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Liv-ex interview with Bernard Magrez

Bernard Magrez

Bernard Magrez is the owner of four Bordeaux Grand Crus Classes: Pape Clement, La Tour Carnet, Fombrauge and Haut-Peyraguey. Liv-ex Director Anthony Maxwell recently caught up with him to find out more about his career and the development of his brands, the Bordeaux market and the 2016 campaign. 

To read this interview in French, click here.

Let’s start with your career. How did you get into the wine trade?

At the beginning, I joined Cordier. I started by working in the cellars before moving into the offices. Then I was fired – I didn’t get on with the two directors.

After leaving Cordier, a banker lent me some money to buy a small Port company in Bordeaux – I was lucky. We were importing Port in barrels, bottling them in the evening and then reselling them the next day in restaurants, cafes and small shops. At the beginning, we produced around 12,000 bottles of Port. We were a small company of just three people.

Around this time – it was 1962 – hypermarkets and supermarkets in France were beginning to open very rapidly. I wanted to sell my Port, which was not an established brand, in these stores. I kept going back – again and again – until they eventually said yes. Soon I was selling Port all over France.

After the success of the Port, I launched a brand of Scotch Whisky. It came in tankers and we bottled it in France. This became the William Peel brand. We were the first in France, before Johnny Walker. I then marketed a Tequila called San José. By 2004 our Tequila market share in France was 64%.

In the 1990s, I established the Bordeaux wine brand Malesan. By the time that I sold the company we were selling 11 million bottles in France. So we were market leaders. Following this, I bought an Algerian wine brand called Sidi Brahim which is very well-known France. We made millions of bottles.

So how did you become interested in Classified growths?

Back in 2004 I saw that the future of the company was with export markets, particularly in Switzerland, Belgium and the UK. To sell in these markets, I would have had to invest in having sales people on the ground, which would have been very expensive. At this time, I was just beginning to understand the power of the negociants system for distributing Bordeaux wine around the world.

Around the same time, I was interested in what was happening among the cru classé of Bordeaux, so with the money I’d made from selling wines and spirits, I bought classified growths. I had already purchased about 4.5% of Pape Clément at this point and my number one priority was to obtain the rest – 100% – of the chateau.

After this, I bought La Tour Carnet, which was not in a very good condition. Then I bought Fombrauge. It is a 60 hectare property while the average in Saint-Emilion is 13-14 hectares, and it was reclassified in 2012 to Grand Cru Classé. So I made it a global brand. Finally I purchased La Tour Carnet with 45 hectares. I now have 120 hectares and make 550,000 to 600,000 bottles of the first wine each year.

That gave me a total of three grands crus classés. Since Rothschild has three, I needed four. So in December 2012, I bought a first classified Sauternes, Clos Haut Peyraguey.

Most recently, I purchased vineyards in Languedoc, Roussillon, Provence, Côtes-du-Rhône, and I recently tried to acquire a Châteauneuf-Du-Pape vineyard but the authorities denied me permission. They say that their objective is to protect young wine growers. I’ll get there eventually. I also have three vineyards in Spain, and one in Portugal, Uruguay, Argentina, Chile, Japan and Morocco.

Does England interest you? How about China?

I have nothing in England for the moment. I previously attempted to invest in Kent, but this was unsuccessful. Ten years ago, I owned a vineyard in Xintao, China, at the edge of the China Sea. I made an extraordinary white wine with Italian Riesling. I am thinking of returning to China very soon.

Are you looking to purchase any further Grand Cru chateaux?

If I buy a fifth, it must be of the stature of Pape Clement. Purchasing a chateau at the level of La Tour Carnet will not bring anything to my business.

How many properties and brands do you currently have in the world?

We have 42 in France and around the world, so 42 brands – usually domain names or chateaux.

Is Pape Clément, at the top of your range, a luxury product?

No, it remains a cultural product with a history. We play a lot on the storytelling (established in 1252 as the property of a Pope…). Being compared to a luxury product does not interest us.

So is it Pape Clement rather than Bernard Magrez brand that is important?

The strategy is to show the Bernard Magrez name and logo of the keys on all the bottles. Now, more than ever, people want to know about the owner or the wine maker. We are an eponymous company in the sense that it bears my name. In France and elsewhere, all communications are done around the name Magrez.

How do you see the 2016 vintage?

Like everyone else! It is a very good vintage. In general, producers did a little more volume, though only 10% for us because we made a selection.

How do you determine the price?

We want the wines to be considered good value: wines that are known for their quality – thanks to the reviews – and are offered at a fair price. To establish a reasonable price, I listen to the brokers in Bordeaux, the top ten traders, and in each country we consult our sales team to find out what their customers will accept.

On your whole range of Bordeaux En Primeur?

Yes, we are talking about a total of 12 wines.

Is this – speaking to brokers and traders – really a transparent way to set a price?

No, this is not an exact science. It is a route to a solution that is agreed with our sales teams abroad, but we also use our own intuition. We never look at our neighbors’ prices.

So for Pape Clement 2016, you’ll look at the price in the United States, England and Asia? [This question was asked before the release of the wine]

It is the distributors that do it. I am not interested in their calculation; I respect their proposal.  The merchant and the distributor must earn their living, and there must be minimal fluctuations in price. 20 or 30 years ago, wine lovers were only interested in Bordeaux. Today, there are other regions that interest buyers, and there will be more in the future. So the battle is not just Bordeaux versus Bordeaux, it’s Bordeaux against the others. It is important to consider the market in this way.

In your opinion, why do collectors buy En Primeur?

For me, a collector is someone who enjoys a certain wine, wants to have one or two cases every year and wants to be sure that they are buying it at a decent price.

But what is a decent price?

It’s the price that the consumer is willing to pay. If he thinks it’s too high, he won’t buy. And that’s life! Our boss is the consumer who puts the bottle on the table to drink it with his friends.

How do you choose the timing of your releases?

Timing is the most difficult. The ideal is to come out just after someone else has released at a crazy price, but sometimes you don’t choose that moment.

Pape Clement is one of the top-performing wines of Bordeaux. Why has it been so successful?

Pape Clement has a historic image – the first vintage dates back to 1252. It also has a really unique terroir located practically in the centre of Bordeaux, which welcomes many foreign visitors.

We offer an academy, tasting courses, and I have also purchased start-ups like B-Winemaker that interest people. So for the past 11 years, we’ve had good wine tourism.

Specifically, I made a mistake by not reducing the prices of the 2006, 2007 and 2008 enough after the 2005. In 2009, everyone was selling well; in 2010 we got 100 points from Parker, so everything sold.

Our strategy has weaknesses: We want to sell everything, so we increase the number of places that the wines can be bought, and the number of customers globally, which increases the demand – and yet we don’t have enough stock!

Will your strategy stay the same? Some Chateaux decide, for example, to squeeze supply to raise prices.

Yes, I don’t want to change it. There used to be speculation around Bordeaux by the main Chateaux, but today is damaging to the brand. I don’t think that speculation is as strong as it was, so I decided to respond to what the consumer wants and put the wine on the market.

Take Clos Haut Peyraguey, for example. We put 90% on the market at En Primeur. We are more interested in selling wine to customers than restricting supply to encourage speculation. My strategy is to ensure liquidity in the market at real prices.

Do you think that consumers are hoping that the wine they buy will appreciate in value?

People don’t drink old vintages of Pape Clement, La Tour Carnet or Fombrauge any more. Today, they drink relatively young wines that are three, four or five years old, although this is different in some places such as England or the United States.

In my opinion, the error of some in Bordeaux is to believe that prices can keep going up. It happened with very great wines due to demand from China, but it won’t happen again.

If the price of my wines go on to increase, it will not be thanks to me inflating the price, but because the product sells well.

Why do you think they increase their prices at such speed?

It is an issue of ego and greed. They just want to have higher prices than their neighbors.

You say that En Primeur Supply chain is stretched. Do you see any risks in it?

I do not see any particular risk. We sell 100% to the merchants and have seven employees abroad who work with merchants and their customers. Our budget for wine dinners is very important, and we do not hesitate to ensure that the best salesmen of the best distributors come to Bordeaux at our expense so that they can get to know the wines.

What about the 2010 campaign, marked by unexpected cancellations?

It was dramatic! I may be wrong, but I think we have to adopt a strategy that can evolve with the market. The Magrez wines are famous, the reviews are good and we put stock onto the market at the right price, and at the right time.  We hope that the main distributors and the best salesmen can come and visit these four grands crus classés (which is possible in one day thanks to our helicopter). It’s a very large budget, but that’s what makes you sell everything.

From the point of view of a producer, how do you see the role of Liv-ex?

We follow Liv-ex prices constantly. I position my wines according to last trade, although I don’t have a lot of physical wines

The negociants look at Liv-ex to try and sell at the relevant price – well, at least the biggest do.

I also follow the studies – blogs and research.

Do you read them?

Absolutely. I read them and I ask the others to read them as well.

What is your opinion about the fact that your wines are sold on Liv-ex?

This is ideal. It is also great when Liv-ex writes about Pape Clement, like they did a couple of months ago.

So you support the idea that your wines are sold on Liv-ex?

That’s the dream. How do you want to answer differently?

Well, some others don’t think the same way…

That’s great! That’s their problem. The less they know the market for their own wines, or for other wines, the better for me.

Parker, as you said, contributed to your sales in 2010. How do you see the role of critics in the future now that he is retired? Do you think this will impact speculation?

I think there will be less speculation. 100-point scores today are not the same as they were from Robert Parker. Currently there are four or five major critics such as Suckling or Galloni. It is clear that the merchants look at the average of the top five as well as the competitiveness of prices.

What is the future of the Bernard Magrez group?

Our goal is to see 30-40% demand above our production for En Primeur releases. I would also like the Bernard Magrez signature to be credible to a maximum number of wine lovers – both the classified wines and other Bordeaux wines. This would perpetuate my activity and would perhaps allow me, one day, to produce two or 2.5 million bottles of a first or second wine of a classified grand cru. When the courtiers say that Magrez sells everything, it’s a different strategy. The fact that I have a reasonable strategy frustrates the other chateaux owners. I cannot be loved.

What do you think of this?

I don’t care! I am aware of my age. Soon it will be my daughter – who goes to the United States five times a year, just as I go to China 5 times a year – who will take over.

So you’re not reducing the number of hours that you work?

There is no reason to! I exercise every morning, and then I eat and drink like everyone else. We are beings of finitude. Each of us will die. I know that and it does not matter to me. My daughter, who is already ready, will succeed me. She has been working with me for 20 years, which is not easy because I have a very difficult temperament!

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