But when a family-owned business can call upon a legacy that has lasted for multiple generations, the brand often takes on a life of its own – something which is both treasured and capable of uniting owners behind a common cause.
The business of luxury is indeed special. If your commercial activity is based on a tangible, high-quality product line, it then follows that your values can be defined by its attributes. What role, however, does the product play in shaping those families who run a business together?
In the case of Krug Champagne, the seeds of a genuine luxury product were sown in 1843 and, more than 170 years later, Krug remains among the most cherished varieties of Champagne in the world today. A combination of astute business practice – where their predecessors faced down two World Wars and a Great Depression – and loyalty to the core characteristics of Krug, has ensured that this family business has survived comfortably into its sixth generation.
Honorary Chairman Remi Krug – great-great grandson of founder Johann-Joseph – carries the brand values proudly, a straightforwardly passionate businessman who enjoys his role immensely.
“Personality and character are extremely important when you talk about Champagne,” he says. “My conversations are less about technique than they are about people and culture.” And well he might, given that the generations of customers enjoying Krug have changed significantly since those early days.
Brand and family originally went hand in hand for both company and customers – thanks to elite society and those loyal consumers who knew and loved the Krug experience – and who subsequently passed that loyalty on to their own progeny. The reputation, stories and respect for certain luxuries embedded Krug into their culture.
Erwan Rambourg, Global Co-Head of Consumer and Retail for HSBC Global Research, recognises the growth trajectory of luxury brands like Krug as ones that develop on the back of an oral tradition which subsequently evolves into a ‘fan base’. Among today’s examples, he argues, are brands such as Prada and Louis Vuitton.
By the end of World War II, however, a new generation came out of an increasingly equalised society, free from the associations that their forefathers had with luxury brands and other goods. A more plural market, says Remi, now meant that “this customer base had to discover themselves why they might like to drink Krug.
“We had to create excitement, become visible and tell people who we are and what we stand for – not wait for them to learn from their fathers.”
So what impact did this have on the way the legacy of Krug is maintained? Remi argues that the challenge is to separate the constants such as brand character, family and history, from the commercial need to innovate.
“Brand culture and family culture is the same – and the brand has to be what it is. You can play with the way you operate or stage it but the brand itself has to remain constant.” With that in mind, Remi and his brother Henri agreed to focus on making the best product, true to its values, whatever the cost.
When faced with a comparatively expensive option to improve production processes, the answer is simple: trust the relationship with the Krug customers enough to reflect these improvements in a higher end-price. At this level of luxury, achieving cost efficiencies is not seen as a valid business practice.
The brand story between Krug and its customers reflects another constant that binds its legacy. As much as the loyal customers will understand the choices of certain grapes in creating the blend, so too will Krug staff be expected to understand why that customer has come to love the product.
It’s all part of the plan to “create strong, personal and long-lasting relationships”, as Remi puts it.
However the ever-changing business world has other ideas about family legacy – particularly in France, where tax law requires the shareholdings to be evenly split when owners pass away. To protect the Krug legacy, Remi and Henri decided to re-structure their ownership model by forming alliances with like-minded Champagne marques such as Hennessy, Veuve Clicquot and Moet et Chandon.
“By the time of my generation, Krug had already become a company of 100 small shareholders,” explains Remi. “We didn’t want [the risk of breaking up] so we made alliances with other trusted brands which we felt held the same ‘spirit’ as us. We have secured the brand legacy by linking with these friends.”
The fluid nature of modern global business practice affects all luxury good brands, according to Erwan. “Many brands are at over-capacity”, he says, and “they are even closing in cities like Hong Kong because of this.” The centre of attention for growth is likely to move from Hong Kong and Singapore, for example, to ‘fresher’ markets such as Thailand or Australia – and brands need to innovate accordingly.
The future for Krug may be more secure as a cherished family Champagne brand, but it’s not without upcoming challenges – many of which Remi’s nephew, sixth-generation Olivier, is now tasked with handling. And innovation is not a dirty word, says Remi.
“Krug is not a museum piece… it’s a lively, emotional experience – a moment of happiness and sharing,” he states. “The stronger the root of the brand, the more it should dare to innovate.”