Introduction

With its 113 000 Ha in 20141 of vineyards, Bordeaux is the largest French AOC wine producer, with the most finest wines in the world which represent less than 5% of the total production1. Though this essay I will come back to the history of the Bordeaux fine wine trade (Bdx FWT). Showing how this trade has taken advantages of a lot of opportunities, but also has been able to create different strategies in order to put itself on the front of the international wine scene. After describing the Bordeaux fine wine trade structure, its strengths and weaknesses, I will discuss where the future market could impact and challenge this institution using some contemporary examples.

I Past

A. How history built up the Bordeaux wine trade

1/ Origin

Based on the 45° parallel with an oceanic climate, the Bordeaux vineyard founds its origin in the Gallo roman period as most of the French vineyard. Plinus mentioned it in 71 AD followed by Ausonius 3 centuries later (310-393/4)1. A succession of opportunities and strategies will give birth to the Bordeaux fine wines and so the « Grand crus Classés » (GCC).  

Almost all Bordeaux is based on a blend of varieties and terroirs which makes it unique comparing to other French vineyards such as Champagne and Burgundy which are based on terroir’s typicities. 

Gifted with the ocean highway and the Garonne river, Bordeaux lays open to the northern Europe and it’s also perfectly well positioned to control local competition.

2/ Under the English Crown and the Dutch Golden Age

300 years under the English crown, after the wedding between Eleanor of Aquitaine and the the future king of England Henri II (1154-1453)1 followed by the Dutch Golden age (XVIIth century) have shaped its vineyards and its wines, and has ease the Bordeaux wine market. During this period there is almost no need for Bordeaux to find customers. The tax Exemption given by King John in 1241 followed by the « Bordeaux wine privilege » decreed by King Henri III giving priority to the sale of wine from Bordeaux, and finally the falling of La Rochelle port to the King of France, being the first Bordeaux port competitor, put Bordeaux wines inside the English cellars.

At this time Bordeaux wines from the « Bas Pays » (Low land) are called Claret as they are pale in 

colour, light in alcohol (8 to 10%) and they turn quickly into vinegar.2

After the hundred years war when Bordeaux comes back to France the loss of the English market will be compensate by the Netherland. Dutch are in need for white wine and dessert wines. Bordeaux will start to grow white grapes. Under the French king Henri IV bordeaux got its actual shape with the work of dutch drainage.

B. The beginning of the Grands crus

1/ Crisis N°1

In the XVIIth century, English tend to prefer the darker and stronger wines from the « Haut pays » (High land) Cahors, Bergerac, Moissac.. and from the Portugal giving a distinction between the lord and the people. Dutch are buying a lot of wines from the « Palus » (St Emilion, Fronsac) to send to their colonies.

For the first time in history Bordeaux wines are in danger and need to find a new place on the market.

2/ From claret to Grand Cru (GC)

In 1660 the half English and French Arnaud de Pontac will drastically improve the quality of his wine in 3 acts.2

First act: made the New French claret Haut Brion

Selecting only the best grapes from his old vines, then using dutch matches (sulfur) to clean the barrel, use barrels made from northern Europe wood, practice the houillage, the clarification and fining with beaten white eggs. The result is a darker ruby and stronger wine able to age in barrel.2

Second act: Reconquer the London’s market

He makes his wine tasted by Samuel Pepys, the London diarist, on the 10th of April 1663 that will write that he « drank a sort of French wine called Ho Bryan that hath a good and most particular taste I never met with… ». 7

Third act: The Trojan Horse

The final part of Arnaud de Pontac’s strategy is the opening in 1666 by his son of a tavern in London « The Pontak’s head » with only one wine served the « Haut Brion”. For the first time in the wine history a wine is referred to his Chateau and not to his area.The word of mouth inside the London aristocracy and intelligentsia will do the rest.7

Other Bordeaux wine makers will follow De Pontac model, Chateau Margaux, Nicolas Alexandre de Ségur « Prince des vignes » for Chateau La Fite, La Tour, Calon Ségur and Mouton. 

This is the keystone of what will give the 1855 classification when Napoleon III’s for the Exposition Universelle in Paris request to the Bordeaux Brokers to formalized their own market ranking with a Five class classification of the leading Medoc  chateaux plus the famous Graves, Chateau Haut Brion, and a 2 class classification for Sauternes and Barsac. This formalized the previous list made by Jefferson and other well regarded men.

At the end of the XVIIth century Negotiants (mostly British, Irish and Scottish) start to be landlord too. The Bordeaux house of wine is installed in the Chartron quarter in Bordeaux, on the Garonne river and they are called the « Cork aristocracy ». 

Bordeaux wines reach not only the English market but the Flemish, dutch, Denmark, Sweden, Russia and Spain. It’s not before 1755 with the Duc de Richelieu, Guyenne (Gironde) governor and the French king Louis XV that fine wines from Bordeaux will reach the French aristocracy in bottles made by the English glassmakers.2

It’s worth notice that Bordeaux fine wines are owned by aristocrats that don’t know how or don’t have time to sell their wine. This particularity has lead to the creation of a unique system, la place de Bordeaux. From the 17th century courtiers have been the one knowing a lot about wines and having the ability to fix prices and quantity that could be sell to wine merchants, first in bulk then in bottle. This system for 300 years allows the 3 parts to get richer. The courtiers spent their time with the owners and their knowledge about wines were endless. This system is still in use today. 

II Present

A. Structure of the Bdx FWT

1/ La place de Bordeaux  

The Chateaux’s owner don’t have time to fix prices and find customers, plus the wines need aging to be consumed. All those specificities explain the stratification of the Bordeaux trade. 

400 Negociants/merchants3 can have different functions:

Buying, blending, aging and selling generic wines, individual chateaux wines in bulk or bottled.

Their role is not only to sell the greater wines which are the easiest but to push the lesser vintages. Some castle owners are also negotiant, Rothschild, Moueix or Lurton.

The link between Chateaux and negociant is made by 130 Brokers/courtiers3

They are fixing prices and allocation at « La place de Bordeaux » . Due to the market, the first courtiers were obviously from England, Ireland and Scotland. The first notable name is Lawson an Irish man who founded his house in 1742 and whose wine notes served probably the first classification . The work of the courtiers is very important, they have to know everything from the Chateaux’s improvements, vinification, and the market dynamic. They will be the first to establish very well documented wine notes which will drive at the 1855 classification. There is the official Bordeaux wine courtiers chamber but also brokers all around the world such as Berry and Bros in London and hog kong.

Also Auction house are playing a major part in GC market, Christies in London, Acker Merrall in New York.

2/ The 1855 classification and the other classifications

 

The 1855 classification is not a classification made up for the universal exposition but the combination of hundreds years of wine history and commerce plus other circumstances that drove the Girond chamber of Commerce to expose the courtiers wine notes and figures to the public. This could have lead to a disaster and to « La place de Bordeaux » to collapse. But nowadays this classification still exist and the world is still turning.

57 Chateaux were selected by price and divided into five categories of Grand Cru Classé. 

It will be easy to claim that this classification should evolve as its unfair to the vineyards that didn’t exist at this time. The truth is that every single wine inside this classification has hundred years of history, and figures that can give a proper vision of the quality of this chateaux. Bordeaux climate make it vintage dependent and it’s very difficult to fix a good window that shows a complete vision of a vineyard potential. The St Emilion grand cru classification from 1955 fixes it at 10 years and Pomerol doesn’t have any when Petrus is still the most expensive and the best investment ever.4 

Is not before the the XXth century that the 1855 classification started to be seen as a very good tool for marketing, in 1960 the GCC admit that the classification is an argument for notoriety and a tool to make them known to a new clientele. The new clientele at this time was the American soldiers who have discover our country during the second war.15

 B. Market Dynamic

1/The parker’s era and the China’s market

In 1982 Robert Parker, the most important wine writer of all time, starts his career. This will, despite his own desire, add another strate to the already complexe Bordeaux fine wine trade stratification. Not only the courtiers will define the price but the Robert Parker wine notes too. Easy to understand this notation is on 100, and every wine reaching more than 90 is said to be excellent. Robert Parker soon become the reference, and that will open new market such as China! 

Since his retirement in 2012 no one has been able to take his place even his team members18. 

Robert Parker was really well considered for his talent to extrapolate the future of a wine tasted in primeur. A new study shows that random people wine tasting notes will be closer to a tasting judgement made by an expert than experts between themselves 16 

2/ China/Brexit and new markets

The 1855 classification made the Bordeaux fine wine quality easy to understand, you just have to know how to count from 1 to 5.

In 1982 less than $10 000 are sold in China. There is a need for luxury product. Thomas Yip found Topsy Trading company and start to provide with Petrus and Chateau Lafite Rothschild the five stars luxury hotels in China. Chateau Lafite soon becomes the official gift made inside the communist party, as it’s the most expensive, the most famous and a first growth!
In 2008 the American market is tumbling while the Chinese market is on fire12 , a tax exemption for fine wine imported in Hong Kong from 40% to 0% will put the Bdx FW sales on fire, but prices are flying to keep up with demand. As the English have done in the XVIII century the Chinese are increasing the GCC prices.

The 2008 was clearly the year with the largest purchases of Bordeaux in the world at this point of the time3

This changes the way wines used to be allocated and then the superb 2009 vintage happened and made it the highest priced vintage in history.

But Chinese buyers and business people don’t like, enjoy or understand why these middlemen (négociant and courtiers) had to be part of the deal….

China demands for exclusivity which is not part of the Bordeaux wine system.

The release of the poor 2008 vintage is another example of how the Chinese market works. 8 is a lucky number. This vintage which will have been difficult to sell on the traditional market not only sold itself very well but at very good price. A bottle of Lafite worth $200 jumped to $1600, today you can find it at $650, still $450 over its starting price.12

Mouton Rothschild created labels for this specific year and for the Chinese market to sell at a higher price.

After the china’s anti corruption campaign the Bdx FW sales have been halved while in others French area this was not the case, burgundy’s price held up very well.

In June 2016 the Brexit was voted.

The Chinese market has raised up the prices, the 2009 and 2010 beautiful vintage were the most pricy of the history and « La place de Bordeaux » got some difficulties to come back to good price for investments.

The first 9 GCC are so high in price that you need a very long term investments. Only Pomerol such Petrus and Le Pin are still very rentable.4

Bdx wine the 2017 vintage and the curse of the sevens) 2007 GCC represented 90% of the fine wine market in 2017 only 66%, buyers prefer to invest in Champagne, Italy and Burgundy. In 2016 the Brexit and the Sterling crash gives another cut to the GCC to its historical English market.5

In France 1997 marks a shift into the Bordeaux fine wine market, when Courtiers and Negotiant forced the merchants and consumer to buy biggest allocation for them to get access to the next 2000 vintage. Prices from then starting to rise and rise, and so part of the classic consumers slowly has lost his ability to purchase such kind of wine. From wine lovers, connoisseurs or just passionate clientele the Bordeaux fine wine market slowly turned to the luxe clientele. Did the « chateaux » changed their way of selling.6

III Future of the Bordeaux fine wine Trade (Bdx FWT)

A. Strengths and Weaknesses

1/ Strengths

As we have seen Bordeaux FW are strong from their history due to their length in time producing very high quality wines. Even with the coming up of fine world from the new world such as AO Yun (China), Opus One in California, Nyetimber in England which are officially quoted in the Liv-Ex there is still centuries of experience for Bdx GCC. 17

Another strength is the readiness of the classification, either the 1855, the St Emilion Grand cru or the Cru Bourgeois. Those system doesn’t need any knowledge of the terroir. 

The last strength but not the least is the fact that Bordeaux built up its quality and notoriety on the blending. Blending of terroir and grapes this is a fantastic tool to permit a continuity with the quality even with the warming climate effect.

 

2/ Weaknesses

The biggest weakness is probably the Bordeaux trade stratification, too much middlemen that take margin its probably too much margin that separate the producer and the consumer from the right price to pay and from any other knowledge that will be beneficial to a good consumer experience, the data being owned by the negociant not by the Chateaux. But it’s also too much people involved that slow the process of any evolution. It’s practically impossible to reconsider the 1855 classification when it has never been made to last so there is no need to imagine how difficult it is to move anything from this institution.

The second weakness is still the climate and its sensitivity to vintage which make difficult to prejudge from the future of any wine.

Finally Bordeaux, further more left bank is far behind in term of organic and biodynamic conduct which is today almost inacceptable. 

About the 1855 classification, is any revision should be beneficial ? Hundreds of years of the experiences created this performance of these wines, and certainly new wines should enter the 4th or 5th growth, but the strength of this classification is that the investment needed to buy the property imply as much investment to produce the best quality. In fact is a kind of a free market inside a closed club.

B. The market’s future

1/ The Millenial generation

The millennial generation is the futur market and that are looking for something easy to understand, experience and authenticity. The classification system is a very strong point for this.

But the sale « En primeur » doesn’t make sense for a generation willing to get his investment back as quick as possible. We could argue that they could learn the « how to » and the « reason why » but who will offer this service ? Before and after Robert Parker the tasting notes have always been produced by experimented people, will the millennial generation takes time to get experience ? If os who will buy the wine en primeur since then ?

What make sense for this generation is branding, experience, and virtual learning. 13Website are not enough, chateaux needs virtual reality experience, and to offer accommodation inside their Chateaux. They need learning system. Direct connection with their client like in the luxury market (Hermes, Krug…)

 A quality strategy as made by the negociant Millesima founded in 1983 by Patrick Bernard is perfectly well suited to this new generation. They adapted their service to the B2C market and they are the leader with online sale of Bdx FW.14

2/ The warming climate effect

The froze in 2017, the multiplicity of storm and hail in 2018, and a gradually temperature increase there is no doubt that the climate is changing and if there is one kind of wine makers who have the financial potential to find a solution it only can be the fine wine producers. All this climatic phenomena force the winemakers to look for a change. The risk is that the soils became to dry for the vine to resist. It could be the use of new roots, new clones, ancient grapes or new conduct (Biodynamic) such as Agroforestry.8

Conclusion

The future clientele as china already shown doesn’t understand the necessity of the middle men, as well as the sale « en primeur », they look for authenticity as well in price and in the product. They are craving for information, experience, direct contact with the chateaux. Chateau Latour10 when leaving the en primeur not only protected itself from falsification and bad treatment of its wine but also introduce this new relationship. Pontet canet11 turning its conduct to biodynamic, risking its lost of the AOC gave a good signal to this generation. Biodynamic reinforce the vine from disease. Its a question of year before To keep producing wine with a right level of alcohol, the right bank already reach usually 14,5% of alcohol, Bordeaux needs to redefine their traditional blending with maybe ancient grapes. The organic or biodynamic growing will have a double impact first marketing for this new generation in research of authenticity and for the environment. We could argue about the cost price of these conducts that could increase an already too high price, could this new conduct costs be taken on the middlemen margins ? 

Stéphanie Hennion

1 Jancis Robinson, the Oxford companion to wine- Fourth edition p 89

2 Eric Birlouez, Histoire du vin en France

3 BBR, Bordeaux trade structure

4 Les échos, Primeurs à Bordeaux : Faut-il investir dans le millesime 2017 ?

5 Financial Time, Brexit shakes up the Bordeaux market

6 Xavier Leclerc, interview on the 18th of July Auchan wine buyer

7 Jancis Robinson, The Oxford companion to wine- Fourth Edition p 353

8 Loïc Siri, interview on the 18th of July 2018 wine expert in Bordeaux

9 Dewey Markham Jr, 1855 a history of the Bordeaux classification

10 Latour Website + Visit July 2018

11 Le rouge et le Blanc magazine N°120

12 The wine cellar insider, china Bordeaux wine story

13 Robert Joseph, Interview on the 16th of July 2018, wine critic

14 Sofya Brand, L’analyse institutionnaliste du rôle du négoce vitivinicole: de la filière au mesosystème, Thesis

15 Dewey Markham Jr, 1855 a history of the Bordeaux classification p 199

16 Eric Asimov, New York Times

17 Liv-ex website

18 Marilyn Johnson, freelance journalist, wine expert at Wine what else ?

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