← Cautionary Tales with Tim Harford
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- [00:06]
A
Pushkin. Tim Harford here with a bonus episode of Cautionary Tales. I have got an incredible story for you today about a pioneering businesswoman who disrupted the champagne industry and in so doing, changed it forever. This episode is sponsored by Chase for Business. And I'm joined by Ben Walter, who is the CEO of Chase for Business and the host of his own rather brilliant podcast, the Unshakeables. Ben, welcome to Cautionary Tales.
- [00:38]
B
Tim, thank you for having me. It's great to be here.
- [00:40]
A
Well, it's great to have you. So, Ben, what comes to your mind when I say the word champagne?
- [00:47]
B
You know, obviously celebrations. I suppose the other thing that comes to mind for me is quality. Don't cheap out. Because for any of us who've ever been drunk on cheap champagne, you know that that's a one time affair and you never do that again.
- [00:58]
A
I wouldn't know anything about that, I'm sure. So these associations of lux and possibly of excess come to mind. What if I told you that all of this comes down to a single rather remarkable 19th century businesswoman?
- [01:13]
B
I didn't know that. On our podcast we've had a number of incredible female entrepreneurs who've achieved quite a lot. But hearing that it happened in the 19th century is a whole different ball of wax.
- [01:23]
A
She is quite a character. Barbe Nicole Clicot Ponsardin. She essentially created champagne as a category as we know it today. And she also took a struggling family run champagne house and she turned it into a global empire. And I should say it was partly about the way she marketed things. She drove behavioral change around sparkling wine.
- [01:48]
B
I'm trying to picture what you have in your head. This is the 19th century. Women, I don't think in France could have bank accounts at that time. And this woman revolutionized an entire industry.
- [01:58]
A
It is an astonishing story and Ben, I'm going to tell you all about it and I hope you will give me some of your reactions to the story because I know you're a business expert. You've spoken to so many entrepreneurs on your podcast the Unshakeables. But before we get to that, I need to say I'm Tim Harford and you're listening to Cautionary Tales. Madame Clicquot was born Barbe Nicole Ponsardin in 1777. So we're going back a quarter of a millennium. She was the daughter of a wealthy textiles industrialist and she came of age to during the French Revolution, all of that turbulence and social change, the ancien regime disintegrating the Middle Class on the rise. And when she was 21, she married Francois Clicquot. He was the only son of her father's competitor, Philippe Clicquot, and he was another textiles businessman. So the marriage was effectively a business deal between the Clicquot and Ponsardin families. And at this point, normally we'd tell a story about Barbe Nicole becoming a wife and a mother. She would be expected, like all married women, to live in the shadow of their husbands. However, she and Francois ended up forming a business partnership. She was fascinated by winemaking. So was her husband, Francois. He was keen to grow his family's small wine business. And so the young couple together set about acquiring vineyards and learning all about the industry.
- [03:54]
B
These were two textile families, right? In New York, we'd call it the rag business. So were they supportive of them going into the wine business?
- [04:01]
A
Not really. No, they weren't. I mean, Philippe Clicquot wasn't keen on his son's idea. He thought the textile business was going perfectly well. The wine business was something of a distraction. And you've got to bear in mind the Napoleonic wars are on the horizon, and with Europe ripped apart first by revolution, then by war, wine is not looking like a profitable business because it's going to disrupt all of the trade and all of the commerce. And, of course, he was completely right. So Francois and Barbe Nicole's business started to struggle. And in 1805, things got worse. Tragedy struck the family. Barbe Nicole's husband, Francois died. Now, rumors at the time were that his business was going so incredibly badly that he had killed himself. That's actually unlikely. Much more likely, he died due to typhoid fever. But whatever the reason, he's dead. She is a widow. Her daughter Clementine is six years old. Barb Nicole herself, 27. And she is facing life as the widow Clicquot. Or as they say in France, la Veuve Clicquot.
- [05:12]
B
Aha. Now this is starting to sound more familiar. So Philippe took pity on her, I suppose, and decided to back the business in the wake of the tragedy.
- [05:20]
A
Ben, I didn't bring you here to tell you a story about people who felt sorry for this woman. No, no, he didn't take pity on her. He clearly saw something in her. But he was at first just keen to close the wine business entirely. I mean, the money is in textiles. The wine business has been going badly. Why go ahead with this?
- [05:39]
B
But obviously, that didn't happen in the end, right? I mean, there's a bottle of this stuff in my fridge right now.
- [05:44]
A
I'm very envious. Yes, I mean the product's world famous. She basically somehow managed to persuade him that her idea was worth backing or perhaps more likely that she was worth backing. He must have seen she was incredibly smart, incredibly driven and she had some collateral, she was owed inheritance and she said, look, instead of the inheritance, why don't you back my wine business? And he put in the equivalent of maybe a million dollars today. Which says a lot about her. I think also says a lot about Philipp because as you pointed out earlier, women in France at the time couldn't even have a bank account. And she is proposing that she is going to lead this huge and untried business. And it's also a male dominated business.
- [06:35]
B
So who were the players? I mean, would we have heard of any of them?
- [06:37]
A
Charles, Henri Heidsek, Jean Remy, Moet? Have you heard of them?
- [06:42]
B
Those are certainly names that sound familiar. Were they well known at the time?
- [06:45]
A
They were very well known at the time. Moet in particular, he had this celebrity bromance with Napoleon and he used to advertise his wine by distributing these posters, postcards showing Moet and Napoleon exploring wine cellars together.
- [06:58]
B
Well, it's good to know the bromance is not a new phenomenon.
- [07:01]
A
Absolutely, absolutely. So this is the situation in which Barbe Nicole approaches her father in law, Philippe. He said, okay, I will back the business but you've got to learn something about wine. You've got to go and do an apprenticeship and learn the trade. Four years figuring out how the wine business works. She agreed, she went off, she did her four year apprenticeship. At the end of the four years the business is still really struggling. And so she goes back to Philippe, her father in law, and she asks him for help yet again. And he agrees.
- [07:35]
B
Wow. I mean, so he must have really believed in her at some level.
- [07:38]
A
He must have done. I mean we don't know why. But in any case, whatever it was that passed between them, he backed her a second time. This is the point at which Barb Nicole decides she's gonna have to take a gamble. Possibly she realizes if she doesn't make it, this. It's really a case of now or never.
- [07:55]
B
Yeah, we've had a number of entrepreneurs on the show who've told similar stories about being up against the wall and then betting it all on black, so to speak, because they have no choice. For example, we had a woman who owns a company called Desi Eyewer, her name is Desi Perkins and she went into a number of Places to pitch and couldn't get an answer and was running out of cash and really went for it and it came through. But, you know, to go for broken, it takes courage to do that.
- [08:20]
A
Yeah. I mean, I suppose to some extent there's a degree of survivor bias that we see the ones who took the gamble and then the gamble paid off. But certainly my own research suggests there is something about that crisis that forces people to think differently and to explore new ways of doing things that is something of a catalyst for business transformation, I think.
- [08:41]
B
So what happened next, Bob?
- [08:43]
A
Nicole foresaw that the Napoleonic wars were likely to come to an end and that when they did, that was going to free up trade between France and its foe, Russia. And that meant potentially a huge champagne market in Russia. And Barbe Nicole was making a particular kind of champagne that she was confident would sell very well in Russia. It was incredibly sweet. Do you know Sauterne, the dessert wine, Ben?
- [09:11]
B
I don't. Is that similar to what they were drinking?
- [09:14]
A
Well, Sauternes, very sweet. This champagne was sparkling, like modern champagne, but it was very sweet. It was actually twice as much sugar even as modern Sauternes. So this is like drinking Baileys or hot chocolate or something. I mean, it's a very, very sweet, sparkling drink. And the widow Clicquot, she decides when the war ends, Russians are going to go for this. She smuggles bottles of her best vintage, the 1811 vintage, to Amsterdam, knowing that if the war does finish, they will be very well placed to be shipped to Russia at that moment. So she's taking this risk because if the war doesn't end, then she's not going to get any return from this wine. But if it does, she is perfectly timed to profit.
- [10:04]
B
There's sort of three brilliant moves she makes at the same time. One is really knowing her product market fit, right. She knows that this incredibly sweet drink fits the Russian palate. Two is being aware of the macro effects of what's going on around her, knowing the war is going to end and that will open up trade. And then three is having the guts to smuggle this stuff into Amsterdam so she can get a jump on the competition. That's quite a combination.
- [10:26]
A
Yes. The risk comes. Good. Madame Clicquot's champagne makes it to Russia, beating her competitors, including Monsieur Moet, by several weeks. She gets influencer support, 19th century style, too. The Tsar says that Veuve Clicquot is the only champagne he will drink. And of course, once he says that, the entire Russian court has to follow suit. It's the perfect product. It is there at the perfect moment that, though, poses its own problems because she suddenly got this massive demand to make this kind of champagne. And at the time, making champagne is extraordinarily difficult. And the whole production process is very inefficient.
- [11:09]
B
Yeah, Tim, when people are successful, that can suddenly bring up a new range of challenges. We spoke to Melissa Gallardo, who started a candle company called Bonita Fierce Candles. And when her sales took off, she didn't know how to keep up with production. I mean, she had people in her home just making candles as fast as they could possibly make them because she had a moment and she had to capture it.
- [11:28]
A
Yeah. I mean, this is exactly the problem that Barb Nicole faced. And she realizes she has to do something to change that.
- [11:37]
B
But in this case, it sounds like she had to become a bit of an engineer.
- [11:41]
A
Yeah. So all champagne has sediment. It makes the drink cloudy. That's not what people want. They want a clear champagne. That's true. Now. It was certainly true at the time. But to filter out the sediment is this very time consuming business. What Madame Clicquot invented was called a riddling table. So riddling is the process of getting the sediment out. And this is a kind of wooden frame with holes bored into it, allowing the bottles to be suspended at different angles. So they're basically upside down on a diagonal. And you put the bottles in this frame and then these expert wine riddlers come up and they give it a sharp quarter turn every now and then. And every time you have this quarter turn, you're changing the angle of the bottle and you're very gently disturbing the sediment. You're not mixing it back into the wine. You are letting it slip to the bottom of the bottle. And of course, because the bottle is upside down, the bottom of the bottle is the neck. So you've got this sediment gathering in the neck and you can take it out of the bottle easily. So this riddling contraption, this riddling table, is the killer app that makes it much, much easier to get the sediment out of the champagne. And her competitors absolutely cannot work out how she is doing this. How is she making so much champagne so quickly? Moet figured it out eventually, but it took him 15 years to catch up.
- [13:11]
B
You know, Tim, she was innovating in a physical product that had been around a long time. And it's interesting because that never stops. We interviewed someone on the podcast who has a company, Sibanto, that changing the way that you plant and harvest corn. We've been Consuming corn for thousands of years. He's developing automated tractors that can plant and reap the crops. I think people fall into a trap where innovation only happens in sort of the advanced sectors of tech. And actually there isn't an industry around that's not waiting around to be disrupted.
- [13:42]
A
Yeah, I think that's absolutely right. And the wine industry, as Bob Nicole showed, is clearly one of them. And one of the things that Madame Clicquot did here was not just invent the process, but keep the process a secret. So she had real loyalty from her employees, who presumably could have gone to one of her competitors and collected some kind of reward, but none of them did. And that may have been because she had this profit sharing system. So they were all making money, they felt looked after, and they did not betray her secrets.
- [14:14]
B
Well, she was shrewd in a number of ways.
- [14:16]
A
Is this approach of treating your work as, well, sharing the gains something that you've encountered yourself? Ben?
- [14:23]
B
Loyal employees are critical. I would just say that loyalty and employment is only partially about pay and ownership. It's, you know, particularly in today's world, it's about that plus creating the right environment, making people feel valued and like they belong and like they have purpose. So I think the right compensation structure is important, but it's not the whole ball game.
- [14:45]
A
Yeah. Listeners to our episode on the building of the Empire State Building might recognize this. Paul Starrett, who was in charge of that project, was in some ways an incredibly generous employer. He paid the workers very well. The conditions were great, there was great. Food safety standards were very high. But at the same time, he watched them absolutely like a hawk. He had really, really tough minded site managers cracking down on fraud and theft and so on. So there was this sort of sense of like, I'm going to absolutely insist on the best possible behavior, but at the same time I'm going to reward that.
- [15:21]
B
You know, success is the best retention tool there is. And success gives you the right to be tougher because people want to be in an environment of success and they want to rise to the occasion. You talked earlier about the fact that she basically established the category. I mean, she drove large scale behavioral and intent of change across an entire continent. It sounds like. How did she do that? Tell me more about that.
- [15:47]
A
I think it's a fascinating case study. So at the time, Champagne itself was not the drink it is today. And the Champagne region was not famous for sparkling wine. It was famous for still white wines. So by reaching these influences, reaching the Tsar, by producing this drink that perfectly matched people's taste. And by creating something that seemed luxurious, but at the same time was cheap enough to be affordable because she had made the production process more efficient. And to make it available at scale, she creates this whole category. Suddenly, this drink is something that the Tsar demands, and yet the ordinary middle classes can afford it, and it basically becomes the drink of celebrations everywhere. She established all of this. By the time she died in 1860, the widow Clicquot had a global empire. She was exporting her wine as far afield as the United States. Sales had reached 750,000 bottles a year. That is up from 17,000 bottles back in 1811, before her big breakthrough. And the brand is now so well recognized, I think it's the second most popular brand of champagne in the world. And if you go into a bar in France, I understand that you can simply ask for a glass of the wid. People will know that you want Veuve Clicquot champagne.
- [17:13]
B
Tim, what's interesting about that is we think that hyperscaling is a modern phenomenon. You look at the likes of Apple or Amazon or Google or some of the other more recent startups that have gone global with their impact. And while the timescales might have been longer, this was maybe 50 or 60 years, as opposed to 5 or 10. The impact, even back then could be global in scale in terms of how far reaching some of these insights and innovations can be.
- [17:39]
A
Yeah, absolutely. It's partly about developing the product that people want to drink. It's partly about the marketing, but it is also about the production. You've got to be able to make this stuff. You have to get all of these things right. And that's what she did.
- [17:52]
B
Yes. And aspiration and luxury is a timeless phenomenon.
- [17:56]
A
Something else timeless is the motivational business quote. And I actually have a motivational business quote from Widow Klicko. I rather like this one. This was a letter she wrote to one of her grandchildren, and she commented, the world is in perpetual motion and we must invent the things of tomorrow. One must go before others. Be determined and exacting, and let your intelligence direct your life. Act with audacity.
- [18:27]
B
What an incredible woman. I hope that aspiring female and, frankly, male entrepreneurs can hear this story, because the woman was groundbreaking in so many ways. I don't speak French. I didn't know what the word Veuve meant. So I kept waiting for Tim to tell me that she married Mr. Veuve. And it turns out she did it all on her own. And I think that's fantastic. What she was able to accomplish as a woman in early 19th century France. I mean, I'm just bowled over by that. I think about innovation, resilience, scale, grit, vision. You know, these are things we talk about all the time in business circles. And she had them in spades and pioneered them to something that, you know, has stood the test of time in more ways than one.
- [19:06]
A
No Ben, I will drink to that. Ben Walter, thank you very much for joining me on Cautionary Tales.
- [19:12]
B
Thanks so much for having me. Tim. What a great story.
- [19:17]
A
This episode was sponsored by Chase for Business and I was talking to Ben Walter, who is the CEO of Chase for Business. You can of course find the unshakeables wherever you get your podcasts and there will will be a new episode of Cautionary Tales in this feed very shortly. For a full list of our sources, see the show notes@timharford.com Cautionary Tales is written by me, Tim Harford with Andrew Wright, Alice Fiennes and Ryan Dilley. It's produced by Alice Fiennes and Marilyn Rust. The sound design and original music are the work of Pascal Wise. Additional sound design is by Carlos San Juan at Brain Audio. Ben Nadaff Haffrey edited the scripts. The show features the voice talents of Melanie Guttridge, Stella Harford, Oliver Hembro, Sarah Jopp, Masaya Munro, Jamal Westman and Rufus Wright. The show also wouldn't have been possible without the work of Jacob Weisberg, Greta Cohn, Sarah Nix, Eric Sandler, Carrie Brodie, Christina Sullivan, Keira Posey and Owen Miller. Cautionary Tales is a production of Pushkin Industries. It's recorded at Wardour Studios in London by Tom Berry. If you like the show, please remember to share, rate and review. It really makes a difference to us. And if you want to hear the show ad free, sign up to Pushkin plus on the show page on Apple Podcasts or at Pushkin fm Slash plus.