When a billionaire bought a French château, he found himself on an unexpectedly steep learning curve. “My other businesses are simple,” says Stephen Adams, referring to his banking, publishing, billboards and vehicle distribution businesses. “Wine is more complicated and more challenging, but I like challenges.” Standing among the barrels of his St-Émilion château wearing natty yellow-and-black
braces, the 78 year-old admits that two decades as a wine producer have taken him on an unexpected journey. His wife Denise, who has at times stewarded seven estates on both sides of the Atlantic, agrees. “Yes,” she says, “at first, compared to the US, the ways of doing things in France did come as something of a shock.”
The US approach
Adams was already a keen Bordeaux collector when he and Denise decided to honeymoon in St-Émilion. On the bookshelves of the château where they were staying, he found a book about the wine business that caught his attention. “What other business sets you against 15,000 competitors? And is so dependent on ratings by critics with judgments you may not agree with?”
Two years later, he dipped his toe into wine, buying Bella Vineyards in Sonoma, giving its management to his son Scott and daughter-in-law Lynn. Distribution was handled in the same way as by other California wineries, with a combination of a sales team, a cellar door and a wine club whose members receive regular shipments of wine and VIP treatment at the winery.
“My husband is something of a collector,” says Denise Adams, explaining how after buying their Californian winery in 2000, the Adams acquired an estate on the other side of the Atlantic - Château Lagarosse, in the Premières Côtes de Bordeaux. Two years later, they snapped up Château de Candale in St Emilion before raising their ambitions to acquire, in 2004, Château Fonplégade, a well-sited 18.5 ha Grand Cru Classé. Like many other first-time purchasers of French wine estates, Denise Adams admits there was no real business plan. But both of the Adams were highly successful business people – Denise’s background included running her own interior design company – and, they had the model of the Bella Winery to work from.
In Napa and Sonoma, it’s a rare winery that does not welcome visitors and offer a tasting room in which one can buy their wines. In Bordeaux, however, top châteaux decline to sell any wine at cellar door and many only welcome people who have booked in advance. Wineries across the US also routinely charge for tastings and visits – a rare phenomenon in Bordeaux – and offer wine club subscription schemes. For a regular payment, members of these clubs receive shipments of wine at a preferential rate and VIP treatment at the winery. The concept is so little-known in France that, until recently, none of the necessary software was available in French.
Considering their locations and the investment required, Adams decided against launching cellar door sales, let alone a wine club at Lagarosse nor Candale, handing full responsibility for distribution to salespeople. Fonplégade, however, a beautiful château close to illustrious neighbours such as Ausone and Angelus, seemed to offer greater potential for direct sales. Part of the $7m that was spent by the Adams on improvements to the vineyards and winery went on a stylish tasting room and the creation of basic French-language wine club software. Fifteen-euro tasting tours were introduced and staff were trained in signing up club members.
Over the following five years, the appointment of Michel Rolland as consultant and winery investment – including a switch to organic farming – began to pay off with better points from the US critics. The tasting room also attracted an impressive 7,000 people per year.
By 2009, the Adams had bought a super premium winery called ADAMVS in Howell Mountain in the Napa Valley, and three more châteaux: Château de Bel-Air in Lalande-de-Pomerol. Château Roylland in St-Émilion and Château L’Enclos in Pomerol. In May of that year, Stephen Adams, who had often expressed a desire to own a property on Bordeaux’s left bank, shook hands on a deal to purchase Château Poujeaux in Moulis e Médoc.
That handshake agreement proved to be less than binding, however, as the vendor sold the property to another buyer. But, on reflection, Denise Adams thinks that not getting that estate was probably a blessing. Stephen Adams may have enjoyed collecting châteaux, and the couple may spend much of their time in Bordeaux, but his wife was becoming painfully aware of the volume of work the collection entailed.
The Bordeaux way
After several years of owning Bordeaux properties, Adams had discovered the frustration of having anything less than illustrious appellations. In California, there are few restraints on the price one can ask for a highly-rated wine. “We sell all of our ADAMVS Sauvignon Blanc for $350.00 a bottle – to people who have joined our mailing list,” she says. In France, though, there is a clear hierarchy. However fine the quality of a Premierès Côtes de Bordeaux or a Lalande-de-Pomerol, a glass ceiling will always prevent it from selling for as much as a Grand Cru Classé St-Émilion or a Pomerol. “I wasn’t interested in making mediocre wine,” Denise Adams says, “I wanted to make special wine.” So, all of the French estates were sold, apart from Fonplégade and l’Enclos. “It was the best decision we ever made.”
The other key discovery was that US-style distribution wasn’t working at Fonplégade. There was, Adams says, the simple problem of credit cards. “In the US, people are quite ready to sign up for membership of a winery wine club and fill in a form with their payment details. The French don’t seem to like doing that. I used to get surprised telephone calls from my staff to tell me every time a French visitor had given us their credit card number.”
Nevertheless, 500 people did join the club, and received their invitations to collect their allocation at a château ‘Pick Up Party’. At these events in California, guests are given canapés and the chance to network with like-minded people and to taste other cuvees. In the US, a significant number of the attendees then place orders that help to cover part of the cost of the event. At Fonplégade, by contrast, French club members, came, ate, drank, networked, collected their allocation – and left, without buying any extra wine. “We tried running the Pick Up Parties in three different ways, but the result was always the same,” Adams recalls.
Other issues included the continuing lack of European, purpose-built international direct-to-consumer software for the wine industry. The off-the-shelf programs used in the US handle response programs, database entries, and sales and merchandising. A European model also had to cover multiple currencies and languages. As Adams says, “Without this kind of sophisticated software program, one needed two full-time employees to handle back-office work alone, by hand, as well as additional staff to regulate attrition.”
Finding bilingual staff who understood direct-to-consumer sales was another major problem but, Adams recalls, one of the most challenging parts of running a wine club in France was handling the packing and shipping. “At Fonplégade we did it all in-house. In the US, there are multiple choices of companies that specialise in offering these services to wine clubs.”
Denise Adams began to think that perhaps her neighbouring château-owners were right in their insistence that the best way to distribute Bordeaux was through the négociants who trade through virtual market of La Place de Bordeaux. Relying on dozens of these merchants to market and sell your wine, the Bordelais claimed, was a less costly and more efficient strategy than employing one’s own sales team or appointing agents.
Yet Denise Adams worried about La Place. How could one maintain any control over where the wine was sold and at what price? California wineries routinely took pains to track these kinds of details.
After some consideration, Adams resolved to combine the US and Bordeaux models. Instead of using 100 négociants like many châteaux, the Adams would entrust their wines to a smaller number who would effectively act as regional agents. “We made a shortlist of 40 merchants we thought we might be able to work with and then interviewed them one-by-one over lunch at the château.”
Her criteria included the markets in which they worked, their customers, their financial help, and their approach. “We certainly didn’t just want to go with the biggest, and several négoces wouldn’t have come on board in any case.” Many meals and “about a year of due diligence” later, the list was reduced to just 10: “The ones we were most excited about.”
The relationship she has maintained with the 10 négociants is far closer than it is with most other château owners, who are often happy to see their wines pass through the hands of a courtier to whichever merchant wants to take them. “We really have to work together, in terms of which markets each négociant handles and over pricing. They hold us accountable to support them by making trips to their customers, and to make sure that everyone keeps to the rules and that there is no under-pricing.”
Adams has not completely given up the US model. Although the wine club has been closed, visiting Americans can still visit, taste and buy wine directly from the château – and have it delivered to the US. “We limit the direct sales to 5% of our production, however. Anything above that, we send them to their nearest US stockist.”
Bill Blatch, now of Christie’s Bordeaux but formerly of Vintex, one of Bordeaux’s leading négociants, says that the Adams strategy is likely to become a model for a growing number of producers. “Back in the 1970s, the estates used to give lots of négociants 25 cases each in order to spread the risk. That doesn’t work any more. Today you need to be a lot more focused.” But, as Blatch continues, being one of a small number of négociants that share a châteaux’s exclusivity has its downside. “At Vintex, I really hesitated before accepting that kind of deal. It puts a huge amount of responsibility onto you. How much time are you really prepared to put into working for one producer?”
For the relationship to work, there has to be a high level of mutual understanding and support. “We worked for a garagiste in St-Émilion who allowed us a very decent margin when things were going well, and was ready to share the pain when they weren’t.”
Denise Adams is aware of those good and bad times. “We only produced 40% of our usual volume in 2013 and, yes, we’ve still got it and we’ve got to sort it out, but we sold all of our 2014, and good marks for 2012 meant that we sold all of that, too.”
Looking back, Adams admits that adopting the Bordeaux system “came as a shock”. But now she says it makes sense. As for the Bordelais, they may look back at the Adams’ team-building exercise as a shape of things to come.
As Blatch says: “I think there’s no question that in the future, the négociants will have to do more of this kind of hand-selling.”
