Christian Barré: Restless in Rioja

Christian Barré, chairman & CEO of Pernod Ricard Winemakers Spain, explains how Campo Viejo has become such a success story for the group and outlines his luxury ambitions for the Ysios brand.

Christian Barré, chairman & CEO of Pernod Ricard Winemakers Spain

As the many people who have been seduced by the idea of owning a winery can testify, that romance is quickly punctured by the realities of the bottom line. Impossibly fragmented, vulnerable to the vagaries of farming and often taking several years before it can even reach a market where prices are fiercely competitive, it is no surprise that the giants of the drinks industry tend to focus on spirits or beer.

Just look at Foster’s decision to cast off its wine division in 2011, the same year that Rémy Cointreau sold its Champagne portfolio, freeing up capital to buy itself a nice whisky brand instead. Over at Diageo, investment is being firmly channeled towards the booming Scotch whisky market and the opportunities it sees with Tequila.

So what’s going on a Pernod Ricard? Last financial year its four “Priority Premium” wine brands, which represent 5% of the group’s total business, achieved combined sale growth of 2% – not bad when you consider the slide in Pernod’s overall figures thanks to Chinese-related hit taken by its Cognac and whisky divisions.

Of these wine brands, it is Campo Viejo, a 1.9 million case Rioja brand that controls nearly 10% of the region’s vineyard area, whose performance and activity is particularly eye-catching right now. Pernod Ricard increased its marketing budget by 23% for 2012/13 and was rewarded with 10% volume and value growth. That’s in a Spanish wine market which, according to IWSR figures, saw global volume growth of just 3% in 2012. In the UK, Rioja’s largest export market, Campo Viejo saw value sales leap by 20%. Meanwhile US sales rose by 12% and even the faltering domestic market, Campo Viejo’s largest, grew by 7%.

“It’s growing well everywhere,” sums up Christian Barré, chairman & CEO of Pernod Ricard Winemakers Spain, who attributes this success to a number of different elements. Firstly, he notes, “Campo Viejo is a very easy to understand brand; its hierarchy is very clear.” This simplicity was enhanced in 2012 with the decision to reclassify its crianza level wine as Tempranillo. “Customers were confused by crianza; they thought it was a variety,” explains Barré.

Nor does Pernod allow its wine division to be excused from the relentless level of innovation that is more usually associated with the spirits sector. “Vodka is easy because there are no rules, but that doesn’t prevent us from innovating,” maintains Barré. “Innovation is key at the premium level.” Last year saw Campo Viejo add a Garnacha to its range, which Barré explains as “an innovation that really addresses the consumer need for a round palate.”

What’s more, accelerated by an experimental winery completed in 2013, the next development is already in the pipeline. “We’re working on something new for release in the next year or so,” reveals Barré, although he refuses to be drawn on the precise form this new product will take. Nevertheless, he does acknowledge an obvious gap in Rioja’s current reputation, saying: “We will be doing more in the future with white and rosé.”

Certainly from a viticultural perspective the timing is ripe for such a development. In a bid to strengthen its market share for white wine sales, 2009 saw Rioja’s regulatory board authorise the planting of 1,725 hectares of six white grape varieties. These included the newly permitted Sauvignon Blanc, Chardonnay and Verdejo, which are allowed to make up a maximum of 50% of a final blend, as well as three indigenous – but at the time very rare – varieties in the form of Tempranillo Blanco, Maturana Blanca and Turruntés.

Campo Viejo winemaker Roberto Vicente in the brand’s new experimental winery

For all this work to broaden Rioja’s offer, Barré is wary of venturing too far from the region’s traditional offer. “We just want to make sure we don’t confuse people,” he remarks. “I think Navarra made a mistake a few years ago by going out of its strength, great rosé wines, and going for reds like Rioja and whites too – it’s confusing.” In short, Barré sums up: “White is coming but the hectares are limited so it will take time. If we want to be credible it has to be slow and at a premium level.”

Broadening his gaze to the group’s wine division as a whole, Barré highlights the “important statement” sent out by last year’s move to rebrand this from Premium Wine Brands to Pernod Ricard Winemakers. “It means we all belong to Pernod Ricard and wine is a key pillar of the overall strategy,” he explains. From an internal perspective, he notes the mutual advantage for these brands’ winemakers of annual visits to each other’s winery. “That really helps,” remarks Barré. Alluding again to possible developments on the horizon for Campo Viejo, he adds: “The New Zealand winemakers have fantastic expertise in white wine.”

While spirits remain the dominant force in Pernod’s portfolio, Barré is quick to justify the group’s ongoing significant investment in its wine division. “Today wine is very important,” he insists. “You can be a leader in spirits but there are certain consumer occasions that you cannot address with spirits. A key part of our strategy is to address all those occasions.”

As for the appeal for what is after all a French-based company of nurturing this Spanish brand, Barré highlights some key strengths of this country. “Spain overall benefits from a positive image and more than 60m tourists a year,” he points out. For Barré it is no coincidence that the top export markets for Spain – the UK, Germany and Holland – are also the country’s biggest suppliers of tourists. Similarly he links the 1.2m Russians who visited Spain last year to the fact that Campo Viejo is growing “very, very rapidly” in this market after launching there 18 months ago.  “Everyone speaks about China but in the short-term view clearly Russia will be much more important than China in the five years to come,” argues Barré.

Indeed, in contrast to sister brand Jacob’s Creek, which has been building a solid base in China for more than 15 years now, Barré admits that Asia remains the area “where today Campo Viejo is weakest.” Nevertheless, he maintains, “we do feel it has very good potential,” citing sensory tests carried out by the brand with Asian and especially Chinese consumers. They may not appreciate it yet, but “clearly the Tempranillo variety suits very well the Chinese palate and matches well with Chinese food,” according to Barré. For the moment, however, he confirms: “Clearly the priority in China for Pernod Ricard is Jacob’s Creek,” while Campo Viejo maintains lower key activity “to make sure we are in the right channels at the right price.”

The Calatrava designed Ysios winery in Rioja Alavesa

Instead, Barré is devoting his Asian efforts to building a strong Chinese base for the group’s other main Spanish brand, Ysios, which has recently undergone a major overhaul. Based in Rioja Alavesa and having produced its first vintage in 2001, Ysios is currently perhaps best known for its striking winery design by architect Santiago Calatrava. From around 40 hectares of vineyard the brand currently produces two core wines, both 100% Tempranillo: a reserva and the Edición Limitada, which is only produced in the best years. On top of this the winery has developed Club Ysios, a membership concept through which Barré plans to channel Ysios’ entire Chinese business.

“There’s a list of benefits apart from the wine,” he outlines. “You’re invited to the winery with a business class fare, you work with [winemaker] Luis to ‘finish’ the wine, you can use the facilities or organise a private party there.” Setting this offering within a wider context, Barré insists: “For us Ysios is a luxury wine and has to be positioned as such.” Nevertheless, he admits: “In the past it was in between; the quality was good, the winery was fantastic but we felt it was missing a totally consistent and coherent message. If you speak about luxury wines it must not only be a wish but in every detail of what you do.” As a result Barré explains, “Three or four years ago we started to rethink the Ysios concept, the details of the vineyard, the barrels, club Ysios. We have made dramatic selections in the vineyard and an additional selection for the Edición Limitada.”

Making an initial move in its current main market of Spain, the brand repositioned itself from the 2007 vintage, which involved a price increase from around €18, a level described by Barré as “clearly too cheap”, to €25. With the focus now shifting abroad to China, where it will sell for the equivalent of around €120 per bottle, Barré suggested that the US has the potential to become another strong market for Ysios. Setting out a “target price” of $50 per bottle in this market, Barré identified the potential Ysios consumer in the US as “the ones drinking Pingus or Vega Sicilia today.”

Despite its position as a major hub for the fine wine market, Barré suggests that the UK is unlikely to form a significant focus for Ysios. “In the UK we just sell a few cases and will probably remain small for select consumers who enjoy having a good selection of the best wines from Spain,” he remarks. Explaining this position, Barré continues: “In the UK the price level is extremely compressed; most wine is sold below £10. In the US it’s much wider; they’re used to paying more for wine. There is potential in the UK but for me it’s not as clear as it is in the US. It’s a question of priorities and in the UK there’s so much focus on Campo Viejo.”

For all the glamour of these ambitious plans for Ysios, it is Campo Viejo’s future performance that will do most to shape Pernod’s balance sheet. Despite the brand’s significant growth, Barré assures that it is well placed to meet this demand. The company’s major presence on the Riojan landscape means that it is in a strong position to secure additional grape contracts and, confirms Barré, “We’ve already factored in Russia and sat down with the growers to plan.”

No one’s pretending that building a wine business on this scale is easy, but of the major drinks firms contrary enough to persist with this task, Pernod Ricard’s model is one to watch.