Bordeaux BUSINESS

Question 1

How many producers are there and what is the average property size? How has this changed?

How much many bottles are produced annually?

What proportion of production do co-ops account for?

Answer 1

• ‘Chateaux’ → falling
• Ave size → rising
• 800m → fluctuates by vintage
• Co-ops: 25%

Question 2

What is the average cost of production of a bottle of Bordeaux AOC, Medoc, and classed growth? What accounts for the difference in cost?

Answer 2

1Bordeaux AOC +- €1

Medoc +- €2…

Classed growth €16

Differences due to:

• increased vine density
• harvest cost
• lower y
• grape selection
• barrel ageing

Question 3

What has become an important tool in marketing wines from this region?

Answer 3

Robert Parker

Question 4

What is the value of Bordeaux production and where is it sold (country, business type)? (4)

Answer 4

€4,000m (‘18)

56/44 Domestic/Export

Domestic - 48% in supermarkets

Export - HK, China, US, UK

Question 5

Describe the La Place de Bordeaux (4 plus diagram)

Answer 5

Merchants (la place) 70% of sales

Brokers (la place) handle relationships between producers and merchants

Each producer sells to as many as 40 different negociants who cover a total of 170 countries

Amount of wine available to each negociant based on allocation

Question 6

Describe the market for Bordeaux and Bordeaux Superieur

Answer 6

• Majority of production
• About €1/L in bulk
• Lower demand from France - supermarkets
• Competition from Chile, Australia in export
• Produced by co-ops and small producers

Question 7

Briefly give an overview of the EP system (5)

Answer 7

1. sell classed growth/HQ wines
2. wine sold in spring following harvest
3. April - barrel samples tasted by buyers/ journos
4. May/June - reviews + prices released
5. Tranches released and prices adjusted

Question 8

What are the pros and cons of the EP system?

Answer 8

2011 - poor vintage saw little changed prices, eventually prices corrected → EP buyers lost money

Ch Latour withdrew + several have reduced volumes via EP → these producers can afford to sell their wine at ageing

2017 campaign saw much lower volumes due to relatively poor quality without similar price adjustment

Question 9

What does the price of EP wine exclude, how is it stored and delivered? (3)

Answer 9

• Price is ex-cellar → excludes taxes
• Stored in temp/humidity controlled unit until ready to ship
• The secondary market for 1st growths is particularly strong