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The mail man

Published:  23 July, 2008

It's a bit complicated interviewing Patrick Bernard. You talk to this very affable, very charming man for whom wine is a third career - and you realise that the second career, which was in the family brandy company, is still part of the story, because the ownership is the same as for Millsima.

And the family is also part of the story, partly because Patrick is very family oriented and partly because the family owns so much, and there are dozens of them ('hundreds of them!', according to Roger Bohmrich MW, president of Millsima USA).

But in order to maintain some sort of focus we will forget, sort of, about the sisters and the cousins and the aunts. They can stay in the background. It's Millsima that we're interested in.

From banks to bottles

To get to Millsima we must start in banking, because that's what Patrick did. In 1976, his uncle died in a car crash and Patrick left the bank to join the brandy company, Lucien Bernard.

And it was quite a business: it distilled and rectified spirits and traded in brandy with and without age, and for 50 years it had been the largest brandy company in the world.

Some 500,000 hectolitres (hl) of brandy used to be stored in the cellars on Quai de Paludate, opposite the abbatoir and, points out Bernard's cousin Olivier Bernard of Domaine de Chevalier, that would have needed 5m hl of base wine - a quantity equivalent to the entire production of Bordeaux 20 years ago, or 20% of all French production.

But Lucien Bernard didn't own this inventory: the French Ministry of Finance had a monopoly of spirits production and had a contract with Lucien Bernard. Some spirits were used in the manufacture of gunpowder and all the distilleries were in the west of France - Hesden, Nantes, Bordeaux and Narbonne - as far as possible from Germany. Some, starting with the 1977 vintage, was used for fortifying Port.

But in the early 1980s the government scrapped its monopoly. Olivier says that one reason for diversifying into wine was to spread the risks during the changeover.

The roots of the diversification, however - Patrick knew next to nothing about the wine business to begin with - go back to the twice-weekly squash games he played with broker Max de Lestapis, during which (or perhaps not precisely during) Lestapis told him about the wine trade.

The 1982 vintage came along. 'By November we all knew it was a fabulous year,' says Patrick. The company had between FF20m and FF30m to invest in a classed-growth chteau, and bought Domaine de Chevalier.

Patrick also had the idea of creating a ngociant, but the board said no; it didn't want to have to learn two new businesses at the same time. 'I was very sad,' says Patrick, not least because the 1982 vintage was so good and he had wanted to take full advantage of it. 'So I created it outside the family, with some friends and cousins.'

This was in 1983. About 90% of the ownership is members of the Bernard family, says Olivier, compared to 100% for Lucien Bernard (of which Jean Bernard, another cousin, is boss) and Domaine de Chevalier.

Millsima 'started with very small assets', says Patrick. The aim was to buy only classed growths, and sell both as futures and after ageing.

This hasn't changed, though there is also Champagne and other table wine from other regions on the list. About 80% of turnover was accounted for by exports at the beginning, with 12% sold on the Place and just 8% to private clients.

Bohmrich points out that selling wine by correspondence was a very new idea at this time. 'Patrick has great acumen,' he says. 'He knows when to take a risk, and which risk.' Patrick says simply that 'direct marketing to private clients was the only answer.

I had never learned anything about this. I'd specialised in marketing, but direct marketing is only taught in Lille.'

Nevertheless, Millsima's direct marketing began in 1988, with fewer than 200 private clients. It issued one catalogue each January and the wines were available until the following January.

Prices were generally high: what Millsima has always majored on is selling services. It offers a big choice, you don't need a car and it gives information over the telephone. The staff are all trained to taste and all know the wines. In addition, 'more than 60% of leading CEOs in France are customers of Millsima,' says Patrick.

'Price is not an issue for them. They prefer to pay 5 more and deal with a company that gives information.' Millsima, he stresses, is based on information.

Premium proposition

As one might gather from this, Patrick prefers margin to turnover. In the early autumn of 2005 he was reporting that margins in futures had been lower of late, though that has probably changed with the 2005 vintage.

Olivier points out that 'Millsima is most profitable with years like 2000, 2003 and 2005; in poor vintages it's less profitable.' Even in bad times, though, Patrick's policy is never to cut prices.

Millsima may do promotions, and margins here might be half of the regular margin, but he won't actually lower prices, no matter how hard he's pushed by other people in the company. He also says that 'you can sell 5% to 10% more expensively if the wine has never left your inventory. Millsima only ever buys from the chteau, never on the Place.'

He likes the margin on futures sales to cover the cost of ageing the rest. 'But, since 2001, the cost of money has been higher than the increase in price' - again, that might change soon. Currently a minimum of 60% is sold as futures; it used to be a maximum of 50%. And the more you sell of a wine as futures, he says, the more you sell later.

One of Millsima's key tools is its system of analysis, 'created by us, for us, for the things for which we need answers'. It has to ascertain the day-by-day demand in each of the 11 countries to which the company currently sells (12 with the USA).

'There is nearly the same demand in each country, and the average order is almost the same country by country, even if some prefer futures and some prefer mature wine.'

The big catalogue dates are January, June and Christmas, and 'if new customers order a second time, they are usually hooked; they will be good clients. And the more different products they buy, the better they will be.'

Only three to four per cent of the 4,000 lines in the inventory are without a sale at the end of each year. 'I sometimes wonder if the range is too wide, but it's also a strength.'

One day Chteaux Peyrabon and La Fleur Peyrabon may also be strengths. He bought them in 1998: La Fleur Peyrabon, a rare cru bourgeois in Pauillac was the lure; Peyrabon came as part of the package.

Neither is looking particularly brilliant at the moment, though quality has been picking up since the 2001 vintage. And it's early days considering that when Patrick bought them they were farmed with pesticides and picking was entirely by machine.

He's invested 1.9m(1.3m) so far, with not a penny of that going into the chteau itself: all is for the vineyards and winery. 'It's important for a ngociant to show it knows what it is doing,' he says. 'It's also my passion; it's something I wanted to do, and it's a challenge.' Will he buy anything else? 'Yes, Lafite.' Ahem.

American dream

What he has done more recently is set up Millsima USA, a move well reported in Harpers. 'He planted the seed of the idea with me a number of years ago,' says Bohmrich.

'I was an importer at the time, and had no intention of changing. Then my life changed and, last year, I went to him and he embraced it. It was remarkable how quickly it unfolded. We reached very quick agreement on the structure and the difficulties of transplanting Millsima to the US with its fractionalised market.

'Millsima Europe is reserving 10% of its 2005 allocation for the US. We will also have inventory and can buy from other ngociants in Bordeaux, or from merchants in the US, so we can fulfill any order. And the quality of the 2005 vintage is one reason why we're under the gun on timing: we want to take advantage of the year.'

Just, indeed, as Patrick had wanted to take advantage of the 1982 to set up Millsima.

The last word should go to Patrick: 'I always think: If I was a client, what, would be my view of a decision? Each day I want to create a company of which I would be happy to be a client. We can't do things that are good for us, if they're not good for the client.'