The turnaround CEO - an interview with Margareth Henriquez

Friday, 1. December 2017 - 13:00

Maggie Henriquez by Cath Lowe

Margareth Henriquez, who has just been appointed president of Estates & Wines at luxury company LVMH, is current president and CEO of the Champagne House Krug. Born in Venezuela, she studied engineering at Harvard, to which she returned in 1995 to undertake the advanced management programme, paving the way for her successful career as a corporate executive. Renowned for her ability to steer companies through difficult circumstances, Henriquez has spent more than two decades as president of multinational companies in Central and South America. Her achievements include a stint as president of Seagram in Venezuela, and in Mexico with Nabisco, which at the time was reportedly losing $24m a year, but which she returned to profitability. She was then asked to run Bodegas Chandon Argentina in 2001. Subsequently, Henriquez was head-hunted by Moët-Hennessy to lead the House of Krug. This is an interview that was done with her in 2014.

MEININGER’S: Can you tell us more about your position at Krug?
HENRIQUEZ: In essence, I lead and influence the house’s destiny, in keeping with Bernard Arnault’s vision for all the LVMH Champagne brands; we are family houses, he always reminds us, and I always strive to keep that family spirit alive, ensuring that everything we do is ­consistent with the firm’s long term vision of sustainable excellence.

MEININGER’S: Your original background was in engineering. Have you always had an interest in wine?
HENRIQUEZ: Yes, very much so. My father was the president of a wine and spirits production and distribution firm, so I grew up exposed to the alcohol industry. Indeed, he gave me my first sip of Moët Chandon when I was eight.  I had a very strong relationship with him, and there was a strong sense of wanting to follow in his footsteps.

MEININGER’S: Why did you originally take the position at Chandon Argentina, back in 2001? What was the most valuable lesson you took from your experience of managing Bodegas Chandon?
HENRIQUEZ: The truth is that I started my journey with the Moët-Hennessy group in 2000. I had been on a sabbatical from my role at the Nabisco Company in Mexico City, when director Philippe Pascal contacted me in January 2000. He asked me to run Veuve Clicquot. I remember my instant response – absolutely not! However, he subsequently contacted me in October 2000 and asked me to undertake a project management role, for a new spirits product they were developing in Argentina. But my heart was not completely invested in the role; my natural vocation is running companies. After the project ended they offered me the job of running Bodegas Chandon in 2001. So I accepted the role, which gave me unparalleled knowledge and experience in the mechanisms of winemaking; every detail from viticulture to fermentation science. I knew I could not instil corporate change and work for a wine brand without understanding the mechanics of production.

MEININGER’S: When you were offered the position of Krug CEO in 
October 2008, what was your first response?
HENRIQUEZ: I remember saying to Christophe Navarre [CEO] that Krug has an arrogant image and a closed culture; the complete antithesis of my personality. I felt I would be unsuitable for the role, but I told ­Christophe I would consider the offer. I accepted because my partner at the time convinced me that I could drive change at the house, and that I’d regret walking away from such a potentially wonderful opportunity. 

MEININGER’S: You have managed companies across the globe, often in difficult circumstances. How valuable was this experience for Krug?
HENRIQUEZ: It was important experience to build on: let’s be frank, when I accepted the role in 2008, Krug was suffering. Sales were declining,­ we lost 35% of volume sales in 2008 and 40% in 2009. In the last few years we have really seen a remarkable change in the house’s fortunes, thanks to the dedicated hard work of our team. However, I must admit that it took some time to develop the right approach for Krug. 
 
MEININGER’S: What, in essence, was your strategy in maintaining and expanding Krug’s position as one of Champagne’s leading super-luxury brands? 
HENRIQUEZ: I would argue that at the time of my appointment, Krug was not a leading Champagne house, rather it was respected by ­connoisseurs, but not really widely known as a luxury product. And in fact, I had no strategy initially in mind to turn around its fortunes. So in 2009 I referred to my default strategy that turned around the fortunes of Chandon Argentina: I tried to simplify the Krug message. At first I didn’t find anything concrete to build on for shaping our future strategy. I met with our clients to try and diagnose the issues but to little effect.  So my first evaluation from Moët-Hennessy was very poor. I was criticised for making no progress.

MEININGER’S:So how did you turn things around?
HENRIQUEZ: The turn-around came when I met, and was briefly 
tutored by the president of Dior at a leadership training course in 
London in 2010. I realised then that my initial strategy was more suitable for mass-market goods. So I rapidly studied every facet of luxury: it requires a founding myth and Krug had lost its connection with Joseph Krug and the original philosophy. No one knew anything about him. So we commissioned an historian to properly research and document the story of Krug. Then I started to build a new communications team and strategy; we hired a luxury branding specialist and spent unknown hours understanding just how to communicate the new Krug message, that we’d lost. In terms of markets, the focus was always the traditional markets, regaining consumers we had lost due to the inertia of the house.

MEININGER’S: What is Krug’s new message?
HENRIQUEZ: The new, or more precisely resurrected message is ­simple: we have one mandate, to do the very best every year regardless of the vintage. This sentiment, or rather the communication of this ­sentiment got lost by the previous generations. Indeed, Krug formerly suffered because in a modern era where communicating your message to consumers is vital, the house instead focused on technicalities. Today, consumers won’t pay for a luxury product that they don’t understand.

MEININGER’S:The house was traditionally run on closed lines, with little information on blending, varietal composition, etc, released to your customers. Is this something you always intended to change?
HENRIQUEZ: Definitely, we live in a different world, an era of information, and we need to be open about our products. I remember that Henri initially hated the very idea of sharing all the facets of producing the Grande Cuvée, although subsequently he accepted my decision. I was annoyed by this attitude.

MEININGER’S: What other management changes have you instigated?
HENRIQUEZ: Firstly, I insisted that we age the Grande Cuvée for an additional year post-disgorgement. I have created a complete transparency in terms of the composition of our products and important facts like their disgorgement date. Krug now has an open approach, free of any arrogance. 

MEININGER’S:Krug still refuses to release exact volume data to the trade. Why is that?
HENRIQUEZ: LVMH chairman Bernard Arnault does not want ­volumes to be incorrectly interpreted by customers. There is no ­value in one house publicising its volumes – it will start a precedent. Let us be judged on the wine quality, not our volumes.  

MEININGER’S:Moving toward the brand itself, how has your approach to marketing Krug evolved to meet the needs of today’s consumer?
HENRIQUEZ: Today people want authenticity, roots, truth and quality. We provide all of this for our consumers, with an important emphasis on linking the consumption of the Krug Grande Cuvée with the composition of a piece of music. In fact, we were the first house to build a ­music hall for our customers. We have instigated far more sophisticated,­ open and modern marketing techniques: the Krug kitchen in Hong Kong, our link with music, offering tastings with concerts. This is quite unique amongst the Champagne industry. 

MEININGER’S: Speaking of marketing: you now have a sophisticated website and have installed each bottle of Krug with an ID code. Tell us about how the ID system was intended to work.
HENRIQUEZ: Installing the Krug ID was very much a personal ­decision. Each bottle of Grande Cuvée is equipped with an ID Code that when ­entered on our website, reveals the wine’s full technical data, including year of base wine, the varietal composition and the number of wines. The idea came to me during a tasting with one of our growers: 
I was fascinated by the selection process and I wanted to share at least some of the founding elements of each bottle of Krug with a wider ­audience – it fosters stronger brand identity and reinforces trust in the brand.

MEININGER’S: What is your view of digital?
HENRIQUEZ: While everything is slightly standing still, e-commerce is ­driving the market - growing significantly by about 45%. The dynamism­ of the e-commerce companies is something I have not seen in my ­almost 19 years in the wine business. I think e-commerce will probably be the main route to market in China.

MEININGER’S: How important is the Krug Facebook page  and iPhone app for your personally? Why does an established brand like Krug need social media?
HENRIQUEZ: I think that Krug needs social media for its future 
consumers, but perhaps not the current demographic. But it is my ­mandate to ensure that we use social media in a way that respects our DNA. The key element of Krug is emotional belonging. Social media can help foster that sense of belonging.

MEININGER’S: How do you feel about prestige Champagne becoming an investment entity – as a competitor to Bordeaux?
HENRIQUEZ: I don’t want Champagne to become a tool for speculation.  My dream is that our customers buy Krug to leave for their children, not for speculation. This bothers me greatly and I don’t want to promote it.

MEININGER’S: Clos d’Ambonnay now sells for over $2,500 per bottle. How much further can prices rise?
HENRIQUEZ: Demand is stable and prices will not rise significantly accounting for inflationary increases – I am committed to not raising the release price of the Clos d’Ambonnay. I expect the price of the Grande Cuvée to increase by two percent next year.

MEININGER’S: Would you ever consider Krug placement inside a ­Hollywood film, in a similar manner to Château Angélus and Casino Royale?
HENRIQUEZ: I’m not against product placement and I recognise its potency. I remember how the film Sideways affected Pinot Noir sales in the US. If I had the budget, I’d quite like to use it intelligently to showcase actors never using flutes for the Grande Cuvée; this really bothers me. Krug needs wine glasses! However, it remains highly unlikely that Krug will participate in this form of marketing.

MEININGER’S: Which markets have lagged in recent years? 
HENRIQUEZ: The Italian market has lagged behind in recent years. It’s a tough market and although sales are improving, growth has been slow. I’d also like to see further growth in Germany as the potential is definitely there. In addition, sales in Hong Kong have suffered slightly because of the Chinese austerity drive, although it is still a key market. But a major focus is the US. Before, Krug was not well positioned and distributed in the US, today, we are really pushing for major growth there.

MEININGER’S: When did you first enter the Chinese arena and how quickly did the brand establish a presence there; considering that ­sparkling wine sales in the country are notoriously low?
HENRIQUEZ: We entered the Chinese market via Hong Kong in 2011, with a small volume. It’s a tiny percentage of our global sales. There is still plenty of work left to do. But again, my primary focus is the traditional markets, rather than emerging markets which require a greater investment and present more challenges. The sparkling question in China is simply one of time, we need to focus on female consumers, as women are less partial to tannin.

MEININGER’S: Do you believe climate change represents a big threat, or opportunity for the region, as some growers like to claim?
HENRIQUEZ: The philosophy of Krug is extremely visionary; our blending and reserve wine stocks means we can create the very best Grande Cuvée every year regardless of the effects of climate change. That said, we still have to manage the challenges of climate change in the vineyard.

MEININGER’S: Krug has been involved in a dispute with an Austrian producer this year who used the Krug name. Has this been resolved? 
HENRIQUEZ: We agreed he can continue to use his Krug family name with his still wines and he has conceded to never using the name with sparkling wine production. It was never our intention to fight; we have always proposed coexisting based on respect.

MEININGER’S:What is the most challenging thing about your role?
HENRIQUEZ: Simply put – giving direction to and defining the destiny of a House like this.

MEININGER’S: Looking to the future, what opportunities would you like to seize? 
HENRIQUEZ: The opportunity is to be closer to consumers in very 
different contexts and to be an alternative for food pairing instead of still wine – this is still an alien concept for most people. We want to expand our female consumer base, as women love Krug due to its silky and elegant character. We have no plans to expand our portfolio or ­increase production.

MEININGER’S: If you could change one thing about how the ­Champagne industry operates, what would that be?
HENRIQUEZ: The flute. It is like entering an opera with earplugs in. It is absurd and old fashioned. A white wine glass is the right choice for drinking Champagne!
Interview by James Lawrence