Memo
To: Dr. Susan Soroka, Instructor
From: Yue Yu, English 3304 students, online class
Date: October 21, 2015
Re: Where should the Bordeaux Wine Go
Introduction
“La Place de Bordeaux” is a traditional wine distribution system originally comes from the middle ages, which describes the process of how Bordeaux wine is sold from growers to consumers. It can roughly be divided as three parts: producers (chateaux), négociants, and brokers. The traditional selling method starts with “En Primeur”. This can’t be a new word to most of wine lovers. It is treated as a symbolic annual wine event, and also one of the most important parts in traditional wine distribution system, which is “a barrel tasting in Bordeaux for a week with journalists and buyers from around the world ” (Schiller, 2013). Then, producers (chateaux) will release their price for négociants. After the broker, who is playing a role of intermediary between the chateaux and the négociants”, take the percentage of margin, the Bordeaux wines en primeur will be allocated to négociants (Wendy, 2013). In the past few decades, chateaux, négociants and brokers in this region gained huge profits from this traditional wine business.
However, as the world is becoming smaller, the fine wine market is becoming more international, and emerging markets, such as wines from the regions of the Long island, the Valais in Switzerland, the Crimea in Ukraine, and white wines from the regions of Southern Ontario in Canada, and so on, are seeking for a larger market with each passing day, the traditional wine distribution system may not work as well as that in old time (Majumdar, 2015). As a matter of fact, the market segments are gradually changing and emerging markets are truly taking over a part of the wine market from the Bordeaux region. For chateaux, making a new market strategy should be put on the agenda. At the same time, they are facing a dilemma: whether to preserve the luxury or extend the brand.
This report will mainly focus on answering these questions: What kind of marketing strategy should Bordeaux traditional wine business people make to gain a larger market? How should they sell their wines successfully? How to enhance their marketing of brands? By analyzing the challenges and opportunities, gains and lose for traditional wine business in Bordeaux region with the appearance of emerging markets, these questions will finally be answered and a proper market strategy will come up to answer the dilemma.
Finding
Cost of each bottle of wine
Before talking about the luxury wine distribution system, some additional information about the cost of each bottle of wine would be helpful to understand selling decisions that chateaux made.
The Wine Itself
It is common sense for wine lovers that wine, oak, time and terroir decide the cost of the wine. Oak, as the container, adds special “oak flavors” to the wine, such as vanilla and dill. Also, it helps wine get in full touch with oxygen, which can smooth the taste and reduce the tannins. The oak is always expensive, because only 2 barrels can be made from an 80-year-old oak tree. Besides, some expensive wines require special oak species. For example, the Cros Parantoux by Henri Jayer, which takes consumers around $5,200/bottle, use 100% new France oak. Generally, the average cost of oak in each bottle of wine is $5 (Puckette, 2014).
Another factor that decides the cost is time. As we call know one feature about the wine, the loner time it stores, the better it tastes. Fermentation goes by year, reduce the acidity and increase the natural fruit favor in the wine. Considering the storage cost and the space cost, the price is about $1/ year (Puckette, 2014).
Terroir, as mentioned before, the birth location of the wine is very important, because to some extent, the location decides the quality of grape, the reputation of maker, and sophisticated level of the machining. The price difference between different area can be about $5. “For instance, if you buy a generic ‘California’ wine it might cost $12 compared to a ‘Sonoma’ wine at $17 compared to a ‘Russian River Valley’ (a sub-appellation in Sonoma) at $22” (Puckette, 2014).
Other Costs
Except for three main costs, the bottle, label and cork costs should also be counted, which are around $4 in total. All in all, the neat cost of a decent wine, is around $8-$10/ bottle.
Wine Distribution System
Considering all those costs mentioned before, “ La Place de Bordeaux” seems to be a proper choice for those chateaux.
“La Place de Bordeaux”
We have a preliminary understanding about “ La Place de Bordeaux” that négociants will order the wine a year before bottling in a reasonable price, and then they would sell it to distributors and importers. Meanwhile, visitors are not able to directly buy a bottle of wine from the chateaux.