23/03/2019 Baron Philippe de Rothschild first arrived in Chile over 20 years ago, pursuing a host of goals, from managing long-term risk to banking on the future, while passing on its knowledge as well as learning from the local culture.
Today, as the company born in Pauillac, France, has become one of the country’s leading wine producers, its development is still rooted in the same principles and values of innovation, stewardship, and loyalty to its tradition.
Chile’s longstanding history with wine started in the 16th century when the Spanish ruled the country. At the time, winemaking was mostly about producing altar wine for religious orders that had come with the conquerors. Viticulture truly took off in the 19th century, after the country’s independence. French grape varieties such as Cabernet Sauvignon, Merlot or Chardonnay were then imported. Owing to its location between the Andes and the Pacific Ocean, its climate and its rainfall, Chile is perfectly suited for producing quality wines (1). Today, Chilean vines cover 138,000 hectares (ha), mainly in the country’s central valley, that stretches up 400 kilometres north and down 800 km south of Santiago. As a comparison, wine growing areas span 225,000 ha in neighbouring Argentina, 419,000 ha in the US, 792,000 ha in France, 830,000 ha in China and 1,021,000 ha in Spain, the world’s largest wine producer, and exporter. (2)
Since the 1980s, Chile’s wine growing potential has attracted many international winemakers. Following the first venture in 1996 with Almaviva, Baron Philippe de Rothschild started a local branch and created an exclusive Chilean brand – Escudo Rojo – in 1999. Escudo Rojo is translated literally from the German Rote Schild – the Red Shield – and is Baron Philippe de Rothschild Maipo Chile’s flagship brand. In 2015, Emmanuel Riffaud became the company’s CEO but had been running the company since 2008. “Our initial investment in 1996 was visionary, just like what Baron Philippe de Rothschild did in 1979 in California for the Opus One project in cooperation with the Mondavi family,” stated Riffaud. “In Chile, we created Almaviva, a ‘Cru Classé’ type of high-quality wine, via a joint-venture with the Larrain and Guilisasti families, owners of Concha y Toro, one of Chile’s major winemakers. Following the success of this first venture, we decided to launch our subsidiary here in 1999.”
A Long-Term Kind of Investment
For Baron Philippe de Rothschild, Chile is certainly not a fad. “Chile is one of the New World countries with the most promising wine growing potential,” notes Riffaud. “Beyond that, our long-term commitment stems from the collaboration of two families that share the same work ethic and sense of honour, the same desire to always reach excellence, and a somewhat discreet way of operating. Above all, Baron Philippe de Rothschild is a family-owned organisation that cherishes perpetuation and passing on of values. The same goes for Concha y Toro, owned and managed by the Larrain and Guilisasti families since its inception.”
In a country that was changing at a fast pace, this partnership approach greatly facilitated Baron Philippe de Rothschild ‘s integration and adaptation to a very different cultural environment. “We enriched one another,” explains Riffaud. “We never tried to impose our ideas or ways of thinking. We evolved with the country, adopted a local way of operating and hired many local workers. I believe this is what made us successful here and has enabled us to remain a reference in Chile, 20 years later.”
PHILIPPE BUJARD Technical director, Baron Philippe de Rothschild
A Strong Focus on Passing on Expertise
While Baron Philippe de Rothschild never tried to impose their rules and always strived to remain humble, they also wanted to stay true to their values and traditions, and to pass on their expertise. This aspect of the venture fell into the hands of Philippe Bujard, the company’s technical director. “I first came here in 1996, for the Almaviva project (3). My role was to train the locals, both workers, and managers, and to help them learn our winemaking methods. I also had to acquaint them with the way we manually treat and harvest grapes, as everything here was mechanised. Today, I still focus on transmitting this expertise, because we need to abide by strict quality standards – an endeavour that requires constant adaptation. This is why spending lots of time with our workers and managers and doing a lot of explaining is paramount. What makes things significantly easier though, is that local people display a constant appetite for learning.”
Despite its long winemaking history, Chile still lacks dedicated national training programmes. Therefore, Philippe Bujard’s training missions are not limited to the 70 employees – or up to twice as many, come harvest time – of the company. “I also spend a significant amount of time with our 15 or so grape supplier,” says Bujard, “with the same goal in mind: making sure the fruit meets the quality standards required for producing our wines.”
Sourcing talent is yet another issue. “Beyond finding the right person for the right mission, it’s about striking a pact with somebody that understands the very essence of our business,” says Sebastian Rebolledo, CFO of Baron Philippe de Rothschild in Chile. “High potential individuals tend to favour the urban lifestyle, which limits our options; our ideal candidate also is a nature-loving person who will thrive in the stunning scenery that we’re immersed in every working day. It has to be someone who thinks that this is better than having a Starbucks outlet around the corner.”
The complexity of the task explains the company’s human resources strategies. “Even though our financial objective is optimising our cash-flow and our investment plans, the matter we deal with on a day-to-day basis is humanity. It is both our main driving force and a daunting challenge” concludes Rebolledo.
SEBASTIAN REBOLLEDO CFO, Baron Philippe de Rothschild
Driven by foreign sales
As a result of 20 years of hard work, Baron Philippe de Rothschild Maipo Chile now produces about 330,000 boxes of 12 bottles every year, which amounts to global sales near 12 million USD. “We mostly sell premium wines, which cost about USD 40 for a box. In this category, we rank among Chile’s five largest bodegas”, Riffaud explains. “99% of our wine is exported, with Asia accounting for 40% of our sales. Japan is our first market, and China is growing rapidly. We also sell in Canada, in Brazil, in the US and in Europe.
“The Chilean market is a small one,” Riffaud adds. In global volumes, the country is the 4th largest wine exporter in the world, with 9.1 million hectolitres, but the domestic consumption is rather low. In 2016, yearly wine consumption per inhabitant over 15 years of age did not exceed 14.7 litres, far behind Portugal (54 litres), France, Sweden and Switzerland (4). Considering global volumes, the USA is the largest market, with 13% of the total world consumption. France (11%), Italy, Germany, and China follow in that order (5). These five countries alone consume almost half of the 267 million hectolitres that are drunk in the world every year, for a global value of 73 billion USD in 2015. “In the years to come, Asia and North America will be the main drivers for the growth of the wine and spirits market,” says Guillaume Deglise, General Manager for Vinexpo Bordeaux. “Future markets will be found in China and in the USA, where growth is expected to reach 11% in the next five years. Canada and Japan are also growing significantly. Today, Europe still accounts for over 60% of global consumption, but people everywhere enjoy wine, with new promising markets emerging in Africa, Mexico, Vietnam, and Thailand.” (6)
EMMANUEL RIFFAUD Head of Baron Philippe de Rothschild
Showing foresight, again and again
Riffaud does not see the good performance achieved by Baron Philippe de Rothschild Maipo Chile as an excuse to rest on one’s laurels. “We do have a famous brand name, but we cannot overuse it and be idle. In Chile, as we do everywhere, we need to be able to question ourselves, to keep building our brand and strengthening our position. From our founders, we inherited a spirit of innovation, which we need to bring to life daily. Philippe de Rothschild himself was in many ways a visionary. In 1924, he was the first producer to bottle his wines on the property and to write it on each bottle – he saw it as a token of quality for customers. Innovating, taking risks, banking on the future is part of our company’s core identity. We owe it to ourselves to stay true to it.”
Discovering new lands
Baron Philippe de Rothschild’s future in Chile will rely on the company’s ability to invest in new high potential winemaking areas. “Chile’s climate is not as erratic as Europe’s,” Riffaud says. “We were hit by El Niño last year, but we benefit from somewhat stable temperatures and rainfalls, which enables us to have a better idea of the quality of the upcoming vintage. However, we still need to adapt to natural conditions and reinvent our ways of working and our processes almost every year. In this instance, our Bordeaux culture gives us a true savoir-faire, as it is based on a micro-terroir and micro-winemaking approach which allows for increased flexibility. However, we also consider the longer term, taking climatic changes into account. As an example, we have recently invested in the Maule Valley, 250 km south of Santiago. It is wetter and cooler than the Maipo Valley. So, the wines will be different, but we are banking on the idea that Chile’s wine production will probably have to move south in the years to come. In other words, we see it as long-term risk management.”
With Mazars, Shared Values and a Shared History
“Long-term commitment is one of the main characteristics of Baron Philippe de Rothschild Maipo Chile,” explains Damien de la Panouse, Mazars’ Managing Partner in Chile. “They were one of the first French companies to invest here in the long run, without looking for short term return on investment. This is one of the main reasons that led us to want to work with them.” Neither Mazars nor Baron Philippe de Rothschild is living in the past and giving in to nostalgia; on the contrary, “both organisations put great emphasis on their corporate histories and values and aim for sustainable growth,” says De la Panouse. “Above all, the goal is to develop our businesses soundly, and to make it so that future generations can continue the adventure in the best possible conditions”.