3. Types Of Businesses Flashcards
What are the different types of businesses engaged in wine production
- Estates
- Growers
- Grower-producers
- Co-operatives
- Custom crush facilities
- Virtual winemakers/wineries
- Conglomerates
What is an estate producer
Produces wine from its own vineyards (owned/leased)
What are the advantages of estate production
- Control over growing, producing and bottling
- All profit goes directly to estate, especially when not using intermediates for the sale
- Marketing tool: the story (estate-bottled)
- Large estates benefit from economies of scale (re-use equipment for different wines)
What are the disadvantages of estate production
- Cost of managing vineyard and running winery (equipment like bottling line may need to be hired)
- Possible loss of crop (higher prices to cover costs)
Give an example of an estate
Chateau Margaux on the right bank in Bordeaux, blend of Cabernet Sauvignon, Merlot and Cabernet Franc
What is a grower
Some growers choose not to produce wine, concentrating solely on growing grapes, that they sell to a winemaker or merchant
What are the advantages of growers
- Small vineyards can not justify the cost of buying or hiring equipment
- Better cashflow, when the grapes are sold instead of when the wine is sold
- Focus on quality grapes
What are the disadvantages of growers
- Vintage variation
- Fluctuations in supply and demand
- Fluctuations in price
What are the options for growers when selling their grapes
- Contract with producer or merchant: gives security and a strong working relationship. When quality is too low, grapes can be rejected or price drops
- Spot market: higher risk but greater reward
Give an example of a grower
Andy Beckstoffer, Beckstoffer Vineyards: Cabernet Sauvignon on prime sites in Napa Valley
What is a grower-producer
When a grower produces wine from its grapes, and sells it to a merchant to mature and bottle
What are the advantages of grower-producers
- No need for maturation (barrels and cellar space)
- No need for marketing and sales
What are the disadvantages of grower-producers
- Smaller profit than if they were to sell the finished wine
Give an example of a grower-producer
Fairly common in Burgundy
What is another word for merchant
Négociant
What is a négociant
They buy immature wine from a grower-producer. They sometimes blend wines from different producers, then bottle and sell it under the merchants name
What are the advantages of merchants
- No expense of buying and managing a vineyard
- Flexibility in bad vintage
What are the disadvantages of merchants
- Little control over grape growing and winemaking (solution: make the wine themselves, or offer technical support to growers/growers-producers)
- In bad vintages, buying on the spot market increases price of the grapes
- In popular regions such as Burgundy and Napa Valley, prices have risen (solution: longterm contracts)
Give examples of merchants
- Champagne
- Micro-négociants in Burgundy specialise in single vineyard wine, with a lot of influence on growing
- Bordeaux: deal in finished wine in bulk or bottle
Explain “en primeur”
After WOII, the châteaux in Bordeaux struggled to survive financially. By selling wine in barrel, they generate cashflow more early, covering production costs up to bottling. Merchants buy a proportion of the stock and sell to distributors/retailers.
What are the advantages of buying “en primeur”
- Cheaper
- Chance to buy before sold out
Give examples of regions where “en primeur” is common practice
- Bordeaux
- Burgundy
- Rhône
- Super Tuscans
- Vintage Port
What is a grower-merchant
When merchants own a vineyard and produce wine from these grapes, alongside wine from bought-in grapes. Possibly under the same name, or under a different name.
Give examples of grower-merchants
- E. Guigal in the Rhône Valley: single-vineyard wines in Côte-Rôtie, and wine from villages (Crozes-Hermitage and Gigondas) and generic Côtes du Rhône from bought-in grapes
- Domaine Dujac in Burgundy from its own grapes/ Dujac Père et Fils from bought-in grapes
