First published in the Gilbert & Gaillard magazine
Since wines were first produced in Bordeaux in medieval times, they have been sold through wine merchants via brokers. This way of trading is called the ‘Place de Bordeaux’ and still exists today. Is it an ever-changing efficient model that has enabled Bordeaux wines to become so well known throughout the world today or an archaic rigid structure that is past its sell-by-date?
When Laurent Navarre, the commercial director of Libourne’s most famous wine merchants J.P. Moueix, first started working in the wine trade, a well-known British buyer told him that in a year or two there would be no more wine brokers in Bordeaux. That was 25 years ago. Today the ‘Place de Bordeaux’ still exists with its brokers and merchants, it is still functioning and some say flourishing.
What is the ‘Place de Bordeaux’?
It is the trade of wine between the wine producer who sell via a broker (the ‘courtier’) to the wine merchant buyer (the négociant’) who then sells on to the world’s markets via a developed distribution network.
Some forty years ago the average size of a wine property in Bordeaux was two hectares and it made sense for producers, in terms of economy of scale, to sell via specialist merchants. Today with larger vineyards due to an amalgamation of properties, often owned by institutions, and the push across the world to sell direct and cut out any middle men, why is this still the case?
Firstly we need to understand the unique characteristics of this wine region and the types of wines that are sold within this system.
The ‘Place de Bordeaux, a wine trade network that is unique to Bordeaux
Today there are 10 000 wine producers in the region of Bordeaux, the largest appellation in France of 115,100 hectares (the regions of Champagne and Burgundy have around 30,000 hectares). There are 60 different appellations (producing in 2010, 50.6 million hectolitres representing 3.36 billion euro). Bordeaux is unique in the vast range of wines it presents to the world markets. How best to sell so many wines across the world taking into consideration that there are around 16,000 different labels of numerous different vintages at one time on the market?
How does Bordeaux’s Wine Trade work?
The Role of the Broker
The broker (the ‘courtier’) is the intermediary between the seller and buyer, the ‘third man’. There are 100 brokers in Bordeaux who specialist in different areas. They select and propose wines to the wine trade network. They guarantee that the sale contract (though there is no official document) is correctly fulfilled by both parties. They oversee more than 80% of the transactions between the wine producer sellers and the merchant buyers.
A ‘courtier’ does not sell, he is the middle man who facilitates the business between the grower and ‘négociant’. There is no obligation to use them but they are a very useful tool for business. They add value by providing accurate information and knowledge of the market price and the availability of wine on the market. Their main role is to source wine for the merchants (and to sell excess stocks onto the ‘Place de Bordeaux’ if necessary). Each broker specialises in an area or type of wine and works with several merchants spreading his economies of scale.
It is the broker who has the password to accessing the bank of information of who is holding what stocks where. The merchants pay 2% of the sales value for the quick access to this up-to-date database of information.
The Role of the Wine Merchant
The merchants sell 70% of Bordeaux’s total production to 170 different countries all over the world. Each have their own unique sales network.
Out of the 300 wine merchants in Bordeaux, 25 of the major ones represent 80% of the business (Castel, Grand Chai de France, Ginestet, CIVBG). There are 15 to 20 middle-sized merchants such as Maison Sichel, Moueix, Borie-Manoux, Mahler-Besse). All are different and specialise in different types of wines and markets.
They perform several different roles in addition to promoting and selling in France and abroad including selecting wines, blending, bottling, holding stocks and ageing wines for future release.
Which Wines are Sold on the ‘Place de Bordeaux’?
There are three main types of wine sold on the ‘Place de Bordeaux’; all of the famous Grand Cru Classé are sold this way, some of the smaller individual châteaux wines who supply their wines in bottle and also as bulk wines to be made up into merchant’s brands. The ‘Place de Bordeaux’ works in different ways to sell these different types of wines. It is an open system where the simple market rules reign of supply and demand which regulates prices naturally across the world’s markets.
THE GRAND CRU CLASSE ELITE
There are around about 150 or so Grand Cru ‘elite’ winesproduced in the region of Bordeaux which represent only 4% of the volume produced but 20% of the value. These include the properties classified in 1855 in the Haut Médoc and Sauternes, the Premier Grand Cru Classés of St Emilion, top Pomerols and Pessac-Leognan’s Grand Cru Classé wines.
Many of these wines are sold ‘en primeur’ or as futures, only a few months after the harvest with deferred delivery after their ageing in barrel has been completed some two years later. One hundred percent of these wines are sold on the ‘Place de Bordeaux’. There are 150 or so merchants that specialise in this market and compete on the ‘Place de Bordeaux’ to gain allocation. Each of these wines are sold by a number of different ‘négociants’.
The Points of View of the Players involved
Allan Sichel, president of the’ Union de Maisons de Bordeaux’ which reunites the 300 merchants in Bordeaux explains; “It is possible ‘on paper’ for a ‘grand cru’ property to bypass the ‘Place de Bordeaux’, but there is no logic in doing so. It is a powerful mechanic for distributing these châteaux wines throughout the planet and is essential for brand exposure, image and prestige”.
Bernard Magrez only sells his Graves Grand Cru Classé, Péssac Leognan, Château Pape Clement, via the ‘Place de Bordeaux,’ despite having a sales team who sells his the wines from his 30 or so other properties around the world.
Jean-Jacques Bonnie from Château Malartic-Lagravière (Graves Grand Cru Classé, Péssac Leognan) describes being part of this ancient system as having an “eclectic distribution all over the world with a permanent re-evaluation of the price of your wine on the Place de Bordeaux with little chance for any ‘sleeping’ or stuck stocks of wine”.
Antony Barton, of Château Léoville-Barton (2nd Growth, St Julien) thinks that the margin he loses to the 100 or so merchants who sell his wine world-wide is well worth it and leaves him and his team to focus on what they do well, making the wine.”It says it all that Philippe de Rothschild sold Mouton Cadet direct but chose to sell Mouton-Rothschild on the Place de Bordeaux.”
THE SMALLER CHATEAUX
This presents a range of wines from smaller properties from all over the region presenting a number of different ‘terroir’ that are normally estate-bottled at the château. Eighty percent of these wines are sold via the ‘Place de Bordeaux’. A new generation of wine producer more able to communicate in different languages to his own, who are adept at social networking on the net and off, are travelling all over the world to try to sell direct to benefit from the higher prices they can attain for their wines. There are grants from France ‘Agrimer’ and associations such as ‘Ubifrance’ who organise trade fairs to help them do so.
The Points of View of the Players involved
Franck and Laurence Moureau, Château Béard La Chapelle, St Emilion Grand Cru (www.beardlachapelle.com)
Representing the ninth generation to run their family property, the young brother and sister team sell their wine all over the world via the ‘négociants’ but admit that “it is essential for us to be able to sell at least 70% of our wine direct to buyers in markets such as China, USA and Brazil. Our future is via these direct distribution channels.”
Pierre Rabaud, Château Gaby, Fronsac (www.chateau-dugaby.com)
“For négociants to be interested, wines need to come from sought after ‘appellations’ or already have established some sort of brand and following. Unfortunately this is not the case normally with appellations such as Fronsac. We have to work hard to create a name for Château Gaby via active communication and educating the end consumer ourselves. This is done via the internet and we welcome visitors at our beautiful setting overlooking the Dordogne and sell our wines to them. We currently sell 80% of our wines direct mainly abroad but would like to work more with ‘négociants’ to benefit from their extended distribution network.”
Yves Raymond, Château Saransot-Dupré, Listrac (www.saransot-dupre.com)
“I currently sell all of my wines direct but do not have the time or contacts in certain markets. Working exclusively with a négociant on such markets is the only way the Place de Bordeaux could work for me. I can appreciate the merchant’s reticence in building a following for a wine in a particular market only to be undercut by some-one else. That is why I would look to work in exclusivity on a market such as the USA where the négociant would ‘work my wine’.
Allan Sichel, Négociant Maison Sichel (www.maisonsichel.com)
“There is no need to be exclusive with a single distribution network – there can even and often do, complement each other. All sales channels have a legitimate ‘raison d’être’. The most important consideration in this case is that the pricing structure has to make sense. If the producer sells 20% of his wine direct to the consumer in a market for say 6€ and the rest of the wine is sold via the merchants, they also need to be able to sell it for 6€. There needs to be coherence. It is important for the producer himself to drive his own sales strategy using the different sales channels.’
The Changing Face of the Place de Bordeaux
Allan Sichel thinks that during the past four or five years, there has been a new more modern approach which has led to the ‘Place de Bordeaux’ becoming more adept at adapting to changing market situations, driven primarily, he believes, to the younger generation helped by globalization and more transparent pricing due to the internet.
Today top ‘foreign’ wines from Chile and Italy for example are sold via the ‘Place de Bordeaux’ by specialised brokers on the world-wide markets – proof perhaps that the ‘Place de Bordeaux’ is an effective way of selling top end wines around the world.
As he summarises; “The Place de Bordeaux is not a rigid structure, there are no fixed rules. It is based on good sense, the shaking of the hand, trust and loyalty based on the long-term, a system that has worked over the centuries. We continue with it not because we have to, or that we cannot do it differently, it keeps on going because it is the best way in Bordeaux to do business and no-one has invented a better way.”
It seems that the system continues to work in different ways for the different players involved. Let us finish with the sentiments of someone from the next link in the chain, the largest buyer of classified Bordeaux, London wine merchants, Berry Bros. & Rudd. Over hundreds of years of relations developed directly with the châteaux of Bordeaux, Simon Staples admits that there is some reticence in having to buy the Grand Cru wines via the ‘négociants’ who take an automatic 15 to 20% margin.
“But above all I have immense respect for the history, the loyalty, that a man’s word is his bond, a deal is a deal. … I love the wines of Bordeaux, most of the châteaux and négociants and the whole infuriating, confusing, bewildering and charming system!! Bring on those 2011’s!”