Inside La Place de Bordeaux – Episode Three

From Bordeaux To The World

Inside La Place de Bordeaux Podcast – Episode Three: From Bordeaux To The World

How does a bottle of Bordeaux end up on a collector’s table? What will its journey be, from the châteaux to the world? Who decides who gets access to highly allocated wines? And the most fascinating question of all: who is currently making money (or not) in the fine wine supply chain? With what consequences? Are current margins enough to sustain a complex system?

In this third episode, hosts Felicity Carter and Pauline Vicard look at the behind the scenes of La Place de Bordeaux and consider the opportunities and challenges of this distribution system.

Get ready for an in-depth exploration of how the system really works, bringing in diverse and layered opinions from all part of the supply chain, from producers to fine wine merchants, all operating in crucial markets. With: Max Lalondrelle, Thomas Parker MW, Jeremy Stockman, Philippe Newlin, Vianney Gravereaux and Mathieu Chadronnier.

In Conversation With Max Lalondrelle

Max Lalondrelle is Fine Wine Purchasing MD at Berry Bros. & Rudd  (BBR) in London. Established in 1698, BBR has the distinction of being the oldest fine wine merchant in the world that is still in family hands. Max runs a team of buyers who work internationally, seeking out the best wines in the world. He is also responsible for the Bordeaux portfolio, and attends En Primeur.

Areni Global:

To begin, who do you buy from?

Max Lalondrelle:

Generally, we buy from 34 different wine regions in the world and we currently working with about 700 different wineries.

We have three ways of purchasing. Direct is obviously the most favoured way. Then we buy through what we call third party. That could be a Bordeaux négociant, but that could be also another importer in the UK — if we are not buying the wine directly ourselves, then we’ll have to buy it through an importer. And then the third way for us to acquire wine is through what we call the secondary market. If a wine is very rare and very difficult to get and we couldn’t get it either directly or through a third party, then we will look at secondary market to try to buy the wine. But that would only represent about 10% to 15% of what we do.

We also buy a lot of private collections — either from our own customers or people who have had the wine stored in perfect condition professionally, where we see the invoices and everything. 

Where is your wine stock?

We probably have the biggest facility in the world for fine wine storage. We currently have a capacity of 16 million bottles, which is based in Hampshire in the south of England. It’s quite a large facility. The majority of that is stock that belongs to our customers. Probably about 15 to 20% is our own stock.

We like to do everything ourselves, so we don’t subcontract anything, whether it’s IT or logistics. We do our own distribution, we collect our own wines, we deliver from the collection point all the way to the end consumer ourselves.

What’s the most difficult part of your job?

I guess sourcing. Buying wine at the top of the industry means that the majority of what we do is networking and trying to secure the right amount of the best wines. We have access to some of the most amazing wineries in the world, therefore retaining that access is what the majority of the job entails.

Buying wine at the top of the industry means that the majority of what we do is networking and trying to secure the right amount of the best wines. We have access to some of the most amazing wineries in the world, therefore retaining that access is what the majority of the job entails.

Max Lalondrelle

As I always say to my team, we have to be part of the village. So it’s making sure that we are present in all of the regions and we go and see people, we talk to them, we visit them, we give them feedback, we keep them engaged and also we demonstrate the added value that we provide. And then if we keep doing that, if we keep them happy, obviously they’ll stay with us.

What’s the added value for the consumer?

For the consumer, obviously, access is one of the added values. We have about 800 events every year. A lot of people — around 30,000 people a year — come through our doors for either tasting lunches or dinners. So we do provide a lot of entertainment; we publish a lot of things; we do a lot of marketing, but in terms of storytelling rather than just pure advertisement.

How would you define Bordeaux? What’s La Place for you?

The Place for me is probably the best and most efficient distribution system in the world. I think it’s an extremely powerful machine for distributing wines — or any product, for that matter.

The Place is probably the best and most efficient distribution system in the world. It’s an extremely powerful machine for distributing wines — or any product, for that matter.

Max Lalondrelle

How would you describe your own relationship with La Place?

I was born near Bordeaux, so I did my studies in Bordeaux. So I’m very familiar with the city itself and the players within the city. And the Bordeaux Place is something that we are part of, in a way. We know all the people there very well. And we are actively involved in anything in Bordeaux. If Bordeaux and the Place are successful, then we are successful.

With the volume of wine that you are probably buying from Bordeaux, why aren’t you a négociant?

Because the political aspect of La Place is very old and it would be very difficult to be part of all the layers.

For example, if we buy 10,000 bottles from Château X, as a négociant you cannot get 10,000 directly. So I couldn’t fulfil the whole of my needs from my own negotiation.

In order to get the volume, I will still need to buy it from other négociants. It’ll be a hundred cases here, a hundred cases there. If I need a thousand, I have to then buy from other négociants to get the reminder of the requirements. And because they will see me as a competitor, they wouldn’t want to give me that allocation.

It also it gives you more flexibility as well, because you can always choose not to buy a wine a year and come back and buy another year.

The beauty of the Bordeaux system is that when we buy directly from a winery, we have to buy every year and we have to support them every year because if you let them down, then obviously as a business they will suffer a lot. So we are quite invested in Bordeaux, although the allocation system is still there and very important, if as you said, one year a wine is working a bit less, then we could lower our purchase down by 50% and then go back up the following year if needs be.

How often do you interact with the courtiers?

From a political standpoint, we are not really allowed to speak to the courtier. But in terms of the châteaux and négociants, I spend months in Bordeaux overall.

Are you allowed to go to those châteaux directly to meet them or do the meetings have to be organized by the négociants?

I’ve always made a point to go and do all my business with the properties directly and after that, I spread the business amongst all my partners in Bordeaux in terms of négociants.

You also have your own label.

That goes through the Place as well. The selection process is done by us, not by the négociant. So we go and see a property and normally they’ll have a first wine, a second wine and then some bulk wine. So the aim for me is to try to secure that bulk wine every year. So we do a lot tastings and obviously we change properties if we’re not happy, but that is done by us.

When you buy the bulk side of Bordeaux, are you talking to different people?

No, they’re the same people. They’re the same properties as well. A lot of what is done is strategically driven. You would buy a bulk wine from a property because it is one of the best wines. You get the best deal, but also because it might help to secure other wines in the process. So everything is interlinked.

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You’ve been dealing with the Place for more than two decades now. What has changed the most in your relationship with them and the way that you all work together?

Very little. Although to be fair, I think both the merchants and the négociants have really become more professional. If you went back 20, 30 years, a lot of it was manual and everything was done on a hunch. And I think over the last 10, 15 years, a part of the négociant system has become very professional. They have a lot of data available to them which they were not using before. So now they have a better understanding of where they put things and why.

When I started in purchasing Bordeaux wines, the châteaux were very happy to sell to anybody who could actually pay. So you could go to any of even the First Growths and buy 400 cases and they would be delighted to have somebody who buy their wines. And then the power shifted from the merchants and the négociant to the property over a period of 10 or 20 years and the properties were in the position where they could actually decide where the wines were going to.

The properties have enjoyed a moment where there was a huge amount of demand. That has allowed properties to develop what they call in French “capillarité”, from “capillaries”, the vein. For the last few years, they have been trying to distribute their wines very, very widely — making sure that every single merchant receive a small amount, but that would be through hundreds and hundreds of different customers.

If there’s too much scarcity, there’s a point where too little is too little and then you give up on the brand. So how far are we from people leaving some brands just because they can’t get enough and it’s not worth it anymore?

Oh, there is a lot happening, that’s for sure. There’s an understanding from the properties that what they need now is some representatives across the world in order to have a kind of a lighthouse, if you want. And if you have some big people that you can rely on who will do the legwork for you, you will need the ammunition to do so.

Can you give me an approximate of how many wines are in demand for which it’s difficult for you to buy enough quantity versus the number of wines that you’ve got?

It has changed a lot over the last 20 years. I think there was the best part of 30,000 labels in Bordeaux 20 years ago; that’s probably closer to 10,000 [now]. So a huge amount of wine has disappeared. Either it’s been absorbed by other wineries to make them more efficient or it’s been uprooted and converted into other agricultural product. So there’s been a huge concentration in Bordeaux in terms of number of properties.

We only do 180. When we talk about Bordeaux, we talk about very, very, very small amount of leading properties who pull that big Bordeaux train. Within the 180 that we distribute, I would say that there is probably around 20 or 30 that are easier to sell than the other ones when we put them for sale. And within these 30 properties, five or six which are on allocation only to our customers.

When we talk about Bordeaux, we talk about very, very, very small amount of leading properties who pull that big Bordeaux train. Within the 180 that we distribute, there is probably around 20 or 30 that are easier to sell. […] And within these 30 properties, five or six are on allocation only to our customers.

Max Lalondrelle

What are the keys to success through La Place?

I think there’s a generation that’s got used to cheap money. Effectively, I think the Place had become quite lazy and people would just say yes to everything. Négociants would buy all of the wines that they could get their hands on and they would sit in big warehouses — sometimes up to three times the annual turnover in stock. And it still is the case that a lot of négociants have more than two years’ worth of stock. So if you’re a €50 million business, you would have €150 million in stock. It is inconceivable today that these businesses can survive on 150 million of stock and 50 million turnover, because the cost of money is such that that would eat the majority of their margins.

And I think this is the pivotal moment where if you are in a winery, then you’re just looking around then and ‘oh gosh, I need to be better than the other’. Not just in better in making wines but better in promoting my wines to the whole of that logistic chain.

I think La Place will struggle.

But there will be winners: the people who do know how to be better than the others, and that will do it very, very well. And already we have started to see two divisions of wine properties: those who still completely ignore what’s happening – and one day they’re going to hit the wall – and those who started a long time ago offering a lot of different things which make their wines more enticing. Experiences, for example, is one of them.

We have started to see two divisions of wine properties: those who still completely ignore what’s happening – and one day they’re going to hit the wall – and those who started a long time ago offering a lot of different things which make their wines more enticing. Just going around the world and pouring wine at a tasting isn’t good enough anymore.

Max Lalondrelle

Just going around the world and pouring wine at a tasting isn’t good enough anymore. Those who will make the difference between the two will be the winner. But I think we will have a lot of casualties, that’s for sure.

I think on the Right Bank there are around 20 properties for sale currently that I know of.

Is there anything that the Place is not good at doing?

The system is not very good at brand building. There are a few actors on the Place who have spent a huge amount of time trying to brand build, but the problem is there’s not enough margin.

What about the ‘beyond Bordeaux’ wines? Did their arrival change anything?

I’m still undecided on the beyond Bordeaux. I can see it from a winery point of view, I can see it from the négociant point of view and I can see it from [the view of] a merchant in the middle of nowhere who has no access to this brand. So if you are a merchant in Belgium and you’re a small retailer, you never had access to some of these Argentinian wines or Californian wines, because you don’t have the time to travel and that’s not really your business.

Out of about a hundred beyond Bordeaux wines that are released in September, I would say that we successfully do 20 of them, but out of those 20 we already had access to 10 or 15. So maybe we gained five that we had no access to. And also going back to margin, for us it has impacted margin because Penfolds, for example are going to La Place today and we were the biggest distributors of Penfolds in Europe. And then suddenly our margins are being eroded by having to buy it from the Place when we had very good access before. So there’s some good and some bad.

I want to ask you about the En Primeur campaign because we’ve heard that it’s a high stakes campaign. Do you agree — and why would that be?

I think it is a pivotal campaign. Hopefully it will be a successful campaign, because the wines are good, which is a good start. There is plenty of wine, but obviously it’s a very, very difficult market at the moment and customers have money to spend, but probably not as much as they’ve had in the past. So they’ll be extremely selective. I think the campaign is going to be quite short. I think there are 12 bank holidays in May [across different markets], so it leaves 11 working days in May.

Do you expect the price to drop significantly?

I would expect the price to drop for the majority of the properties.

Why is a short campaign different than a long campaign?

Because we have consumers are at the other end and they’re going to get an email or a phone call and you’re going to say, “Château X has been released today. At what price would you like some?”

Now if you have eight releases during that day, then as a business we have to focus on the winery we think is the most important first. Sometimes it’s the one that’s the most expensive or the ones with the best ratings, or the ones that we have the most demand. So out of the eight properties, we’ll be able to do two, maybe three. The five other ones will not be offered. And then the following day you have another five properties, on which we take two. So the first five, they’ve gone forever.

Do you wait to hear from your consumers to actually secure your allocation or do you buy and then you sell?

We need to get a bit of interest. Sometimes as soon as you know the price, it’s going to be [in high] demand and then you can go and secure the whole of your allocation. But if the price is a bit borderline, you put a filler in and then as soon as orders start to come in, the rate of orders gives you an idea of how much you will need. And then you can then buy accordingly.

Does the recommended retail price come from the négociant or the château?

The château. But it’s usually the same set margins. So it’s 2% courtier, 15% for the negociant. So they don’t set the price, but the price is automatically set by the 15%.

What’s the worst that can happen this year?

I think the fundamentals of En Primeur will work. It will be a cheaper En Primeur, so from a consumer point of view, it will make sense and the wines will be good. What I am afraid of is having a fast campaign where the expensive wines are released first, which means they will take the sizable part of the spending power from everybody. And it means that a lot of the wines will have no audience.

As I said, we are part of the village, so we try to sell wines that we like. But my worry is that in a normal year where everybody has money, people will still buy the wines at the end. But this year, if they spend the money on the big items, they don’t have that spare cash to spend on the other ones.

But we are hoping for a very good campaign. We want consumers to be happy to buy a good wine at a good price. We want the negociants to be successful.

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