Wines for a Dragon Kevin O'Leary's Interview with Renowned Wine Expert Natalie MacLean

Kevin O is best known as the prickly Merchant of Truth on CBC's Dragon Den as well as on ABC's Shark Tank. He's also built a software company that was acquired for more than $4 billion and now runs OIR Funds, an investment firm with assets of more than $1.5 billion. He joins me today to talk about his latest venture and launching his own wine, OIR Wines.

"Welcome, Kevin! Great to be here."

"Thank you, Natalie."

"Terrific! Before we jump into your own wines, tell me, can you remember the first wine that you ever tasted?"

"I can! You know, my dad, who's Swiss and lives in Geneva, loves Pinot, and he's got a huge cab full of Burgundies. I think remarkably, one of the first wines I ever tasted was a 1962 Latache, which, you know, is a really bad place to start because it doesn't get any better than that. I think he really polluted and gave me a, you know, sort of a feeling for how down I can go from there. That's the real problem because you don't want Latache to become your favorite wine; you just can't afford it anymore."

"No, you either have to do that or start your own investment fund to afford that kind of taste!"

"Well, touche! So what drew you to wine? Was it that wine or was it another wine experience that really made you, um, say, 'Hey, wine is something I want to know more about, learn about,' that sort of thing?"

"Well, it was always part of my family. So, you know, we would have wine even when I was a young child, five or six, because in Europe, they generally give you wine a little bit so that it's not something that you're not used to. And I think that's actually a very good culture because I didn't drink excessively ever, and it was so much part of my family all the way through, that I just got used to it. So wine has been a natural element to all my meals. I've always enjoyed it. I don't drink it excessively, although I love it so much. But I do the same thing with my children. I've introduced them to wine at a young age. My daughter has really taken to it; she's actually very good. My wife is very interested in wines and actually manages our five cellars. We have now—I have a lot of wine as an investment, and I buy aggressively. I've got a really deep cellar of Burgundies, Bordeaux, and Californians, and I've just sort of extended into the Italians now with some Super Tuscans that I'm enjoying. So, you know, at the end of the day, it's one of the most wonderful hobbies you can have. It brings family together, friends together, and above all that, it's great to drink good wine."

"Absolutely! Um, and just before I move on to the next question, five cellars? Approximately how many bottles?"

"You know, I probably am less than 10,000 because I'm very, very selective. A few thousand in each cellar, but you know what I'm looking for is—and I buy with a group of five of us who are always on the lookout around the world for opportunities. You know, I think of some of the greatest purchases I've made are what I call divorce cellars. What happens is, you know, men and women separate, and they can't agree on the wine, and they look for a buyer to buy the whole thing out. Recently in Boston, that happened to me and David, one of my buying partners. We got up at 5:00 in the morning and went through a cellar that was massive. We bring our technology with us, our wireless computers. We want to be fair about the prices we offer; we know the world price auctions for everything. We bought that entire cellar, and it took us two trucks to move it, and it was just so much fun doing it. And, of course, we helped that couple out because we gave them liquidity in a market that I think is, in some ways, very expensive. Auctions of wine generally cost 15 to 20% of the value just through the auction process, and if you get a buyer like me to come and get it, you save a lot of money."

"Wow! I was going to say that sounds like vulture capital! But I guess you were helping those people out, uh, trade their liquid assets for other liquid assets."

"What gave you the idea? When did you first get the idea to launch your own wine brand?"

"Well, you know, I love wines, and I'm always interested in exploring new ideas in wine. And, you know, for 20 years here in Ontario, we were a backwater. You know, I'm a proud Canadian. I live—I at least have a home here in Toronto. I spend a fair amount of time, two days a week here. And so what I've always watched over the years is the progression from being a, you know, relatively unknown place. Let's face it: 20 years ago, Niagara primarily was growing Labrusca grapes, which are terrible. I mean, you make jam with that stuff; you go blind if you drink the wine that's made. Just awful. And what's happened is the climate's changed, and some really great wines are being grown now by some very capable vintners. So you take Pinot Noir, for example; the climate is perfect for that grape in Ontario. And lately, in the last five years, we've had some amazing Pinots that have come out of here, and I think you can get a classic Bordeaux blend right out of Ontario. And that's what I wanted to do. I wanted to do a couple of things: launch myself into the wine business because I've always wanted to do that, particularly with a cab blend. And I love Chardonnays in the summer, so I thought I'd just do two. And I went looking for a partner. Luckily, I have a brand name that I enjoyed doing multiple businesses with, OIR funds, O mortgages. I thought, why not OIR Wines? And we've been relatively successful, and we've only been on the market a couple of months. We've won five international awards on our cab blend. So believe me, I'm licking my chops; I'm liking this."

"No, but you're a cash flow kind of guy, Kevin. Why not spirits where the margins might be greater?"

"Well, you know, I think you can go there, Natalie, but I think it's more delicate to develop a brand around something that I love. I don't drink that much spirits or liquor. You know, occasionally I have a vodka and soda, but my real love is developing my evening with a great crisp Chardonnay or Montepulciano when I get home from work. That's my idea of a cocktail. And then with dinner, a fantastic bottle of red that I enjoy with my family. So, you know, hard liquor is not part of my fiber, and so that's not where I want to go. I want to be able to stand up to people and say, listen, I have created a wine for you that is so spectacular in value that I want you to compare it to anything else you can buy at the same price. That's what the O brand is all about; that's what I wanted to do in wine."

"Okay, fair enough! But why Niagara? I know you're a proud Canadian, but what was it from a business perspective that made you say, 'Okay, Niagara'?"

"Well, what I wanted, Natalie, was consistency. If I bring a wine and you try it once, I want—and you take it from the first case—I want it to be as good on the 10,000th case. So I need access to, you know, a quantity that I know is going to have consistent quality. I don't think that's easy to do with a Montepulciano in Ontario. You know, I think that's one thing. Also, explaining to the market what a Montepulciano is versus a Chardonnay, in some ways, are the same thing; it's not that easy. Right now, the fastest-growing category—and I've done a lot of research on this—are unoaked Chardonnays. People are getting tired of the heavy, buttery, you know, challenging your own food flavor of a heavy oaked Chardonnay. And I thought, let me bring an unoaked Chardonnay. A Montepulciano, if you will—if you, you know, go with me on this—crisp, almost with an element of a Swiss fondant, an effervescence, a yeasty kind of thing happening there. And I was describing that to my wife and to the guys, you know, at Vineland Estates, Brian and Allen. I said, can we get there? Can we blend an unoaked Chardonnay that I’d want to sell? We spent a lot of time on that Chardonnay, and one day, I just tasted and said, 'This is it,' and that's what we went with, and it's been very well received. So I'm trying to introduce people to different ideas when it comes to white. For years here in Ontario, a heavy oaked Chardonnay was the way to go; now this category is growing, and I want to be part of it."

"Okay, and why not a premium, like a $35-$50 Niagara Chardonnay?"

"Great question! Because that's where I wanted to go. So here's what I learned when I started doing research, because this is also a business venture for me. I have employees working on it. I want to be successful. When I enter into a business, I want to be competitive, and I want to win. That's what I do in everything I work on. So I started doing some research. I sat down with the people at the LCBO and said, 'Let's talk about price point.' I thought I'd want to come out at around a $48 price point for the white. They said, 'You're crazy!' Here's why: 97% of wines purchased in Ontario are under $19 a bottle. The sweet spot is $14.95. If you want to garner massive market share quickly, you want to be at $14.95. So effectively what happened is I took what I thought was a $50 bottle and brought it out at $14.95. And the guys at the LCBO were right because you can't get a permanent listing at a crazy high price point. You can't get a permanent listing if you're not VQA. And you want a permanent listing because there's over 600 LCBO stores. So I'm in 120 now; I'm rolling out another 100. I'm doing a lot of tastings with the customers. I'm enjoying the marketing process, but understanding the market is very important if you're going to launch a wine and gain market share. So it's $14.95 for the white O Chardonnay and $14.95 for the cab blend. Those are very good price points because I think they're both worth $50 a bottle."

"Spoken like a true marketer! Why did you go with Vineland Estates? Why not a bigger distribution arm based in Niagara?"

"You know, that's a great question, Natalie, and believe me, we spent a year doing due diligence with all the partners—all the potential partners. You know, the guys at Vineland really care about the product. They have an emotional attachment to their process, the land. They've done this; they're building capacity; they had the production capabilities. When I did due diligence with the LCBO and many of the fine restaurants I like to dine in, everybody loved those guys. So relationships in wine matter more than any other business. You got to trust your partner; you got to like your partner, and all of the people involved in the distribution process have to like them too. They came out with flying colors. And not to say we didn't go far down the road with some other bigger players, but the consistency of the product—I mean, Brian understood: I said, 'Look, if I put my name on it, I want to drink it, and I don't want people to open the bottle and find one tasting different than another. That just blows my brand up; I can't have that happen.' I believe they can do what I need to do; I think they can expand with me. I think you're going to find this wine all over Canada and in some very interesting co-marketing deals I'm working on right now. Luckily, I enjoy a very large audience on television; many other companies want to work with me on that and radio, and we're doing a lot of cooperative marketing around both wines in the next year."

"So no more Pepsi or coffee on the table during the broadcast; you're going to have a glass of wine with you?"

"Absolutely!"

"Well, cheers to that, Kevin! Thanks for chatting with me. I want to come back again and, of course, taste your wines with you, ask you a few more questions, but I appreciate your time."

"Great! Thank you, Natalie!"

"All right."

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