Monday, September 01, 2008

Bernard Magrez - the French wine revolutionary

An interview that appeared in Meininger's Wine Business International

Bernard Magrez is an unusual figure in the world of
alcoholic drinks. He has not only personally created lead-
ing brands in both wine and spirits, but has also recently
launched a new form of wine globalisation, in the shape of a
collection of more than three dozen super-premium, limited-
production wines from numerous countries, all sold under the
Magrez brand.
The son of a stonemason, Magrez was born in Bordeaux in
1936. After an unusually harsh upbringing, he joined a
Greyhound tour of the United States at the age of 25, with a
number of other ambitious young compatriots. He was struck
by the supermarkets he saw there (his travelling companions
included the future founder of Auchan) and by Anglo-Saxon
skills in wine branding. Three years later, he bought a small
importer of port based in Bordeaux and renamed it Pitters, a
name he subsequently extended to William Pitters. While mak-
ing little effort to expand beyond France and its European
neighbours, Magrez quietly built a set of brand-leading spirits
under labels such as William Peel and San Jose, as well as
Malesan, the only branded Bordeaux ever to compete with
Mouton Cadet (and to beat it soundly within France).
After profitably selling his spirits and Bordeaux brand,
Magrez, who had already acquired Chateau Pape Clement, one
of the jewels of Bordeaux, plus Chateau Fombrauge, the largest
estate in Saint Emilion, began to focus exclusively on premium
wine from estates like these - and from micro cuvées such as
Magrez-Fombrauge within them. Earlier this year, he courted
controversy by giving journalists Cartier watches as gifts to
mark the 1,700 years of winemaking in his estates. His Bernard
Magrez group now turns over €40m.

Joseph: Your father was evidently a very formal, unusual-
ly strict man who threw you out of the house when you were
12. But he also hid Jews from the Nazis in his cellar when that
kind of behaviour was rare in Bordeaux. How do you think
these factors influenced the way you behave today with the
people with whom you work?

Magrez: My father was a man of unusual rigour, at the limit of
what might be considered acceptable. He had a personal idea of
duty that included the efforts I had to make at school, where I
was very poor, and the sanctuary he felt he should give to
people who needed it. But sending me away to a woodworking
school in the Pyrenees at the age of 12, where I wore clogs and
was surrounded by children who had virtually no education at
all, gave me confidence - and a certificate for my proficiency in
sawing wood. I also met a boy there who had been sent for the
same reasons as I and who today owns one of the very top
chateaux in Bordeaux. Maybe my father’s demanding attitude
is genetic. I have some of the same traits and that does not
make it terribly easy for people to work with me.

Joseph: What lessons did your experiences selling spirits
at William Pitters teach you about selling wine?

Magrez: Most importantly, I developed a fundamental desire to
understand the motivation behind consumers’ behaviour.
When you are competing to sell spirits against the likes of
Diageo and Allied Domecq, you discover that research is indis-
pensable. So, I learned that the average purchase takes 18 sec-
onds, and that 28% of people turn the bottle to look at a back
label. In France, especially in Bordeaux, back labels are not
generally used. But all of mine, including Pape Clement have
them, with my photograph. It’s part of a policy of transparency
about the wines - and it obviously helps to promote the other
Magrez wines.

Joseph: Why is it so difficult to build a Bordeaux brand?

Magrez:If Bordeaux enabled us to make a good enough margin
to do proper marketing, it might be possible. Brands need
public relations, advertising – and time. Up to ten years,
though we created Malesan in four. If you are swallowed in a
market of Bordeaux at €1.50, it’s almost impossible to compete
with the New World. Especially when wines like Yellow Tail are
produced in a place where you can plant everywhere and
produce wine of a regular quality. There’s no secret why people
put San Pellegrino in their shopping basket: they know that
they aren’t going to be disappointed.

Joseph: You began your business selling into French
supermarkets and your wines are still sold in those outlets.

Magrez: Supermarkets sell 80% of the wine in a large number
of countries. One can’t not be there. And they are increasingly
having to meet the demands of the consumers who are looking
for wines at over €15. If they don’t satisfy those demands,
they’ll lose customers to the Internet.

Joseph:Your business model is focused on ‘micro cuvées’.
What is the largest volume you can have? And don’t these small
batches lack the critical mass you need to build brands?

Magrez: From the outset, my aim was to produce crus
d’exception, wines that offered something astonishing or excep-
tional. Traditionally, people used to look for established, famous
names, but now they increasingly want to be astonished, and to
surprise their friends. Wine buying at the premium level has a
great deal to do with the ego of the purchaser. But critical mass
is a valid issue. Over the last four years, I’ve been moving
towards cuvees of 4-5,000 cases, with the possibility of going
up to 20,000. But there’s a maximum volume for any wine:
Chateau Latour could sell 120,000 cases, but not 500,000

Joseph:How do you react to the charge that all your wines
share a common style, irrespective of their origin?

Magrez: Michel Rolland and I are easy targets for criticism.
And yes, there is a common denominator in all of my wines:
they are all made from grapes that are picked as late as possi-
ble, when the pips are ripe. People like the combination of fruit
and ripeness. And I’ll admit that this may give them a family
resemblance, but nothing can change the soil in which the
grapes are grown.

Joseph:At William Pitters you kept away from the UK and
US. Why was that?

Magrez: To be in markets outside France, you need money. At
the time when I had Malesan, producers in Australia and the
other New World countries were already there with cash to
spend on marketing. It would have taken me 20 years to win a
battle with competitors like them.

Joseph: You apparently want to add a first growth to your
stable. Wouldn’t the payback be ludicrously long?

Magrez: All the top estates that are traded on the Place de
Bordeaux as well as others in five countries have received a let-
ter from me declaring my interest. And, when you consider the
price, you have to consider the property values. I paid 100m
francs for la Tour Carnet. It was recently valued at the equiva-
lent of 130m.

Joseph: You once said “Bordeaux chateau owners should
no longer rely on traditional Bordeaux merchants; to succeed
today, you have to run your own dynamic sales policy”. But you
still rely on the Place de Bordeaux system of chateaux, nego-
ciants and brokers. Isn’t that inconsistent?

Magrez: The Place de Bordeaux still has its role. There are
150-200 top estates and they can’t all be everywhere. Bordeaux
still has 400 negociants, or merchants, of which 200 or so work
with the grands crus. Some chateaux work with 25 or so.
We work with 150. While half of these might have one sales-
man, the other half has two. That means that we have over
225 people selling our top Bordeaux into places like little wine
shops in Singapore.

Joseph: You have just sold your three least prestigious
Bordeaux properties. Does this mean that you’ve lost some of
your belief in the lesser levels of Bordeaux?

Magrez: Like Angelo Gaja, I think 30% of Bordeaux wine has a
future. A future that will be created by consumers. It’s my view,
and I’m not saying that I’m right, but I don’t see a role for many
of the smaller appellations of Bordeaux, however good the wine
they produce. Areas like Bourg, Blaye and Fronsac have almost
no resonance with consumers and in the future they’ll have
even less. The names people know are Bordeaux, Saint Emilion
and Margaux. That’s why I’m selling the Cotes de Bourg
chateau I bought four years ago. Nowadays, I’m only interested
in buying Medoc estates.

Joseph: Why, though, sell estates after such a short time?

Magrez: I’ve done the same elsewhere. In Spain, I sold our
Rioja estate to move into Toro and Priorat, regions that are
definitely up-and-coming. I got Italy wrong, but I want to go
back there, with four or five estates.

Joseph: Outside France, you have 32 vineyards in
Argentina, Chile, Uruguay, Spain, Morocco, Algeria, California
and Portugal. And now there’s a joint venture in Japan and
even talk of England. Why not Australia?

Magrez: In every country, I want to be among the five best
producers, or certainly near the best in quality. If that’s not
possible, I won’t do it. Australia has big companies like Foster’s
who make excellent wines and have the means to let people
know about them. Besides, it is also a very long way away. I
have far more interest in Chile.

Joseph: To say that an average piece of terroir can
produce beautiful wines is heresy in the French wine world.
Does this make you feel lonely?

Magrez: It was Henri Duboscq of Chateau Haut-Marbuzet who
said that terroir is what gives wine its genius, but that a good
all-round vigneron can give it charm. Sometimes charm is more
attractive than genius.

Joseph: Which markets do you see as being the most
promising in the near future?

Magrez: We have a commercial team of 10 people, twice the
size of the larger Bordeaux negociants. And then we use good
local agents such as Pieroth in Japan. Our sales people spend
30% of their time promoting the wines that are sold on the
Place de Bordeaux, with the rest of their effort expanding the
number of outlets and consumers for the entire range.

Joseph: Isn’t the launch of a Japanese and an American
wine all about image building in those countries? Calling your
California wine Magrez Napa is not exactly modest.

Magrez: If my name was Rothschild, I wouldn’t have needed to
do that. People in the US don’t know Magrez; producing a top
wine like this makes me part of the Californian wine scene and
shows that I believe in it… And the same philosophy applies to
my project in Japan.

Joseph: But your friend Alain Dominique Perrin, head of
Cartier and owner of Chateau Lagrezette in Cahors, recently
said that Bordeaux pricing was immoral. How do you justify a
$160 price tag on your new Napa wine? And is this the moment
to launch it?

Magrez: Prices that seem immoral or excessive to some people
don’t strike others in that way. If you go to the Cote d’Azur,
you’ll see that the people there aren’t troubled by the price – or
the current economic crisis. At Pape Clement (the only top
class chateau to be open seven days a week, by the way), we
organise tastings where we are regularly asked for wines such
as Petrus by individuals with no limit to their budget.

Joseph: You are famously associated with the French film
stars Gerard Depardieu and Carole Bouquet. What is your
business relationship with them?

Magrez: We have a small 50:50 joint venture, called la Clef du
Terroir, which has five little estates, each with two to three
hectares. Apart from that, their own wines go through the
Magrez international distribution network.

Joseph: Let’s talk briefly about the saga of the journalists
and the Cartier watches. Were you surprised by the reaction?

Magrez:If I’d wanted to buy the press, that wouldn’t have been
the way to do it. I wanted to hold an event to mark the number
of vintages that had been harvested at my estates, and since
this was all about time, I thought that watches engraved to
commemorate what we had done, like the one I’m wearing now,
would be appropriate gifts. Most of the criticism came from
people who weren’t there and, while I won’t reveal names or
numbers, I will say that the people who refused the gift were
in the minority.

Joseph: You are over 70. Isn’t it time to hand over to your
son, Philippe?

Magrez:My son has an estate. I gave him Chateau Plaisance in
the Premières Côtes de Bordeaux. He’s responsible for sales of
our wines in Belgium and Switzerland and he does the public
relations for the firm in the US, China and Japan.

Joseph: So, will he take over the business?

Magrez: S’il a des tripes– If he has the guts.

Joseph: Is that your father speaking? Or you?

Magrez: Ah… now, that’s a good question.