For a trio of French professors based in Provence, the road to an award-winning case was through the olive groves of the Nice hinterland, to the Moulins de la Brague oil mill, established in 1848.
Co-authors Philippe Chereau and Pierre-Xavier Meschi both hail from the southern French region of Provence, where they teach at the Skema Business School, and other universities. As a consultant to the Chamber of Commerce, professor Chereau came to know Christine Michel, the owner and manager of Moulins de la Brague, an olive mill producing both olive oil from its own fruit, as well as other blended varieties. “This mill presents many interesting pedagogical options,” explains professor Chereau, “Within its own small universe, it must confront issues of market segmentation on many fronts: the product itself, the sales channels, the distribution network, the sourcing of raw materials, and the market positioning of the finished products themselves.”
Founded in 1848, the Brague mill is located in the village of Opio, about 30 kms west of Nice, in the arrière-pays, the very hilly and quite arid area that eventually becomes the high Alps. Brague mill has been family-owned since its founding, with Christine Michel being the current director.
The beautiful, yet somewhat hostile land is suited to the undemanding olive tree, which thrives in the Mediterranean sun. Of the many olive varieties indigenous to the Provence (Picholine, Tanche, Aglandau, Grossane, etc.), it was the famous Caillette variety that the Brague mill harvested and processed, producing a geographically denominated AOP Nice upscale oil.
Yet, as with many terroir products, geographic definitions can also mean production ceilings. Champagne can only come from grapes produced within the confines of that region. Nice AOP olive oil can only come from olives growing in that difficult, rough terrain. Implying that much of the potential crop goes unharvested, since trees in steep ravines are difficult to reach.
For the Brague mill, this meant a serious obstacle to expansion, which the company overcame by adding to its product line.
Beyond its original terroir olive oil, the mill proceeded to add blended oils, albeit carefully chosen and selected, the same as done by winemakers in Bordeaux. By choosing different olive varieties, and blending different tastes into a new (yet still extra-virgin) oil, the Brague managers introduced new oil blends to their product palette. Product proliferation also covered downstream product transformations, for example in olive-based spreads (tapenade), or even into olive-based cosmetics.
Producing the olive oils is one challenge. Selling it is quite another. As production increased and products proliferated, Brague’s marketing team needed to address issues of which distribution channels to exploit, at which price points, and in which geographic areas.
One burning issue was the competition from agro-food giants for supermarket shelves, with Groupe Avril (Lesieur and Puget brands) and Unilever (Maille brand) looming very large on the horizon, not to mention store brands (generics).
This preoccupation was all the more pressing since fully 60% of Brague’s sales happened at the mill itself; “These are high margin sales, but are constrained by the limited number of visits to Opio,” explains professor Meschi.
Not to be forgotten in the competitive landscape are the other upscale producers, often also using AOP labels to qualify their regional heritage. These include Huilerie Vigean and Huilerie Emile Noel, Chateau Virant, and more, all competing for limited upscale shelf space.
Yet expansion into high-volume sales channels (supermarkets and hypermarkets) carries its own risks, namely the need to adjust prices to lower levels, from Euros 23.00 retail price at the mill to Euros 5.00 within a typical Carrefour hypermarket, for example. Export sales could also provide added revenue, although bitter memories of container loads being blocked for months in foreign harbours made Brague managers think twice about which markets to target.
Perhaps another solution for expansion is the innovative “organoleptic” experiment being carried out within the mill’s retail area. Here, customers could concoct their own olive oil variety, suiting their particular tastebuds, by blending oils from a palette of available oils with different tastes.
And of course one could dream of increasing overall olive oil consumption in France, which, at 1.5 liters per capita/year, is barely one-fifteenth of the Greek level (23 liters/year).
The Brague mill case study offers many angles for study, whether on the strategic management front, on the product positioning front, on the geographic expansion front, or on the development of innovation front. And studying olives is surely a welcome respite from high tech or social media.
A terroir olive oil mill against agri-food multinationals Ivey Publishing case number 9B16M030
Professors Philippe Chereau, Pierre-Xavier Meschi and Franck Brulhart
Why did this case win an award? Click to read more
Expanding into the toughest market first?
Professors Meschi and Chereau are planning their next case study on the Brazilian cosmetics industry, with insights into Natura Brasil’s expansion into France.
In their next case, professors Philippe Chereau and Pierre-Xavier Meschi are turning away from Provence, and heading toward the Copacabana.
They plan a case study, along with professor Sherban Leonardo Cretoiu from Fundação Dom Cabral (in the Minais Gerais province of Brazil) on the international expansion of Natura Brasil, the top Brazilian cosmetics producer, founded in 1969.
Their strategic interest? Why did the company choose France, a very large but hyper-competitive market for beauty products, as their first foreign investment destination?
Click here to find out more (Q-Point), and in particular to help the professors in their research, especially, if you have expertise in the field of beauty products or direct marketing sales channels.
Expect the Natura Brasil case study to be published in 2018.
Interview: Philippe Chereau: http://casium.net/philippe-chereau-skema-business-school-sophia-antipolis/
Interview: Pierre Xavier Meschi: http://casium.net/pierre-xavier-meschi-skema-business-school-sophia-antipolis-and-iae-aix-en-provence-aix-marseille-universite/