The Miracle That is Google: De-constructing Another Wine-Related Business Venture
The core of being an entrepreneur is the ability to imagine ways to turn commodities into something special. Think Starbucks: until Howard Shultz came along, coffee was coffee was coffee. A cup cost a quarter and no one gave a damn where it came from. Schultz turned a 25-cent commodity into a $4 lifestyle expression.
In this case, the commodity resource is fallout shelters left over from the Cold War. Europe is littered with underground apartment complexes built to protect important people while everybody else died in sizzling horror. The basic construction is the same in all of them: they’re underground, with three-foot-thick concrete walls and climate control. Once the Cold War ended they had no real purpose, but were so well constructed that they couldn’t be torn down — or torn up, since they’re all under ground.
It takes a rare kind of entrepreneur to look at one of those nuclear-proof bunkers and sense opportunity. The bunker in question is in downtown Geneva. No doubt justified as a “vault” in order to placate soon-to-be-irradiated shareholders, the heavily fortified basement was built to shelter Swiss bankers — because who more deserves to be saved than bankers? According to the utterly dependable Google Street View, the vault sits beneath what is now the Arab Bank (Switzerland) — which, were I not so sensitive and enlightened, might be the source of a couple of jokes about just exactly how bomb-proof the vault needs to be.
Fortunately, I’m not like that. And, really, there’s every possibility that Google has the location wrong. I once hosted a corporate event, and anyone who followed Google’s directions ended up driving down a boat ramp into the Ohio River. So you never know. The vault, for all I know, could be miles away and the Arab Bank could be lawyering up as we speak to sue me for libel. Because, seriously, they’re an entirely reputable firm with no need for a nuclear-proof vault, which brings us back to the entrepreneurial opportunity.
Felip Opdebeeck, then in his mid-20s — an age at which everyone I know was still trying to remember where they left their pants last night — formed Au Bonheur du Vin, a company whose name means, I think, “with a wine bonheur,” which is apparently a reference to Opdebeeck’s passion for wine. Au Bonheur, in turn, leased the vault in question and Opdebeeck repositioned the bomb shelter as wine storage.
Opdebeeck says his clients in fact fall into three categories: “Expatriates, often home owners who, for professional reasons have gone abroad. They often have large private cellars, anywhere from 600 to 3,000 bottles”…A second group is people whose storage space is far from perfect or has no security, or who have no cellar at all. “They usually don’t have many bottles when they start out, maybe 50, but their cellar can grow easily thanks to our service. They go for the same type of wine as the expatriates. And they use the home delivery service, or some come to collect their own wine”…(The third group is) small business importers, restaurants and hotels (that) have many more bottles and tend to rent the space for shorter periods, when they are renovating or have a temporary overload of bottles.
Au Bonheur’s value proposition is simple: store your wine under perfect conditions in absolute security.
Au Bonheur makes money like this: the company charges a registration fee of about $50 to open an account, and then charges roughly 25-cents per bottle, per month for the storage. There are ancillary services as well, including wine transport, that generate extra revenue.
The vault has 37,000 bottles in it, according to this, owned by 137 different clients. That translates to about $7,000 in registration fees collected and $10,000 a month in revenue. The vault has room for another 100,000 bottles which, if the current pattern continues, will result in about $20,000 in registration fees and a total of $35,000 in monthly rental fees. That’s gross revenue of about $400,000 a year, plus extras like hauling. Call it a half-million.
Mr. Opdebeeck says there is a “relationship of trust” between himself and his clients, which implies that he’s not delegating a lot of the operational particulars to underlings. Only one client at a time is allowed into the vault — a rule that not only protects the privacy of clients but guarantees that Opdebeeck doesn’t need to keep extra staff around in case a half-dozen thirsty magnates show up at the same time. I have no way of knowing this, of course, but I’m guessing his staff consists of a couple of brutes-on-call to lug boxes of wine around, but that most everything is handled by Mr. Opdebeeck himself. Maybe he has a couple of former runway models to provide eye-candy and customer support at critical moments. They’ll work cheap anyway, since there’s nothing former runway models like more than being in contact with rich guys. Let’s say Au Bonheur is on the hook for $100,000 a year in staff costs, with no benefits up-charge because the Swiss have national health care.
Aside from that, on the expense side there’s only rent and leasehold improvements. Let’s assume he can store 50 bottles per square foot — these are stacked cases, remember, not bottles on display. He’s going to need 2,800 square feet for the wine and a couple of hundred more for office and reception. It doesn’t need to be terribly nice, because I’m guessing the rich guys send their butlers to pick up the wine, or they have Au Bonheur do the digging and delivery. Call it 3,000 square feet.
Commercial real estate in Geneva leases, according to this, for about $90 a square foot — and that’s above ground, with windows and everything. That actually sounds low to me, but we’re talkin about basement space here. I bet his lease negotiations went like this:
Super: You want to lease the vault?
Opdebeeck: Yes. For the next 25 years.
Super: The vault in the basement?
Opdebeeck: Yes.
Super: Give me $500 cash and it’s yours.
Still, he must be paying something, so let’s call it $45 a foot. Rounding up for the sake of conservatism, that’s annual rent of $135,000. Let’s say he spent another $200,000 fitting out the vault with shelves and lockers and stuff. For the sake of expediency, we’ll assume he amortizes that over 10 years, which means he’s got another $20,000 a year to account for.
All in, when he’s operating at capacity, he’s taking in a half-million a year on expenses of — again, we’ll round up — maybe $300,000 a year. This for a job that is about as stressful, literally, as doing nothing — because that’s most of what he does. It’s a vault, for heaven’s sake. It’s not like he has to hang around outside to make sure no one gets in.
Right now, of course, he’s not operating at capacity. With 37,000 bottles on board, he probably hasn’t hired the former runway models and is lugging the cases around himself and touting it to his clients as personal service. He probably hasn’t built-out the whole vault, either. I’d bet that he’s breaking even on the vault and making most of his money providing consulting services to the subset of his clients who are building their cellars as they go.
In other words, he’s charging other people to use their own money to buy wine he thinks they should buy, and then he charges them to store the wine in his vault. And when they want the wine back, he charges them for that, too.
If there’s a better business model out there in the wine business, damned if I’ve seen it.
March 3rd, 2010 at 12:21 PM
I actually looked into doing this in Chamonix. Victoria told me to ” have a nice life”. Since my definition of nice life includes being married to her I shelved my scheme. Bon chance, Felipe.