Devil's Advocate: The Only Solution for Bordeaux - Cut Volumes and Raise Prices

As top critics head for Bordeaux to taste 2023 samples of wine selling en primeur at prices from €20 to €200 or more, Robert Joseph looks at the 'other' Bordeaux that the giant supermarket chain Carrefour is selling at prices that compete with Red Bull and Coca Cola. 

Reading time: 4m

Robert Joseph - with horns
Robert Joseph - with horns

In 2012, Annette Alvarez-Peters, buyer for the giant Costco chain was interviewed for the CNBC programme, ‘The Costco Craze: Inside The Warehouse Giant.’ Her frank contribution has gone down in vinous history. Replying rhetorically to a question about how wine sits in the retailer’s portfolio, she said,

 “Is it more special than clothing, is it more special than televisions? I don’t think so.”

The interviewer, Carl Quintanilla, responded by querying “Certainly it’s different than toilet paper… or tin foil?”

At the end of the day, it’s a beverage.

“Why?” countered Alvarez-Peters.

“Because it’s personal.”

To which Alvarez-Peters said “People can look at it that way. But at the end of the day, it’s a beverage.“

Some Europeans saw the notion of wine-as-toilet-roll as typical of the philistine attitude of their transatlantic counterparts. For us, they implied, wine matters.
 

Rock bottom pricing

How much does it matter? Well, I guess Carrefour’s answer to that, a couple of weeks ago, would have been €1.66 – the price shoppers taking advantage of the chain’s ‘Spring Wine Fair’ would have paid per bottle of Comte de Maignac Bordeaux Rouge, when buying a pack of six. Customers wanting a chateau name on the label of their Bordeaux would have had to dig a little deeper into their wallets. For another €0,37, they could have had Château Fontana.

What would these wines – reduced by a third from €2.49 and €2.97 respectively – have been like? Well, the cheaper of the pair apparently won a gold medal in the 2023 Gilbert & Gaillard International Challenge, while the pricier one picked up its gold at the 2023 Concours International de Lyon.

Assiduous readers will have noted that the last two paragraphs were written in the past tense. After complaints from a number of Bordeaux organisations, including les Jeunes Agriculteurs – the Young Farmers – the offer was dropped.

As Carrefour told Vitisphère, the cost of the discount was entirely covered by the negociant, Johanès Boubée, which had bought and bottled the wine.

News

Several French associations are collectively protesting against dumping prices and are advocating for a minimum price of €3 per bottle.

Reading time: 1m 15s

Unfamiliar negociant

For the many tasters gathering in Bordeaux this week to taste the 2023 vintage en primeur, this company’s name may not be as familiar as CVBG, Duclos or Joanne. This is because Johanès Boubée, which has six warehouses and three bottling plants, belongs to Carrefour.

Of course, Bordeaux-watchers know that this kind of incestuous relationship is not particularly strange, except that, usually, it is the chateau proprietors themselves who turn out also to be owners of merchants with whom an arms length distance is supposedly held.

Like the toilet rolls, wine will sometimes be sold without profit or at a small loss to reduce stock or attract customers.

The point is that, for Carrefour, as for Costco and Tesco and every other major general retailer, wine is, and will always be, just one of the products in which they trade. Alvarez-Peters was merely telling the truth. And like the toilet rolls, wine will sometimes sold without profit or at a small loss to reduce stock or attract customers.

To put those Carrefour prices in context, before it advertised them, the chain’s discounter competitor, Lidl, had already been offering Bordeaux at €1.89.

Carrefour Bordeaux offer
Carrefour Bordeaux offer

No profit

And what would the producer of any of these wines have been paid for them? Again, according to Vitisphère, looking at 120 contracts covering some 52,000 hl of red 2023 and 2020 Bordeaux, the average price in March was €946 per 900-litre tonneau, or €0.71 per 75cl bottle. Of course, for that price, one might not be getting gold-medal quality wine, and there’s the cost of the bottle, cork, label, carton, bottling, transport and tax to take into account, but even so, if profits aren’t a consideration, those sub-€2 prices may not seem quite as surprising.

Bordeaux is, of course, uprooting large areas of vines, but that probably isn’t going to solve the region’s problems. Even when one sets aside those eye-catching €1.66 and €1.97 discounted prices, French supermarket shoppers have still become used to routinely paying as little as €2.50 for medal-winning wines. That’s only twice as much per litre as Carrefour is currently charging for vanilla-flavour Coke. (Worse still, the discounted Comte de Maignac was just 50% more per litre than the soda).
 

Learn from Coca Cola

So what’s the answer? Learn from Coca Cola and the toilet-paper manufacturers, and focus on creating brand value. Carrefour customers can buy the chain’s own label ‘SIMPL’ cola for a little over a quarter of the price of the US brand, and they can choose to wipe their bottoms with paper costing between €0.19 and €0.79 per roll.

The difference between the higher and lower-price products is clear. The costlier ones are available elsewhere and their manufacturers are not entirely reliant on Carrefour.

Learn from Coca Cola and the toilet-paper manufacturers, and focus on creating brand value.

Basic Bordeaux, like much of the wine world, needs a hard reset. Volumes have to go down a lot further than most people currently imagine, and prices have to go up sufficiently to give the producers a profit, and enough money to cover some marketing.

It is striking that, alongside Comte de Maignac and Château Fontana, Carrefour was offering Mouton Cadet at the supposedly giveaway price of €6.35 per bottle (when two bottles were bought), compared to its ‘usual’ price of €9.50. Is Mouton Cadet really that much better than the gold medal winers? Is it even as good as those wines?

La Baronnie, owners of the Mouton Cadet brand, understands the point Annette Alvarez-Peters was making. Whether you are offering soda pop, toilet paper or wine, what matters is the price you have persuaded your target customers that they are worth. Get that right, and you can have a grown-up conversation with the retailer. Get it wrong and you are their slave for life.

 

Insights

Producers are protesting and revolution is in the air. Louise Hurren reports from France.

Reading time: 9m

 

 

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