In early September of 1991, I was on
vacation in France in the Cognac Region and in Wine Country around Bordeaux.
I was getting away from the thoroughbred horse industry or so I thought.
I found a great many situations that had occurred in Cognac and Wine Country
Country, that paralleled what had occurred, and was still happening in the
It is important to examine how events
affect different industries. The relatively recent events with Cognac
and great Bordeaux Wines and the recent events in the thoroughbred industry
in America were of great interest. As we know and read about all the
times, the effects of tax law changes have greatly hurt the thoroughbred
horse industry in America. We never did receive investment tax credit
on horses anyway, but slower depreciation and changes in capital gains along
with countless other changes have had a significant role in reducing the
price of horses.
Cognac is considered a luxury product as
are racehorses. The majority of all Cognac produced, nearly eighty
five percent, finds a home outside of France. Whenever an importing
country wants to raise revenues, luxury items such as Cognac, Perfume and
Champagne are usually very hard hit. Cognac sales were increasing at a
rate of eight to ten percent in the late sixties. Just when Cognac
firms were set to unleash a great quantity of Cognac in the world, outside
events created big problems. Britain devalued their currency making
French goods very expensive. In retaliation against duties imposed on
American chickens going to France, the United States Treasury placed higher
duties on fine Cognacs. In 1977 alone there were more than forty
restrictive measures instituted against the importation of Cognac involving
more that thirty countries around the world. Brazil, Ghana and Peru
banned Cognac entirely.
Meanwhile, in the world of great Bordeaux
Wines, it can be said that folly was in the air in the early 1970s.
One Texas retailer paid $36,000.00 for a magnum of 1929 Mouton-Rothchild at
a Chicago auction. For whatever the reason, great Bordeaux vintages
were recognized as investments, not for drinking but strictly for buying and
selling. In short, too many people--some of whom had only the
vaguest understanding of wine--began buying wines on speculation, certain
that the market which was healthy then would continue to grow. It grew
only because everyone from French banks to English brewing companies, from
Swiss chocolate firms to American multinationals, continued to buy wine
without thinking where, or when they might sell it. The prices rose to
extraordinary levels just as yearling and stallion seasons and broodmares
prices rose to extraordinary levels in the mid 1980s in the thoroughbred
business. A world wide economic slowdown aggravated by the so-called
oil crisis, came hot on the heels of a local scandal in Bordeaux involving a
shipping firm with dubious blending practices. It all hit the customer
at once.. Resentful to begin with a the grossly exaggerated price for
the fair-to-medium 1972 vintage, wholesalers, retailers and consumers
refused to go along. Cases of wine piled up in the warehouses of
Bordeaux and abroad, and no one was willing to pull the cork from French
bottles.. The bottom fell out practically overnight and many foreign
speculators were wiped out.
Our situation of the 1980s in the
thoroughbred horse business included the problems associated with the
Spendthrift Farm public offering, the Tom Gentry bankruptcy, the Nelson
Bunker Hunt forced sale of horses along with countless dispersals of major
owners and breeders and expensive syndications that proved to be
unsuccessful as sires of quality racehorses. Add this to the tax law
changes and like Bordeaux Wine, it all seemed to hit at once and for us it
is still going on. Even today, the very cornerstone name of the
thoroughbred industry, the great Calumet Farm is in bankruptcy just when
they once again attained there industry leadership in 1990 by being awarded
Eclipse Awards for Leading Breeder and for Horse of the Year Criminal Type.
They also stood the Leading Sire Alydar and the Leading Second Crop Sire in
1990, Wild Again.
Just as you might associate American
Thoroughbred Racing with names like Calumet Farm, Greentree Stud, Sagamore
Farm, Cain Hoy Stable and the familiar names of Phipps, Whitney, Vanderbilt
and so on, we associate Great Bordeaux Wines with the great chateau names of
Margaux, Mouton, Lafite, Latour, Haut-Brion, D'Yquem, Petrus, Ausone,
Cheval-Blanc, Lascombes, Pichon Longueville, and others, and we associate
Cognac with the names Hennessy, Martel, Otard, Remy-Martin, Courvoiser, Hine,
Augier and others.
In the Cognac region ownership has changed
until today, Seagrams of the United States and Canada own Martell and Augier;
Hennessy is officially known as Moet-Hennessy, a publicly owned
multinational company combining the interest of Moet and Chandon Champagne,
Christian Dior perfume, Louis Vuitton, Domaine Chandon sparkling wines of
Napa Valley and Hine Cognac: Bass-Charrington, the British brewers own Otard;
Remy-Martin is still in the hands of descendants of Andre Renaud who bought
the company in 1924. Remy-Martin now owns the Champagne firm of Krug
and and is now a conglomerate owning distributorships in Hong Kong and the
The great Bordeaux chateaus are owned in a
variety of new ways but mostly by corporations. Large inheritance
taxes in France require that individuals cannot afford to own the virtual
wine institutions. Chateau Margaux is owned by the Societe Civile du
Chateau Margaux (Mentzelopoulos family) who also are part owners of Perrier,
Chatreau Lafite-Rothchild is owned by Domaines Rothchild (descendants of
Baron James de Rothchild who purchased Lafite on August 8, 1868 for
4,440,000 French Francs), Chateau Mouton-Rothchild is owned by the family of
Baron Philippe de Rothchild, direct descendents of Nathaniel de Rothchild
who purchased Mouton for 1,125,000 French Francs in 1853 in a corporate
format, Chateau Latour is owned primarily by Allied Lyons, Château d'Yquem is
owned by Comte Alexander de Lur-Saluces, a direct descendant of Marquis de
Lur-Saluces who acquired the vineyard in 1785, and Chateau Haut-Brion,
purchased in 1935 by an American banker named Clarence Dillon, in owned
under the title of Domaine Clarence Dillon and operated by the Duchesse de
Mouchy, the granddaughter of Dillon.
In America, Gainesway Farm is owned by
South African Graham Beck whose property includes Greentree, the Hancock
Family operate Claiborne Farm, Allen Paulson of Gulfstream Air owns
Brookside Farm, the Arab Sheikhs have several farms as do the English.
It would seem that the great farms of Lexington, Kentucky are now owned in a
format that one might not have thought possible, just a few short years ago.
The fate of the legendary Calumet Farm now hangs in the air as the industry
waits to see who will step forward and save the name.
The great and noble Cognacs and Bordeaux
Wines of France are legacies that have been preserved. Sometimes, families
are able to pass down the legacy for centuries and sometimes corporations
both foreign and domestic must move in to preserve the legacy. If the
American Thoroughbred Industry is to be preserved, and move on through
history, it must learn from other industries.
So sit back, drink a glass of fine Cognac
or lush Bordeaux Wine or both and give some thought to it all.
I wish to thank all the great people in
France at the vineyards I visited and especially at Chateau Margaux, Chateau
Haut-Brion, Chateau Latour and Chateau Mouton-Rothchild in the Bordeaux
Region and Chateau Otard, Courvoiser in the Cognac Region, who were so kind
to show me their facilities. I also wish to credit my reference
material, Alexis Lichine's Guide to the Wines and Vineyards of France and
David Peppercorn's Bordeaux.
After Thoughts - April 30, 2002
Horse prices are high, the world is at war
and the economy is once again having some problems. Big companies have
recently failed with a strong aftermath for investors such as the Enron
case. We all know that economically speaking, business cycles about
every 15 years and we seem to be coming back into a cycle which could easily
hit the horse business as it did in the late 1980s and early 1990s.
We entered the new millennium with prices
once again beginning to soar in the business. The breeders are holding
out for high reserves and there is a substantial number of buy backs.
Just this year, stud fees in the middle price range took a solid hit.
Syndications of new stallion prospects might just have been a bit too high.
Foreign participants, especially from the
middle east are under strong political pressure. We all understand
that a big portion of the thoroughbred market is currently influenced by
sportsman from the Arabian Peninsula. Although it seems that there are
more billionaires then ever in our industry, we still need to take notice of
the situations in the world in which we reside.
I always do what I can to contribute to
the health and well being of the horse business. I love this business
and most of the people in it. Furthermore, I make my living from the
horse business and I am noted for making deals that take into consideration
that the business world and life in general is certainly not a static
situation. Frankly, the dynamics of life must be considered by
everyone interested in the health and well being of the thoroughbred
industry. In this era of hundred mare books to stallions, those
wishing to see a healthy industry must especially consider the smaller
players that are the life blood of the business. The stallion owners
especially should keep in mind that money is like manure and must be spread
around if they expect things to grow.
Thought - September 24, 2009
It has been greed and some
corruption that has hit the world economies and caused an economic situation
that is unequalled in my lifetime and may be unequalled in economic history
long before it ends. A commercial real estate crisis looms on the
horizon and the leveling of salaries in a global work force market is also a
strong factor. America exported a lot of jobs because unions and
workers priced themselves out of the global work force. New jobs of
quality require skills that many American workers will not be able to
acquire in this age of Nano Technology, Robotics, High Bandwidth Utilization
Products, Microbiology and Physiology, etc.
The American and Global Healthcare
Crisis is actually a Disease Care Crisis. Fast Food and Restaurant Chains
are crippling their customers with high sodium, high sugar and high calorie
foods that are destroying world health. The drug companies are
actually killing and disabling people in the long term. The new technologies
to cure the root causes of illness are not being offered by most medical
practitioners. Lobbyists and business as usual, disguised as new
business practices, is going to run out of time and things will continue to
journey down the wrong path for what might be another decade or so until the
leaders wake up to what is actually going on.
Solutions to environmental
situations are scheduled much too far into the future. Disasters
involving the ruination of earth only add to the problems. The Time is
Always Now so solutions to environmental issues need resolution and
enforcement immediately. Each new disaster cost lives and alter the quality
of life for the survivors.
The horse business needs to utilize
the best minds available and do it quickly. We are being passed by
everyone, everywhere we turn. Slot machines are not and never as the
answer and synthetic racing surfaces only add to the problem. We must
realize that no one has a franchise on new ideas and we need to keep our
minds open to new concepts from all sources.
I am hopeful that my next update of
this article in several years or more will demonstrate that my message got
home and changes that were positive have augured in a new day.
Drugging horses and greedy business practices must go and a fair and level
playing field needs to be the cornerstone on which the new thoroughbred
racing and breeding business is built. We need for the popularity of
horse racing to return and that will only come when integrity and economic
soundness return to the business.