Invest in Bordeaux vineyards

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by Compagnie Bordelaise Viticole & Agricole – Rustmann et Traonouëz

Investment opportunities in Bordeaux wine industry

Rustmann & TraonouëzWine Estate & Finance Advisor

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Contents

• About Compagnie Bordelaise Viticole & Agricole - Rustmann et Traonouëz– In a few words – Key factors of success

• A long history of investors hosting

• Organization of the wine industry– Overview– Focus on the wine merchants / negociants

• Why investing in the Wine Industry in Bordeaux ?– Investment’s asset and obstructions

• Investment’s risks– Factors of failure to avoid

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About Compagnie Bordelaise Viticole & Agricole Rustmann et Traonouëz

• La Compagnie Bordelaise Viticole & Agricole, in a few words, is :

– an independent consulting firm based in Bordeaux, providing Corporate Finance services such as :• M&A (Mergers and Acquisitions / sell or buy side)• Fundraising• Fairness opinion• Business Recovery• Due Diligence

– We have developed a recognized experience in corporate finance, for every Company in touch with Wine & Spirits Industry.

– Our company has a well-known financial expertise, reinforced by a long and real experience as winegrowers, winemakers and distributors of wines.

– La Compagnie Bordelaise Viticole & Agricole is headquartered in the heart of Bordeaux wineries and "Châteaux" place, but our team is active all over the world.

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• Key factors of success

– A dedicated team of sales and acquisitions with several years of experience in Wine Estate Advices.

– A double training (financial and technical) for each advisor, reinforced by a real experience as producers and distributors of wines. We don’t provide advices as theorists but as real practitioners.

– A sector know-how within the wine production and other wine related industries (from equipment suppliers to wine merchants).

– An expertise marked out by more than 40 successful deals.

– An access to a complete network of wine and spirits professionals and opportunities..

– A tradition of absolute confidentiality and privacy, heritage of our experiences as a former Lawyer or member of Corporate Finance Department.

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• Key factors of success

– A dedicated team of sales and acquisitions with several years of experience in Wine Estate Advices.

– A double training (financial and technical) for each advisor, reinforced by a real experience as producers and distributors of wines. We don’t provide advices as theorists but as real practitioners.

– A sector know-how within the wine production and other wine related industries (from equipment suppliers to wine merchants).

– An expertise marked out by more than 40 successful deals.

– An access to a complete network of wine and spirits professionals and opportunities..

– A tradition of absolute confidentiality and privacy, heritage of our experiences as a former Lawyer or member of Corporate Finance Department.

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A long history of investors hosting

• Roman times– The history of Bordeaux Wine dates back Roman times (2000 years) when the first vine

growing. The area's location along the Gironde estuary provided an ideal trade route with the Bristish Isles.

• English influence and vineyard expansion – In the Middle Ages, the marriage of Henry Plantagenet and Eleanor of Aquitaine opened the

Bordeaux region to the English market and eventually to the world's stage. As the popularity of Bordeaux wine increased, the vineyard expanded to accommodate the demands from abroad. In the 13th and 14th Century, a code of business practices, this enhanced Bordeaux wine a distinct trade advantage over its neighboring regions.

• When Dutch Traders drained and planted vineyard in the Médoc– In the seventeenth Century, Dutch traders began to drain the marshland around the Médoc

and encouraged vineyards plantation. The Dutch would also open new distribution channels to the Bourgeois which helped usher in a second era of prosperity. Irish and Hanseatic (German) investors launched also wine merchant houses in Bordeaux.

• Contemporary Investors– American, Belgian or Japanese investors established in Bordeaux in the second half of the

20th century.– Today, Bordeaux is proud to host new Asian investors from HK, China, Taïwan, Singapore,

Korea…

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Organization of the wine industry

• Wine Industry in Bordeaux is made of :

– 7 650 wineries (“Châteaux”) in 57 AOC (Indication of origin). More than 80 vineyards in Bordeaux belong now to Asian investors.

– 38 cooperative cellars

– 88 Wine brokers• A key intermediary, the wine broker selects and proposes wines to the Wine Trade network

and guarantees that the sale contract is correctly fulfilled by both parts. The wine brokers oversee more than 80% of transactions between owner-seller and wine merchant-buyer.

– 300 Wine merchants / negociant firms• The commitment of the wine merchant is to buy to sell. 300 Wine Trade firms sell more than

70% of Bordeaux’s production in 170 different countries.

– Suppliers (Laboratories of oenology, coopers, phytosanitary producers, glass and corks producers, coppersmith…), most of them are worldwide leaders in their industry and export all over the wine world.

Opportunities of investment exist for each of these activities, with the exception of the wine brokers (investment is not possible for foreigners because it is a regulated trade)

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Organization of the wine industry

• Focus on the Wine Merchants / Negociants

– Each wine merchant features his own carefulness and trades various products ranging from a complete array of wines and spirits to more selective choices: Great Growth wines, château wines, brand wines…

– Great Growth Wines are exceptional wines whose rank is established by certain classifications and whose name enjoys great renown throughout the world.• Although they represent just 4% of total volumes of Bordeaux wines, their percentage in value is naturally

significantly higher, at 20%. • In Bordeaux, the term “primeur”, or future, indicates a particular sales method for Great Growth wines: an

immediate sale with deferred delivery, in general 2 years later, once the wine has been fully matured at the estate.

– “Château wines” come from an individual and strictly delimited property that bears the name of a château. • Given the multitude of châteaux which exist in the Bordeaux region (about 7 650 wineries and more than 10 000

different labels), some Wine Trade firms have specialized in supplying the market for these Bordeaux wines that can be described as “middle-of-the- range”.

• Most of these wines are “estate bottled” by the winegrower, but also quite frequently by the merchant who brings his own technology to carry out the bottling procedure “at the estate”. 80% of these wines are sold by Wine Trade firms.

• The distribution of a château wine can be entrusted to one or several wine merchants.

– Brand wine • Having purchased wines in bulk, the wine merchants proceeds with their blending and maturation before bottling

them. The wine merchant marks his name and his own “brand” on the label. “Brand wines” strategy is to develop customer loyalty by ensuring huge availability of stocks of wines to which the merchant has committed his name to ensure consistency both in quality of the products and stability of their price.

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Why investing in the Wine Industry in Bordeaux

• Investment’s asset and obstructions

– Investing in a French vineyard or a French wine merchant house can help you to secure your goods supplies in terms of exclusivity, cost of sales…

– Thanks to the reputation of excellency in the French wines, as well as Bordeaux is one the main places in the world for Wine Business, investing in a French wine company can provide you with access to other markets in Europe or in the USA.

– Investing in a French company is relatively free.• The foreign investments are submitted to simple administrative declaration • Exception : investing in casino, press, private security and some technological industries Require a preliminary

administrative authorization

– In case of real estate investment (investing in a vineyard) the purchaser has to obtain a prior authorization of growing (“Autorisation d’exploiter”). • It is delivered by the Departmental Commission of Agricultural Policies. • This approval process is not a real obstruction : more than 80 vineyards have been bought by Asian investors in the last

5 years without any problem

– Owners’ protection for new investors• The right of ownership is one of the most protected rights in France. It is an absolute right. Such as, freehold ownership

confers on the holder the use of the assets, the right to receive the fruits (rents, interests on due money, etc.) and the right to dispose of these assets.

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Investment’s risks

• Factors of failure to avoid

– Underestimate the running costs of the company after investment (working capital requirement, necessary investment…)

– Forget that the investments in the wine industry are in direct (Vineyard) or indirect (wine merchant or supliers) link with the nature. Weather condition have influence on your next result and you have to accept not to control it.

– In case of opportunities of growth or threat, slow reactivity of the company due to lack of confidence in the french management after investment

– Not to be advised by a consultant during the transaction process

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Compagnie Bordelaise Viticole & Agricole – Rustmann et Traonouëz

Château Beau Soleil – 33500 Pomerol

Website : www.compagniebordelaise.comEmail : [email protected]

Invest in Bordeaux vineyards

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