Wednesday, March 19, 2008

Mauss, "tontons flingueurs" style (trouble maker)

Yesterday, François Mauss posted the following comment:
“Lets keep our cool concerning the worries of Bordeaux wine merchants : they should regain control on price negotiations with the property owners for, if they have what it takes, the ball is a bit more in their court, isn’t it?

In Bordeaux, margins, like in Champagne (I speak about the top 200 crus), are sufficiently large to weather a 2 digit drop for the 2007 vintage, no?”

Mr Mauss doesn’t know anything regarding margins, or even the economy. If he did, people would know about it!
Don’t touch at my margins, Mauss… or else!

Jokes aside, you seem to forget net margins, after taxes from the “caste” of Bordeaux negociants…
You would be amazed at what’s left, except for around 30 companies (out of 300 or 400)! A point should be made about the fragility of this sector (just ask banks). Almost no one in Bordeaux will be able to afford the 2007 vintage and only sell 30 to 50% without receiving payments from its own customers.
The normal margin for wholesalers in Bordeaux is often under 20% after taxes, which gives no rooms to maneuver in case of a catastrophe, pay a large sum to the tax authority or carrying inventory. With interest rates at 5/6% per year for the best customers. The usual gross margin for 80 to 90% of sales is around 12 to 13%. You take out 7 or 8% for operating cost. You see what’s left.
When one doesn’t know, one shouldn’t speak, except if your intent is to be provocative, and now is not the right time.
As a conclusion, it is not because I sell a few speculative crus, 5 to 10% from my allocation, at market rate, that the rest was not sold at the release price + a little margin, to faithful customers who bought 2002, 2004 and even 2006!

On the 25, the civil court will hold a session to get to the bottom of the last Saint Emilion classification opposed by a few downgraded properties.
As you know, I am often on the side of the complainer, the widow, or the oppressed. But I am also paradoxically very legalist (check Pierre Marie Chauvin’s theses).
I experienced the rejection of Valandraud but didn’t contest this decision for I believe that if this time I didn’t pass, the next time I will, if I present Valandraud. I find it ridiculous to contest this decision.
It makes me think of married couples who, once they want to divorce, only say bad things about the one they once loved (which is like shooting your own foot).

Today, the UGC hosts a tasting of the 2007 vintage for all the wine merchants and brokers from Bordeaux before the grand festival which will begin at the beginning of April. I will be attending to represent my wholesales business as well as Château La Dominique.

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