All the top Bordeaux wine producers sell their wines En Priemur. That means the wines are sold in barrel, several months after the harvest and long before the wines are available in bottle. If you think buying wine before it’s finished and bottled is risky, until the late 60′s, some negociants purchased the crop before the grapes were harvested. The practice of “sur souche,” buying the grapes off the vine stopped in the late 60′s. The last two major vintages for buying “sur souche” were 1961 and 1969. Both years spelled disaster. In 1961, while the wines are legendary, the crop was so small, most chateaux were not able to deliver the amount of wine purchased. In 1969, what was on target to be a great vintage turned into one of the worst vintages of all time, due to the non stop rains during harvest.
Bordeaux wines are sold on the Place de Bordeaux.vIt has worked that way for hundreds of years. Will it continue to operate in the same manner? That is the million dollar question. To read about where Bordeaux wine futures are headed, The Future of Bordeaux Futures after the 2010 Campaign
The negociant system can be compared to a pre-arranged group of wholesalers who contract to purchase a percentage of a properties harvest every year. The negociants all pay the same price on the same day at close to the same time. In theory, they are supposed to sell the wines to their customers for the same price, with the same markup as well. In the past, negociants were responsible for bottling, labeling and arranging shipping, as well as marketing the wines. Stepping back in time, negociants were also responsible for producing custom blends ordered by customers that could range from assemblages that included various percentages of Syrah from Hermitage, or even blends from different producers. For example, at one point, it was possible to order a barrel of 50% Chateau Latour along with 50% Lafite Rothschild!
This started to change with the advent of Chateau bottling which was heavily promoted by Baron Rothschild at Chateau Mouton Rothschild in 1924. The purpose was to offer a guarantee of quality from the property to consumers. By 1970, the vast majority of Bordeaux chateaux bottled their own wine.
Today, with every chateau bottling their own wine, the negociants are responsible for selling and distributing the wine to a myriad of wholesalers, importers and merchants all over the world. They are important because part of their responsibilites are to help create new markets. Currently, there are more than 400 negociants active in Bordeaux. Each chateau works with a different number of negociants. Some properties work with 5 different negociants, others work with over 100. Of course a few properties, most notably Tertre Roteboeuf in St. Emilion sell direct and do not offer their wines for sale to negociants on the place de Bordeaux.
The courtier plays an interesting role. Long before phones, faxes and Emails, the negociants were all located in the city of Bordeaux in what became known as the negociants quarter, located district of Chartrons. Needing to travel by horse or carriage took an entire day. The courtier stepped in and carried messages back and forth between the negociants and the chateaux, helping to arrange an agreement between the two parties. For this role, the courtier earns 2% of the transaction. In today’s world, when communication is instant, some people question if their role is warranted. Money and ego are not the best blend for a successful business transaction. The courtier is able to remain unemotional and help facilitate an increasingly heated and difficult transaction. There are over 120 active courtiers. But the number of courtiers working with the top properties is small. Less than 20 are actively working with the most famous estates.
The system works because it gets the wine into marketplace quickly. Some of its faults are, while it helps the top chateaux that participate in the system, smaller properties are left out and their wines are not available to many consumers. Another fault is the dependence on selling wine from the 1855 classification. Classified wines, especially the First Growths are the heart and soul of the system. Along with the wines of the Medoc, that has traditionally been their core business. Ets Moueix was the first and is the largest negociant focusing on the wines of the Right Bank.
While many consumers think the negociant system causes wines to be more expensive, that’s not true for the majority of the Bordeaux wines. Interestingly, when Michel Rolland took his Pomerol, Le Bon Pasteur from the place and marketed the wine with his own company in 2005, the wine was more expensive than it would have been, had it been offered through negociants.
Tranches is to many wine consumers a dirty word. It is considered market manipulation. A tranche is a small slice of the production that is designed to test the strength and price of a wine in the market. The truth is; very few chateaux release their wine in tranches. That practice is mostly limited to The First Growths. Other chateaux might announce a second or third tranche, but the size of those tranches, are the direct opposite of what is taking place with the First Growths. A First Growth could release 5-10% of their wine on a first tranche. When other Bordeaux chateaux announce a second tranche, that is usually limited to a small percentage of their wine. The purpose is to gain press and show momentum in the marketplace. It is for show and does not reflect the market.
The negociant system will probably remain in place for the majority of Bordeaux chateaux. The chateaux are not in the business of hiring a large sales team of a hundred different people who will contact people all over the world to buy their wine. They would also have to hire people to arrange deliveries and provide other costly services. The chateaux can usually sell every bottle offered in a few hours when the vintage is in high-demand. It will take a few more days in more moderate years. Regardless of the quality of the vintage, they will sell every bottle. With that in mind, why would the producers want to change the system?
Negociants and chateaux have an interesting relationship. They need each other. They work together. Yet, they are separate. For example, once a chateaux sells their wine to a negociant, that is the end of the sale as far as the property is concerned. While all negociants sell the wine on the same day at the same price to all their customers, where the wines are sold, and how much of the wine was offered, versus the percentage of stock that was held back remains a closely guarded secret. Most negociants do not release that information to the chateaux. Some negociants, as part of their business plan hold back a portion of their stock, hoping to sell it at a higher price after the wine has been released. In part, this helps the negociant earn money in the difficult vintages that are hard to sell. Not every negociants holds back stock. Some offer out all the wines they have for sale as soon as possible.
Changes in the system have taken place, but in ways the long-established negociants are not happy with. They have more competition for allocations of the top wines than they were use to obtaining. This is because some of the top properties have started their own negociants companies, not only to sell their wines, but to market the wines of other chateaux as well. Plus some companies like Millésima has an Internet division that sells direct to consumers.
In June, 2012, another massive change in the Bordeaux negociant system took place. Diva, a large, but not one of the top negociants, with sales of a reported 33, million Euros per year sold a 70% stake in their company to Chinese investors. The buyer, Shanghai Sugar Cigarette and Wine (SSCW), a subsidiary of the Chinese state owned Bright Food company is China’s largest food products group. The relationship between negociants and the Chinese market has continued expanding since 2008 when taxes on wine were reduced to zero by the Chinese government.