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 path 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 it’s 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 can sell to as many as a couple of hundred negoçiants who can each 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 (usually a wholesaler) 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 – more on that below) and restaurants. At each stage, there are multiples that can complicate the system while providing alternative paths to the market and the ultimate 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 also 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 retailers 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 theoretically) 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 courtier are mysterious and elusive figures. I have only ever met one and he didn’t say much.
The chateaux and the courtiers place or list the wines and the negociants buy the wines in a sort of market called the Bordeaux Place (pronounced “plahs”) or the Place de Bordeaux. A “place” is a sort of open square where markets were once held and the Bordeaux Place was once that sort of physical market although now “The Place” (as it is called) is a network of computer databases.
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.
Importers buy from Negoçiants. Generally. But we’ll come back to the exceptions in a bit. Importers generally buy from negoçiants and then sell to the next level. The importer may be a national company that sells to numerous wholesalers in numerous states. A US importer may buy from several different negoçiants and may sell to dozens of wholesalers including more than one in any given state. Sometimes the importers are also wholesalers and sometimes the “effective” importer is actually a retailer. In any case, the negoçiant sells to the importer who then sells to the next level. In case you are counting, we are now up to three middlemen.
Wholesalers buy from the importers. Or, if the wholesaler is also an importer (and a great many are), they can buy from the negoçiant. The wholesaler then sells the wine to a retailer or restaurant. Some wholesalers are “clearing houses” who pass the wine through for a set fee per case instead of taking a percentage mark-up.
Retailers buy from wholesalers and can sometimes assume the role of a wholesaler (in Texas properly called an “LD” or “Local Distributer” and often mistakenly called a “Class B Wholesaler”) in that, with the right permits, they can sell wine to both restaurant and club accounts and to the ultimate consumer. Restaurants buy from some sort of wholesaler (whether a traditional wholesaler or an LD) and sell to their customers for consumption on their licensed premises. Together, retailers and restaurants make up the Retail Tier that sells to the ultimate consumer.
Consumers buy wine from either restaurants (for consumption at the restaurant) or retailers (for consumption at home or wherever else they can bring it). While the rest of the chain works with wine, it is the consumer who ultimately and actually enjoys wine.
In a sort of worst case scenario, this all works out to as many as five middle men between the producer and the consumer. In a best case scenario (as it could play out in the Texas market), that can sometimes be cut down to three or even two middle men between the producer and the consumer. In the one case (three middle men), the chateau sells directly to a negoçiant (bypassing the courtier – it happens, especially among the lower priced properties) who sells to a combination importer/wholesaler (in the very best case scenario, a clearing house) who then sells to a retailer who then sells to the consumer. In the other case (two middle men), the chateau sells directly to a combination importer/wholesaler (bypassing both the courtier and the negoçiant) who sells to the retail tier who then sells to the consumer. Obviously, the fewer middle men involved, the more efficient the system is from a pure pricing standpoint. The fewer the middle men, the fewer the mark-ups.
In Spec’s best of all possible worlds, we work through an importer/wholesaler that acts as a flat fee clearing house to buy from a chateau or a negoçiant (but never from a courtier). If we are buying from the negoçiant, he may or may not have bought the wine from a courtier and I would be unlikely to know which – unless the negoçiant decides to tell me.
In all cases in Texas, the retail tier has to buy from a licensed wholesaler (whether full-service or of the clearing house type). In all cases in Texas, the consumer has to buy from the retail tier. That is the law.
Some chateaux have chosen for any of a number of reasons to work outside the negoçiant system. Some negoçiants chose not to work with national importers and instead only work with distributor/wholesalers.
As a matter of practice, Spec’s prefers to buy the most efficient way possible but we recognize the utility of each layer of the system and buy wine via several paths. We buy such diverse chateaux as Ch. Cantenac (St. Emlion), Ch. Trocard, Ch. Penin, and Ch. Lepine (all Bordeaux), Ch. Rollan de By (Medoc), Ch. La Lauzette and Ch. Landat (Haut Medoc) and more all through a clearing house combination importer/wholesaler. We buy wine (both fancy big name chateaux and smaller lesser known but more value-oriented chateaux) from a plethora of negoçiants including Nathaniel Johnson, Joanne, Wings, Compagnie Medocaine, Ballande et Meneret, Castell, Barriere, Borie Manoux, Sovex Woltner, and more. We also buy some wine from full service wholesalers and sometimes from such national importers as Pasternak, Country Vintner (formerly Stacole), and Maisons, Marques, & Domaines. Why? Sometimes it is the only way to get a certain wine (such as, say, Ch. Petrus). Sometimes it is the only way to get enough of a certain wine (such as, say, Ch. Lafite). In the case of classified growths such as the Leovilles or the Pichons, Lynch Bages or Ducru Beaucaillous, etc., we wind up buying the same wine (say, Leoville Barton) from as may of six different negoçiants in a given vintage because that is the only way we can get enough and insure a consistent supply year after year.
Whatever the scenario, the ultimate power is with the big name chateaux. A Ch. Ducru Beaucaillou or a Ch. Giscours can tell certain courtiers and/or certain negoçiants not to sell the wines in a certain market effectively giving a particular negoçiant an exclusivity in a market and maybe another negoçiant an exclusivity in another market. If they choose, they can control, even through the courtier and negoçiant system, exactly where and to whom their wines are sold.
Is there a “Bordeaux, Inc.”? No, although it sometimes seems that way. Instead there is a very old, sometimes efficient, sometimes roughshod, sometimes genteel, sometimes antiquated, often rewarding, frequently frustrating system by which the Bordeaux wine trade distributes the wines of Bordeaux to a shocking number of markets large and small around the whole of the world. Even though I am sometimes frustrated by the roughshod inefficiency and antiquated nature of the system, I remember the immortal words of former Houston Oilers coach Bum Phillips: “If it ain’t broke, don’t fix it.” The Bordeaux wine trade, as complex and varied as it is, ain’t broke. Bordeaux, Inc. will have to wait for another day.
Lets say that Ch. de 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 courtier. 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. So I have the same wine coming in from six different sources at different prices (because of different paths to the market) and with as many as six 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 on each purchase, do some cost averaging, add a ridiculously low mark up (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.
– Charles M. Bear Dalton