ILPB - Ep Five: How to Build (Successful) Fine Wine Brands

In the global world of fine wine, so many threads are connected by one single place, La Plas de Bordeaux. For 800 years La Plas de Bordeaux's unique trading system has brought the fine wines of Bordeaux to merchants and collectors around the world. But what was for so long an exclusive local club is now the hub of the international world of fine wine. But despite its huge influence on the world of fine wine today, we don't really know much about La Plas de Bordeaux. I mean we don't really know what the Plas de Bordeaux is and what happens behind what appears to be closed doors. The most important and influential wine market place in the world remains shrouded in mystery. How does La Plas work? And maybe more importantly, why? And when does it work? Who's behind it? And who gets to be in the club? And what are the questions that we hear most often from wine makers around the world is, will my wines be successful if they go through the Plas de Bordeaux? I am Poulin Vigel, co-founder and director of a rene global. And after hearing these questions over and over, we decided to explore exactly what La Plas de Bordeaux is, who the people behind it are and explore the role that the Plas is likely to play in the future fine wine distribution. And I'm Felicity Carter, the editorial director of a rene global. For me this is a fascinating journey into a place that's growing in importance, but yet remains poorly understood. So come with us as we enter La Plas. Welcome to this fifth episode of Insana Plas de Bordeaux. I have a confession to make before we start. Is that Felicity and I, we hadn't planned for this episode. It wasn't on our original draft from the series. But as we took our deed dive into La Plas, there was a sentence that we kept on hearing and that you have been hearing too, as I think it features in all the previous episodes. And that is La Plas doesn't build brands. Yeah, the interesting thing about this is most people don't think that fine wine uses classic branding techniques. Branding is typically more associated with the commercial end of the market. Indeed, and also if La Plas doesn't build brand, then who does and how do they successfully do it? So today we're going to look at four questions. One, what does it mean for a fine wine to be a brand? How to fine wine brands to fine and measure success? How much does it cost to be a successful brand? And finally, what's the role of the secondary market in building successful brands? And of course, we're going to look at all those questions through the lens of La Plas de Bordeaux. But I have to say that this episode in particular should hopefully also be very relevant for every wineries that want to position themselves at the top end, whether or not they are thinking of working with La Plas. But Felicity, before going further, you know how I love this edition. So let's start with definitions. What is a fine wine brand for you? Okay, so I think there are lots of different ways of thinking about brands. Historically, the term comes from the literal branding of livestock, which meant that a brand was a mark of ownership. So it's a signal about ownership and intellectual property. Another way of thinking about branding is to think of it as a differentiator. Companies who make fast-moving consumer goods like washing powder, for example, have to create a memorable personality around their products to differentiate themselves from their competitors who make much the same thing. And they do this differentiation through advertising, marketing and branding. Finally, I think brand can simply mean reputation. I wouldn't think of a wine like La Feet as having a brand in the commercial sense, but it has a reputation that functions like a brand and it reinforces that reputation using branding techniques. I like that you bringing up multiple definitions because I've seen this question to branding creating a lot of confusion in the world of wine. Many people in fine wine dislike the idea that wines can be brand and I must admit, I might be one of those people, but similarly many people will cringe at your statement unless you're not being a brand in the commercial sense. So I talked about branding with one of the top marketing experts that I know and I have to acknowledge bias here because we are going to listen now to Pauli Hammond who is the founder and director of Five Forest. And we work very closely with Five Forests at Reini because they built our website, they created our branding and our elements of design. Pauli herself is also part of Reini Board of Advisors and he was fully state on brand's definition. So my very first question is how can we define a brand, generally speaking. Okay, so you have to remember that I'm coming at this from the perspective of a professional marketer in the wine industry, one who was born and raised in the US. And in our work, we define a brand as the unique set of identity elements that differentiate a product or your service or your company from your competitors. This encompasses elements like your name, your logo, your design, everything visual, but it also includes the emotional and psychological associations attached to that brand. It can convey specific values, promises and customer experiences, which is very important with a goal of all of this leading toward better customer loyalty and achieving a competitive edge in your market. I for one Felicity strongly believe that one of the things that makes you a brand is your willingness to be a brand. If you're not doing anything to be a brand that you are not one like you, you have to want to be one. And if you want to be one that comes with a mindset and the past to follow and some consciously taken decisions to be executed, but Pauli disagrees with me on this. Let's listen. Any business that wants to grow ultimately will have a brand whether they choose to or not. Right. So when we talk about Brandy, there is a responsibility of the business to hopefully own and to devise and own its brand. However, even those enterprises that have not done that, they will still have a brand because the other part of branding is perception. So I think that in all areas of the supply chain in line, we do have brands. It's just whether or not the enterprise is choosing to commercially grow by building their own brand. Yes, I'd actually agree with Pauli on this, whether we're talking about commercial branding or the sense that a brand is your reputation or what you're known for. We all have a reputation whether we like it or not. And so however you choose to define yourself, it's important in the commercial context to shape that reputation as much as you can. And I agree that you can build a brand whether you intend to or not. People will fight to protect their commercial identities even if they don't recognise them in those terms. So try copying the labels of even the smallest and most artisanal wineries and see what happens next. Yes, that's very true. And at the risk of sounding again, really, you say, I must admit, as I've said that even after the eight years in the UK, I still, you know, cringe every time I hear fine, wine, brand or together because I grew up in an environment where those two ideas were irreconcilable. If you wanted to be fine, you couldn't be a brand because brand were for people whose wine wasn't good enough to sell on its own merit. So I actually asked Pauli if she noticed any difference in how the French understood the concept of brands versus how the Americans did, for example, as she works with clients on both sides of the Atlantic. So you had asked the question, why do some people, the French in particular, have so much difficulty talking about a brand? One, it is a language, is a semantic issue because the French use the word brand mark trademark or talking about something that's much more legalistic. The French framework of branding is a legal focus on protecting the origin and the authenticity of the product. And this has very strong geographical protections. Alright, so that is paramount to this discussion of, of to Picity. The American approach has legal protections, but it has a significant emphasis on the commercial and emotional aspects of branding. The French national branding highlights tradition, heritage and regionality. So, Terroir, and this is wine and cheese, great examples both of those. The American focus is innovation, its customer experience, its your emotional connection to the brand. And then with the market strategies, so a brand strategy in France, may prioritize, often will prioritize, maintaining the integrity of that product's origin and quality. Whereas in the US, the market strategy often includes extensive campaigns and brand management aimed at building your customer loyalty and brand equity. And the problem that we're having now, and this goes to your beyond border lines, right? The problem that we have are brands, those brands are competing with non-French brands who have a completely different brand. a completely different view of what it is to be a brand. And if you're selling to an American audience, but you're trying to rely upon the French approach that has a very legalistic underpinning, well, you're going to have a real cultural problem in competing with American brands. - That's important, notably because there are so many wineries, who want to play in this club of being the best now. So I think whether we think of a brand as a constructive identity or a reputation or a marvel ownership, I guess what we learned from previous episode is that the work around that brand, the development of that brand is the wineries job. And that can seem very obvious, but it's actually one of the things that I realized through that podcast is that by going through that last, you take on much more responsibilities when it comes to your brand development, something we developed, for example, in the Beyond Borto episode. But how does one measure the success in developing their brands? That's another question. So I asked Matieu Julien, and Matieu Julien is the head of Van der Exception, the LVMH unit that manages a cool game in the US, Domente Lampagneberg in D, and Chateau de Cam, and Chateau de Chevalvelein Borto, in a very, very small wine. So I've asked him about some of his metrics for successful release. The metrics is that several ways, but one is the premise is that it's always more difficult to access our wines and always more expensive to access them. If you miss the first release, the first initial release, whether you are on Premiere or not, whether you are through Plas de Borto or not, it doesn't matter. The first commercial release of the wine is always the best time to buy it. The other metrics, so it means that it goes very far into the distribution chain because the final consumer knows that he shouldn't miss the initial release to secure the case or two of this wine. So it's the engagement to add the final at the end of the chain. That's one. Second is that price should go up on the secondary market. We are very careful about not going into the overheating speculative mode, but because of the low of the market of demand and supply, we believe that a wine in our league should go up as its quality increases and its supply diminishes, should go up in the value on the secondary market. And I think another metrics would be how much of it is how much quantity is available to final consumer because a great distribution means that at the end of the line, this distribution line, there is not a lot of stock available. There are a few cases maximum available for each client who will hopefully cherish them and share them and drink them, drink them, where we see potential risk for speculation is when people, people are actors in the market have access to way too much stock that they more than they can drink. And Felicity, I like Matthew's very articulated answers because as we've heard repeatedly in previous episodes in order to be successful in my plans, why needs to be highly desirable and have a great reputation? But reputation can be hard to measure and we've seen it before. Some brands that, for example, recently entered the Plasma Board, they didn't really succeed as expected. And my take on this is that they probably overestimated their reputation and know to be in regards to the end of materials. There's the reputation that you think your project and of course there is what your audience thinks or actually even remember about you. And that's really difficult to measure. But when you define your metrics as Matthew did, you can actually measure your desire, your desiability quite clearly. - Yeah, and it's interesting to put this in the context at the current 2024 campaign. It's a very complex one and it's not been great so far for a lot of wineries. It certainly hasn't. We've seen dramatic price drops even for wine with a really great reputation. - The desiability is always the key to success and the comment thread between all the successful releases so far has been the capacity of the winery to maintain or increase their level of demand. - Yeah, but of course it's easier said than done. Just have more demand here one year. (laughs) So we wanted to know how the successful ones actually did it and we've asked around some producers to market this and gathered their thoughts on what they did in order to achieve the level of durability and reputation. And the first thing that they said can seem really, really obvious, like no strategy 101, but it's to have a clear vision and it's your objectives for your brand. And again, I know how obvious it sounds. But you and I, we've been to so many wineries where it was very clear that they never really asked themselves who they were and who they wanted to be and why they were actually waking up every morning. - Yeah, I know he's not the plus but we recently spoke to Mike Rackliff from Villa Fontaine, South Africa about this. And basically in his view, the lack of financial sustainability that, you know, we see so often in the wine industry usually runs parallel with a lack of strategy. And more often than not, as he said, it runs parallel with a lack of focus. - It's a fair comment. There are loads of people in our industry who are certainly trying to do everything there. There I say too much, maybe. - Yeah. - Mike pointed out that there seems to be a common denominator of financial success amongst the people who have identified at least some form of speciality, some form of speciality I like this. And actually, Polygo is slightly further on that point. - Every brand has different measures of success. So good work, good branding work starts with clearly articulating what those stakeholder goals may be. And that can be financial sustainability to great one, but it can also be, do you have a 100 year plan? Use your goal leading the most awards. Do you enjoy tax benefits? Because of your winery operations? Do you want prestige? Are you growing simply for the purpose of an exit strategy? So we all have different goals. And then the other thing to understand about it is that we didn't want, we are by and large, a multi-generational sector. And so those goals can change over time and with generations. So the first thing is, goals are different. I am going to take a traditional look at metrics and tell you what I would be looking at when we go in and run strategy programs. And obviously the first one is return on investment. Look, whether we like or not, we got to make money. Are we making more money than we're spending? The next one is going to be customer acquisition cost. And I think that when we're looking at any metrics relative to customers, this is essential in the cost discussions. So you got customer lifetime value. You've got market share, you've got brand equity, loyalty and advocacy. You have brand awareness. Going back to our discussion about who is actually responsible for the branding, you have customer perception or customer sentiment. And then nowadays in the digital world, we of course are also tracking customer engagement. What I will note about this is I think that sometimes the goals can not be communicated with accuracy. So when we talk about goals setting, one of the things we say when we get into the room is what are your real goals, not your BS goals? Why am I literally sitting in a room doing this work? And then once we can clarify what their real goals are, more often than not, it's going to come into metrics that indicate sales for a lack thereof. - So let's go back to what Mike said in terms of having a kind of speciality. - Yeah, that's what Pony called in our interview, defining your unfair advantage. What do we have that gives us an unfair advantage on our competition? Looking at the recent success stories on the past, it is hard to miss the rise of shuttle car mobile young, a wine that went from being released at 24 euros to being released at 150 euros in 12 integers. Can you believe that? It's the dream, right? So we met Guillaume Coutier, who's the wine maker and Andy at Cam, and we asked him his recipe to success. It's in French, so I will translate as he goes. - I'm very convinced that we need a great wine to be able to have a great wine. - I'm firmly convinced that you have to make a great wine to stand out from the crowd, but that's not enough. It's no longer enough. A big part of our efforts today is, at say, to give life or to give flesh to the wine in its environment, to set it to music if you will. And to reflect on this for Cam, first of all, I looked at the commercial successes in Bordeaux and why one shuttle worked, but another didn't. And what all these wines had in common, the successful one in Bordeaux. and elsewhere for that matter, was that they had really worked out a unique singular side to their products, through their history, through a way of presenting their wines, through the assets they chose to highlight. For me at Carmen was simple. There were four or five singular assets. The first was that it's the only border estate in border itself, since our address is on the Rudec arm, Tront-Wamil-Bodel. So that's a very strong point of distinction. Because my idea of uniqueness is to say, "Well everyone tells you they're a great border wine, whatever they are, but we are a con van de Bordeaux in border." And that's that. We're the only one. There's not 36 of them. So that's the first point. The second point is that we have this unique heritage of Cabanefron. It's a capricious grape variety that's rarely grown in Bordeaux, except in very famous vineyards, mostly on the right bank and almost nonexistent on the left bank. But the people who have this grape variety are in fact, post-boys, it's Chval-Blanc, it's Hauzone, it's La Flore, they all icons, myth even. So here too, I thought I had to capitalize on this notion of grape variety, which we don't have in Bordeaux that much, especially since what we have at Gamm is all Cabanefron wines, massare selections that are 85 years old. So I wanted to put Plan Physiology back at the heart of our uniqueness. And so, in addition to seeing the old Cabanefron wines, I could, in all honesty, talk about these massare selections we had, and especially the name of the old Cabanefron that is called the Boucher. The Boucher is, when we have Cabanefron that we have almost 80 years old, it's E, actually, that reigns at this point. And maybe you don't know it, but you have to know that the Cabanefron is the pearl and the pearl of the merlot and the Cabanefron. So in the vegetal physiology, in the paleography. And so Guillaume on top of that had a third point, a third specificity or unfair advantage he wanted to work on, but that was his vision in terms of taste. So he wanted to make a wine that will have the long aging capacity that came to characterise Bordeaux stock wine while still being highly enjoyable young. And that was really, really important to him. And of course, the rest is history as Guillaume has since then proven is, you know, his capacity to work with whole bunch fermentation Bordeaux. And so that brought a lot of changes in terms of aromas, freshness and texture. And the question of taste is a really interesting one. So I've spoken to a lot of executives and producers of mass market beverages. And they will all tell you that as long as the drink is pleasant enough, that's all that matters and that it's branding, marketing and distribution that's more important after that. And then of course, we also know that, you know, fashion has a lot to do with taste. So we see that, you know, wines that are regarded as really fantastic historical, you know, wonderful wines like ports, for example, just no longer have the traction that they once did. But at fine wine, it's also true that marketing will only work if the wines taste is also remarkable. Yep. And that's the one thing that everyone agreed on this series. We had a lot of debates, you know, people didn't agree on much, but on this one, everyone agreed. And then the taste matters to everyone. It matters to wine makers because more often than not, you know, one of their motivation is not to make a, you know, a whole bunch of money, but it's to compete in terms of quality. Are you sure that I don't want to make a whole bunch of money? Are you sure about that? Or is that just what they say? One of them motivation is competing in terms of quality, you know, in relation to taste complexity, capacity to promote emotion and capacity to age, they want to make wines as good as the one that make the, you know, dream going up, growing up. And the capacity to age is actually quite interesting because we'll talk later about the secondary market. But again, capacity to ages, more to be successful in the secondary markets and a lot of producers are thinking along with these lines today because they want to show at the secondary market. But taste matters to people with cell wines, of course, because when a certain taste is endorsed by critics and by the community of taste, this influence pricing and the capacity to sell a wine relatively easily, or not, you know, you mentioned the example of thought. So, there can be another example. We know that those are fantastic things, but the taste are not that fashionable today for multiple reasons. So that makes them hard to sell. And of course, taste matters to consumers because when a wine is said to be at its ideal drinking window, which is again, something that we don't really talk about when it's more on the commercial end of the spectrum. But when the wine has beat, there is an increased in demand, which means a decrease in supply and price and to be higher. So consumers are expensive to buy, but also more interesting to be sell. But we've touched on an important point anyway, which is that successful brands are successful at finding their own consumers and engage them with them. I agree with that, but I would like to add another caveat. If we're talking about fine wine or artisanal wine, it can also work the other way round. You know, there are plenty of misanthropic, grumpy wine makers who maintain a singular focus on what they're doing and then someone discovers them. The next thing that happens is the world beats a path to their door. And at that point, their distributor starts nagging them and they get pulled into wine, tastings and trade fairs and dinners and so on. It's still true that in the first instance consumers found them, not the other way round. Yeah, that's true. And that's maybe the situation that everybody wants to be discovered. But even in those scenarios, I guess they were discovered because they signed up to look wine fair or they're wines in front of a wine critic problem. And that brings me to another layer and all of this, which is wine critics. There are plenty of wine writers who are on the hunt for rare and special wines because discovering something special is how they build their reputation. But it's also dangerous to hope that you'll be discovered because most of the time you won't be. Yeah, I guess it's a bit the same for Hollywood star, right? That's your waitress and just hope to be. It works for something. I guess it doesn't work the majority. But I can see another issue here, but looking around in the world of fine wine, I love to have you take on that, but I can't help but think that we're not really, really original in the way we present ourselves. And in where we want to be distributed or with which consumers we want to engage. It seems to me that, you know, where I've come from in the world, when they want to be considered fine, when they want to be in that perceived club, they all tend to do the same thing like the define the unique advantages being almost uniquely the terroir. What's the unique about your wine? Well, the song is different. And we've seen why where's polyurethane centric vision of differentiation. And also they all want to go for the same contours. So I'm just wondering why don't we go for different consumer base? Yeah, I think I might be able to answer that again, if you look at the arts, they also have places where they cluster. So if you're mad keen on going to theater when you're in London, for example, you should book a hotel near the West end and you can walk to everything. And the reason is that these hubs begin to develop expertise in what they do. If you want to build a theater in Lewisham, for example, you're going to have logistical challenges starting from where do you park the lorries with the sets? The area is just not set up for that. And then the more of a hub you create, the more people you pull into it, you know, one shop is a shop two shops is competition three is a destination. Maybe or maybe and that's my own personal theory, but I'm wondering maybe they think the dog really have a choice. Like, for example, hear me out, you know how I believe to be city is a collective result, right? That we could talk about the city at my parents time, just because everybody was doing the same thing. Therefore, the wines ended up tasting the same way. And I'm wondering if it's the same thing for wine distribution, because we all kept on doing the same in terms of brand building and human engagement for so long. Now it is kind of what is expected of us if we want to be seen as fine to producers not really have a choice unless they are ready and willing to challenge the status quo any thoughts on this. I guess the question is whether it works or not. So breaking out of any system is very difficult. And it can be very expensive and time consuming for the first, you know, pioneers who do it. So there's an incentive to keep doing what's known to work when it comes to fine wine. I'd argue that the system mostly does work fine wine goes up and down, but mostly it's a pretty robust sector of the market. It's clear, however, that at the commercial end of the market things need to change very radically right now. Well, I agreed I was also thinking, you know, of all the new fine wines, all the new pretenders to the title and all of those red wines that have the quality and the drive that I yet not established as brand. And I am not sure at all that what they need to do in order to establish their own brands is to simply copy, you know, the past that established brands have established that's a lot of established in one sentence. Now let's go back to my very favorite topic, money, how much does it cost to build a successful brand? That's a fascinating question indeed, but before we get into it, I just want to take a second to ask a favour to everyone listening to the podcast right now. If you like what you've heard so far, please do subscribe to the Rini podcast channel on any of the platforms that you are listening this episode on and give us a cool rating, it really helps. And when we say give us a cool rating, what we mean is please give us five stars. Five stars, please back to your question about money, Felicity, a lot of money, way more that we usually think of. And I guess we need to specify here that there are two different costs related to two different activities that theoretically should work hand in hand to build a successful brand. But of course, we've got the marketing budgets, which are all the resources one needs to find and engage their consumers. And the second is the sounds budget, which is all the resources that one needs to build the appropriate distribution and roads to markets. And I think the wine industry is quite used to spend money for sales and distribution, but doesn't have yet a spending adequate amounts on the marketing side. This is changing of course. And you know, some of them most successful brands in that campaign, in that entrepreneur campaign are brands that haven't understood that and have made the change, but it's still new to a lot of people. So we've asked how much it costs to a few people in the industry. So as our reference marketer, Pauli Hammond, is there a magic number to spend on marketing? Very successful brands. Right now, right now, very successful brands are standing 30% because luxury brands are growing likely never ever ever ever. So what we've seen is 4 to 5% really does nothing. You're going to be miserable. You're not going to be able to keep up with your competition. What we see is that about an 8% of revenue is the minimum, NERSUN, some qualifiers here, the minimum that an established, independent wine brand should be spending to stay where they are. So 8% is a good way to allow them to stay where you are. 10 to 12% is slow, that consistent growth over time. And yes, no, just over time. What you're going to see is that this is just slow and steady growth. Right. 10 to 12%. It's not going to skyrocket you. You're not, this is not the person that's going to say, I want to go from being a small independent brand to being, you know, in the math or whatever it is in the next three years. This is slow growth over time. Newer brands should be spending anywhere from 10 to 20% depending upon their growth roadmap. So it's always levers of change. More money equals less time. Less time equals more money. Right. So, so those are the numbers that we see time and again work. We actually see it from our clients. So it's not just research that 8, 12 and 16% is really common research that you can find out there. And that would be values in any wine countries of the world. Yeah. That's whether you want South Africa from so New Zealand that would be that has been that has been our experience. Okay. Then we ask a similar question to Don Sample here. So Don is well known in the fine wine world for his expertise on both the Chinese market. So he co founded a SC fine lines top importing agency based in China that he directed until quite recently. We also has a lot of knowledge on the US market with his interest in being folio and fine. That's rare. No, it's it's always difficult to give like straight numbers. But do you have a you know a benchmark or bracket of how much do you need to develop a brand in in China or to develop or maintain a brand in market. Like the US or the UK. Did you end up having recommendation in terms of percentage of the turnover or like what does it take in terms of financial resources. Very very difficult to put that into to quantify that into a dollar percent. I mean if we generally speaking we were investing in the China market. Let's say 15% 10 to 15% of the sale into the market. But you know our margins were in the 50% range. So we had more room than what perhaps you had today. And so the emphasis then shifts more from the importer. Should all during the burden of brand building activity to the brand owner working with the importer. And to some extent that makes more sense because you know the brand owner has more control which you know theoretically they should want to have in the key markets in which they're focused. So I think if the market's important yes the brand owner wants to invest with their importer. But they also need to have their own resources on the ground and they need to be directly involved in those investments more and more. And I think you know one of the really key elements to this is the digital marketing strategy for brands particularly as it relates to new consumers. You know what are they doing with YouTube? What are they doing with Do-Yin? What are they doing with Xiao Hong-Shu? How do they communicate their messages effectively to new consumers entering the category? They have the money to spend but just don't have the awareness or understanding of what makes these brands these producers special. Yeah one of the things that we've been hearing a lot from successful brands is that going through La Plastie Bordeaux means if you want your brand to develop you need to make sure that your distributors make money from it. Yes and Jung Boot-Sia came up with this wonderful phrase during our interview. Wine tastes better when it tastes of margins. I'm going to steal that. That's great. And here is what Fiona Morrison who's an MWBed also the owner of Cult Wine Chet-O-Lupan with Husband Chet-Chet-O-Lupan says about this. One of the great keys to the success of La Plastie Bordeaux is that everyone makes money with it and the consumer at the end of a line is still delighted to have a bottle of La Plastie in his cellar. The wheels of the cogs are oiled. Everyone is happy to have La Plastie Bordeaux. They're not going to be sitting on inventory. They're going to make money. They're not going to make 15%. They're going to make a lot more with that. And the trade have been so important to us. It's the press okay that's great but it's really the trade that has oiled the wheels that have got La Plastie Bordeaux distributed and where it is today. So I want to go back to something that Matt Tudjouli and said at the very beginning he said that great distribution means that at the end of the distribution line there's not a lot of stock available. Yes because of course this is also key to achieve the desirability we were talking about at the very beginning and that's really a common thread that we have found throughout the interviews. Many wineries seems to be following the same goal in order to achieve desirability that is to put less wines into the hand of more consumers in order to create all and to manage scarcity. And that can sound quite logical but it's fairly new because I think it's fair to say that before wineries were just very happy to sell to whomever had the money to buy but then they realized that it wasn't enough for them to sell wines. They actually needed the consumers to drink the wines and of course to enjoy and because it's what wines are meant for but also to reduce the existing volume as they were doing so because when the trade of consumers are buying too much the risk would be that a majority of these bottles will end up on the secondary market because and too much wine is on the secondary market shows low desirability for a wine and price can decrease. So to give you a practical example of how what line they are thinking of, Guillain Putier went from working with a hundred nighose, Jarl selling to a hundred and portus, to working with 14 nighose, Jarl selling to 1200 in portus. Again with this idea of putting less wines into more hands and to avoid over buying. Yeah it's a very interesting strategy but key distributors like Max Londrela are already talking about the limits of this system. If they don't have enough access to the volume, then any action that you know they use to develop the brand like events or tastings is no longer possible. Yep of course so it's you know walking around walking on that on that fine line for wineries at the moment but I think it is time for us to look at the secondary market a bit more because if we go back to our original question how to build success. for Firewind brands, but on top of everything that we just said, one also needs to understand how you know this unique platform works. And it's not that easy and it's pretty complex, it's still a bit of opaque. And every time I think about that sentence, I think about your plan of listening to Retire and to live a simple and easy life making a ton of money, sending fine wine and how it doesn't seem to be that easy, I guess. Oh, foiled again, dammit. So here is my definition of the secondary market. Let me know what you think. So the secondary market is where all the non-primary release cells happen, meaning that if a wine is released by a shadow and immediately sold to either the final consumer or its normal chain of distribution, for example via Negotiant to Importer, Trashant to consumer, then it's sold in the primary market. The wine ends up on the secondary market if it's stocked by any member of the chain, for example, if it's stocked via Negotiant to Importer to consumer, and then resold a few years later, longer period of time later to any of the members of the chain. So Importer to Importer, Collector to Negotiant, Collector to Auction Houses, when the initial quantity of wine available is supposed to have change and to be less of course. Yes, and just like the plus is not a physical place, the secondary market is not one actor and transactions don't all happen in one place. Yes, and prepping for this podcast, I've tried listing all the actors that are part of the secondary market, who's on the secondary market, who's part of the secondary market. So for the next interview, I am talking to Anna S. Oli, who's the global head of Wine for Bonnames, so one of the most famous auction houses. And auction houses of course are indeed a major player of the secondary market, but here I am asking him about all the other players and their specificity. No, you've got platform like live X and you've got actually like, you know, good dozens of them that are operating at a at a serious level. And then you've got in each and every, you know, major country, you've got like a neccessy system of very, very fine wine trades. And this type of company, the buy stocks from individual, the buy stock at auction, the buy stock maybe from the shadow, and then it's up to them to resell that. The difficulties like you need a lot of capex to do that because you initially need to buy very high value portal. You need a lot of expertise because you've got, you know, a subject and condition, provenance, you know, counterfeit some time. And so it's much difficult for them. So some of them are operating very, very well, but it's very difficult to do that on a high volume basis. So usually they tend to focus on the highest value and they provide liquidity to the marketplace either by buying stock and to resell stock on a more refined and precise basis to their client and their closer to to the collector. So what I took from MIS and our conversation is, you know, some of the transaction of the secondary market happened on visible platforms and the prices are at which they happen are public and globally accessible now that a lot of things online. And that's actually the big change that online auction houses or platform like livex or wine searches have allowed. Yeah, we should clarify that livex is the London-based fine wine exchange where fine wine merchants can buy and sell each other stock. It also produces a lot of data about sales prices that it makes publicly available. And it's because of them and companies like wine search are the pricing on both the primary and secondary markets is now much more transparent than it was. Yeah, but at least to me many of these transactions are still not visible, which is why when I've heard people saying that the secondary market is more transparent than the primary one, I mean, for me, it's a bit unobvious of an overstatement. I wouldn't say that the secondary market is more transparent than the primary one, but also don't forget there's lots of transactions that are never visible to consumers. So if you go to a supermarket, you've got no idea how much they paid producers for the stock, but that does make food and opaque market. In wine consumers can go to auction sites and get a sense of what fair value is for wine. So there is a lot more information than when it's available in the past. Yes, that's a very fair comment. And what's interesting is everyone in the fine while world has an opinion on the secondary market, right? Is it a good thing or a bad thing when your wine ends up on the secondary market? Are you becoming a commodity? What does it say about you and about your strategy? We've asked these questions to Don Sampea. Let's listen to what he said. Well, first of all, I think the secondary market is important to your point. There's real benefits of the secondary market. And I think it is a help in many, many respects. And it's always going to be there. You're never going to achieve the type of distribution where every bottle you sell into the primary market will be into the hands of people that will consume it. But I think there's a happy medium. And some brands have achieved this happy medium, but most have not. And to me, that happy medium is more people have access to the product. So there's fewer bottlenecks in distribution where a few number of people have large quantities sitting in their cellars. Now, to your point about is the secondary market, a help or a hindrance? Well, first of all, I think the producer, it's very important to understand the secondary market. They must understand where their pricing is at or in the secondary market if they're to make intelligent decisions as to where they should be priced in their primary releases. So it's not something that producers can afford to ignore. It's something that I think they're increasingly interested in understanding and engaging with. If you look at how producers are embracing the auction houses, working with them, there's a lot of evidence to me that producers understand that this is a very important element of the fine-wine market. And they need to maybe embrace it as too strong of a word, but they need to understand it and work with it. It's interesting that Don points out the producers are increasingly interested in engaging with the secondary market. And both you and I have been asked many times by producers what they need to do to put their wines on the secondary market and about the steps they could take to get there. So Pauline, you've asked this question to Amai, is right? What did he say? I did indeed. Let's listen. So you mentioned earlier that the auction house was so, you know, powerful in terms of PR in terms of putting the wine outside and telling the stories and making it accessible to, you know, people that will love that bottle wherever they are in the world. So I've had all of those conversations with wine makers that really see the auction sell as, you know, as a goal. I want my wine to be so famous that I will be sold at auction something like at the end goal down the line. What makes a wine, you know, auctionable, auction worthy, what other basis that a wine needs to have so that it's interesting for you to build an auction sell around it. It's a very, very interesting question because it resonates with the call of what we have and what we do. The pricing of the wine has like thousands of parameters, but one is absolutely key for me and that's the recognition, the global recognition. Either for producer, for region, of course, of a vintage, of a narrow, of a taste, but that's the recognition. We can help or participate at the end of the chain, but we cannot create it. So how do you measure that recognition? Is it a gut feeling? Like, you know, everyone knows Barolo now, so I can have an auction sales of Barolo because it, you know, everyone I talk to know about it. Or do you have like a specific system that agglomerates some data? How do you measure recognition? And you know, the collective willingness to buy this wine. Eventually, it will translate into prices, but right after not at the beginning, first you need to have a demand. Then gradually, you've got different pricing method and some one region or very high very fast, some other state, you know, calm depends on the quantity you have to sell. So in Barolo, you've got lesser quantity than in Tuscany, let's say. So it depends on many, many factors. And it depends on the logistics route that you have to ship you one. And then it can, it depends on the number of tasting, number of books and the number of myself wine doing even there operating, etc. How famous is the top producer locally? How long has been the winery in existence? Because usually in fine wine, as I said, the beginning, the secondary market has a long, as a very good relationship with time and history. And usually you want to make sure that it's consistent across the board. So like you want to taste the 80s to make sure that, you know, the 2020 is good to a certain degree, you want to understand the trajectory of the winery of region. So the consistency, or just being general, I think it's important, the consistency the improvement of a regional winery. It's something that we can at the end of the journey, maximize and value because we're going to have a story to tell and something to increase or improve to the marketplace. So, John, so your question, is there any processes? No, I'm coming from an investment banking background. I know what the process is. There is a process pulling on that front. Is it my only gut feeling? No. This is what we call expertise. So, you were telling me reputation, consistency in quality and continuous improvement in quality, which is really important as well. And you were mentioning the wines from the 80s. So, how long does a winery need to have produced wines to be considered as an auction? Because we have this conversation about how long do you need to go back to, like, if a producer has been doing wine for 15 years, is it enough for you? It's not for me, but what I can tell you from the data I'm looking in, is to a certain degree, the minimum to go at auction is around 10 years. Before that, we can sell. We're selling wine that are much younger than that for sure. We do not have such a value that it supports certain name of like, "extremic to rarity". But like, the cost of the board, if I were to sell the board from like 2020, I wouldn't add value. I would say, we're starting to add like really strong value after 10 years, roughly around 15 years. And we maximize the value after 20 years. Why? Because, again, you've got like, I'm covering 95% of the cases here. But because all the vintage will start to fade out from the primary market, from the retail market, and from the sumo. So, the rarity effect will come into play usually for fine wine after roughly 10 years. And starting at 15. So, I would say 15 years is kind of like the beginning of the journey. Felicity, what's your take on the secondary market? What do you think it's role in its impact is? So, the secondary market is incredibly important in fine wine, and it plays a critical role in pricing. If you can buy a high quality older vintage for less than a current vintage of the same quality, for example, it could mean that the current vintage is overpriced or vice versa. So, the secondary market keeps pricing dynamic. It also encourages a higher volume of trading. People are willing to buy wines that might never drink because they know they can sell them later if necessary. But this has turned what was once a consumable into an investment vehicle. It's financialized wine, if you like. Well, I get that, and I agree with this. And one of the problem with the secondary market is people are saying, well, wine are now too expensive. But if I, if I'm being the double advocate, what's the risk of saying, well, you know, too bad if the majority of us access it anymore, this is just how things work. I mean, why should producers want to stop the value increase of their wines if people are still willing to buy them whatever the price? Yeah, I have a lot of sympathy for producers because it can put them in a terrible bind. So, I remember speaking to makers of Australian cult wines during the year, Parker era. Now, they would release their wines for about $50. I need to see speculator snap them up and resell them for $400 or 500. So the people who made these wines didn't get any of the value and it was inevitable that they put their prices up. But what happens when your wine stops being a cult wine and, you know, it's at $500. It's very difficult to put it back down to $50, which is what they needed to do. So this is a vicious conundrum right now that many French producers are facing. I spoke to an importer in the US last year who was tearing his hair out because he was importing wines that sell in Europe for 40 euros. But speculators in the US were buying them and reselling them for about $400. So what does the producer do? If they put their prices up in Europe, then they betray their loyal customers and they make people angry. But if they put them up only in the US, then they anger American consumers who can see the European prices on wine searcher. Yeah, remember we interviewed a collector in Thailand who was, you know, flying back to Thailand to see if his wines from the Juhar had arrived. And that's a wine that I was buying for 20 euros. And he was buying them for $600 a bottle and with, oh, that's interesting. It sounds like you're saying it's inevitable that many fine wines will end up in the end of the rich, right? But having wine traded on the secondary market brings prestige to the producer, though a present there is in guaranteed. Isn't that the same thing as, you know, you only loan money to rich people. Also, you want to say you only sell wines that are already recognized on the secondary market. So hence the difficulty for newer wines to get into that secondary market. Yeah, generally the most important thing you need for the secondary market is time. So wines need to prove themselves over the long term. Having said that, I have seen wines come from nowhere that are highly sought after and get traded on the secondary market. And a secondary market is now springing up for natural wines. And that's a phenomenon that's less than a decade old. But here's the problem. Anytime you get the prospect of big returns, you're going to attract criminals. And in the past 25 years or so, we've seen counter-fritting and fraud rising tandem with the growth of the secondary market. And here is Fiona Morrison telling us what they are doing at Le Pen in terms of protecting their wines. I did think I'm giving any secrets away when I tell you that almost any high-priced luxury wine has several methods of traceability and authentication built into their bottle. Whether it's Grand Croupe, Burgundy, Fersgrove, Bordeaux or the luxury brands of the Panneral, there are two issues here. There's the traceability. I being able to track the history of the wine like you do with a fine painting and to be able to track the different stages of the wine's life until it reaches until the bottle is drunk. That's one side of the problem. It's a bit complicated because you do rely on the trade playing a part and being co-operative with the traceability. And again, that's why you need to have such close relationship with them. Exactly. Exactly. And so traceability is very important. It blockchain is not really doing it and you know, with great, great friends with several top Burgundy estates and it's a really hard and very time- wasting or time-using process. But traceability is important. And then authentication is easier because there are certain things that we can do on the glass of the bottle, on the label, on the cork that really show that that bottle was genuine. But I have certainly been, Jacques and I have certainly been in the Far East where we have seen somebody a sommelier basically take apart a bottle of lapar, open it without any trace of that bottle being opened, pouring the wine out and filling it up with something else, replacing the cork and the capsule and making it sot again. And if you look on Alibaba or any other sites, it is amazing to see how much a empty bottle of a first-growth bordeaux sells for, especially if the bottle, the capsule and the cork are sold together. The best solution is to trust your distribution chain. Do you request them to like break the bottle or to? Especially in a restaurant trade, after we done a tasting, we'll go out to the loading dock and it's become sort of ritual with a lot of the sommeliers. Okay, let's go and take a glass of wine and we'll go out to the loading dock and see the bottles being destroyed. Absolutely. And again, we can do that because we're small but it's very important to make sure that you are showing the trade that you're taking fraud and authentication very seriously. It's post-sale reinsurance. It's not a 100% fallible. You could have lips with, we have a NFC dot on our bottles, but sometimes the connection doesn't work, just like a credit card doesn't work sometimes. But if you have to be show, show the trade that you are taking it seriously. And then you spend the energy. So if we can sum up the discussion for a wine to be successful on Laplace, it has to be desirable. Which means it has to be known and sought after. One way to create that desirability is through brand building and this has to be done by the producer, not by the negotiations of Laplace. Yes. And if I have to summarize what a successful brand is, a successful brand is a brand that sells the amount of bottles that they want to sell in the markets that they want to sell. out to for the price that they want to sell to and are perceived the way they want to be perceived. Now, Felicity, what are we talking about in the next episode? Pauline, we're going to go back in time. We're going to go to the beginning of Laplace to find out how it all began, including how institutions like the 1855 classification came about. I can't wait to hear what you've discovered. I think it'll be really interesting. Until next time. Bye. This podcast episode was presented by me, Felicity Carter, editorial director of Oriny Global, along with Pauline Vickard, the CEO and co-founder, and it was edited by Pauli Hammond and the five forests team. We want to thank all the fascinating personalities who took the time to answer all of the hard questions we threw at them, only a few of whom were featured in today's episode, but you'll be hearing from many, many more of them in the episodes to come. Insign Applairs de Bordeaux was made possible thanks to the support of the civil vision, one of Bordeaux's leading negotiations house. We are very grateful to Matrius Chadelogne and all of his team for sharing Insights, Data, Contact, while allowing us to totally tutorial freedom. Until next time. See you. Bye.