2.6 Bordeaux Wine Business

Question 1

How many estates are there in bordeaux and what can chateau mean?

Answer 1

Over 7000 estates, chateau can be both a castle but also a farmhouse.

Question 2

What is the trend when it comes to the number of estates in bordeaux?

Answer 2

They are shrinking and small properties are being bought by large ones in order to create commercially viable volume of wine. Average size of a bordeaux chateau is 17 ha and annular production about 800 million bottles.

Question 3

What role do cooperatives have in bordeaux?

Answer 3

An important role. 40 percent of grape growers and 25 percent of production.

Question 4

How is the percentage planted by types of wine in Bordeaux?

Answer 4

Medoc-Graves 18%
Cotes de Bordeaux 12%
Saint-Emilion, Pomerol and satellites 11%
Dry whites 9%
Sweet whites 3%
Bordeaux (Red AOC, Supérieur and rose) 47%

Question 5

What are the lvls of production costs per bottle for Bordeaux AOC, Medoc Estate and a Cru Classe? What are the additional costs?

Answer 5

Bordeaux AOC 0.54€
Medicin Estate 2.35€
Cru Classe 9.8€
They exclude loan costs. 
Increased vine density
Harvest costs
Much higher viticultural costs
Lower yields
Rigorous grape selection and barrel ageing in more new barrels.

Question 6

Besides the classification system, what other important selling tool do Bordeaux contribute from?

Answer 6

Robert Parker 100p.

Question 7

What is La Place de la Bordeaux?

Answer 7

The unique commercial system since few producers sell wine directly.
(Grape grower—>)Producer—>Broker (Courtier)—>Merchant (Négociant, 80% of all sold wine by volume)—>
Retailers and wholesalers—>Consumer

Or Chateau—>negociant—>distributors—>consumers

Question 8

what percentage do the middlemen take in La Place de la Bordeaux?

Answer 8

Courtiers 2 %

Négociants 15%

Question 9

Talk a little about the bordeaux distribution to markets.

Answer 9

More than 170 markets. Chateaux sell to as many as 40 distributors which get an allocated no of cases per vintage.

Question 10

What is the market situation for the majority of wine from Bordeaux?

Answer 10

Bordeaux AOC and Supérieur, inexpensive and struggles to raise prises above 1 euro per bottle due to competition on export markets and less demand in france. Can often be found in supermarkets.

Question 11

What is en primeur?

Answer 11

The system by which high-quality classed growth wines are sold.

Question 12

How does en primeur work?

Answer 12

Wines are sold as futures, 12-18 months before it is bottled, sold in spring after harvest when the wines are still in barrel.
Idea is that consumers can get sought after barrels at a cheaper cost than if they buy it finished in the stores. And also that the price will rise as it matures and also becomes less available.

Question 13

What is the history of en primeur?

Answer 13

Started after Second World War when chateaux were struggling financially. 1970s is when it started to become popular and the big breakthrough was the magic vintage of 1982.

Question 14

Describe the schedule for en primeur?

Answer 14

Begins in April with barrel samples to be tasted by négociants and journalists, about 6000 wine professionals participate.
May and June prices are released. Prices depend heavily on journalists assessments and the chateau rep.
A first small tranche is made to see what the market is prepared to pay for the wine. After prices may be adjusted and usually increase after each tranche.
Consumers can then order the wines through the wine merchants.

Question 15

What are the pros and cons about en primeur for the estates?

Answer 15

Pros - ability to test market by releasing early lower-priced tranches and early payment and ROI
Cons - potentially selling wine to lower cost than worth in early tranches, risk that négociants mismanages finances and go out of business creating a bad rep for the estates.

Question 16

What are the pros and cons about en primeur for the final consumer?

Answer 16

Pros- ability to secure exclusive wines at a theoretically lower cost, option to keep or trade these wines
Cons- having to rely on sample tastings of professionals, intermediaries may go out of business before delivering the wine, prices may fall due to economomic conditions or declining quality in upcoming vintages.

Question 17

How does the allocations system work?

Answer 17

Applies for the most sought-after wines. Négociants may have to buy wines in less good vintage if they want to keep their allocation. These may be sold in years when the better vintages either bring extremely high prices or are sold out.

Question 18

What demands the success of an en primeur campaign?

Answer 18

The quality of the vintage - top vintages increase demand
Prices - if set to high by estates, négociants will end up with stocks what will have to be stored for many years compromising profitability.
State of the market. -average vintage follows a number of successful ones, prices may have to be decreased to attract buyers. Estates might not want to, leading to unsold wine.

Question 19

What is the trend for en primeur?

Answer 19

Prestigious estates such as ch latour 2012 have announced that they won’t sell their wines or lessen their volume via en primeur since they can afford to keep the wines and sell them when bottled, giving higher price. Many small or less prestigious estates cant afford to do this though.

Question 20

Why is the en primeur system under debate since 2010?

Answer 20

Due to the boom in en primeur thanks to interest from mainly China, prices have increased. 2011 however was a poor vintage, but was offered at a very high prices. This led to a decrease in value for the wines, making investors loose money.
Also, debate regarding the power of journalists grades when they are based on barrel samples rather than finishes wine.