Chateaux Case

1. How does the Bordeaux wine distribution system work? Who benefits and how?

There are 400 hundred merchants in the Bordeaux, who taste the wine first to get the information about the surface, volume and harvest. Then they provide with the information the largest buyers.

So merchants get the primeur cheaper, but then chateau Margaux can ask for higher process on the bottled markets, which the merchants accept, to get the primeur price for the next year. The merchants allocated wine to their buyers. This makes wine available to their customers.

This system profits everybody. For wine industry it’s good because they get the payment earlier and they do not have to worry about distribution. As for merchants they are as well paid early. Customers benefit because they get a high quantity.

2. How is price set? Trace the process from the sale of the first tranche to the sale of a bottle in a wine store for $1,200. Why is the process so complicated?

The distribution is mostly performed by the en primeur system. It means that Chateau Margaux sell its wine in barrel and no after bottling when the wine is in advance about the major vintage. This way of distribution is used by most of the chateaux and wine producers because they sell only between 5 and 10% of their wine in after bottling. The en primeur system is characterized by different step that Chateaux and merchants respect in order to fix the final price.

This system is complicated because of the number of middle men who are involve in the transaction and how each take a commission , Because Chateau Margaux wants to concentrate on producing the wine they are have many negotiators who are there to sell the wine to the international clientele.