La place de Bordeaux, what are the roles of wine négociants?

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CONTENTS
Definition of Négociants
Bordeaux Négociants
Bordeaux Courtiers
Next Step for Négociants

For decades, wine négociants have had a nasty reputation in the wine world, yet this reputation is undeserved. The wine industry deeply respects growers. Wine négociants sometimes look like they’re making money off the hard work of farmers. The goal of a good négociant is to take on the expenses of bottling so that farmers can focus on doing what they do best: growing grapes.

What is a wine négociant?

Négociant means trader in French. A wine négociant is a wine trader, then. Also known as a wine merchant. They buy grapes, grape juice, or fermented wine from growers and vineyards. Then they bottle them, label them, and sell them.

When you ask this question, you’ll always get a vague answer. That’s because the definition varies depending on the merchant. In general, you’ll encounter three types of wine négociants:

  1. Standard Wine Negociants: the most well-trod wine négociant strategy is buying complete wine in bulk then bottling it and selling it wholesale. This leaves the harvesting, crushing, pressing, fermentation, and clarification all to the grower, vineyard, or winemaker. The role of négociant in this setup is packaging, marketing, and sales.
  2. Négociant-Éleveur: Éleveur means breeder in French. A négociant-éleveur, then, means a wine merchant and developer. These are the negociants that acquire grapes or unfermented wine juice and do their winemaking effectively from scratch. They can pull any number of levers like the amount of wine tannins or wine alcohol content. It is, perhaps unsurprisingly, the most difficult and prestigious négociant.
  3. There is also a middle ground between standard negociant and négociant-éleveur. You can think of it as a négociant-éleveur-lite. They take fermented or clarified wine and make small improvements to it. That also invites the risk that they degrade the wine, too (see wine oxidation and bottle shock in wine). They do more than the standard négociant, but less than a full-fledged négociant-éleveur.

The old cliché that merchants, négociants in French, are all baddies and growers are all goodies is now well and truly out of date.

Jancis Robinson, MW

Let’s say you purchase a bottle that says “Burgundy” on the label. When you open it and taste it, you know it’s not a Burgundy. It tastes more like a Alsatian Pinot Noir. That’s because the négociant, based in Burgundy, acquired Pinot Noir grapes from Alsace. The rest of the winemaking may have happened in Burgundy, but the wine itself has a distinct Alsatian terroir. That’s how you can end up with a wine name that says Burgundy that doesn’t taste like the Burgundies you’re familiar with. PDO mentioned on the wine label is important!

The presence of wine négociants first started in Burgundy, so it’s no surprise that some of the best known Burgundy producers are mostly négociants.

How the Bordeaux Wine System works?

All the top Bordeaux wine producers sell their wines En Primeur. In fact, they sell the majority of the wine En Primeur, which is also known as futures. That means the wines are sold in barrel, several months after the harvest and long before the wines are available in bottle.

This system has been in place in Bordeaux since the early 1600’s. The négociant system is a good part of the reason Bordeaux became the world’s most important and collectible wine region. The Dutch were indispensable in the creation of Bordeaux. Aside from draining the swamps, they were some of the first négociants. The négociants were directly responsible for the increase in production, exportation and promotion of Bordeaux wine.

At first, Bordeaux wines were sold with only the name Bordeaux on the bottles. By the late 1600’s specific regions and brands began developing allowing discerning consumers to chose which Bordeaux vineyard, or appellation they preferred.

For all this to happen, the need for courtiers and négociants and was born. At first, the négociants offered all types or retail and brokering services, including some food and agricultural productions. In time, the négociants focused on selling only Bordeaux wine. Originally, how the system worked was quite simple. As far back as the early 18th century, the owners of the château tended the vineyard, made the wine and placed it in barrel. The négociants handled the rest of the job from aging of the wine, bottling, to sales and distribution.

Keep in mind, the château owners were all wealthy and many were members of the royal family. The thought of having to personally sell their production could have been viewed as unseemly at the time from the château owners point of view. Hiring someone to take care of the mundane commercial aspect of a wine producing château was exactly what they needed.

The system where the négociants agreed to buy the wine in advance of bottling and sales provided instant funding allowing the owners to maintain the vineyards and wine making operations going. The most powerful négociants soon became the unofficial bank for the château owners. Because the top châteaux only sell their wine to the négociants, Bordeaux became the only wine producing area without any need for direct customer interaction with the château and the owners. Because there was no wine to buy, there was no need to meet the ordinary wine drinkers.

The royal owners discovered another method allowing them to run a commercial enterprise while avoiding contact with the masses. That is another reason the négociant system flourished.

The négociant system can be compared to a pre-arranged group of wholesalers who contract to purchase a percentage of a properties harvest every year. The négociants 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.

The fundamental rule in negociant wine is that whatever it costs, it should taste like it costs more.

Thom Elkjer, Writer

La Place de Bordeaux release 50 wines

Bordeaux wines are sold on the Place de Bordeaux. The Place de Bordeaux is not an actual physical place. It’s more of an idea and a system that is located in the Chartrons district, located in what is known as the négociant quarter in the business district of the city of Bordeaux.

Today, with every château bottling their own wine, the négociants are responsible for selling and distributing the wine to a myriad of wholesalers, importers and merchants all over the world. They then sell the wine to their customers around the world: wine importers, distributors, hotel groups, airlines, supermarkets and more. 

They are important because part of their responsibilities are to help create new markets. Currently, there are more than 400 négociants active in Bordeaux. Each château works with a different number of négociants. Some properties work with 5 different négociants, others work with over 100.

A château is not required to sell through négociants, but there are only a handful of estates with the ability to sell their entire production in every vintage on their own. Of course a few important Bordeaux producers sell direct to merchants and private customers and do not offer their wines for sale to négociants on the Place de Bordeaux.

There are now more than 50 international wines released through La Place de Bordeaux each September.

While all négociants 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 négociants do not release that information to the châteaux.

Some négociants, 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 négociant earn money in the difficult vintages that are hard to sell. Not every négociants 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 négociants 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 négociants companies, not only to sell their wines, but to market the wines of other châteaux as well.

By 2016, the négociant world was in a state of flux. While the biggest companies remained well financed, as you would expect from organizations capitalized at one billion dollars or more in some cases, the smaller négociant firms were having a harder time. The reason for the slowdown is the lack of volume selling through at a quick pace during the futures campaigns. The end result is more companies are forced to hold stock for longer periods of time, which hurt their cash flow. The end result has brought on several merges in the industry.

The Courtiers: between the négociants and the châteaux

The courtier plays an interesting role. The courtier systems dates back to the days when this area was under English rule and law, when brokers were needed to act as middle men between producers and buyers of Bordeaux wine. The money for the transactions were also handled by the courtier, who escrow-ed the funds between the sellers and buyers.

In those days, needing to travel by horse or carriage to and from the vineyards took an entire day. The courtier stepped in and carried messages back and forth between the négociants and the châteaux, helping to arrange an agreement between the two parties.

For this role, the courtier earns 2% of the transaction. Due to the never changing charge of 2%, many courtiers are addressed as Mr. 2% by Bordeaux insiders. The courtier, négociant system became law in 1680 when it was decreed by King Louis XIV that all négociants from every wine region had to work with courtiers.

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.

Interestingly, courtiers are by law allowed to own châteaux and vineyards. Some do own various Bordeaux vineyards. But courtiers are forbidden by law to own, or act as a négociant. If the desire to become a courtier seems like an interesting career, it’s one of the most difficult jobs to obtain. You need to pass a series of exams and blind tasting tests, coupled with a minimum of 5 years of training before you can become a licensed courtier.

There are over 120 active courtiers. But the number of courtiers working with the top properties is small. Less than 20 courtiers are actively working with the most famous estates. The best courtiers retain a vast store of knowledge. They are not only aware of the demand for individual wines in a myriad of markets, they also know which négociants hold stock, and what stock they are holding. All that information help makes the transactions between the châteaux and the négociants move much quicker.

That is at the top end. Much of the work done by courtiers involves buying and selling of bulk wines, which are marketed as generic Bordeaux. For châteaux that use the négociant system on the Place de Bordeaux, all transactions go through a courtier, regardless of if the sale takes place during En Primeur, or years later when a château decides to sell some of its older stock.

The system works because it gets the wine into marketplace quickly. Some of its faults are, while it helps the top châteaux 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.

As a consumer buying Bordeaux wine En Primeur, you will probably be asked to pay as soon as your order is confirmed. But that is not what takes from négociant or the châteaux. The négociant will offer generally the buyer time to pay. They offer the merchant to make staggered payments in usually 2 or three stages. Most orders must be paid in full before the end of the year the first year the wines are offered for sale in. For example, 2009 futures were required to be paid for by the end of December 2010. The châteaux also need in full around that same time as well.

Generally speaking, the main reason consumers choose to purchase Bordeaux wine En Primeur is that when the vintage is considered to be of extremely high quality, the wines will go up in price before the wines are bottled. This represents a savings for end users or investors. However, following the 2009 vintage, that has not been the case. Prices paid for most wines have remained flat or in several cases, declined. Price is not the only reasons to buy wines as futures. The buyer can protect an allocation of a rare and desirable wine.

What is the future of négociants?

Before Robert Parker rose to prominence as the world’s leading wine critic, négociants held more power in their relationship with the châteaux in setting prices. Today, that is no longer the case.

When Robert Parker retired in 2015, it was interesting to see how that balance of power shifted, as well as view how the system progresses and adapts to a new world economy, emerging markets and an aggressive pricing policy over the next several years.

Bordeaux négociants sell wine all over the world, but they are primarily located in Bordeaux. However, due to changes in the American marketplace that took place following the demise of Diageo, coupled with the lack of interest by Southern Wine and Spirits, as well as other larger importers and distributors, négociants opened offices in America.

The craft-consciousness of modern consumers is changing the way négociants do business. Today’s newer négociants are working with select vineyards or star winemakers to create custom-crushed, custom-fermented wines. This approach leans into the négociant’s strength: if more than one organization has a hand in the winemaking process, make it a collaboration with as much name recognition and hype as possible.