In 2018, the Harvard Business Review (HBR) published an article by Peter Walsh, Michael Peck, and Ibon Zugasti under the headline “Why the US Needs More Worker-Owned Companies”. Apparently, nearly one in eight American workers is employed by what in Europe would be called a cooperative; successful examples include Ocean Spray fruit juices, Land O’ Lakes dairy, and Publix supermarkets. These businesses, the authors argued, “outperform their competitors, especially during economic downturns” and have easier access to financing.
Worker-owned businesses have, however, been far less prevalent in the New World wine industry than the in the Old World. A small enterprise called the Carlton Winemakers Studio in Oregon, with 16 members, claims to have been the first wine co-op in the US when it opened in 2992 and is still one of the best-known. In Australia, the Berri-Renmano cooperative which produced 15% of the nation’s wine in the 1980s, acquired a family business called Hardy’s, shed its worker-owner origins by listing on the stock exchange, and ultimately became part of Accolade.
In Europe, by contrast, the widespread creation of cooperatives at the beginning of the 20th century revolutionised and helped to save an industry crippled by phylloxera. Today, co-ops produce around half of Western European wine and in France, 18m hl – nearly two bottles in every five – come from 600 co-ops or groups of co-ops. One such group, InVivo, is – just five years after its launch – the third largest wine company in France, behind Grands Chais de France (GCDF) and Castel. It is already halfway to achieving its ambition of turning over €1bn ($1.176bn) in 2025, which would make it one of the biggest wine businesses in the world.
Unique structure
Apart from its cooperative structure, InVivo is quite unlike its competitors. Castel has considerable interests in beer and water, along with bestselling, inexpensive, high-volume domestic brands like Vieux Papes, Roche Mazet, and La Villageoise, and a long list of Bordeaux chateaux. GCF, which also has a business in Bordeaux boasts export brands like JP Chenet and Grand Sud, and a range of regional estate wines that make it a one-stop-shop in markets like China.
Brand creation and building has, however, not historically been a focus for cooperatives. While some high profile, dynamic co-ops have created successful brands like Nicolas Feuillatte in Champagne, les Dauphins and Cave de Tain in the Rhône and Wolfberger in Alsace, most have focused on supplying wine in bulk to negociants and retailers.
This was the background against which Thierry Blandinières, CEO of the huge, €5.5bn-turnover, cereal-producing cooperative group InVivo, decided to enter the wine industry in 2015. His aim, he told the French newspaper Les Echos, was to enable the cooperative sector to compete directly against the privately-owned French giants. “To have a turnover of €500m in five years should be easily achieved.”
Wine was not on the radar of InVivo’s founders in 2001, which helps explain why the name was not internationally registered for alcoholic beverages when a couple of New Zealanders launched their very different InVivo winery on the other side of the world four years later. And why the French business never uses its corporate name on the labels of its bottles.
The strategic partner Blandinière chose was Vinadeis, France’s biggest wine producer by volume, formed by the takeover by one Southern French cooperative, Val d’Orbieu, of another, called Uccoar. Curiously for a worker-owned enterprise rooted in southern France, Vinadeis owned a large negociant called Cordier Mestrezat which Val d’Orbieu had bought in 1997.
Three factors
The story of these acquisitions illustrates three factors that affect French cooperatives. First, there is the need for higher-value routes to market than businesses with a background in the bulk market are used to creating for themselves. Second is the desire to acquire brands and, last, there’s the one referenced by the HBR authors: access to financing. This is even more relevant in Europe where coops have benefited from local and regional subsidies and cheap loans unavailable to other businesses.
But being able to go shopping for companies in other regions does not necessarily go hand in hand with an ability to run them successfully. Part of the appeal of Cordier Mestrezat may have lain in a portfolio of estates including Châteaux Grand-Puy-Ducasse in Pauillac, Rayne-Vigneau in Sauternes, and Meyney in Saint-Estèphe. Unfortunately, those illustrious chateaux’s wines proved hard to sell and, by 2004, the Bordeaux business had warehouses full of unsold stock and debts of €115m. Cordier Estrezat did manage to find buyers for the chateaux and vineyards, but only recouped €110m from their sale.
In 2015, Vinadeis sold InVivo 78% of what remained of Cordier-Mestrezat and 10% of its own business. Alongside the Bordeaux-based distribution business, Blandinières bought a Languedoc merchant called Vignobles du Soleil and, two years later, he went on to acquire Baarsma, one of the biggest distributors and bottlers in the Netherlands. With that purchase came the distribution of Chateau la Tulipe in southern France and a South African estate called Lyngrove, and ownership of an Italian sparkling wine brand called Canei which had previously belonged to Pernod Ricard. Other labels include Marval, a private label distributed in the US, and Guillaume whose main market is in Belgium.
Baarsma gave InVivo another distribution tool that might not seem to be an obvious match for a big cooperative. Since 2017, it has owned a well-regarded London-based fine wine merchant called John Armit which supplies restaurants as well as private customers.
The pattern of achieving growth by acquisition or partnership continued in early 2019 when InVivo signed a global distribution agreement with Robert Eden, co-owner and winemaker of Château Maris, a 50ha biodynamically-farmed estate Languedoc. As Eden explains, “The wines we are making at the chateau, are only part of the picture. I’m now in charge of all of the organic programmes and of building Maris into a global organic brand.”
Eden who bought his estate in 1997 has won international recognition for quality, his wines include some of the priciest in the region, and for green credentials that have led to it being named one of the five most environmentally-friendly in the world by the Wine Spectator.
While Eden’s role is officially limited to InVivo’s organic wines, his experience in brand-building and long-term thinking may prove invaluable. In the five years since InVivo’s launch into the sector, the company’s wine business is on its third CEO. Bertrand Girard, former CEO of Vinadeis, left abruptly in 2018, while his replacement Fréderic Noyère had only held his position for 20 months when, in May 2020 departed, citing “fundamental differences over future strategy”.
Confidentiality agreements prevent both men from revealing precisely why they parted company from the company, but Philippe Leveau who was in charge of European sales before taking on his current role as CEO earlier this year, tellingly says that “you have to have deep pockets to withstand a couple of mishaps”.
Brand development
Since the launch of the business, no new high-volume premium brands have been launched, and there are no signs of the ‘iconic’ wines with price tags of €30-50 that Bertrand Girard told Meininger’s in 2014 he wanted Val d’Orbieu to be producing. As Leveau acknowledges, “brand creation is not necessarily an objective. How efficient is it to have lots of brands? If you can get one that has traction, develop it”. This is clearly the strategy behind the acquisition of the Café de Paris sparkling brand and production plant from Pernod Ricard in 2019.
Speaking at the time, the then CEO, Frédéric Noyère, said, “Café de Paris is currently one of the 10 bestselling sparkling wine brands worldwide, mainly in Japan, Switzerland and France. This brand, which is not rooted in any specific region, offers virtually unlimited scope for innovation. We shall be taking advantage of its reputation and re-energising the brand before attempting to win over new markets such as China and the USA.”
If purchases like this have helped InVivo to hit and pass Blandinières’ €500m target, further acquisitions are apparently set to help it to double that figure. There are plans too to increase export sales of the Cuvée Mythique range, and to take advantage of the growing interest in organic food and drink to build sales of Maris from their current 1.2m to 3.5m in four years. These exports will hopefully be helped by the launch of InVivo subsidiaries in the North America and Asia, but these are dwarfed by the ones that have already been set up by InVivo’s southern French neighbour, Gérard Bertrand, and by GCF’s and Castel’s efforts in China.
The HBR authors quote the French economist Thomas Piketty in suggesting that cooperative ownership can help to create a more “sustainable balance between the aspirations of workers who strive to become less pay check-dependent and the demands for ever-higher returns from shareholders and capital providers.” But the international wine industry is highly competitive and whatever its ownership structure, a would-be giant has to build a coherent business with a portfolio of brands to compete with the likes of Barefoot, JP Chenet, 19 Crimes and Casillero del Diablo. It will be interesting to watch how InVivo sets about achieving this.
Robert Joseph
