Krug CEO’s Leadership to Reform While Preserving Tradition
This is the English version of my wine column at Forbes Japan. The Japanese version is found here.
Krug is a champagne house with a rich history established in 1843 by Joseph Krug, who emigrated from Germany. It is a brand loved by passionate fans across the world that focuses on prestige cuvée. Currently, Olivier Krug the 6th generation serves as general director of the House.
I have previously touched on how the process of creating champagne takes time, but prestige cuvée is especially long and takes at least six to ten years until release. Creating a complicated champagne from high quality grapes requires time. From a business perspective, cash flow management is necessary as well. There is also a challenge of luxury goods that are highly priced, as they could be easily influenced by the economy.
Krug has been owned by the LVMH Moët Hennessy Louis Vuitton group (LVMH) since 1999, which is a global conglomerate. LVMH is a French company that has major champagne brands such as Moët & Chandon, Veuve Clicquot, and Dom Pérignon, other than Krug.
At the end of 2008, Margareth (Maggie) Henriquez, from Venezuela was appointed as the CEO of Krug by LVMH in order to restructure the house.
Maggie is a business leader in the wine industry. After meeting her in person I quickly learned that she is a kind, warm, and passionate individual. She has this charm that attracts people and the hints of her success as a leader were spilled from her own words during our conversation here and there.
South America Born Woman Becomes CEO of Traditional Champagne House
Maggie was born and raised in Venezuela and experienced marriage and giving birth in her early twenties. She began her career as a system engineer and gained her experience in marketing onward.
The turning point arrived when she went out of the country to study at Harvard University in 1995. She left her previous job because “it didn’t stay true her beliefs” but her possibilities expanded as a result of her study abroad. “If I hadn’t left Venezuela back then, who I am today wouldn’t exist,” she told.
After study abroad, Maggie became the CEO of Nabisco in Mexico and headed 3,500 employees at the time, which has been losing a lot of money every year. To restructure, she conducted a thorough research to identify what kind of biscuits the consumers want and turned the business around only after a year and a half by increasing the share of biscuits within Mexico from 3% to 28%.
Then after, she spent several years as the CEO of Argentina’s LVMH group. At the end of 2008, her achievements were bought and was selected as the CEO of Krug, which falls under the same affiliated group. After some serious thought and encouragement from her partner then (now husband), Maggie decided to accept her offer and move to France.
Returning to the Founder’s Starting Point
The first year after Maggie became the CEO of Krug she tackled challenges with full force. Unfortunately, this was during the time of Lehman Shock and many faced the economical struggles. She received a “D” evaluation after the increase of loss. It was her first failing grade.
At that time, her friend said to her, “Luxury goods aren’t made in a day.” That’s when she realized that the person who is the symbol of the brand is the essence of a luxury brand. For example, Coco Chanel is the symbol of Chanel and Christian Dior of Dior.
Luxury good is drastically different from consumer products like what she experienced with Nabisco, said Maggie. Consumer products require listening to the consumer’s opinion, segmenting, and creating a product that meets the needs of the consumers. On the other hand, luxury goods, which are created from the founder’s brilliant creativity require in-depth understanding the founder’s ideas.
Krug is a brand that has developed through years of operating a family business. Maggie thought understanding the founder’s belief is imperative and began her journey of following that origin.
During that time, she found Joseph Krug’s notebook and learned the founder’s beliefs and Krug’s starting point. For instance, since 1860s Krug had the belief that “great wine cannot be made without great quality grapes.”
Prestige cuvée champagne is not just an expensive or premium item but is a champagne with long history and unique story. Krug’s flagship, Grande Cuvée is a blend of more than 120 kinds of wine separately vinified from each plot of the vineyard and is produced every year, striving for the best results regardless of if it’s a good year or a bad year.
It is contrary to most prestige cuvée that are “vintage champagne” produced only in the great years exclusively from grapes harvested from that specific year. This is a very unique product since beginning of the family business and is based on the founder’s ideas, which is written in his notebook, “producing the best champagne to the world every year, regardless of the weather and climate.”
Maggie herself strives to better understand the essence of Krug’s champagne by closely working with Cellar Master, Eric Lebel, visiting the contract growers that supply the grapes, and participating in the blending process.
Reforming while Preserving Tradition
Changing an organization with tradition was not easy. For example, as one of the reforms, the Grande Cuvée is now given an edition number based on the year produced, which all used to be seen as the same, one product regardless of the year produced.
Also Krug began disclosing detailed information for the bottle by adding a 6 digit ID number to the back label of the bottle to allow consumers to learn how the champagne was created. By entering the ID number to the Krug app or website, consumers can learn the information about that bottle.
For example, as for the 166eme Edition bottle that I tasted at the Krug tasting room in July, the app or website tells that the bottle was created with harvest year 2010 wine as the youngest wine and a blend of 140 wines with 13 different harvest years dating back to 1996. It was disgorged in winter 2017, (meaning it was aged on the lees for 7 years), and is made up of 45% Pinot Noir, 39% Chardonnay, and 16% Meunier.
The reformation is unthinkable from the traditional house surrounded with secrets, and faced strong internal opposition at the beginning but she took some time to convince them. Today, the availability of information receives great support from champagne lovers.
“In leadership, it is imperative to have empathy and include and involve others”, says Maggie, who now strongly and gracefully sticks to her beliefs. She continues to maintain the tradition and reform by adopting new ideas like “Krug & Music,” which is a pairing of music and Krug champagne.