Who are the middlemen, buying cherry Burgundies and marking them up six fold?

There have been a couple of threads where this came up recently, and it seems that somewhere in our lovely three tier distribution system, somebody is making a lot of money. Any insights?

I believe it is all 3 levels—importer, distributor, and retailer.

I spoke with an importer who directly buys from the domaines who will remain unnamed but they told me that he was contacted by a distributor who complained his prices were too low. There’s likely a certain amount of collusion out there.

My solution=move to France

The two brick & mortar retailers I buy most of my Burgundies from have a standard mark up on all wines. I have enough inside info to know it’s true. (There is a third retailer I buy from on-line, and I don’t know their specific practices, but the prices are not “out of line” or apparently gouging.)

I believe it is all 3 levels—importer, distributor, and retailer.

Alan - in many cases the importers are also distributors. The third level would be the producers.

In this case, if Mark is suggesting that the domaine prices are not out of line, and it’s coming from the middlemen and prices are not widely disparate across the country, my guess is that is it would likely be the importer. But it would be unusual for a producer to notice that he’s leaving a lot of money on the table and not try to recapture some of that.

Kermit…

not in Burgundy. Look at ex-cellar pricing and compare to retail. The producer isn’t making the $.

ex-Domaine prices have obviously grown but there are plenty that do not want their wines flipped and prefer reasonable margins presented to customers - merchants risk losing their allocation otherwise. This is a lot easier to police in the UK than the US, given the distribution struggles over here. UK retailers more often than not have direct and sometimes exclusive allocations, so there’s only one step between the producer and the customer.

Just a question from someone who also wants to buy wine for the best price possible, but realizes capitalism is a reality.

Shouldn’t those markups be taken by someone in the chain eventually, or should the consumer be allowed to buy them for under market, when many of those bottles are just being flipped to the eventual end-user? I know there are some folks that do not flip. But when the real high-end cherries are offered for sale, the potential profits are often too much, not to realize.

An ITB person asking a question that they should know (and profit by), what exactly is the motivation here?
Why don’t you tell us instead of trollin.

Well…that’s why some people end up flipping - the upside is just too great vs drinking. There’s always going to be some people who cave.

I am yet to be convinced that even a technical majority of top end wines are flipped and I reckon this compounds the price pressure right at the top. I think many of the 1st tier buyers are very attached to their allocations, and rightly so.

Same here. The problem is NOT the three tier system nearly so much as it is the direct importer and grey market. YMMV- I know this is not how it is everywhere or with every Domaine. And if it is a problem within the 3 tier system, most likely to be your retailer who is contributing to any big recent changes.

I said in another thread I paid about $380 for 2016 Meo-Camuzet Echezeaux. Go to winesearcher and see who has it for sale for a lot more. Just one example- but the pattern fits nicely.

I’m not an expert in the three-tier system. Nor economics in general. So excuse my ignorance if the following makes no sense …

I’m always reading about ex-cellar prices and “Don’t blame Mme. Gibourg (fill in your favorite producer here) for escalating prices, s(he) only charges X euros at the door blah blah.”

So my question is if you are truly one of the hot shops, why not charge more and close the arbitrage gap – instead of letting others scoop up the majority of profit?

Or why not just send the majority of the top stuff to auction and just let the highest bidder win? Isn’t that what Liger-Belair does with Acker?

MarkuS

Perhaps you can explain how I should “know” as I don’t buy directly but I know that prices ex producer are very different to the retail prices which I pay here in the US.

Perhaps next time before you come out with your unfounded accusations, you might try doing some research, or even just think and explain my possible motivation. Thinking may be alien to you, but it’s worth a try.

I would think it’s partly down to each of the middlemen - and the more middlemen, the more likely the end price will be close to “market” or even “market leading”. I would think the model has at least three parts:

• Importers / distributors with good, regular and exclusive allocations: sell majority portion to “regular” loyal customer base at “cost plus” or at least “below market” and the rest is sold at market
• Importers / distributors with good, regular and exclusive allocations: sell majority portion at market
• Grey market - i.e. from European distributors / wholesalers / retailers, which obviously will have a higher total mark-up to arrive at around market
  I think it’s fascinating how these markets work, and the high emotion many express about it. In general, I would always say “blame the buyers” rather than “blame the sellers” when items become subjectively (i.e. for me) over-priced. I have yet to see anyone propose a better model.

+1. I have seen it manifest in a few different ways as there is no standard practice on the release. With no standard practice, volatility of prices and speculation, there are plenty of permutations. As someone mentioned, a well-known market clearing mechanism such as an auction is probably the simplest theoretical answer if one desires a common approach. There are some examples of this in ‘Dutch auction’ form such as the German auctions that have been around for a very long time. An example of it working for the producer is the Keller Pettenthal Auction- price almost tripled y/o/y with an educated group buying at the group market-clearing and published price.

Perhaps a new business opportunity for an eager entrepreneur for the cherries using technology… an online release mechanism for producers whom want to go to market pricing. Like the German one, you could start with authorized purchasers who are retailers (or some form of professional) whom aggregate orders for a regulated region, distributes and can authenticate. I am certain there are a lot of issues around regulations to navigate - this is just an illustration. It would also be wise to start with ultra-high demand cherries to start where the system can be refined without failed auctions or other unintended consequences. Until a more standard approach, each scenario likely has different profiteers but perhaps that is appropriate for the vast majority of wine sold.

Yeah, let’s figure out a way to raise prices even more, that’s the ticket

Don’t forget FLIPPER!

+1