Yesterday we looked at the three primary channels for commercial wine buying in the UK: wholesalers, agents and buying direct from producer. In this follow-up article we look at the additional supplementary channels that can help you build the strongest range possible.

For those looking to buy wine for resale in the UK, it’s a rare business that doesn’t work with at least one of the following: wholesalers, agents or direct from producer. Choosing which of these channels to use should be clear from the type of business you operate and your market. But they are far from the only options.

Businesses keen to build an outstanding range of wines have a number of other channels to consider. These can help you produce a strongly differentiated and desirable range – but they also bring added complexity, requiring extra effort, time, risk and associated costs. Exploiting these channels, however, can turn a good range into an exceptional one.

Increasing your proximity to the source of production can be beneficial in terms of negotiating best prices, uncovering exclusive wines and developing a unique range. But thanks to the propensity of some wines to develop over time, buying from those who mature or collect wine can also prove fruitful.

Auctions

Buying at auction is often the cheapest way to pick up fully mature wines, and not just top end classics. They can also be a source of interesting mid-range wines such as aged Cru Bourgeois or mature wines from New World estates. For Kate Goodman, owner of Manchester independent merchant Reserve Wines, buying from auction is about “being able to offer something interesting”. But it’s easy to get carried away on the day: “have a price and don’t go over” she adds.

Fine wine broker Bordeaux Index occasionally sources stock from auction, but buyer Gareth Birchley warns “you’ve got to be very careful about provenance”. Although sometimes the owner of the cellar is identified in the brochure, this isn’t usually the case and it’s not always possible to inspect stock before you buy.

For Tuggy Meyer, owner of London independent merchant The Huntsworth Wine Company, the disadvantages and risks outweigh the benefits. They are time consuming to prepare for and attend; auction houses are rarely happy to replace out of condition stock; they are awkward to budget for; and often “you just can’t guarantee where [the stock] has been.”

Private sellers

Similar to buying from auction, this option can also be a source of unusual and mature wines, but provenance can be an issue. As can storage conditions – though some individuals will be happy for you to inspect their cellars.

Although neither auctions nor private sellers offer credit terms, if Goodman is satisfied with the quality, she sometimes offers the wines on email, selling them to clients before paying and collecting from the private seller.

Buying from private sellers can also be difficult to plan for. They often crop up out of the blue; you can’t rely on being able to source stock this way as and when you need it. But for Birchley from Bordeaux Index, at least with private sellers “it’s easier to construct a deal… and [the seller] may want to respend it with us.”

Place de Bordeaux

If you want to buy Bordeaux en primeur, you’ll need to get in touch directly with a Bordeaux negociant. Don’t expect immediate allocations of the top wines however, except perhaps in lesser vintages.

Birchley suggests you choose carefully: due to the two year time lag between payment and delivery of stock “if the negociant goes bust, you lose your money”. David Round MW, Purchasing Director of London independent merchant Jascots suggests you “do credit checks on negociants… some are financially weak.”

They are also a good source of bottled stock and drinking vintages. Thanks to the proliferation of petits châteaux in Bordeaux, negociants are a good source of relatively inexpensive labels not widely available in the UK. They should also be happy to help you find parcels to fit precise specifications. Most also stock Crus Classés, but compared to the secondary market in the UK they are rarely the cheapest option. Shipping is your responsibility, but it’s a relatively straightforward process since they are usually accustomed to dealing with UK clients.

Overseas merchants

Though a common source of stock for fine wine brokers, sourcing wine from overseas merchants is a less commonly exploited channel elsewhere. It shares the shipping-related detractions of buying direct from source: the extra time, effort and paperwork involved, potential language barriers, delays and currency fluctuations. Birchley from Bordeaux Index says aside from this “it’s not difficult at all… but the things you have to be careful of are reputation and trust” and avoiding “sharks”.

Despite the potential pitfalls it can be the source of good quantities of unusual, rare and mature wines, and possibly otherwise unavailable in the UK. Additionally, there can be a strong disparity in prices between the seller’s market and the UK market; this, coupled with exclusivity, can be a recipe for very healthy margins.

Fine wine brokers/traders

Brokers can be a convenient source of unusual, rare and mature wines without investing the time and effort of buying from a multiplicity of channels yourself. But you’ll need to be confident that they are as diligent about provenance and storage conditions as you are. Round advises “deal with those that have a really good reputation – be selective”. It’s also worth confirming the stock you’ve ordered lies in the UK if you have any kind of time constraints.

Round contacts brokers “if we’re looking for small parcels of top Bordeaux”. He praises “the convenience of buying from UK stock and being able to take small parcels. There’s also frequently a price advantage of top Bordeaux in the fairly liquid London market; prices can be very good compared to what’s available from a Bordeaux negociant.”

The downside for him is the “lack of margin available when reselling, because it’s a very liquid but very competitive market… there’s high visibility of prices so we have to be very careful with the price we offer to the customer”.

Long term strategy vs. tactical buying

The complexity of wine production, ageing ability and its range of prices has led to a convolution of channels: above are just some of the supplementary options available. You can add to this list buying unwanted stock from Oxbridge universities, from older established European hotels and restaurants, charity auctions like the Hospices de Beaune… and so on.

The increased complexity of opening and managing some of these channels and the resulting higher transaction costs means they aren’t relevant to all businesses – just those who want to create a truly exceptional range of wines.

For those who do want to develop their supply chain above and beyond wholesalers, agents and buying direct from producer, the mix that you choose also depends on your buying strategy and your available finances. These three primary sources offer a degree of stability and consistency that are invaluable when it comes to long-term planning. Buying direct can also give you flexibility to gear the product and packaging towards your customers.

Most supplementary options are harder to plan for, particularly auctions and private sellers. As such, they are better suited to short term tactical buying to top up and add interest to a core range. Goodman at Reserve Wines points out the wholesale and retail arms of her business have different needs, which is why she uses a diversity of sources: “It’s always a balance for me… buying the bigger amounts and those little parcels of stock that we all get dead excited about.”

 

Pros and cons

Auctions

+ A source of unusual and sometimes exclusive lines

+ A source of mature wines

+ There are bargains to be had

- Storage and provenance is not always certifiable

- Time consuming to prepare for and attend

- Hard to plan for financially

 

Private Sellers

+ A source of unusual, exclusive, and mature lines

+ Can be easy to negotiate a good price

+ Sometimes possible to inspect storage conditions

- Storage and provenance not always provable

- Hard to plan for: they tend to crop up unexpectedly

- No credit terms

 

Place de Bordeaux

+ The source of en primeur Bordeaux

+ A source of petits châteaux that are not widely available

+ Help in sourcing specific parcels

- Not always the cheapest option for top wines

- Danger of losing en primeur purchases if negociant goes bust

- Your responsibility to organise shipping

 

European merchants

+ A source of unusual and exclusive lines

+ A source of mature wines

+ Margins can be very healthy

- Be sure of who you are dealing with

- Storage and provenance not always clear

- Your responsibility to organise shipping

 

Fine Wine Brokers

+ Huge breadth of available lines

+ Easy and convenient to buy from

+ Relatively easy to plan for

- Storage and provenance not always clear

- Consumers can often buy at the same price as trade

- Possible delays if stock not in UK

 

Case study: Naked Wines

Norwich-based internet wine retailer Naked Wines are one of the few wine companies to have embraced the unique opportunities created by the internet. Naked employs a technique known as crowdsourcing: customers pool resources to help set up winemakers in business in return for preferential rates. Eamon Fitzgerald is COO; when it comes to buying: “We always go direct. We don’t work with agents, wholesalers or middlemen… We’ve got three sources: [winemakers] come to us; we actively go out and chase top talent; and we send our customers to wine fairs and get them to do the buying for us.”

Customers are actively encouraged to engage with each other and winemakers via their online social network and offline tastings, and their views are highly valued. Particularly the opinions of the ‘archangels’ – “highly engaged super-users” but nonetheless “normal drinkers”. Naked effectively outsources much of their buying to these top customers, who enjoy free buying trips. They are respected within the broader customer community, which follows their recommendations. “It’s proof this social media business really works… one day it’s what all companies could be doing”.

 

Originally published in Harpers Wine & Spirit, but this is a longer version.

 

2 Responses to Wine Buying Options Part 2: Supplementary channels

  1. Chris Smyth says:

    I would just join The Wine Society – they can buy en primeur and help you build a cellar. You certainly have to know what you’re doing if you go to auction and you could end up buying wine that has not been kept well.

    • Matt says:

      Hi Chris – if you’re buying wine for your own consumption, you’d certainly be better off sticking to retailers (and the The Wine Society are great). Even the most dedicated drinker would be better off leaving the methods above to businesses to deal with! Auctions can be fun though if you’ve got a few quid to spend…
      Matt

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