by Admin
NY Distributor Dumps Bordeaux Inventory
February 8, 2010 in United States by Admin
Chateau & Estate, a distributor of fine wines in NY, that once owned the market for Bordeaux wine to the tune of $70M, has pretty much belly-flopped due to the recession. Once upon a time, all NY retailers would have had to deal with them if they wanted the good stuff, which brought about a horrible culture of customer service at Chateau & Estate, where wine salesmen would walk into a store with a notepad to simply take an order. No unions needed here, this job was once as safe as you could get.
Then came the internet. Major NY retailers started circumventing Chateau & Estate, and buying their wine directly from European sources like Farr Vintners, and other London brokers. This slaughtered Chateau & Estate little by little over the years, as orders became MUCH fewer by the accounts that really mattered to them over here. Name any major NY retailer, and i’ll show you a former major customer of theirs.
This last week, it’s been reported that Chateau & Estate has been dumping their inventory at the lowest prices anywhere. Due to the economy they have been dropping their prices so low, that major Bordeaux houses are buying their inventory BACK! Petrus, and Gruaud Larose are two that have been doing this. But the real reason this is taking place is the outrageous prices that Chateau & Estate had to sell these wines at. They were never competing to begin with.
What’s begun now, is a race to grab as much of their portfolio available. Why i don’t know, but these small distributors are now fighting like piranhas to grab a portfolio that although might look good on paper, but is falls apart on price. With Bordeaux wines, price is king. Good luck to them. It might be nice to go around and show Haut Brion on your list, but no one in their right mind will ever buy it for the price you must sell it at.
Note to the consumer: If you are in the NY area, ask your local retailer for the most competitive pricing on Bordeaux wines. If they are dumping wines, the time to shop is now!
So first off, I’ve found plenty of good information on this Blog, the picture along with this post is great.
And while I agree with some of this post, there is stuff here that just doesn’t hold true.
I tried to figure out who wrote this to no avail. Yes C&E sales (& other) staff had it easy – gonna be tough for them going forward.
The decline of Chateau & Estates was not retailers in New York buying from Farr Vintners and others abroad. Yes some of that occurred but not to the demise of C & E aka BNP aka Diageo. And the dumping by Diageo/C&E/BNP or whatever you want to call them began during the summer of 2009, and is now coming towards the end, plenty of opportunity still but plenty of Bordeaux booty has been scooped up. While I am not on the inside of that company, I have been involved in buying an awful lot of their wines as a buyer and have heard numbers far greater than 70 million of inventory that they are (or were) weighed down by. The real culprits to their decline are greed, the economy, the auction market, a decline in restaurant wine sales (especially expensive wines), and especially DIageo’s decision not to buy 2008 Futures.
The greed portion comes from C&E cornering the Bordeaux market for decades, buying the lion-share of wine and selling a portion of it as futures to favored clients (trust me, futures weren’t open to every store or restaurant). The portion not sold as futures was offered for sale at higher and higher prices the further from a vintages release. Along with the greed came the consumers speculating on highly scored wines in general and Bordeaux in particular. SO when a Wall Street Executive had a huge bonus, they looked at the returns great vintages of Bordeaux were getting if bought early. Then came the vaunted 2000 vintage followed by the 2003 and then the 2005 vintages. These were scooped up by speculators, not drinkers and when the AIG, Madoff et al happened, these wines were thrown on the market to cover debts and bets. The auction markets came way down, and the retail markets responded (naturally helped by the internet and winesearcher.com) and restaurant decadence came to a sudden halt. AIG, CIticorp and Goldman (for a moment) executives couldn’t get away with expensing off 1982 Petrus anymore. So if your a big Bordeaux retailer with giant inventories and commitments to futures from 2006 and 2007, you gotta get some sales. How do you do that? Lower your prices. Do that and your competition responds. Trickle down wine economy! Just have a look at the big boys in wine sales…K&L, Wine Library, Sherry-Lehmann, Zachy’s, Morrell, and many others and see how they have changed their prices. It is leveling off now, but the fourth quarter of 2008 and 2009 was amazing to watch (if you weren’t vested yourself).
Now with the biggest buyer of Bordeaux (likely in the world) opts out of the next vintage (Diageo declared no interest in purchasing any 2008 Bordeaux), they don’t have to worry about their allocations anymore and they are free to sell there inventory at any price that unwinds 100 million + dollars of inventory.
And that’s just the beginning of this story – currently I am looking to work directly with Bordeaux Negociants for my future purchasing. But doing so means I have to come up with the money before the wine is shipped. During the Chateau & Estates heyday, they took the risk and paid for the wines, I just committed to purchase and paid on normal 30 day terms.