Bordeaux - Wine Business

20 important questions on Bordeaux - Wine Business

Wine business: châteaux and numbers

  • Over 7.000 estates
  • called châteaux, but are also farmhouses
  • number is shrinking > very small properties taken over by neighbours
  • average size over 17 ha
  • annual production over 800 million bottles

Production cost per bottle are high in Bordeaux, can you split it by appellation/classification? What is causing the differences in cost?

AOC Bordeaux: EUR 0,57 per bottle
Medoc: 2,35
Classed growth: 9,80

  • vine density,
  • harvest costs,
  • higher viticultural cost,
  • lower yields,
  • grape selection,
  • barrel ageing; new barrels, time in barrel

Production costs Bordeaux 2011

  • Bordeaux AOC > 0,57
  • Médoc estate > 2,35
  • classed growth > 9,80

Not costs of bank etc. Included

What are additional productions costs which make classified Bordeaux wines expensive

  • Increased vine density
  • harvest costs
  • hugely higher viticultural costs
  • rigorous grape selection
  • barrel ageing

What is important to sell Bordeaux wine

  • Classification system
  • 100-point rating system by Robert Parker

What is Place de Bordeaux and how does it work

  • A unique commercial system
  • Producers (estates, coops, large wineries) sell wine to merchants (négociants, handle 80% of wine by volume
    • Négociants sell those wines to wholesalers/retailers
  • In between there are the brokers: courtiers
  • Châteaux sell their wine to négociants
    • Negociants sell it to distributors (importers, wholesalers, retailers)take about 15% of sale price Cht. Receives

To how many countries Bordeaux wines are sold

To over 170 countries worldwide

Which contrasted markets are in Bordeaux

  • Great majority inexpensive wines, less than 1 euro/l  / bulk
  • Cru wines > en primeur

How works En Primeur sales in Bordeaux

  • Châteaux sell their wines in spring after harvest
  • buyers and journalists taste bottle samples in April at the châteaux
  • the châteaux release their prices in May-June
  • the châteaux/their négociants put up for sale small amount of their wine = first tranche
    • price influenced by reputation château and reviews of experts
  • depending of sales, price will be adjusted for subsequent tranches, usually going up
  • most rare wines on allocation > négociants/trade buyers also have to buy in less good vintages, not to loose their rights

What is the idea of En Primeur sales in Bordeaux

  • To secure consumers hard-to-buy wines and at a lower price than they will appear in fine wine shops when bottled and shipped.
  • Estates benefit from early payment for their wine
    • system dates from period after WOII, when Chts truggled financially

What does the succes of the En Primeur sales depend on

  • The quality of the wines
    • top vintages highest demand
  • The prices of the wines
    • too high > estates, négociants, retailers too many stocks
  • The state of the market
    • average vintage following outstanding vintages > estate may have to reduce prices or stuck with that vintage

What is the En Primeur price of the Bordeaux wine

  • Includes bottled wine brought to the storage of the buyer a year after the primeur tasting
  • ex cellar > excludes taxes due in buyer's home market
  • held in secure storage, right condition until sent to buyer > the longer, the higher the price for the buyer

Why is the continuing debate whether the En Primeur system in Bordeaux still works

  • In the boom period of the 2000s e.g. China bought a lot or Bordeaux wines >
    • En Primeur prices rose considerably >
    • Châteaux asks high prices, even for average vintages
  • This led to Bordeaux prices falling > investors lost money
  • Critics are concerned their reviews influence the prices, because the wines they tasted are not ready yet

Which Bordeaux Châteaux and when decided to stop selling En Primeur

  • 2012
  • Château Latour

Advantages for Bordeaux estates to sell En Primeur

  • Testing the market
  • early payment > finance for next vintage

Disadvantages for Bordeaux estates to sell En Primeur

  • Potentially selling at lower price than might be obtained for the bottled wine
  • potential for financial mismanagement of losses by négociants > can effect reputation of estate

Advantages consumer Bordeaux En Primeur sales

  • Ability to secure sought-after wines and theoretically at the lowest prices
  • Option to keep or trace sought-after wines

Disadvantages consumer Bordeaux En Primeur sales

  • En primeur tasted wines (by journalists and buyers) may be different than the final bottled wines
  • Négociants/shippers may go out of business before the wine arrives
  • Prices may fall before the wines arrive due to
    • economic conditions
    • quality of following vintages

Is wine tourism important for Bordeaux

Historically not, but the city of Bordeaux it renovated and includes La Cité du Vin, Bordeaux's wine visitor centre.

Explain la Place de Bordeaux in reference to the Wine Business.

  • Commercial system, allocating wine to negociant
  • Trading structure unique to Bordeaux
  • Producers sell to negociants (merchants, take 15% commission for 80% of the wine sold by volume) via local brokers (aka courtiers 2% commission) to distributors (importers, wholesaler, supermarket, agent etc)  to customer.
  • No need therefore for own sales force

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