Moët Hennessy North America President and CEO Predicts Good Future for Wine Despite Headwinds
October 03, 2019
Jim Clerkin, president and CEO Moët Hennessy North America, predicts a good future for wine in spite of numerous challenges, including slowing wine consumption.
Clerkin sees opportunities, he said at Wine Business Monthly’s Wine Industry Financial Symposium on Wednesday at the CIA at Copia in Napa. After all, the United States is the richest nation on earthy with more than 300 million people, and the premiumization trend in the wine industry continues.
One way he predictus growth is to exceed customers’ expectations with new wines and innovative packaging and investing in e-commerce and direct-to-consumer opportunities. Domaine Chandon, Clerkin noted, has 250,000 visitors a year, he said. “Rosé is here to stay, by the way. Don’t think it’s a fad. It’s here to stay,” said Clerkin.
Other strategies include investing in luxury experiences, gifting and personalization products. The company has also invested in multi-cultural opportunities for the wine industry. The thousands of Hispanic stores in the United States that sell beer are a big opportunity, Clerkin noted.
“Everybody is not a white Irish guy like me,” said Clerkin, who grew up on a farm in Northern Ireland, and is now a U.S. citizen. “We’re a very diverse nation.”
Moët Hennessy North America is a division of LVMH, a Paris-based company with revenues that exceeded $5 billion in 2018 and a leader in the luxury industry. LVMH actually includes 75 luxury companies, including wine, sparkling wine and champagne houses. The brands under its portfolio include Moët & Chandon, Hennessy, Veuve Clicquot and Newton and Domaine Chandon in the Napa Valley.
“This company thinks long, long, long term,” Clerkin said.
Clerkin said he worries about the U.S. government's intentions to impose tariffs on alcohol imports, including wine imported from France. (On Wednesday, the U.S. Trade Representatives said it would impose a 25 percent tariff on bottled wine from France, Spain, Germany and the United Kingdom, according to Wine Institute.)
After his talk, Clerkin said he expected the tariffs would be 25 percent because Europe had imposed 25 percent on American whiskies. “So if there is a tit for a tat, one should expect 25 percent,” he said. He declined to say how much that would cost his company. “But it is a tremendous amount of money and unsustainable for companies to absorb it,” Clerkin said.
He is also concerned about customers paying more for wine. “The big worry is it will be very difficult for companies to absorb these tariffs,” Clerkin said. This will also likely hurt tourism. “Our wines will be more expensive on the wine list and tourists won’t buy.”
Wine Institute opposes the retaliatory tariffs. Bobby Koch, Wine Institute president and CEO said Wine Institute is concerned it will lead to increased tariffs on U.S. wines.
Clerkin leaves his CEO post in January to work on acquisitions around the world with the Paris-based LVMH team. “I will look at the gaps in this extraordinary portfolio that we have and see if I can fill them up a little bit more,” said Clerkin, who has worked in the industry for 40 years.
Rick Tigner on Jackson Family Wines' Strategy
Another speaker at the Wine Industry Financial Symposium Wednesday was Rick Tigner, CEO at Jackson Family Wines.
Among other topics, Tigner discussed the company’s investments in Oregon over the past few years.
The late Jess Jackson did not invest in Oregon. It poured rain during his visits, Tigner said. However his wife, Barbara Banke, chairman of Jackson Family Wines, has invested in Oregon wineries and vineyards beginning in 2012. The properties had authenticity, an original story to tell and beautiful terroir. “The wines were spectacular and different,” Tigner said. Jackson’s Oregon holdings include Gran Moraine, Penner-Ash, and WillaKenzie Estate. “So we’re heavily invested in Oregon,” Tigner said.
Before making a purchase, the company asks “’will it make world-class wine?’” he said. “Because that’s what we want to do. We’re trying to make $45, $55, $75 and $150 bottles of wine. “So you’re going to need world-class terroir to do that.”
Oregon has been a good investment. Properties purchased in 2012 are worth twice as much, he said.
“I love Oregon because you can make good margins,” Tigner also said. “Even if you had a bad year and you didn’t bring in a crop, the four good years can offset the one bad year,” Tigner said.
Today, before buying a property the company considers whether or not the land is in a fire zone, he said. The two-year anniversary of the deadly Wine Country Fires that destroyed neighborhoods in Santa Rosa is in about a week. There were fires last year as well. Santa Rosa “has come a long way in two years,” Tigner said. “It’s got a long way to go.” There was another fire last year as well, he pointed out.
“And so we've got to be thinking about these real estate investments knowing that there's going to be some issues going forward with smoke or smoke taint or fire,” Tigner said. The company has precautions and deals to make sure employees are safe. “But when it comes to buying land, that's what we're thinking about,” Tigner said.
The company also thought Oregon wineries offered great potential for direct=to-consumer sales. “If we're looking to acquire something we want to know that has a DtC potential,” Tigner said.” I think that is the wave of the future, along with digital marketing and the digital shelf space,” Tigner said. “That's kind of where we're going to show you some new investments”
The company also considers water availability before making an investment. “What is the availability of water today? And forever?” Tigner asked.
The Jackson family has invested in the fight against climate change. One of its project is the International Wineries for Climate Action, an effort created in February with Familia Torres, which owns wineries in Spain, Chile and California.
Its goal is to reduce carbon emission by 50 percent by 2030 and 80 percent by 2045.
The company is also working with UC Davis on predictive algorithms to figure out weather patterns two decades from now and plant accordingly.
“We don’t plant based on climate change. We plant based on demand,” he said. However, the company may plant at a new elevation or change a vineyard’s direction as it take into consideration weather patterns. “We need those lines to last not just 25 years, we need those lines the last 35 or 40 years,” he said.
Jackson Family of Wines owns 40,000 acres of land, including 14,000 of those planted in vineyards. The company has wineries overseas, including France, Italy, South Africa and Australia.
The two-day Wine Industry Financial Symposium ended Wednesday. Wine Business Monthly’s Wine Industry Technology Symposium was Tuesday at the same venue.