Greg

How many wines do you think you taste a year?

Jeffrey Davies

In the thousands. I don't know, I don't count.

Greg

So one of the things we were talking about is, if wine was as simple as a quantitative checking of the box and understanding titratable acidity, pH, alcohol, brix at harvest, it might be quite easy to mimic this and in fact there's a group in Colorado that is trying to do reverse engineering on popular, stylized wines in order to replicate a profile for consumers. Now I know you and I are near vomiting, in that it's anathema to our experience and expertise, but it's not that simple because the reality is there's a qualitative experience and a requirement to taste those thousands of wines to really understand and appreciate. Can you put some parameters on that? Can you explain how you developed those skills? What did you learn over time? Studying with Emile Peynaud way back when, what were some of the things that you learned?

 

Jeffrey Davies

First of all, I agree with you. I don't think you can reduce wine to numbers. Numbers are, with few exceptions, purely quantitative and rarely qualitative, and if anything I think in a lot of the wines we tasted from the '18 or even the '16 vintage we were actually nonplussed by the numbers, because we taste the balance in the wine and then we go back and see, oh my goodness, it was 14 and a half, 15 plus percent. It didn't taste that way. So the numbers are misleading. They're misleading. I imagine that with the advances in so many fields of science they will get close to being able to manufacture a wine by the numbers that may be palate pleasing. Who knows?

 

Jeffrey Davies

I recall that when I was making the decision between going to UC Davis or coming here to Bordeaux, that what I saw them doing at Davis was trying to make the greatest possible quality of wine with the fewest possible defects. Wines that were quantitatively flawless but with nothing exceptional about them. Then I came and visited Bordeaux and talked with people here, and there was no talk about least common denominator. It was all about how can we make better and the best wines ever. I thought that was far more challenging and stimulating, and I chose Bordeaux. I still remember some of the professors in my first classes saying, wait a minute, you're from California. In fact your name is Davies, almost Davis, why didn't you go there? And I said, because I think what you guys are looking for here is of far more interest to me.

 

Greg

So you'd say the people in Bordeaux were pursuing perfection?

 

Jeffrey Davies

I think so.

 

Greg

Have they achieved it?

 

Jeffrey Davies

Occasionally.

 

Greg

Is that revealed in 100 point wine?

 

Jeffrey Davies

I suppose, yeah. I remember some wines that with Karim we tasted in 2016 and I go, wow, that's perfection. How could it get any better? And then we went back to those same properties and tasted the '18s. I go, I don't know how, but it did. It got better. So even perfection is something you can't reduce to numbers. It's widespread. I think we've been very, very fortunate with what we've seen in Bordeaux in '15 and '16 and '18. But like I said, when I first came here, I remember back in ‘75 we thought, pinot included we've met some of the best wines ever. We now know that's not the case. So perhaps we'll still make even better wines than what we've made in '15, '16, '18.

 

Jeffrey Davies

And plus, there is another factor.I think tastes do change. So what we think of today as being fantastic, maybe in five or 10 years, tastes will have changed again or evolved further and they'll be looking for something slightly different. We hear all too often to my taste but we hear all too often that now the wines are not over extracted or they're not overly this or over that or overly oaked. Perhaps. But if we didn't test the envelope, we wouldn't know where we needed to come back to. And in Bordeaux, 20 years ago we began testing the envelope. We were doing the malo in barrel, we're using 100% new barrels, sometimes even 200% new barrels, and we were pushing ripeness to levels to which it had never been pushed. If we didn't do that, how would we know where to come back to?

 

Jeffrey Davies

So we've pushed and tested the envelope. I think we've come back to a place where everybody's pretty comfortable. We've gotten away from 100% heavily toasted new oak, and we're using different fermentation vessels as you know. We've gotten away from oak tanks or cement tanks or stainless steel tanks. On the contrary, we're using a combination of those, plus we've added the amphorae, which are made from different clay composites. So we're adding new elements all the time, and they're making I think for fresher, brighter, more complex wines which I think are in line with where tastes are going. But I don't think we ever got as far away from this idea in Bordeaux as they did in some other regions, but I think we're getting back to evermore food friendly wines. Again, I don't think we got as far away from food friendly as some other wine regions.

 

Greg

Jeffrey, talk to me about the Grand Place. How does it work? I'm quite confused, because it's somewhat of a traditional system.

 

Jeffrey Davies

Very much.

 

Greg

And I'm not clear on how it started. You must be one of the few Americans as a negociant, right?

 

Jeffrey Davies

Well, I wasn't here when it started.

 

Greg

Okay, well, I believe you.

 

Jeffrey Davies

I didn't dig any of those ditches that separate the Appellations of the Medoc.

 

Greg

Right, those are the Dutch.

 

Jeffrey Davies

Yes. Yes. I want to make that clear. It's a system that's probably 350 years old now.

 

Greg

There's levels of this, right? Can explain some of that?

 

Jeffrey Davies

You basically have three levels. You had the chateaux, you had the courtiers or the brokers, and you had the negociants or the merchants. Initially the courtiers would scout the countryside, find wines, bring samples back to the merchants in Bordeaux or in Libourne, much later. And the negociants would taste and think this is interesting. And, then usually they would buy the wine in barrel, bring it to their cellars, age and blend it more or less scrupulously, bottle it.

 

Greg

It was labeled under the negociant label, not necessarily-

 

Jeffrey Davies

It would be negociant plus chateaux frequently. You could have famous chateaux but bottled by one of the many negociants in Bordeaux who existed over time.

 

Greg

This dates back to 17th century?

 

Jeffrey Davies

I would say 18th but possibly even 17. No, I would say 18th. 18th and 19th. Chateaux bottling, as everybody I think knows now, is a relatively recent phenomenon where the chateaux ultimately took back some of their authority and power by saying, no, we're not going to sell the wine until we have bottled it. When we feel it's right, when we feel the blend is what we want it to be-

 

Greg

And our estate worthy of distinction.

 

Jeffrey Davies

But if I'm not mistaken, my recollection is that chateaux even as prestigious as Chateau Latour weren't doing a hundred percent chateau bottling until probably the '30s and were still bottling barrel by barrel, so you can imagine the bottle variation, into the mid fifties. And they were certainly not unique in that. Butthe bottling of the blends determined by the chateaux at the chateaux is still a relatively recent phenomenon in wine terms, because at best it's 70 odd years old, and in many cases even more recent.

 

Jeffrey Davies

So the negociants today, the merchants are rarely buying wine in barrel, bringing it into their cellars, aging and blending it to their guise and then marketing it. With one exception, the so-called marques or branded wines like a Mouton Cadet or what have you, where the companies are buying from the so-called co-ops all over Bordeaux and maybe from a few independent growers and they are blending the wines in their cellars in substantial quantities and taking out a brand name and marketing it, Mouton Cadet being the most successful in those, because I think there are 1.2 or 1.4 million cases of Mouton Cadet today. It's just huge.

 

Jeffrey Davies

And I take my hat off to them, because to come up with consistent quality that is recognizable as a style year in and year out for that quantity of wine, I think it's an amazing feat. I don't look down at them at all. I think it's admirable that they're able to do that, but it's not my passion. My passion is, as we've said, it's more to the artisanal grower who's hands on making his wine, trying to make the best from his terroir that he possibly can. That's one of the levels. It's the producer, the chateau-

 

Greg

Explaining the number of hands. There's a winery, then there's a courtier, then there's negociants, in America there's an importer, and then there's a distributor, then there's a retailer.That's a lot of hands in the pie.

 

Jeffrey Davies

Yeah. I suppose it would be a long debate as to how much each of those pairs of hands add to the value. We kind of have a three tier system here in Bordeaux: chateau, courtier, negociant. And you have a three tier system in the United States: importer, wholesale distributor, retailer or restauranteur. But I think both in the United States the lines are beginning to blend, and frequently the wholesaler is the importer, selling to the retailer, but often the retailer either has a wholesale license or has a cooperative wholesaler importer who will bring wines, clear wines in to him. So the traditional three tier system for Bordeaux wine I'm not talking about all the rest, I think the lines have tended to disappear between them.

 

Greg

Well it's a condensing of margins necessarily to be more competitive.

 

Jeffrey Davies

I think that's a part of it. I think though that by virtue of the fact that first Diageo decided to get out of the Bordeaux wine market game by basically ending Chateau & Estate, that sent shockwaves through the market, and as a consequence Southern Wine and Spirits who was the biggest distributor in the country decided that it too would pretty much get out of the Bordeaux wine business. And a lot of wine was purchased in the United States and brought back to Bordeaux or put into warehouses for sale later, so that the whole market just didn't crash. I think that the system had one advantage that we have lost. The wholesalers would not only sell to retailers, but they would also sell to restaurants. Today there are very few wholesalers in the United States selling to restaurants, and so Bordeaux has lost, I would say, 85% of its presence on restaurant wine lists and is now basically sold to the retail chains or chain of distribution I mean.

 

Greg

There was also a change though that affected a lot of that. The trickle down was that the wineries raised prices in order to keep more of the margin themselves, and they held back inventory in order to see what the marketplace would pay for those wines over time. And in so doing, I think they ... The top growths in particular enriched themselves and made good decisions economically for themselves, but what you've seen is the consumers and the intermediaries, the wholesalers and producers, decrying the end of the Bordeaux futures campaign and the end of the Bordeaux investment as an opportunity. What's your perspective on that?

 

Jeffrey Davies

It's a much talked about subject and has been probably for the last 10 years, especially since the shockwaves that came from the Diageo, Southern and so forth getting basically out of the Bordeaux wine business.We all know that there are several reasons to pursue futures. One is that when the wine is bottled and becomes for sale on the market, it may no longer be available, because the production may have been small-

 

Greg

Small production, limited allocation, sure.

 

Jeffrey Davies

... Snapped up. Another reason is, if you're a fan of special format bottles, basically buying them en premieur is the only way to ensure that you will have them. Thirdly, of course, is the fact that you believe that the wine will gain in value between the time you buy it on futures you and receive it delivered and thereafter.

 

Greg

I mean it makes sense to me, but what do you think? Do you think buying something 18 to 24 months in advance of receiving delivery confers a discount?

 

Jeffrey Davies

I'm not sure the word would be confer, but that you put your money up front should hopefully allow you to have a reasonable return when that product is delivered.

 

Greg

Whether or not you're buying Bordeaux futures as investment grade opportunities, I would argue if I'm parting with my money today and not getting delivery in 18 to 24 months, I would expect some sort of discount as a consumer.

 

Jeffrey Davies

Well, I think the discount is the futures price, because theoretically-

 

Greg

That's the quotes. Theoretically.

 

Jeffrey Davies

the difference between the price you pay for the delivered wine, there should be, there should be about a 20 point spread.

 

Greg

Which minimum ...

 

Jeffrey Davies

Yeah, which would more than justify the investment given the cost of money today. Now if the cost of money were still high, 10% or more, then the equation would be more difficult to satisfy, or to balance. But today with money costing 1% or 2%, 3% maybe in the US, depending ...

 

Greg

So we're talking about inflationary costs. Even if you benefited on it 20%, which may be 15% on a on a first growth, and then you factored in the cost of inflation, two to three for two plus years, suddenly I'm paying ... Maybe I get an 8%, 9%, 10% discount.

 

Jeffrey Davies

I would say you get an 8% to 9% return on a 24 month investment, which unless you're-

 

Greg

That's if you sell the wine and there's a buyer on the other side, and if you're a consumer-

 

Jeffrey Davies

Or if you keep it, then it's a discount. I could see you saying that. Yes. But I imagine Warren Buffet would be pretty happy with that return.

 

Greg

You're obviously not a Berkshire Hathaway shareholder. They have much higher expectations.

 

Jeffrey Davies

The sole reason for buying futures being a speculative one is not my motivation for encouraging people to buy.

 

Greg

No, sure. Yeah. Going back to the argument of access, allocation on limited supply wines.

 

Jeffrey Davies

And formats and so forth. If people are in it purely for speculative reasons, then they take the risk, and what happens happens.

 

Greg

Agreed.

 

Jeffrey Davies

We've all I think I've been pretty fortunate in that over the past couple of decades, particularly in the great vintages, the returns have tended to be there, which is an added bonus to the high quality of the wines that continue to improve in bottle over time. So it's like a dual bonus.

 

Greg

But then there's Chateau Latour that said, thank you, but no thanks to the whole Grand Place system. They're still selling to negociants, but the idea of releasing their wines at a discount en premieur, they said, “No, we're good.” What's your thoughts on that?

 

Jeffrey Davies

I think that they watched that Orson Wells commercial where he said, “We'll sell no wine before its time,” and they realized that if they put the wine in their cellars until the wine was theoretically ready to drink, that they would make or reap a lot of that return that otherwise the trade and the consumer would.It's a very ambitious and audacious approach. I think it's still a bit early to say how successful the approach will be or has been.

 

Greg

But they looked at the immutable law of supply and demand and said, “We will restrict supply and demand will remain high and we will set higher prices as a result.”

 

Jeffrey Davies

I don't know if they'll set them, but they hope to fetch them at any rate. One negative impact that that whole approach did take is that for many of us negociants who had bought Latour traditionally when it came down on futures and decided to hold a portion of it back for sale later, well then when Latour started late releasing from their own cellars some of the same vintages that we had been carrying, consumers around the world would say, well wait a minute, is this the late release from the Chateau or is this from your cellar?

 

Jeffrey Davies

I'd say, it's from our negociant cellar. We've had the wine since it was released. Oh, well I really prefer to have a direct from the Chateau cellar. And then they went a step further. They put special proof tags on the capsules and bottles for the late release from the Chateau, so that our wine suddenly took a hit.

 

Greg

That sounds like an Asian phenomenon. Were Americans doing that? Were Americans responding in kind?

 

Jeffrey Davies

Oh yeah. Perhaps to a lesser extent, yes, but they still were. They still were.

 

Greg

Just because there's been so much counterfeiting in particular around these wines.

 

Jeffrey Davies

I don't have anything against the proof tag and other similar systems, nothing, but it suddenly put us in the awkward position of having bought the wine on futures, held it in our cellars, and then suddenly they'd be told, well ...

 

Greg

Thank you very much Latour.

 

Jeffrey Davies

We'll see what happens.

 

Greg

Tell me, you've really spent more of your life in France than America at this point, haven't you?

 

Jeffrey Davies

Yes, I guess I crossed that line some years ago.

 

Greg

Are you a dual citizen?

 

Jeffrey Davies

No, just American.

 

Greg

You're still an American passport. So what has it been like? Because there's lots of perception-

 

Jeffrey Davies

It's like being married, you can't be faithful to more than one wife.

 

Greg

Is that right?

 

Jeffrey Davies

That was a rhetorical question, right? I don't have to answer? How can I be faithful to more than one flag at a time?

 

Greg

Well, there's plenty of dual citizens, but ...

 

Jeffrey Davies

Can you be faithful to more than one flag at a time?

 

Greg

My question relates to, what has it been like to be American in France? Have you encountered challenges?

 

Jeffrey Davies

Well yeah, because many of the leading negociants in Bordeaux, their families have been at this for two and three hundreed years, and there is a bit of silver spoon-ism. I certainly didn't have that. When I started as a negociant I had basically nothing. As I told you earlier, I really started as a journalist writing about wine, which was and still is my passion, and gradually, slowly transformed that into a negociant business, a wine merchant business. But there's no silver spoon, there's no family that's been here for several hundred years, so it's all been thanks to my own passion and hard work. I would make a distinction to you saying, well what's it like being an American in France? That's one thing. What's it like being an American in Bordeaux is another thing, because Bordeaux is a very closed and insular society, and I don't think if you're not native born and been here for a long time, you're ever fully accepted.

 

Greg

People say the same thing about going to Boston.

 

Jeffrey Davies

Well, I could understand that because it is an old traditional American city, one of the oldest American cities, and so they want to know that you came over on the Plymouth, or came over to Plymouth rock on the Mayflower, rather. There's a bit of that here. I suppose I could let it bother me, but that wouldn't be very productive, so I don't. And as you know, I'm married to a French woman, but her family was not in the wine business. Thanks to her, largely speak the language fluently, and probably better than most of the people here because I hear it differently, and all kinds of word combinations and plays on words occur to me that don't immediately occur to the locals.

 

Greg

Do you say oui or oue?

 

Jeffrey Davies

Ca depend. So I have fun with the language and I play with it, and that's always been interesting.

 

Greg

Do you miss America?

 

Jeffrey Davies

Yes and no. I go back frequently. Sometimes when I have to get on the plane in San Francisco they have to put a couple of people behind me to push me into the plane. But I think anywhere you live, or just about, there are pros and cons, and the trick is to concentrate and to focus on the pros and not be obsessed by the cons. Otherwise you're going to be miserable wherever you are. Bordeaux and France both have a hell of a lot to offer. I think of France kind of as a concentrated version of California. We have the oceans and the rivers and the lakes and the mountains and the vineyards, all of which you have in California as well, our native States. I'm not sure if it's your native state, but it is mine.

 

Greg

Texan by birth.

 

Jeffrey Davies

That's okay. But France obviously has 2000 years more history and culture than California does. But I mean I love both places. You say United States, but I think mostly of California because that's where I'm from, and that's my probably favorite state in the United States, and there's so many beautiful places in that state too. I always loved driving from San Francisco and the Bay area down to UCSB, Santa Barbara. What's so amazing to me today is, as we talked about earlier, when I used to drive down there, there wasn't a vine anywhere to be seen. And now from, what is it? King City all the way to south of Santa Barbara, on both sides of 101 there are vines as far as you can see. And some damn good wines being made. I think you're making some of them.

 

Greg

Thank you, we are.

 

Jeffrey Davies

It's just amazing the changes that have gone on there as well. I think you have to look at the positives wherever you are, not dwell on the negatives, because it would be easy to get despondent. I prefer not to be.

 

Greg

Jeffrey, thank you so much for your time. This was a fantastic, engaging and illuminating discussion. Chin-Chin and best wishes.

 

Jeffrey Davies

Thank you for taking the time to come by and see us.

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