Domaine Bousquet: Moving to the Next Level


Organic wine maker Domaine Bousquet was having difficulty in sourcing unsecured working capital to support urgently-needed expansion of its production capacity. Then it was introduced to HSBC, and its challenge was swiftly resolved.

Domaine Bousquet

Domaine Bousquet has been established in Argentina for nearly twenty years, but in 2004 Labid Al Ameri joined the company as General Manager with the brief of growing overseas business. This strategy proved highly successful, with international sales of the company's organically-produced wines expanding rapidly into more than 40 countries, including Scandinavia, Western Europe and the USA.

Capacity constraint
In order to support the additional capacity needed to service these new and rapidly expanding markets, the company significantly expanded the planting of its vineyards. However, while this guaranteed sufficient volume of grapes for the necessary literage of wine, the company was running up against constraints in its processing, storage and maturing capacity.

If the company was to address this bottleneck successfully, it would need to make significant new investment in machinery to press and process grapes, large stainless steel refregeration systems and oak barrels in which to mature the wine.

The difficulty was that while the company had lending relationships with various local banks, these banks were only prepared to lend on a fully secured basis against collateral. At the time, Domaine Bousquet did not have sufficient fixed assets that were available for this purpose. This situation had the potential to constrain the company's highly sucessful international growth.

Fortunately Domaine Bousquet's Financial Manager had worked with HSBC when he was previously employed by another Argentine wine maker and introduced the company's management to the bank at a local wine trade meeting. HSBC immediately appreciated that a more flexible approach would be needed to help solve Domaine Bousquet's problem.

Original thinking, flexible financing
Instead of merely focusing on available collateral like the local banks, HSBC was prepared to take other factors into account when making its lending decision. One important factor was the considerable business experience and expertise of the company's management. General manager Labid Al Ameri had held a senior sales trading position at Fidelity Investments in Boston, while company president Anne Bousquet had previously worked as an economist for project analysis in the European paper packaging industry. Another consideration was that the company was dedicated to organic wine production, which was an important competitive advantage in most of its overseas markets.

Finally, in its 600 acres of vineyards in Tupungato, Mendoza, the company had the ideal terroir for producing the finest grapes. This made it likely that the company would be strongly positioned to grow its overseas sales rapidly on the basis of a very high quality product.
After taking all these factors into consideration, HSBC decided to provide an unsecured facility to Domaine Bousquet that enabled the company to lease the necessary equipment - grape pressing/processing machinery, refrigeration and oak barrels - to raise its annual production, which has now reached a capacity of 3.5 million litres.

Further evolution
After this highly positive first step in the partnership between Domaine Bousquet and HSBC, the relationship has continued to develop. As a result of the initial facility provided by the bank, the company's international sales have continued to grow strongly. HSBC has been active in supporting this by providing 180 day pre-export financing facilities. This is an important element in the company's working capital strategy, which has to cover the considerable funding required for the complete production and maturing cycle for a high quality organic wine that will be globally competitive. In addition, HSBC is making its extensive trade advisory services available to Bousquet, especially in Scandinavian markets where the company is a core supplier to several state alcohol import monopolies.
The extent of trade regulation in Argentina has declined in recent months, but is still significant. Compliance with this regulation is obviously essential for Argentine exporters and this is another area where HSBC provides support to Bousquet via its dedicated trade documentation services team.

The relationship between Bousquet and HSBC within Argentina has developed in other ways as well. HSBC now handles the company payroll, as well as providing employer's liability insurance, plus personal financial services to the shareholders and employees. Insurance services are also currently under discussion.

The international angle
While the relationship between Bousquet and HSBC within Argentina has evolved rapidly, the company's international growth has benefited substantially from HSBC's global network. HSBC's global network and capabilities have been of material assistance in introducing the company to new trading partners, as well understanding local business practices and opportunities. For instance, the bank was able to introduce Bousquet to a new high-volume supplier for the top quality corks it requires for its wine. Elsewhere, HSBC offices on the US West Coast and in the UK, Belgium and France are actively supporting Bousquet by introducing potential new customers.

Conclusion
The partnership that has evolved between Domaine Bousquet and HSBC illustrates how a flexible and far sighted approach in the early days of a client relationship can have long term benefits. HSBC's initial unsecured lending decision was based on its understanding of the wine industry not only in Argentina, but also globally. At the same time, it was apparent that Bousquet's international ambitions were an excellent fit with HSBC's global network and trade expertise. The net result is that HSBC is able to facilitate Bousquet's business as it continues to grow into new markets.

Client Profile: Domaine Bousquet
Jean Bousquet, the founder of the winery and a member of a wine growing family from near Carcassonne in France, visited Argentina in 1990 and was immediately struck by the highly favourable natural conditions of the Mendoza region in terms of soil composition, altitude and terroir. It was immediately apparent this was the ideal location from which to produce high quality organic wines.

In 1997 Bousquet acquired 600 acres of virgin soil in Tupungato, Mendoza and five years later Domaine Bousquet harvested its first wine crop and launched Domaine Jean Bousquet Malbec 2002 onto the market.

In 2005 Domaine Bousquet started to produce wines orientated towards overseas markets and as result has seen exponential growth ever since. The company is now a major international player in the premium organic wine segment, with exports accounting for 95% of its production.

Domaine Bousquet’s philosophy concentrates on preserving the highest grape quality through delicate handling. To achieve this, it combines traditional and modern methods, producing first class organic wines. The company has obtained Organic Wine Certification granted by the OIA (Organización Internacional Agropecuaria) under various international standards.


References