A conversation with Hugues Lechanoine, Managing Director of Baron Philippe de Rothschild, on April 4th, 2012 in New Delhi. The assessment in the introductory paragraphs below is my own. The transcript of the full-interview is below this summary.
Baron Philippe de Rothschild (BPDR) is a company that straddles the two extreme ends of the wine business – the very top-end luxury category through its Bordeaux first-growth Château Mouton Rothschild, and the value-branded end of the business through Bordeaux brand Mouton Cadet, and Chilean brand Escudo Rojo. Occupying the middle are other super-premium wines such as Opus One (in partnership with Robert Mondavi) and Almaviva (in partnership with Concha y Toro).
Château Mouton Rothschild is a wine that practically sells itself – given that most of it is sold exclusively through Bordeaux Négociants and that too strictly on allocation. It finds its way to India and is available on the wine lists of the top hotel properties – with the prices starting in the six figures. This ensures that the wine is and will remain out of reach for all except the very few exceptionally rich. Attractive as this luxury category may be, limited production of this wine means that the company’s upside from it is also limited – with the inherent risk of price volatility depending on vintage variation and market conditions.
It is no surprise then that the company is aggressively looking to expand sales in the value-branded end of the market. That means turning to its trusty old brand ‘Mouton Cadet’ (which was established in 1930!), and creating new brands in new places (such as Escudo Rojo in Chile). Mouton Cadet sells a million cases a year and has traditionally done well in France, Canada and USA. However, the upside in these saturated markets is obviously limited and BPDR has to look elsewhere for growth. China is now an important market for the brand and India represents a potentially big market. I met with BPDR Managing Director, Hugues Lechanoine, during his visit to Delhi this week.
Mr. Hugues Lechanoine came across as very down-to-earth, friendly and engaging. Over a glass of wine, I asked him a few questions about BPDR’s plans for the Indian market. Below are his answers. Also present during the conversation were Mr. Aman Dhall of Brindco (the BPDR distributor in India) and Mr. Anthony Gourmel, BPDR’s Asia Export Manager.
Gaurav Anand: What is your view of the Indian wine market? What are your plans for India?
Mr. Hugues Lechanoine: For me India is a very unique market for many reasons. The consumption is very small, and the culture of wine needs to be developed here. To us this is an emerging market. Everyone is looking at China, and we do also. Everyone is going to Russia, we also go to Russia. But I personally think that we should have a very specific approach for the Indian market, or the Indian markets. To me, not just because of the population growth India is at the very beginning of developing a wine culture. I call it a wine culture because, I think in the very long term what’s about to happen here might be more mature, more secure than what’s happened in other markets where wine suddenly became trendy and suddenly millions of people became experts, or showoffs, about wine and wine brands. Due to India’s culture it may take more time for the Indian people to get to wine consumption but they will do it the proper way – step-by-step, with progressive educational initiation and not just by brand image. In the very, very long term I would be more optimistic about the evolution of the wine consumption in India versus other markets that are maybe quicker, very reactive but maybe not on the right basis.
Gaurav Anand: Is this visit part of your initiative to start getting involved with the market, and to start educating the market about your particular brands?
Mr. Hugues Lechanoine: Baron Philippe De Rothschild is a very international, prestigious and qualitative company. But we’re quite small. So we’re not here or anywhere to develop the wine consumption. If you expect Baron Philippe De Rothschild to develop wine consumption in Russia, in Germany, in Asia or in India – it is not our mission. We do not go for volumes for the sake of volumes. We do it step-by-step and we have a consumer value proposition which is very specific for the enthusiast or the connoisseur. So we do not have the ambition to say that we’re going to help you develop the wine culture. We’re going to help you to understand better what to drink, why, with what and so on. But we’re not a recruiter to the category. We leave that to the big guys and we absolutely respect their mission and business model but we don’t have the same philosophy. So we will follow the market, increasing the penetration over time and we will make sure that when people drink our wine they understand what they drink. They drink not just the brand, even if it is very prestigious to drink a Rothschild brand – but it is not enough. We want people to understand what they drink – they don’t drink just the wine, they drink also the culture of the family. That’s where – not just for the wine evolution here, but also for our positioning- I’m quite confident about the long term.
Gaurav Anand: So you think that Indian consumers will be able to connect with that kind of story?
Mr. Hugues Lechanoine: Oh yeah, you already have an elite here who have access. You know it’s funny because one century ago Baron Philippe (father of the Baroness Philippine, the President of the company) in the early 1920’s he had only the elite Château. But there was also the mass consumption (including the quarter liter for the soldiers as part of their daily energetic ration). They were the extremes – the elite and the mass consumption.
Today in India you have the same – very heavy mass consumption and then the elite. I think that Mouton Cadet will be a good bridge as its consumer value proposition is access to a sophisticated wine but still accessible, affordable – between the château and the brand. And that’s part of the history of the family that Baron Philippe in the early 1930’s created Mouton Cadet (maybe he was visionary without knowing it) as an alternative proposal between the elite and the mass. He proposed something alternative. That’s how Mouton Cadet emerged at that time. I think in Asia, because of the middle-class, Mouton Cadet and brands from other companies will find their right place.
Gaurav Anand: In terms of your focus on the market – what’s the main business priority in India? Is it to develop your branded business like Mouton Cadet or to focus on what you call the elite wines like Château Mouton Rothschild?
Mr. Hugues Lechanoine: I think what we really need to focus on is to develop in a proper way the branded wine business – because by definition the Château wines are reserved for people who are able to spend a certain amount of money. This is not just in India; it’s the case also in France, in Bordeaux and everywhere. I think the stakes and the ambition should be on the wines between Rs.1,000-4,000.
Gaurav Anand: And Mouton-Cadet is a very successful brand in France as well?
Mr. Hugues Lechanoine: France remains our biggest market by far with 22% of our business. Then you have Canada, US, Germany, Japan, China, and Russia. India is far but, once again, let’s see in 10-15 years down the road.
Mr. Aman Dhall: It’s the evolution of the market as well. We started drinking wine in India in 2001. So I think you cannot compare to a country like the UK which has been drinking wine for hundreds of years. Claret was famous there, then came Port and now it has become a hub for wines around the world.
Mr. Hugues Lechanoine: The key to the success is the quality of the product. I think we have a quality product but we’re not the only one. Then we need to have the right pricing – we’re not 100% influencing what’s happening here, maybe that will change. Then we need perfect execution – I think we have with Brindco the most knowledgeable and professional people in terms of wine so we’re in the right hands. We’re looking at the long-term. Then you need the facilities, the logistics and so on. So everyone has to work on it and think about quality, not just business.
Gaurav Anand: Château Mouton Rothschild is a well known wine around the world particularly with wine lovers. But India is a different country with a lot of new drinkers and a lot of newly rich people who can afford the wine but they do not know its background or its history – and they may not understand why they should pay a big premium for it. How would you describe this wine without reference to the obvious history?
Mr. Hugues Lechanoine: If I have to introduce the wine to someone who doesn’t know it I’d say: You’re going to experience and drink one of the top five wines in the world. Sometimes the best, sometimes just one of the top 5 in Bordeaux and the world. Now Lafite, Margaux – they can say the same thing. Where we’re different is that…I think, what is important is inside but also outside the bottle. How this company differs from the other companies is that we’re the only 1st growth that’s been belonging in the same hands of the same family since 1853. All the other first growths changed hands. We’re the only unique 1st growth that has been in the same family hands since the start. So it means we have a real consistency. And it means that when you drink the wine, you drink the culture of the family as well. So that’s where for the Indian people, who have a very good culture, I think there’s something to say about Mouton that is unique and adequate for Indians. So this is quite unique – we’re opening the doors of the château and the cellar and you’re drinking the family culture. And as you know we have a very unique proposal in the form of specific labels – the latest one has been done by Anish Kapoor. That way we’re quite different. But I think we’re very consistent. Maybe we will spend more time in India than other countries because we want to be connected with the culture and not be just where the product is demanded. That makes a difference. Art is very much surrounding the wine – that’s another unique thing about this company. The Baron created the concept of the paintings for the labels and the Baroness then organized some expositions of the labels. Mouton Rothschild is a mix of mother nature and technical skills but also family flair and art incorporated – that makes the difference for Mouton versus the other ones. That’s right for the Château but also for our other activity which is the branded wines.
Gaurav Anand: Do you recommend for Château Mouton Rothschild – do you make any suggestions for when the wine should be drunk (the drinking window)?
Mr. Hugues Lechanoine: For Mouton you have to wait a minimum of 10-12 years. But to me the wine is to be drunk, not to look at in the cellar or worse to look at in a bank account. That is not the philosophy of the company.
Gaurav Anand: Which countries, outside of France, are you making wine in?
Mr. Hugues Lechanoine: We have our own facilities and estates in California, Napa Valley – Opus One, in cooperation with Robert Mondavi. In Chile we have Almaviva: a 50-50 Joint Venture between Concha y Toro, the number 1 wine Chilean wine company, and ourselves. We also have our own winery for branded wines in the south of Chile and we make Escudo Rojo from our own vineyards. So France is the core business, the flagship and the essence of the company. And we have some experience in California and Chile – for business reasons of course but also because of relationships. One day the family meets another family and says why don’t we do something together. And then it does not come from a business plan. Sometimes it comes from informal meetings.
Gaurav Anand: Do you have any plans to make wines in emerging countries like China or India?
Mr. Hugues Lechanoine: Not for the time being. Maybe one day.