine industry. Always changing weather conditions make it even more complicated.

158 H.H. Zs.: In which markets do you sell your product in the world? Do you use different branding strategies on the foreign market? K. Zs.: We sell our products in Poland, Germany, England, Belgium and China. We use the same strategy like in Hungary, focusing on personal appearance and building connections.

H. H. Zs.: What kind of opportunities do you see in the future? K. Zs.: We hope we can establish Swedish and Norwegian connections. At the moment, we are working on this project with one of our partners. We participate continuously on wine tasting events, therefore we hope more and more people and countries will get to know Hungarian wines and us as well. We hope our sales numbers will raise as a consequence of reputation.

159 Interview V.

Interviewer: Hubay Hanga Zsuzsanna

Interviewee: Andrea Hanyecz, Sales director of Disznókő Winery Date: 14 June 2017

Place: Linz, Austria

Type of the interview: Skype interview

Persons present: Andrea Hanyecz – A. H. Hubay Hanga Zsuzsanna – H. H. Zs.

H. H. Zs.: After the failure of the communist regime, how did the reorganization of properties and wine production happen? A. H.: In 1992, the French investor company AXA Millésimes established Disznókő Winery. The name Disznókő exists since 1413, as it is a vineyard. We started to use the name of the vineyard as our brand. The territory had very good geographical endowments and it was classified as first class vineyard. The most important aim of the company was always to achieve the highest quality and it is the same nowadays. Our main profile is the sweet wine, we want to produce the best in the world.

H. H. Zs.: How did changes in Tokaj-Hegyalja affect your company’s brand? A. H: Our brand was created directly after the communist regime. I think the presence of foreign investors helped the region to have a fresh start. However, problems were still present, for example it was difficult for us to convince locals our new style aszú is a valuable and great product.

H. H. Zs.: How did you rebuild your brand and start managing it? A. H: We didn’t have to rebuild our brand, but we started to manage it according to the instructions of our investors.

H. H. Zs.: What is a brand for you? A. H.: It has to be clear, modern and qualitative. These are the most important elements of a brand. Brand building rests on trust. If the company is able to attract customers, they will visit the company often and buy its products, if this happens the company already has a brand.

160 H. H. Zs.: What is the importance of brand management in your company? A. H.: Brand management is important in our company. We want to reach more and more people and show them our products are extraordinary and Tokaj-Hegyalja is wonderful.

H. H. Zs.: What does a brand represent for you? • How would you describe your company’s brand? • How is it positioned regarding competitors?

A. H.: We use the name of a vineyard as our brand and this is Disznókő. It is the most significant property with the greatest knowledge. We are a wine expert company. We are big in quality and knowledge and luxurious in price. Our style is very elegant and our quality is very high. At the beginning, I thought other similar companies are our concurrency like Hétszőlő or Oremus. But later lots of small wineries were established. In production they are not there, where we are, therefore I think we have to compete with those companies, which are similar to us. We sell most of our products in abroad, in 42 countries, thus competitors are different everywhere. For example, in China extremity is present, because they buy the very cheap product or the very expensive. In this country Tokaj-Hegyalja cannot even compete with the lowest segment, thus we have to work on that to build high prestige for Tokaj-Hegyalja. All wine producers have to focus on that, to provide a very good reputation for the region and for its wines.

H. H. Zs.: What kind of message would you like to deliver with your brand? Please let me now ask some questions related to the market and the customers. • In which markets is your company active? • What is the target group of your product? • How would you describe your customers? • What do you think, how the expectations of customers could be satisfied? • What is your opinion, how customers identify your brand and your product? • What do they have in their mind and what they feel and experience with your brand and product? • What steps do you take to help customers in brand recall? (the way they recognize the brand) • How is the product positioned according to the customers? • Do you think origin of the product is important aspect for the customers?

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A. H.: The message of our brand is pleasure of purity. We have very elegant, clear wines which are trustworthy and have a good style. We know that, our company was born to make the best quality sweet wines. We sell our products in China, Asia (Vietnam, Korea, Japan), France, United Kingdom, the USA and in the Scandinavian countries. Our target customers are those people, who have some idea of wines. We can sell our product to the simple customers as well, but if customers understand what we want to convey, it means they already collected information about us and know our brand and our winery. They are more sophisticated customers. I think we have to bring the same quality every year to satisfy our customers. We think in long-term. Our products are available for the customers, in most of the cases they are satisfied with our wines. We represent an elite style, high quality, but it is available for everyone. We try to make a balance inside and outside of the bottle, which means that, we focus on not only the quality, but the design and the packaging of the product. The brand is elegant, it communicates well, which is compelling for the customers. Thus, it helps them to recall the brand. The product is positioned as a prestige product for customers over 30 years, who like gastronomy and fine dining restaurants, who are in good financial situation. I really hope origin of the product is important for the customers. Our brand, Disznókő, is the origin itself. This is very important for us, so I think it is significant for our customers too.

H. H. Zs.: What is your branding strategy? A. H.: Our main aim is to produce the highest quality sweet wine and position ourselves to premium category.

H. H. Zs.: Please describe your activities regarding the implementation, i.e. the 4 Ps (Product, Price, Place, Promotion)?

• Product/service positioning - What are the features that differentiate your product? - What are the segments you target? - How would you describe the packaging of your product? What kind of message stands behind the design? What is the visual appearance of the brand, e.g. Logo?

A. H.: We produce the same high quality every year, our products are trustworthy and elegant, which makes a difference with other products. We position ourselves to a high category, targeting fine dining

162 restaurants and wine shops. Our winery is present in those places, where high quality is crucial. We also focus on building good relationships with sommeliers, therefore we often invite them to visit our estate. This process ensures us that, they will offer our products to the customers. Regarding packaging we wanted to put a tone on the origin, therefore we put the picture of our estate on the label. We used golden and blue colours, which expresses the elegance and style of the product.

• Price positioning - What is your pricing strategy? - What is the main aim of your pricing policy? (survival, present profit maximization, present revenue maximization, turnover maximization, market decantation or top product quality) - Producers try to communicate quality through price. Do you agree with this statement? What are your personal experiences?

A. H.: We don’t want to sell our aszú under 30-40€, but still we are affordable. We want to be the best of the best thus, we aim to be in the premium category and ensure to product quality. In my opinion the price communicates. Selling a product on a very low price is harmful for the brand. In our case, we have to hold the prices. We want to increase them and sell our product on a higher price, but at the moment we cannot implement this plan.

• Distribution channel - How does your product reach your target consumers? - Do you have established distribution network or do you need to extend your distribution option? - Which distribution channels do your competitors use? - How does the cooperation with other channel members or intermediaries work?

A. H.: We sell our products in Hungary and abroad as well. In foreign countries, we have connections with importers. Our company has contracts with our partners for long-term. We don’t deal with the distributors, only with our importers. In Hungary, the winery works with traders, the biggest wholesaler is the Veritas, but we also sell to private buyers and collectors. In my opinion our distribution channel is wide and working well, there is no need for extension. Our competitors use the same distribution channels, there is a healthy competition between us in Tokaj-Hegyalja.

163 • Promotion - Please describe your communication strategy? How does it support the brand? - What do you want people to think, feel or do about your brand? - What kind of communication tools you use to make your brand well-known?

A. H.: We use Facebook, our website, the press to communicate our message to the customers. Moreover, we focus on the packaging and design of the product as well. The winery also invites important persons to spend one or two days on our estate. We show them how we work, what we think and of course they can taste our products. These steps are important parts of our communication strategy. The major aim is to show everyone what we represent is true and to make our customers to understand it. Building trust with them is crucial for us.

H. H. Zs.: How does your brand perform in the market? How do you evaluate the performance? What kind of attributes determine your brand’s performance?

A. H.: At the moment, the company performs well on the market. It proved quality of the products are very high. In the future, the main aim is to be more in demand and have bigger prestige. I think, we have a good strategy and the implementation is going step by step, but still we have some small tasks to build further.

H. H. Zs.: What does regionality mean to you? • What are the drivers of regionality according to your opinion? • How does the region build a strong regionality profile? • What do you think about the initiative of rebuilding the brand Tokaji?

A. H.: Regionality means Tokaj-Hegyalja to me. In my opinion locals have to cooperate and work on building prestige for the region. It is the best wine growing region, but unfortunately, I can see that on the market we are not good in prices, not even close to other countries’ prices. I also think that, we have to build prestige for the sweet wine not only abroad, but in Hungary too. Because somehow people forgot about sweet wine and they prefer to drink dry wine. We have to work to change this tendency. Rebuilding the brand Tokaji is very important, but all the locals should agree. It would work, if bigger wineries could support the initiative and take the lead. We should do something similar what Austrians did, but it is very

164 complicated in the current situation. There are not enough professionals, everyone is just talking about it, but nobody wants to take an action. We need to establish a very good management team, then rebuilding of the brand can start.

H. H. Zs.: What are the new challenges of brand management in the wine growing industry? What kind of difficulties do you have to face with nowadays? What was the biggest challenge in the past and what it is today? A. H.: We have to face with changing trends in the wine industry. We don’t want to follow the trend, because it is a very difficult task. We have customers, who understand us and who are educated, therefore we hope always changing trends cannot misrepresent them. The winery holds itself and follows its strategy, but sometimes we have to make small changes and move toward new trends. In the past, it was difficult to prove our new style aszú is much better than the old type, which was made from bad stock. Nowadays, the biggest challenge is that, within Hungary people don’t really drink sweet wine, no prestige created for it. They are not open for epicureanism.

H.H. Zs.: In which markets do you sell your product in the world? Do you use different branding strategies on the foreign market? A. H: As I have already mentioned we are present in 42 countries, e.g.: China, USA, United Kingdom, France, Vietnam, Japan, Scandinavia. There is only a little difference between the foreign and the local strategy. At home, we try to communicate our dry wine next to the sweet wines.

H. H. Zs.: What kind of opportunities do you see in the future? A. H.: Sweet wine has a really good market in abroad, I would strengthen that in the future. Unfortunately, there is not a high demand for sweet wine in Hungary, therefore I would work on this with some creative promotion. There is a need for cooperation in the region to achieve a change in the issue. The winery has to communicate its prestige stronger within the country.

165 Interview VI.

Interviewer: Hubay Hanga Zsuzsanna

Interviewee: Tamás Oroszlán, Marketing director of Tokaj-Hétszőlő Winery

Date: 21 June 2017

Place: Linz, Austria

Type of the interview: Skype interview

Persons present: Tamás Oroszlán – T. O. Hubay Hanga Zsuzsanna – H. H. Zs.

H. H. Zs.: After the failure of the communist regime, how did the reorganization of properties and wine production happen? T. O.: Hétszőlő was reborn in 1991. In this time period, territories, cellars and buildings were offered for sale. Steeply dipping lodes of Hétszőlő needed to be replanted. These territories were started as bio grapes plantations. In 2009, we got eco-guarantee and for the year 2015 our whole plantation became bio. The company was established by a French investor, called ZSMF and produced aszú. We were making only aszú, in new wooden barrels, not so long time, for three years to reach as clean and fruity wine as possible. It didn’t have a great success, locals called it as a reductive wine according to the old system’s knowledge. Till 2000, we were fighting to make our wine and special yellow soil accepted within the region. Finally, László Alkonyi columnist succeeded to make local professionals and snobs to understand yellow soil is not a disease, but a beautiful terroir and Hétszőlő has a style. Later we started to produce bio and dry wines as well.

H. H. Zs.: How did changes in Tokaj-Hegyalja affect your company’s brand? T. O.: As I have already mentioned, Hétszőlő was reborn after the communist regime. A French investor bought the winery and empty territories were replanted with bio grapes. Later the whole plantation became bio. At the beginning the company was producing only aszú wines, which had fruity taste, therefore locals were on the opinion it’s not a real wine. With time, they accepted it and later the winery started dry wine production too. All in all, changes affected the brand in a good way.

166 H. H. Zs.: How did you rebuild your brand and start managing it?

T. O.: A French investor, called ZSMF bought the company and started to manage it.

H. H. Zs.: What is a brand for you? T. O.: It is difficult to find the proper answer what the brand really means for us however, I try to identify myself with the brand, put some personal feeling to it. Trust and experience is very important component of the brand as well. We have to ensure that, consumers will always get the same quality, therefore they can trust the brand and the product.

H. H. Zs.: What is the importance of brand management in your company? T. O..: I totally try to identify myself with Hétszőlő, it is like a family business. This is an important part of the brand. In case of wine, personal filling is necessary. It is important to have a confidential relationship behind the experience, the brand.

H. H. Zs.: What does a brand represent for you? • How would you describe your company’s brand? • How is it positioned regarding competitors?

T. O.: We are more expensive than other brands, but we are not extremely expensive. We put ourselves to a higher position, we don’t buy fruits from other producers, we don’t use machines for harvest and we make our products only from first class grapes. Until there is no common multilevel quality classification and controlling, everyone is everyone’s competitor.

H. H. Zs.: What kind of message would you like to deliver with your brand? Please let me now ask some questions related to the market and the customers. • In which markets is your company active? • What is the target group of your product? • How would you describe your customers? • What do you think, how the expectations of customers could be satisfied? • What is your opinion, how customers identify your brand and your product? • What do they have in their mind and what they feel and experience with your brand and product?

167 • What steps do you take to help customers in brand recall? (the way they recognize the brand) • How is the product positioned according to the customers? • Do you think origin of the product is important aspect for the customers?

T. O.: Message of our brand is purity, fairness, history, naturalism and trust. We want to provide an unforgettable experience for our customers. We are active on both domestic and foreign markets. We want to achieve some developments in local sales. In abroad we get nice money for our products, we are present in Scandinavia, Benelux countries, UK, USA, Transylvania, France and China. Customers of Hétszőlő know and understand the brand, they purchase our products because they got a nice experience before. It is very positive when we have personal contact with our customers as they are searching for a great experience, they can remember later. I think they expect high standards, therefore we ensure them what they want. We try to put a tone on that, more and more people should come to Tokaj. We focus on tasting, thus someone tasted our wine and got a nice experience that person comes back to us and bring more potential customers. We have high prices, own style and we are trustworthy, pure and memorable, this is how customers can recall our brand. I think origin of the product is important for customers.

H. H. Zs.: What is your branding strategy? T. O.: Our strategy is that, we position ourselves as first class, but we are not a luxury brand. We are in the affordable price category. We try to build the brand in a way, our products are elegant and affordable. I want to follow this strategy in the future. It’s not a luxury product, but the person who buys it, feels happy and proud.

H. H. Zs.: Please describe your activities regarding the implementation, i.e. the 4 Ps (Product, Price, Place, Promotion)?

• Product/service positioning - What are the features that differentiate your product? - What are the segments you target? - How would you describe the packaging of your product? What kind of message stands behind the design? What is the visual appearance of the brand, e.g. Logo?

168 T. O.: Our historical vineyards differentiate us from others. Our terroir contains yellow soil, which has extremely big value. Our wines are organic, they are softer, which can help brand building in the future. Our winery provides nice experience and it is available for everyone. Our labels are new and clear with the Hétszőlő property on it. It is our logo. By the aszú we use the old label, which is very elegant.

• Price positioning - What is your pricing strategy? - What is the main aim of your pricing policy? (survival, present profit maximization, present revenue maximization, turnover maximization, market decantation or top product quality) - Producers try to communicate quality through price. Do you agree with this statement? What are your personal experiences?

T. O.: We don’t want to compete in the low segment. We try to participate in the middle and high segment. We have connections with wine bars, wine shops, traders and restaurants. We want to sell our products on an affordable price, not cheap, but not too expensive. We have higher costs because we work with our high quality own grapes and bio grapes, which increases our costs. We don’t want to be extreme, therefore we position ourselves to the medium and high segment. I partly agree with the statement, producers try to communicate quality through price. For example, when something is too cheap, I don’t buy the product. If the product is too expensive, I know I have to pay for the brand. Price often screws us, but it also sends words. It is very important to spare the time for the purchase of the product.

• Distribution channel - How does your product reach your target consumers? - Do you have established distribution network or do you need to extend your distribution option? - Which distribution channels do your competitors use? - How does the cooperation with other channel members or intermediaries work?

T. O.: We sell our products locally, it brings positive experience, therefore this is the most important channel. Within Hungary we have connections with wine bars and wine traders. For us it is crucial to have a very good relationship with these partners. Every year at least once we visit them to make sure everything is fine. Thus, personal contact is significant for us. All distribution channels have to be supported, small and big connections are important in the same degree. We have good relationship with

169 other channel members, we know each other’s strategy. We try to work in a calm atmosphere without arguments and aggression. There are forums, where we share our opinions and experiences with each other. But unfortunately, we cannot work together for Tokaj, it is getting nowhere. It is impossible to cooperate with those companies, which have lobby interests, however we check and know each other.

• Promotion - Please describe your communication strategy? How does it support the brand? - What do you want people to think, feel or do about your brand? - What kind of communication tools you use to make your brand well-known?

T. O.: We want to prove that through our communication, we are an available, pure and good brand on the market. History is very important for us, what we also try to communicate to our customers. We want people to think that, our products are available, clean and trustworthy and they have a style. Our strategy is to work personally with our customers. We also have website, commercials and articles, but we find personal contact, such as tasting and experiencing, is the most important.

H. H. Zs.: How does your brand perform in the market? How do you evaluate the performance? What kind of attributes determine your brand’s performance? T. O.: Our performance could be better. Customers like our products, we perform well, but because we stick to higher prices, we have difficulties. Until there is a standard price, we are working for nothing. Our value and reputation is big, but there can be a worse and cheaper product next to it, which can be more attractive to the customer.

H. H. Zs.: What does regionality mean to you? • What are the drivers of regionality according to your opinion? • How does the region build a strong regionality profile? • What do you think about the initiative of rebuilding the brand Tokaji?

T. O.: I think the main driver of regionality is terroir. Tokaj-Hegyalja is the most wonderful, the most extraordinary with the most potential. Wine tourism and restaurants are not really present in the era. Unfortunately, the region cannot take an advantage on what it has. There are big price pressures and market destroying effects. Lobby interests have to be deleted, otherwise nothing will work. I am not

170 negative, more and more Master of Wines are working with us, but we have to differentiate the levels (e.g.: superior, grand superior). Tokaji is protected, it has its own bottle, but we need a basic portfolio too. A base furmint is needed, it can be a vineyard furmint. Rules regarding what this wine should contain and how it should look like have to be written down. The settlement Mád already started it, Mád Furmint was created. There is a need for standardization. After the base wine, vineyard selected products, late harvest, sweet szamorodni and top aszús should come. It is impossible to remove state companies, but we can position segments above them, where higher quality wines could take place. As I have already mentioned, for the rebuilding of Tokaji a basic portfolio is required. A good base furmint should be produced with restrictions regarding the material. It should be put into the furmint bottle. We are facing bottle problems nowadays, which means there are lots of different types of bottles for the wines in the region. In my opinion we have to be simpler and use only two or three different bottle shapes. We should use several names and categories for the products (superior, grand superior) to differentiate them from cheap products. If we achieve these points, we can continue with historical and communication steps. Until price causes stress, there is no solution.

H. H. Zs.: What are the new challenges of brand management in the wine growing industry? What kind of difficulties do you have to face with nowadays? What was the biggest challenge in the past and what it is today? T. O.: We have to fight against price killers in the region. At the same time price competition is a big challenge for us, it is difficult to work with bio grapes because of the high costs. Moreover, we have to struggle with other producers, whose product has the same designation, but it has low quality. We try to protect ourselves in a way, we appear personally on events, where customers can taste our wines. We believe that, personal contact can help us to fight against other low quality wines. In the past, the biggest challenge was to make our clean and fruity aszú accepted and nowadays to handle the costs, which come with bio production and to fight with products with same designation but low quality.

H.H. Zs.: In which markets do you sell your product in the world? Do you use different branding strategies on the foreign market? T. O.: We mainly sell our products in France, Scandinavia, Benelux countries, United Kingdom, Transylvania, the USA and in China. The strategy of our company is usually similar in the domestic and foreign market, but it depends on the country. We have two labels, one is the original Hétszőlő label, we

171 use the other one in abroad when lower quality fruits are used for the production of the wine and we have to sell it on a lower price.

H. H. Zs.: What kind of opportunities do you see in the future? T. O.: We want to sell more in the future and we want to create reputation for Tokaj-Hegyalja. To have more opportunities, the region needs a clear portfolio with clear prices and bottle shape. Furthermore, there is a need for more restaurants, accommodations and wine tourism, however for the execution we need the help of the Hungarian government.

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