Such an exceptional wine. Love the cepage in Ausone and Cheval.
William -
Are you saying this is an issue with Cheval in particular or also with Ausone and Petrus this year?
Has Petrus come out yet?
I have not had a Cheval Blanc since the 1964 vintage. Now that was something. Had it around 10 years ago.
I have also been offered Cheval at a discount. The negotiant wants to keep his allocation, and not have to sit on the wine. At some stage, wines like Cheval will put too much pressure on the negotiants, who will not buy. I can’t see any of them making money now while the chateaux have been raising their prices, absorbing what little profit margin there was. For the wines like Cheval, it is a system that will some day break, and I suspect they will have to distribute the wines themselves.
You think? I do not think that is possible… From a conceptual perspective every visit to France I end up trying to explain U.S. liquor laws state by state and Federal and so on… The mind of the French they cannot grasp the concept… It is so foreign to them, 2ndly from a practical stand point how in the world will the Chateaux even begin to distribute the wines themselves in the U.S.?
You need a license for every state and those licenses have all kind of requirements including local facilities.
Once they would obtain a license they need staff and facilities, think of what you are suggesting,
The Chateaux - even the most successful are very small staff operations. An operation such as Chateaux Margaux has about 12 employees which includes the barrel maker. Not including the farming crews, the Chateaux staff is so few people.
You now picture the additional function of distribution in the U.S.? That is never going to happen. Even if you focus on the 10 largest markets in the U.S. - they would have to replicate the total staff, administration, sales, compliance, warehouse functions, delivery, back office of a distributor.
That is not practical although I can understand how your mind went their.
You may be correct about E.P. breaking, Chateau Latour has been the very first to leave that system.
The owner - François Pinault - or his management group have decided to withdraw from the entire E.P. system. They can afford to wait - because they realize when the wine is ready to drink they can charge a great deal more for the wines.
They will release wines when they believe the wines are ready to drink, this past year they released the 2005. So it is going to take a while to catch up.
How many Chateaux have the deep pockets of Groupe Artemis - and all of the Luxury Brands they own, LVMH?
The E.P. began simply to help with cash flow because of the cost of maintaining the Chateaux for 2 - 3 years before releasing a wine.
Sorry, my mistake - I’m very bad about time, I looked it up, “this year” was actually March of 2017 that we were offered the 2005 from the Chateaux.
I swear - It felt like we purchased this year… we should sell those.
We paid $750/bt - but you would have to look at the Euro at that time to figure out the release price.
Retail currently is $850 all the way up to double that, it is a remarkable once in a life time memory to drink …
How many other Chateaux will find it advantageous to release when they want to? You need very deep pockets to afford to wait years without that cash.
Pichon Baron is owned by the largest French insurance company and I wonder if they have the cash flow for that delay.
Rauzan Segla and Canon are owned by Chanel - so they could wait if they wanted to.
Some Chateaux have foreign wealthy owners who also own banks or so industry. Obviously the 2 branches of Rothschild - I imagine they could afford if they wanted to.
And many are long standing Bordeaux families such as the Lurton branch who own endless Chateaux and I would doubt financially across all of the Chateaux that they could afford to delay the cash infusion for 3 - 5 years at E.P. release.
As angry as I am, I’ve learned the negociants are frequently being burned in many instances. It is the Chateaux that need to feel the pain.
And I’m much too small potatoes to do anything about that.
As expressed by another Berserker - even Diageo departing from the entire Bordeaux market because of the year after year of bleeding Red ink, and they are giant, that move did not even cause a ripple to the market. I believe China came in and soaked up the excess that was or would have been in the market place.
Now that the China market has been significantly reduced - due to fraud - you can purchase a bottle of Lafite at a restaurant for 3 prices, - Hypothetically -
$1,000.oo USD for a bottle with the cork already removed, $2,000.oo for a bottle with the cork still in , and finally $3,000 for a bottle with the cork and capsule appearing new.
or half price for a bottle that the Chateau name is misspelled and so on… I do not know who has taken their place.
I know customers in Hong Kong and China tell me that due to the new tariffs their business is so extremely hurt that they pass on our higher end offers - for now.
You know the saying, “You want to become a Millionaire?” “Go into the wine business with 2 million.”
I do not know how we have managed to survive and earn a living for almost 30 years, when so many forces are working against us that you would imagine are supportive.
I’m not sure I understand the part of your question asking “this is an issue with Cheval in particular…”?
it is an issue with me, and I am only speaking for me.
As someone else mentioned Ausone has released and the price is higher than the 1st Growths, which were at 408 EUro
TO businesses like mine, importers.
The AUSONE was offered higher and it did not hit me wrong, the Cheval came in at 120 Euro’s higher and that hit me as greedy,
so it is me that has the issue.
Petrus has not been released…
Petrus is like Screaming Eagle, the quality of that particularly vintage has only a marginal affect on pricing -
awful vintages that bring reviewers giving the wine 90 points, those vintages for the most part are still $2,000.
Just like the Screaming EAgle Sauvignon Blanc, we wholesale those bottles at $3,900/btl… a wine that critics score at 90 pts.
Petrus, Screaming Eagle are merely brands,
Did you know businesses like CHANEL, LVMH and those kind spend 70% of their money on branding - reassuring the public how super terrific
we all are with our name brand products.
They do not pour that money into make super-terrific products.
An “entrepreneur” by definition is a middleman. He buys at a lower price from a source, moves it to a new market, and sells it for a profit. An entrepreneur does not make the product, nor control the market and, in the case of wine, there can be several levels of entrepreneurs, each interested in taking as much of a share as the market will bear while incurring as few expenses as possible. That’s how the business works. And, as William has noted, it can be a tricky business, filled with ups and downs of markets, fickle buyers, currency variations and, of course, the yearly variability of the product and the demands of the sellers. Traditionally, it has been a fairly profitable business to be in, but it may not always be. Given that it has been fairly profitable and consistent for a long time, I have some sympathy for those who have gotten stuck with wine that won’t move. It’s not your fault, though unfortunately your business model is such that you assume the risk.
What I would recommend: unless your pockets are so deep you can afford to hold these wines, sell them at a loss, get them out of your warehouse. Convince your colleagues to do the same. Send a message to the Chateaux and the Negoce that you’re not going support an artificially buoyed market, force their prices down, put some serious pressure on their business model, and let the world know that they can go F- themselves while you sell through your 2009’s and 2010’s at prices that are below EP for 2018. That’s a bit of a Guy Fawkes kind of plan, but someone has to give buyers an opportunity to break out and vote with their wallets
I’m no accountant, but I would have sold these off a long time ago, written off the loss, and freed up the remaining cash to work for you elsewhere. It’s not doing anything for you sitting in a refrigerated warehouse taking up space.
William,
First of all nobody is suggesting that the chateaux will distribute state by state. They will have national importers who will deal with the minefield of state regulations. Easy to see a Wildman or a Southern working the market for them. Personally I think it would be a disaster if they decided to kill off the negotiant system through greed. It’s a cushy option, and an incredible way to realize quick cash flow. But they seem to be doing their level best to make the job of negotiant impossible and ultimately they will be the ones who lose. Never mind having to work with individual states, finding distribution in sixty to seventy countries, and then working with them over the years, you are right, that will require serious increases in personnel and gray hairs dealing with all the problems.
As to your question about whether or not owners can afford to hold their wines (and it should be clear I am ONLY talking of the top 100 wines) believe me they are not hurting. At the top, Latour is holding back tens of millions of first wine. However the Forts de Latour is more than making up for it. The inflation adjusted figure of what they are getting for the Les Forts is about the same as they were getting for the Grand Vin in 2000. A wine in the middle tier, say the family owned Malartic may not have the resources to go it alone, and have far less leverage, so work pretty closely with the courtiers and negotiants.
We/they have allowed the first growths and a few chosen other wines to have free rein to price exactly where they want, and the immediate clients, the negotiants are afraid to say no. The next layer, wine shops, importers and consumers can and do say no, leaving all that inventory bottled up with the trade in Bordeaux. They can just about eke out a business with top vintages, but God help them with off vintages. A run of three or four non vintages of the century and we may see some say non. It would have happened in 2008 but for unexpected demand from China. It will happen, and then we will either see the system bend, and a new direction found, or shatter.
Yes, until the chateaux feel the pain, this failing model will continue.
Agree with all of this except the 1st sentence! To me entrepreneur has connotations of innovation and creation, and yes, risk. Not just arbitrage, or wholesaling, which is really what we are talking about here.
The normal justification for wholesaling would either be distribution logistics or liquidity. And that’s obviously changed in this market compared to a few decades ago.
To respond to Mark Golodetz,
First you wrote this in your earlier comment -
For the wines like Cheval, it is a system that will some day break, and I suspect they will have to distribute the wines themselves.
I replied to your comment and stated how impractical it is to suggest that the Chateaux will distribute themselves - then you state no one is stating that? so if that is not the point of your sentence then obviously I do not understand what you are stating?
"William,
First of all nobody is suggesting that the chateaux will distribute state by state. aaaaaaaaaaaaaa’ (Isn’t that what you are stating? - Mark They will have national importers who will deal with the minefield of state regulations. Easy to see a Wildman or a Southern working the market for them.
2ndly I wonder just how intimately you work with Southern to know their potential for “being a national importer of Chateau such as Cheval Blanc” and other classified Growths.
I do not want to go into a lot of personal detail, besides saying, that may be your impression, but that is not how Southern works.
I do not work with Wildman so I do not know how they work. Southern is broken down so that each division works independently, they do not buy for the most part as a unit, it is regional, states.
And within each state the divisions work independently.
The divisions we work with at Southern have us to do the importing of fine Bordeaux for them. They have - for the most part removed themselves from the E.P. system of purchasing Bordeaux and rely on importers such as myself.
While it is true that the importers/distributors of wine in the U.S. is shrinking in the past 30 years by 90%, the negociant numbers are growing and when you attend a lunch or dinner presented by any major classified Growth Chateau at VINEXPO - you will see the hundreds of distributors & importers from around the world and it is unimaginable that they will partner in the manner you are suggesting - to seek a few to do their distributing, or am I misunderstanding your comment once again?
The picture you are creating is not how the business currently works and I cannot imagine how you can so off the cuff predict that is what will happen in the future.
I’m just speaking from an etymological perspective. From the French, “entre” - between and “prendre” to take. That is the actual definition of the word. It is usually translated as “enterpriser” (and “enterprise” shares the same derivation) OT adventurer, but was coined by a French economist to describe someone who identified business opportunities or opportunities for profit in the discrepancies between utilization and efficacy, and, in the process, discovers or invents new markets. The innovation piece, as you rightly note, is a part of this.
I’m just speaking from an etymological perspective. From the French, “entre” - between and “prendre” to take. That is the actual definition of the word. It is usually translated as “enterpriser” (and “enterprise” shares the same derivation) OT adventurer, but was coined by a French economist to describe someone who identified business opportunities or opportunities for profit in the discrepancies between utilization and efficacy, and, in the process, discovers or invents new markets. The innovation piece, as you rightly note, is a part of this.
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I wonder what the Chateaux would think about this? Etymologically speaking…
William -
Don’t really care what the Chateaux think. Most of them are owned by conglomerates, investment banks and foreign investors at this point. I’ve met some nice winemakers and emissaries, but it’s been a racket for a long time.
If the Chateaux have the reserves to fund a business model that perpetually insults the consumer and trades on aspiration pricing and the ratings of a few symbiotic critics struggling to maintain relevance, I wish them luck. Everyone in the food chain, however, perpetuates the misery, and this bitchy little thread, like every bitchy little thread on Bordeaux pricing, is absolutely toothless until people like me and the other WB on the 2018 Bdx thread stop buying entirely in protest, or people like you sell your stocks of overpriced Bdx at a discount, stop buying entirely, and tell the Negoce to F-off. And the Negoce complain but they’re entirely beholden to the Chateaux and so fearful of losing their place in the market that they perpetuate the crap by buying up the crappy vintages and holding them for years and paying whatever the Chateaux choose to charge for good vintages.
As far as they care about the etymology of “entrepreneur” I am not sure they have much of an opinion on that… 
I respect your view and wish if it was true… the world market is so diverse I do not see an organized campaign having any affect. I wish it would
But entre prendre translates best as “undertake”. It has nothing to do with being a middleman. When you put “eur” at the end, it indicates some kind of agent, so in this case someone who undertakes things. And it was originally used to indicate someone who puts together or manages theatrical productions. An Irish guy, Richard Cantillon, coined the term “entrepreneur” to describe someone who made a product or bought a product, at a certain price and hoped to sell it for a price that was uncertain until the product was finally sold. He published a book in France called “Essai sur la Nature du Commerce au General".
A few decades later, a French economist named Say used the word to define someone who undertakes an enterprise and shifts economic resources from an area of low productivity into an area of higher productivity. Economic resources could be money, labor, or goods. The guy who buys grapes and makes wine out of them is indeed shifting resources. The grapes are cheaper than the wine - he adds value by manipulating the fruit and sells a higher-value product.
The interesting part is that the original definition considered the price uncertain because you never knew what someone would be willing to pay. You could make some pretty good guesses, but until you actually asked for your price and received the money for it, you had some risk. The top chateaux are playing a game right now and will continue to do so until they no longer have buyers. In the long run I don’t think they help the world of wine or even the world of Bordeaux, because it tends to be lumped together as a unified entity and it really isn’t. But for now, they seem to be doing OK.
This all makes eminent sense, but I’ve been hearing the bolded part for 2 decades. With modern technology, global warming, and a well-honed publicity/hype machine, will there ever be a run of 3 or 4 non vintages of the century?
William,
Not sure exactly what you are saying, but I am not going down this rabbit hole with you. You clearly were talking about Cheval et al distributing state by state, and I responded they would naturally be using a national importer. I have not worked with Southern, so I don’t know the the ins and outs on how they work, but I have dealt with others who have established national distribution systems very successfully. That being said, the distribution would be far more cumbersome, take far more resources and end up up from the Chateau’s point of view far less effective than the current negotiant one. That is why I think the system will ultimately resolve itself, and the estates will make sure that the negoces can make money.
Demand more of the public? I regret to inform you, “the public” are not the target market of these 1st growth Chateaux… It has been a long while since the average consumer of fine wine was the goal of these establishments, it has seemed to me, for a decade at minimum, that these Chateaux target a strata of society that simply cannot be lumped in with “the public” and for whom 400e is not much different from 600e, and for some label chasers, it might even make the wine seem more desirable than less…
I have had fewer than a dozen 1st growth bottles in my life, and they have been exceptional, but I have never felt they would want me as a customer, so I think their pricing is just a doubling down on the ultra-luxury image of a wine for the .0001%. Reminds me of the CEO of Abercrombie & Fitch trying to stop people from donating their clothes to the homeless lest the paupers tarnish their brand…
For what it is worth, I have tasted almost all the 2018’s during the EP week in the beginning of April. For me, Cheval Blanc was the wine of the vintage with Lafleur just behind Le Pin but before Petrus and all other big names! So perhaps compare the price to those names in stead of to the First Growths.
That being said, Lafite was very close in score and slightly less expensive, but other wines with great scores which are relatively affordable: Beychevelle, Calon-Ségur, Léoville-Poyferré, Les Carmes Haut Brion and Pichon Comtesse. Only problem: all these wines are difficult to find (even during EP!)…
Nice information,
what is difficult to find?
the negociants are still sending out offers today - with the campaign being over - on all of the top wines because they did not sell through,
we have fresh offers today on ; Mouton, Lafite, Cheval Blanc, Les Carmes on and on… at 1st Tranche prices