Bordeaux - Trade Structures

Question 1

How many cheateux in Bordeaux and what is the trend?

Answer 1

7000 chateaux and dwindling. Lots of consolidation to acquire economies of scale and make economically viable wine

Question 2

Average size of estates in Bordeaux region is?

Answer 2

17 hectares but growing

Question 3

With vintage variation, how does this effect the number of bottles made from year to year

Answer 3

Number of bottles made varies annually

Question 4

What is the average number of bottles of wine made in the Bordeaux region in a year?

Answer 4

800 million bottles made

Question 5

What proportion of bottles produced in the Bordeaux region are red?

Answer 5

90% of the wines made are red

Question 6

What proportion of wine is made by Coperatives in Bordeaux?

Answer 6

25% of wine is made by them

Question 7

What % of producers give grapes to the Cooperatives in Bordeaux?

Answer 7

40% give grapes to the Cooperatives

Question 8

What factors drive up the price of the classed growths I Bordeaux?

Answer 8

• denser vine plantings need more materials
• high harvesting costs (expertise and workload and standby crew awaiting optimum weather)
• grape selection (many grapes thrown out)
• new barriques
• longer maturation time

Question 9

What is the basic cost of producing a bottle of classed growth wine (not incl interest on loan, land taxes etc)?

Answer 9

$9.80 as opposed to 57c for a basic Bordeaux or Eu2.35 for a Me

Question 10

What are two factor influencing the marketing of Bordeaux wines?

Answer 10

Robert Parkers Scale and Classifications

Question 11

What is the Place De Bordeaux?

Answer 11

the unique commercial system of Bordeaux

Question 12

To whom does a grower sell their grapes in Bordeaux if they are producing and bottling their own wines?

Answer 12

to a winery or co operative

Question 13

Estate grown and vinified wines sell their wines to?

Answer 13

merchant/négociant via a courtier/broker

Question 14

To whom do Cooperatives sell their wine?

Answer 14

merchants via a broker

Question 15

What percentage of the sale price that the chateau receives does the broker and the merchant take

Answer 15

2% and 15% respectively

Question 16

What does the merchant do?

Answer 16

Merchants buy wine and market, sell and distribute to wholesalers, importers and retailers

Question 17

Why might a winery sell wine to as many as 40 merchants?

Answer 17

To assure their wines are distributed in the maximum number of markets

Question 18

What is the allocation system?

Answer 18

Merchants are allowed a certain % of the wineries production each year and so different merchants are alloted different amounts

Question 19

In which country is most of inexpensive Bordeaux sold?

Answer 19

France

Question 20

Why is inexpensive Bordeaux in decline?

Answer 20

• Drop in French wine consumption

- Increased competition from elsewhere (eg. Chile and Australia)

Question 21

Name an important wine cooperative

Answer 21

Castel

Question 22

What is the En Primeur System?

Answer 22

wine is sold as futures 12-18 months before bottles are released. En primeur prices are lower than after bottles are released

Question 23

What quality of wines sell through the En Premeur system?

Answer 23

Cru Classe growths and other high end wines

Question 24

When are the wines sold in the En Primeur system?

Answer 24

The spring after harvest

Question 25

When and why was the system developed?

Answer 25

After WW2, producers needed money in advance to mitigate financial uncertainty. Became very popular worldwide after the outstanding 1982 vintage

Question 26

Name an example of a chateau that has opted out and why

Answer 26

2012- Ch. Latour opted out of the system because a) releasing optimally stored wine of impeccable provenance when ready to drink would show their wines at their best b) market differential between en primeur and secondary pricing meant they were losing a significant amount of money per bottle in the en primeur system

Question 27

What is a hybrid approach to En Primeur and who is exhibiting it?

Answer 27

Ch. Palmer releases a % of its wines en primeur and a tranche is released in September 10 years after the vintage date

Question 28

What happens in April and then May/June in the en primeur calendar?

Answer 28

- April over 5000 journalists an tradespeople are invited to Bordeaux for barrel tastings. - May/June - prices are fixed by the producers influenced by feedback from the April tastings

Question 29

What is the first tranche and who sells it to retailers, distributers etc?

Answer 29

The small number of initial wines sold via négociants to the market to gauge what price the market will bear. Subsequent tranches may change price depending on the results of the first tranche sales

Question 30

Give a reason why more chateau have not opted out

Answer 30

Bottle ageing wine until ready to drink by the producers needs space and temperature/humidity controls etc. It costs money

Question 31

Having participated in the en primeur system, why would retailers and négociant be left with unsold wine?

Answer 31

- pricing was too high | - average or poor vintage after a run of successful ones

Question 32

How long does one wait for delivery of wine to a retailer's storage after buying en primeur?

Answer 32

12-18 months after buying en primeur

Question 33

What caused a bubble in en primeur pricing in the 2000s?

Answer 33

Increased interest from the Chinese drove prices up year on year (even in poor vintages like 2011). When the Chinese lost interest in the wine, Bordeaux prices began to drop meaning many who had bought En Primeur were left with bottles worth less than they paid for them.

Question 34

What is the critics influence on Bordeaux en primeur pricing?

Answer 34

Great! In the Spring following harvest they taste barrel samples of wine which is an approximation of what it would taste like after the blend and the wine is immature.

Question 35

What are the advantages of the en primeur system to the customer?

Answer 35

-potential to secure rare wine for a discount (theoretically)

Question 36

What are the disadvantages of the en primeur system to the customer?

Answer 36

- intermediaries may go out of business before the wine arrives and one may lose the investment - economic conditions may mean wine price falls before wine arrives - wines bought on opinions of professionals who don't actually taste the final wine so it mightn't be representative

Question 37

What are the advantages of the en primeur system to the producer?

Answer 37

-early return on investment allowing them to reinvest in the next vintage

Question 38

What are the disadvantages of the en primeur system to the producer?

Answer 38

- potential for losses in the differential between en primeur and secondary pricing - mismanagement by négociant driving themselves out of business might reflect badly on the chateau

Question 39

What is the Cité de Vin?

Answer 39

A large wine culture museum in Bordeaux