June 23 (Bloomberg) -- Charging down the red carpet of the 64th Cannes Film Festival last month, the 39-year-old grandson of Baron Philippe de Rothschild recalled his pioneering ancestor’s eccentricities with delight.
“My grandfather was the only Rothschild who detested being referred to as a businessman,” says Julien de Beaumarchais de Rothschild. He’s the baron’s heir and with his 77-year-old mother, Baroness Philippine de Rothschild, owns privately held Baron Philippe de Rothschild SA, which he says annually produces between 100,000 and 150,000 bottles of the Bordeaux first-growth Pauillac Chateau Mouton Rothschild.
It has been that way since 1973, when the baron successfully concluded his 20-year crusade to convince fussy French government vineyard analysts and the fashionable four first-growth chateaux of Margaux, Latour, Haut-Brion and Lafite-Rothschild to include Mouton as the fifth member of the exclusive Grand Cru Classe wine coterie first established by Napoleon III at the 1855 Universal Exhibition in Paris.
The baron’s lobbying campaign employed the jingle, “First, I cannot be. Second, I do not deign to be. Mouton, I am.” Once accepted into the club, the baron, who wrote and translated poetry, rewrote the ditty to read, “First, I am. Second, I used to be. But Mouton does not change.”
Then, in 1981, seven years before his death and just months before the fabled 1982 crop, when collectors began to hoard Mouton and other Bordeaux first growths as investment vehicles, the baron brokered what at the time was a unique long-term sponsorship accord with Cannes festival organizers.
The roll-over deal ensured that Chateau Mouton Rothschild would remain the festival’s official wine supplier. The baron’s brands, including Mouton Cadet Rothschild, the $8.99 everyday drinking wine he first bottled in 1930, now share the festival’s marquee with official private bank Societe Generale SA, water supplier San Pellegrino and French hair-salon operator Dessange International SA.
“The Cannes Film Festival,” says French Minister of Culture and Communication Frederic Mitterrand, “continues to generate a powerful dream.”
At Cannes, Beaumarchais lives the dream. He waves at the platoons of photographers snapping his photo for lifestyle magazines and smiles when a fan mentions that cinema villain Auric Goldfinger served James Bond a bottle of 1947 Mouton in the movie “Goldfinger.”
“The baron was the elegant bad boy of the Rothschilds,” Beaumarchais says of his grandfather’s role in the family that financed Wellington’s victory at Waterloo, underwrote construction of the Suez Canal, funded the California Gold Rush and brought Diaghilev’s Ballets Russes to Paris.
“My grandfather loved life and would have hated the idea of bankers storing Mouton in a vault as an investment,” Beaumarchais says with a frown. “He raced Bugattis at the Grand Prix, Stutz cars at Le Mans and made ‘Lac aux Dames,’” one of the first French talking movies.
As for the baron’s signature drink, “he wanted Mouton to be the wine of adventure, action and exploration,” Beaumarchais says. “Grandfather was full of strength and life and wanted his wine to be drunk among those who shared his humanism. This is my legacy.”
The chateau’s 41-year-old managing director, Hugues Lechanoine, says the minimum price of sharing in that heritage is 300 euros ($432). “A good wine costs 150 euros a bottle,” Lechanoine says on a terrace that overlooks a flotilla of yachts in the Cannes harbor. “A luxury wine starts at 300.”
Mouton has established itself well above that hurdle. Prices for top vintages of the past two decades range between $420 and $1,410 a bottle, according to the Liv-ex web-based wine exchange in London. The cost of rarer, more historic wines from the chateau is much higher.
“There’s no doubt that it was correct it got the leg up in 1973,” says Serena Sutcliffe, head of the wine department at Sotheby’s. “It had been achieving the price of first growths for decades.”
At auction, top vintages of Mouton lure eager bidders, particularly in Asia where sales regularly set records. That’s because of its first-growth status and quality, the Rothschild heritage and the collectibility of its labels, which at the baron’s instigation have featured a different artist annually throughout the postwar years.
“You combine all those factors and Mouton is a hot label,” says Gary Boom, managing director of London-based fine-wine merchant Bordeaux Index Ltd., which has an office in Hong Kong. In China, “the brand Rothschild is strong. The guys in the Far East are great collectors.”
At a Christie’s International sale in Hong Kong in April this year, 60 bottles of Mouton Rothschild spanning the six decades from 1945 to 2005 fetched $123,300, or just more than $2,000 a bottle.
For rare historic Mouton vintages in top condition, Chinese and other international buyers will pay even more in the auction room. A 12-bottle case of Mouton 1945 sold in Hong Kong by Acker, Merrall & Condit on Nov. 5 last year fetched a record $207,400, or more than $17,000 a bottle.
“China accounts for 10 percent of our market,” Lechanoine says. “We have 210 people there spending a great deal of time and money on wine promotion and education. The worst scenario for the chateau would be for the Chinese economy to go into decline.”
A case of Mouton 1986, described by historian Clive Coates as “the wine of the vintage,” fetched a record $23,100 at a Christie’s Hong Kong sale on Nov. 26 last year.
Yet Mouton typically sells for less than its neighboring Pauillac first growths, Chateau Lafite-Rothschild and Chateau Latour. Its 1982 and 2000 vintages, among the greatest of the past 30 years, are only the third-most-expensive of the five first growths for those years, priced respectively at $22,400 and $17,000 a case by merchants cited by Liv-ex.
There are disappointments. Mouton’s 1990 wine sells for just $5,200 a case, behind lower-ranked Bordeaux estates including La Mission Haut-Brion, Chateau Montrose and Chateau Angelus. Even so, that’s still $433 a bottle.
Lechanoine frets about the cascade effect of Mouton’s market price.
“There’s huge risk with investors turning Mouton into a commodity,” he says. “Our problem is ensuring we don’t become disconnected from those who buy Mouton at the corner wine shop and actually drink it. We can’t afford losing that clientele.”
Over dinner with clients from Russia, Japan and the Netherlands, Lechanoine pours a few glasses of Mouton Rothschild 1998.
“The worst thing that could happen to this company would be to have an equity fund as a shareholder,” he says after the first sip. “Mouton is only made to be looked at in a wine cellar, never in a bank vault.”
That sentiment is reflected not just in the wine-making but in the artistic tradition that has been part of the vineyard since Baron Philippe took over. As early as 1924, he commissioned Jean Carlu to design a colorful Cubist label for his wine, breaking with the regional fashion for showing the facade of a chateau in pen-and-ink monochrome.
Artists since then have included Jean Cocteau, Georges Braque, Salvador Dali, Joan Miro, Marc Chagall, Pablo Picasso, Andy Warhol, Francis Bacon and Lucian Freud.
Distribution Director Geraud de la Noue says Mouton Rothschild sells an undisclosed amount of its production through its own network, a radical departure from the system of “negociants” stretching back to the 19th century.
“We only do this in France,” Noue says. “We want to know our domestic market and have 110 people devoted to the project. It keeps us proportionally more disconnected from the negociants and better connected with the consumer.”
It also may help sales at the lower end. Lechanoine says the 1 million cases of pedestrian Mouton Cadet the chateau sells annually contribute to making the Mouton Rothschild brands what he calls the “aspirational wine of choice.”
“Frenchmen a century ago drank a quarter liter of wine a day,” Lechanoine says. “There was noble chateau consumption and poor vin de table, for the soldiers in their daily ration. The baron broke the taboo. Grand Cru Bordeaux growers are too discreet for their own good.”
Information: Baron Philippe de Rothschild SA, http://www.bpdr.com
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