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Gregory Salinger is one of the many Harvard MBAs who have become Internet entrepreneurs. But he's far from typical. Raised and educated mainly in France, Salinger is the son of Pierre Salinger, White House Press Secretary under John F. Kennedy, later appointed U.S. senator from California (he lost in the election), and later still a TV journalist. After working in acquisitions and project finance for Lazard Frères, expanding Pathé Cinema's French theater chain, and acting as a new-media consultant to the French government, Salinger the younger launched Paris-based Chateauonline.com in 1998. Today, the company claims to be the largest Internet wine seller in Europe. Salinger says the privately held company (www.chateau-online.com) had sales of about $7 million last year and is expecting to do far more than that this year.
By virtue of his diverse background, Salinger, 34, has a good perspective on differences in the business culture here and abroad. And running a wine company gives him plenty of insight into nuances in taste among European countries. At the end of the day on Friday, Oct. 20, I caught up with him by phone in his Paris office. Here are edited excerpts of our conversation:
Q: Are online wine sales more advanced in Europe or the U.S.?
A: Europe is the main wine-consumption area in the world. Wine is a $100 billion world market, and Europe represents about $60 billion of that. And France is No. 1 in the world in wine consumption, both per capita and on an absolute basis. The French wine market is around $15 billion -- maybe more. Fifteen years ago, the average French person consumed about 100 liters of wine annually. That has now come down to about 50 liters per capita annually, but the size of the market [measured in sales] has grown. That's because we're going through a shift to [higher] quality wines.
Q: In what sense can Chateauonline claim to be the largest European Internet wine seller? How close are the biggest competitors?
A: We're first in terms of sales -- we did about 10 million francs [about $7 million] last year. The closest competitor [in France] is estimated [in the press] to have done less than half that. This year, from internal estimates, we're still ahead of the pack....
We're the only online wine e-service company with a presence in all the major European countries. We're present [with national Web sites] in France, the U.K., Germany, Holland, Italy, Ireland, and as of next month, we should be present in Switzerland. And we can deliver throughout the European Union.
From a recognition point of view, we were selected last year as one of the top-10 European e-commerce companies by Forrester Research. We were the only one from France and the only one from the wine sector. We also won an award this year from students at the wine school at Dijon who went through the selections of a thousand wine sites around the world. And we won an award as the best e-commerce site in France judged by IBM, Ernst & Young, and a couple of other organizations.
Q: In theory, the European liquor market is more open than the U.S. market because you can sell freely throughout the whole of the European Union.
A: That's the theory. In reality, alcohol and tobacco are still heavily regulated on a national basis. Yes, you can move wine from one country to another But there is a lot of paperwork and a number of taxes that must be paid. In the U.K., they levy an excise tax of around $2 per bottle of wine.
Secondly, there are not only language but cultural differences among the different countries. The U.K, for instance, is pretty much a non-wine-producing country. It has a very open market -- the market share of French wine is around 30% -- but they also consume a lot of wines from the New World, [including] Australia and the Americas. The French essentially drink French wine, and the Italian essentially consume Italian wines. There have been some big improvements in German wine, so Germans -- quite rightly -- drink a lot of German wines, though the market otherwise is split between French, Italian, Spanish, and New World wines. People in the U.K. tend to consume wine quite quickly after the purchase. People in France and Germany tend to store it in wine cellars.
Being present in all these markets is a real challenge. We've built an infrastructure that enables us to deliver throughout the EU and comply with national regulations and handle local taxes. This represented a significant investment.
Q: Do you expect to do an IPO at some point?
A: No, we're happy being a private company.
Q: Are California wines making any inroads in the European market?
A: California wines are generally of very high quality. [But] from a pricing point of view, they're at a real disadvantage to wines from other regions. The strength of the dollar relative to the euro means that U.S. wines are pretty much priced out of the market.
Q: Your strategy puts heavy emphasis on good service....
A: We're gearing up as an e-service platform with a qualitative and selective approach. We don't aim to provide all the wines available in the world. We don't think the wine connoisseur wants that. We provide a product that is selected by the best sommeliers in the U.K., Holland, and Belgium. All of the wines on Chateauonline have been tasted by world-class wine experts.
Q: Do you have top sommeliers under contract?
A: Yes. And our [chief] sommelier is a cofounder of Chateauonline who used to be the head sommelier of the Paris Ritz Hotel.
We're really focused on developing what we call a wine e-service platform. We have a general wine offering, a [wine] futures offering, we have rare wines coming up online at the end of the month, corporate gifts. Plus, we have a whole area developing around intermediation. This week, for instance, we launched [wine] auctions. It's in a totally secure environment and totally tailored to the wine sector.
Then there's content and creating a sense of community. We have a number of specialized forums. The most developed right now is probably in France, where we have a number of wine experts who intervene and answer questions, both from laymen and connoisseurs. We also have a whole service [to sell wines] to hotels and restaurants. We want to be present on all interactive platforms, whether via PC, mobile phone, or interactive TV.
Q: What are Chateauonline's estimated sales this year?
A: All I can say is that by June, we were already way above [the sales] we did in 1999. We'll do more.
Q: The holidays are the most important selling season, no?
A: Yes, there's a very high seasonality in the business. People tend to consume more wine in winter, especially around Christmas. And for us, corporate gifts are very important. Wine is the No. 1 corporate gift, for instance, in France.
Q: Let me ask about your background and how that plays into this. You grew up mainly in France, then?
A: I was born in Los Angeles, spent the first four years of my life in the U.S., and then grew up in France. I went back to the U.S. for college -- I went to Swarthmore College. Then I worked for a while and then went back to school and got a degree from the School of Advanced International Studies in Bologne. After that, I got an MBA from Harvard.
Q: How does your Harvard MBA help you? I lived in France for five years, and it seems to me that there is a big clash between Harvard MBA culture and French culture....
A: I got my MBA relatively young, at 25. But it definitely helped me coming here. We're creating a company that's present in three major European countries, that has gone from zero to 80-plus employees, that is experiencing high growth, that's dealing with very complicated regulatory, logistics, and marketing questions. It's very demanding, and anything that can help you organize that is helpful.
Q: You're too young to have met John F. Kennedy, though your father was involved in the Kennedy Administration....
A: Yeah. My father was Press Secretary under Kennedy and stayed on for a year in the Johnson Administration. Then he was named senator of California by Governor [Edmund G. "Pat"] Brown, but he lost in the general election. He went into business, then back into journalism. When I was five, we lived in London for a year, and when I was about six, my father went back to journalism in France and worked for [the French magazine] L'Express. One of his groundbreaking series was trying to explain Watergate to the French. He moved to ABC TV at the end of the 1970s.
Q: Did you know any of the other Kennedys?
A: Our families are friends. We've been friends over the years. I've spent time with the Kennedys at Hyannis.
Q: Which of the Kennedys did you know?
A: As I say, our families are friends.
Q: Are you being discreet?
A: Yes.
Q: And what are your parents doing now?
A: My parents are divorced, and my mother lives in Paris. My father lives between Washington and the south of France. His new wife opened a bed-and-breakfast in the south of France, near Avignon.
Q: Have you found cultural differences between France and the U.S. in terms of wine appreciation?
A: Well, Chateauonline is a pretty cosmopolitan place. There are 10 different nationalities at work. It was a European project from the beginning. There are many different kinds of people working here with a common appreciation of two things: good wine and development of new media on the Internet.
Wine is kind of a lingua franca around the world -- it brings people together. We're addressing the quality aspect, but for us quality doesn't have to be expensive. It can be a $3 bottle of wine, or one that costs a couple of thousand dollars. There's the old picture of people who drank gallons of table wine, but that's quickly eroding in France and around Europe. People are drinking better wine now. And people who are interested in wine tend to be open-minded, interested in cultural things.
Q: Do you think there's a greater joie de vivre in the U.S. than in Europe and France -- or is that a myth?
A: I don't really see a huge difference there. If we had clients in the U.S., I think they would have the same appreciation and joie de vivre and enjoyment of les bonnes choses de la vie as French or German clients. The only problem is that in the States, wine is tied in with the 21st Amendment [to the U.S. Constitution, which repealed Prohibition] and kind of bundled in with all the alcohol regulations.... Here, wine is [regarded as] one of the oldest businesses in the world, a fact of life... People tend to be much more at ease with it, maybe, than some U.S. regulators.
But we also have some stringent regulations here. There are some really stringent rules in France on advertising alcoholic beverages -- no TV advertising and only very restricted radio advertising.
Q: But isn't it much more acceptable for teenagers and even young children to drink a little wine at a meal?
A: We don't promote that. There are laws against it. But I think there's probably also a much greater tolerance of it.
Q: How is the current vintage shaping up?
A: This year, it's looking pretty good. In Bordeaux, it's looking very good, although the quantity is going to be restricted. I was in Alsace recently, and the feeling was quite good about this year's crop. In Burgundy, it seems O.K., too.
Q: Do you have daily tastings?
A: No, I would say we have monthly tastings with the team.
Q: Do you expect this business to go global?
A: We definitely see a period of consolidation. Does that mean the business has to go global? There may be some forms of what we're doing that we will offer in the U.S. But at this point, our approach is European. And we wish good luck to [competitors] from outside Europe who think they easily can make a dent in the European market.
Peterson is a contributing editor at Business Week Online. Follow his weekly Moveable Feast column, only on BW Online Edited by Douglas Harbrecht
Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.
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