The label is everything

For Bernard Arnault, quality comes before cost. That's why he's ready to pay over pounds 100m for a small French vineyard. Why?
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The Independent Online
More than pounds 120m is a hefty price to pay for a small farm, but that's the value Bernard Arnault, one of France's most astute businessmen, has placed on Chateau d'Yquem.

Of course, Yquem, complete with fairy-tale chateau perched atop a sea of vines, is no ordinary estate. Its 260 acres of vines in Sauternes, 20 miles south of Bordeaux, produce the best, and most expensive, sweet white wine in the world. Indeed, in the famous 1855 classification of the wines of Bordeaux, only Yquem was deemed worthy of the accolade of Premier Cru Superieur; other Sauternes, and even the greatest clarets such as Chateau-Lafite, had to be content with being called Premiers Cru.

Unfortunately for the owners, this nectar comes only in minute quantities. Whereas every vine producing black grapes yields a bottle of fine red wine, those at Yquem grants a mere glass. Moreover, in some years, most recently 1992, no wine at all worthy of the great name is produced and in many other years, less than half the wine produced is deemed worthy of the name.

This is because of the extraordinary nature of the whole process. The concentrated quality of the wine comes from a natural phenomenon called botrytisation, in which the grapes, attacked by a tiny fungus, shrivel into unappetising-looking raisins which have to be gathered one by one during a harvesting season that can last well into December.

It's hardly surprising, then, that a bottle of the 1990 vintage, the last to be released, is worth more than pounds 100 on the Bordeaux market.

But the purchase of a majority stake in Yquem by M Arnault's group, the clumsily named LVMH (it stands for Louis Vuitton-Moet Hennessy) is not just a nine-day wonder. It is a startling example of how profoundly French habits differ from those prevailing on this side of the Channel. Sadly, it is part of a trend in which the greatest names in Bordeaux are now increasingly in the hands of financial institutions or groups such as LVMH.

In most cases, the newcomers have the funds to produce better wine than the previous owners - although Yquem has been brilliantly run by Comte Alexandre de Lur-Saluces since 1968.

The reason for the sale of Yquem, as of many other estates, is the diktat, dating, like so much else in France, from the days of Napoleon I. This decrees that a parent has to divide the family property more or less equally among all his or her offspring. This ensures that after a few generations, shares in an estate like Yquem are held by large numbers of distantly related cousins, many of whom will be far more interested in ready cash than in the exiguous dividends - including a few cases of the wine which they got as their share of the botrytised spoils.

This problem has been exacerbated by the vast increase in the value of estates such as Yquem. When M de Lur-Saluces took over the management of the estate in 1968, it was worth less than a tenth of today's price. Despite his success, it seems likely that he will be one of the first victims of the transaction.

This is not the only way in which the sale marks a sad day for Bordeaux and has naturally aroused a considerable storm of protest.

Yquem has been in the hands of a single family for more than 400 years - far longer than any other estate in France. It was leased from the French crown in 1593 - having first been taken from King Henry VI in 1453 - by a M Jacques de Sauvage.

In 1785, his direct descendant Francoise-Josephine de Sauvage d'Yquem married a M de Lur-Saluces. He died three years later, but his widow fought against all the odds and managed to hold on to the estate during the upheavals of the French revolution.

Since then, successive generations of Lur-Saluces have run the estate on behalf of an increasing number of family shareholders who, led by M de Lur-Saluces's elder brother, have finally decided to cash in their profit.

The positive - and equally distinctively Gallic - side of the deal lies in Bernard Arnault's reasoning. The name of the group he has built up with astonishingly deft financial footwork over the past 10 years gives only a hint of the brands it covers.

They include many of the great names of Champagne, including Moet & Chandon, Veuve Clicquot and Pommery (the latter snatched from a British bidder at the last minute in a successful attempt to ensure that such a proud old name remained in French hands). In Cognac, he controls Hine and Hennessy, the biggest name in the business, and Louis Vuitton is the most famous name in the glitzy luggage business. M Arnault has steadily increased his presence in the perfume and fashion world which includes Christian Dior, as well as backing Christian Lacroix in his rise to fame and fortune.

Like Yquem, all these businesses have one common feature. They are synonymous with luxury the world over, and M Arnault makes no secret of his belief that such names represent a guarantee of long-term profit, if the glamour inherent in the name, and the monopoly power it represents, is properly exploited.

This policy involves not only policing the brand to ensure that its value is not dragged down by using it for inferior or down-market produces. It also means consistent long-term spending to improve the products, and to add and promote "brand extensions" which can range as far as the sleek Barbour-type jackets sold under Dior, a name once only associated with perfume and haute couture.

Such an approach is necessarily long-term, for it can take a decade to turn a new idea or a new brand into a profitable item on the balance sheet.

This is where the story of M Arnault and Chateau Yquem take on relevance for the British economy. For British quoted companies, in contrast to those in France, are inevitably dominated by the need to show the City that earnings are rising every three months. Hence the fact that only a handful of companies - including some in the drinks business - are capable of nurturing brands old and new and thus creating a capital asset. They are difficult to value, but worth more in the long run than the bricks and mortar beloved of the accountants who dominate British business. Hence, I fear, the absence of a British Arnault and a growing gap in the commercial armoury of British business.

Nicholas Faith is editorial director of the French magazine `L'Amateur de Bordeaux'.

Vins extraordinaires

What's in a name? In the case of Rolls-Royce, Yves Saint Laurent, Faberge, the Ritz, Concorde, the name says it all: exclusivity, luxury and snob value. A similar unpalatable irony permeates Yquem and the world of wine. As Edmund Penning-Rowsell, author of The Wines of Bordeaux, likes to point out, "the best wines get poured down the wrong throats". The blue chip names may be familiar, but the closest most of us ever get to more than gawp at fancy labels is in our dreams.

The fanciest of French labels dwell in Bordeaux, where the prestige of the five First Growths is immutable. Since the 1855 Bordeaux classification elevated Chateau Haut-Brion, Lafite, Latour and Margaux to the head of the list, the addition in 1973 of Mouton-Rothschild has transformed the fab four into the famous five. Reclassified alphabetically since 1973 to spare sensitive owners' feelings, each battles for top place every vintage. Haut-Brion is widely regarded as top in 1989 for instance, Latour in 1990.

The classification conveniently omits the famous five's rivals from the right bank of the Dordogne, but Chateau Cheval Blanc and Ausone in St- Emilion command as much respect as Lafite or Latour and prices to match. Chateau Petrus, the rare Pomerol property, is the most expensive of the lot. Even Petrus has been eclipsed this year by a new Pomerol phenomenon: Chateau Le Pin. Gold dust comes cheaper than the 1982 vintage of Le Pin, which sold at Christie's New York this year to a Far Eastern buyer for pounds 28,000 a case - or pounds 400 a glass.

The Domaine de la Romanee-Conti, or DRC, is the most prestigious estate in Burgundy with Romanee-Conti itself the most highly prized of its six wines. The DRC's redoubtable part-owner, Madame Lalou Bize-Leroy, lost control of the estate in a power struggle in 1992; her Richebourg now attains higher prices than all the DRC wines except for Romanee-Conti.

The Rhone valley's Hermitage rivalled Bordeaux in the last century for prestige, but star status has only returned recently to the Rhone thanks largely to the praise heaped on its wines by the American critic, Robert Parker. Great older vintages of Paul Jaboulet's Hermitage La Chapelle are now highly prized, but the sky's the limit virtually on day one of release for Marcel Guigal's three top Cote-Roties, La Mouline, La Landonne and La Turque.

The glamour of champagne makes it the ultimate status symbol. According to Paul Bowker of Christie's, the scarcity value of Krug Clos de Mesnil and Bollinger Vieilles Vignes Francaises gives these two rare champagnes the edge on price. But Moet et Chandon's Dom Perignon is the most obvious fashion statement in de luxe champagne. If DP, as its Hollywood admirers call it, is consumed for its power to win friends and influence, Krug is the purring Mercedes of champagnes, Roederer Cristal the elegantly crafted Lalique.

Anthony Rose