BORDEAUX, INC. How the Bordeaux Wine Trade Works by Charles M. Bear Dalton You may believe that the Bordeaux wine trade (aka “Bordeaux, Inc.”) is an incredibly efficient market driven machine that gets the right wines to the right markets in the best possible way. Or that the Bordeaux wine market is a product of a slow moving genteel antiquity that rewards traditional connections at the expense of efficiency. (Actually, I see a bit of both views when I look at the Bordeaux trade.) Or maybe you’ve never thought about it. In any case, it’s interesting to see how the Bordeaux wine trade works in terms of the paths from the chateaux to the consumer. There is one main (preferred, touted, promoted...) path which can split and converge at several stages. And there are some variations that bump in at different points. In its best known form, Bordeaux, Inc. has the big name chateaux sell through the courtiers to the negoçiants who then sell to importers around the world (or distributors in France) who then sell to wholesalers who then sell to the retailers and restaurants in their various markets who then sell to the consumers. You might notice a couple of things about that last run-on sentence and especially about the words in bold italics. One is that all of those words are plurals. The other is that they all need some definition. As to the plurals, most of the big name chateaux sell to as many as twenty different courtiers who sell to as many as a couple of hundred negoçiants who sell to as many or as few importers as they like or can. Those importers (who may or may not also be wholesalers) then sell to whomever they like or can. Then the wholesalers (who may also be importers) sell to retailers (some of whom may also function as a sort of wholesaler) and restaurants. At each stage, there are multiples that can complicate the system while providing alternative paths to the market and ultimately to the consumer. As to the definitions, lets take them in order. The Big Name Chateaux are just that. They are the chateaux (the plural of chateau) that produce the wines your average wine geek has heard of. Of the over 8,000 chateaux making wine in Bordeaux, fewer than 300 are what I would consider to be “big name chateaux.” These include the wines found in the Classification of 1855 as well as many found in the several other classifications of Graves, St. Emilion, and Sauternes, and many of the top wines of Pomerol (which has never been classified). There are another 7,700-plus chateaux that can follow this Bordeaux Wine Trade Path but often don’t. Maybe they sell only at their cellar door and at various European wine fairs. Maybe they sell direct to the French grocery stores. Maybe they work directly with a US importer and cut out the courtiers and negoçiants. Maybe they work directly with wholesalers or even retailer in the US. The Courtiers act as brokers between the chateaux and the negoçiants. One way to think of them is the string between the two tin cans of a kid’s primitive telephone. For a 2% cut of all completed transactions, the courtiers provide a communications conduit with a buffer between the chateaux and the negoçiants as well as guaranteeing that the chateaux get paid. That buffer means that a negoçiant can pass information anonymously (at least theoreti- cally) to a particular chateau that might not want to hear what the negoçiant has to say. And since no negoçiant can afford to offend a courtier, bills get paid. Courtiers do not hold physical stocks and do not “take delivery” of wines. The transactions pass through their hands and the 2% sticks. Most courtiers work with a number of different chateaux and a number of different negoçiants. Some are very strong with certain specific chateaux. Even to some of the top negoçiants, the courtiers are mysterious and elusive figures. I have only ever met one and he didn’t say much. Negoçiants are the grease that keeps the wheels turning in Bordeaux. They are the agents for the imagined “Bordeaux, Inc.” who sell the wines (or at least the top wines) of Bordeaux to the world. A good negoçiant allocates the most popular wines and finds and helps develop new or unknown wines into up and comers. They find the rough jewels, polish them, and present them to their clients around the world. Most negoçiants work with several courtiers but generally have a couple with whom they have their strongest relationship. When I asked why not just one, one of my negoçiant friends told me that by working closely with at least two, they are spoken well of to the chateaux owners at least twice as often. continues on page2 An Example Let’s say that Ch. Bubba (a theoretical “classified growth” in Pauillac) offers its 2011 vintage at a certain price. The chateau manager calls the nine courtiers they work with and tells each the price and how many cases they can have. Each of those courtiers checks their records from previous years to build their allocation chart, adds 2% to the chateau’s price, and then calls or emails the negoçiants they work with. Any given negoçiant might buy from as few as one to as many as eight or more courtiers. The negoçiants then add up to 20% to the courtiers’ price and begin calling and emailing their customers around the world. When I wake up at 5:30am on any given morning during the Bordeaux futures campaign, I might have as many as 800 emails in my inbox offering the wines that opened overnight. When I see the pricing (the price is right) and availability (no one is offering more than 21 cases and I need at least 80 cases) on Ch. Bubba 2011, I start ordering from several people. At the end of the day, I have my 80 cases but I have bought 56 from four different negoçiants (which I will buy through a clearing house importer/wholesaler), 14 cases from a full service wholesaler (at a higher price), and 10 cases from a national importer (also at a higher price) which I will clear but not as efficiently through yet another wholesaler. To further complicate matters, two of the first four negociants gave me a slightly discounted price (but not the same price) so I have the same wine coming in from 6 different sources at five different prices and with as many as 6 different payment terms. (And, for all I know, the full service wholesaler and the national importer I bought from may have bought from some or all of the same negoçiants who sent me “direct” offers. Or not.) Now I have to bet on the euro-dollar exchange rate, figure out Spec’s landed costs, do some cost averaging, add a ridiculously low markup (because the Bordeaux futures market is so competitive) and post the wine for sale. It is a lot to deal with and lot to keep track of but that is how the system works, and it has worked in basically the same way since the 1700s.