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Bordeaux’s Allocation System – A Dickensian Way To Run a Business

The Decanter website has published an article recently written by Rebecca Gibb on the subject of the Allocation System which Bordeaux operates during the En Primeur Campaign. The article contains conflicting views – from fair to unfair – where leading Wine Merchants have questioned the system raising its inadequacy. Also a leading Negotiant has been quoted as being particularly faithful to those who bought the previous 2008 vintage.

To gain any comprehension of the Allocation System one has to try to understand the dynamics and personalities involved. Courtiers represent the Chateaux and are paid 2% by the Negotiants who then distribute the wines to the worldwide market.

The Chateaux owners are Product Orientated (ie with the primary focus being on making their product and on the skills and knowledge that support that product) rather than Market Orientated (ie focusing on what their customer’s need and want) – which I believe most of the Negotiants are. In between you have the Courtiers whose role it is to appease any conflicts between the two.

However if for whatever reason a Chateaux does not wish to sell to any particular Negotiant then the Courtier will receive that dictate. Because the ultimate power of Allocation rests with the Chateaux owners it is very unlikely they will receive the truth from either the Courtier or the Negotiants for fear of losing either Allocation or their job. It truly is a Dickensian way of running a business. Knowing the power the Chateaux have they use or abuse this power to its fullest effect. Therefore because they are so Product Orientated and because of the relationships within the system the Chateaux can never receive the reality of the market in a true business like fashion.

The idea of Chateaux owners sitting down with Negotiants and discussing the system is farcical as it would result in a polite exercise whereby their voices would be heard but not acted on. And why should they? They control the pricing, they control the supply and they are making a supernormal profit (surplus profit).

What I find amusing is that in vintages like 2009 this power is yielded by the top Chateaux as they know full well they can sell anything they produce but where the system becomes fickle is that they are like rabbits in the headlights of a car in the poorer vintages and this is when they really need the services of the Negotiants. I can therefore sympathise with the Negotiants when they are loved one minute and in the next they are considered to be an impediment.

If one can understand all these variables one can then begin to understand why it is not necessarily a fair system. Although it is said loyalty is rewarded by following year on year it is in my experience that this is not the reality – especially in good vintages. This is where the frustration really sets in and that is what has happened with the 2009 campaign.

In the Decanter article a Negotiant was quoted as saying “we have been particularly faithful to those who bought 2008s”. As a company we dealt with this Negotiant and found the opposite with the more popular wines where we received zero Allocation despite having bought the 2008s. However there a number of Negotiants with whom we have built a very good rapport with over the years who do deal strictly to the Allocation System.

I think the truth lies somewhere between what the Chateaux wish to allocate and what the Negotiants want to retain as stock but you can be assured that in the poorer years both will allocate at optimum levels and be over their customers like a rash!

As for the coming vintage of 2010 the hype has already started with reference to it being very much like the 2003 vintage. If this is the case we are going to get high alcohol content along with mixed reviews of the vintage and there will be those that follow and those that won’t. Whether it will be a good vintage only time will tell. However the way the 2009 Campaign was run and considering that Mother Nature has had a big hand in the recent decade with the vintages of 2000, 2005 and 2009, I think the top Chateaux owners have been very lucky and they haven’t used their good fortune wisely.

Some may say it will do them good to have a run of poor vintages which would give them a reality check where they may have to look back from pastures new to their more traditional markets needs. I think it is time that consumers looked at wines from less well known and less well branded Chateaux where they can find excellent quality at more than acceptable prices and this might give the top Chateaux something to think about. I believe it is down to a basic lack of information that stops the consumer from seeking out these other wines. Smaller producers just don’t have the budgets for promotional material. You ought to bear in mind that the cost of producing a 20 euro bottle of wine is not that much different to that of producing a 250 euro bottle!

So what of future campaigns? I really don’t know. All I do know is that something has to change because if it continues on the same basis with all this verbosity surrounding the allocation system respect will be lost (this, I think, is happening now!) and the traditional customers may well seek alternative products . . . and the newcomers to the system will drop out of the market as soon as they jumped upon the band wagon, leaving the top Chateaux licking their wounds wondering where and why they went wrong!

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One Response to Bordeaux’s Allocation System – A Dickensian Way To Run a Business

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