What a Broker Does
WHAT A BROKER REALLY DOES
Marketing advice and performance information.
Brokers provide buyers and sellers with guidance in determining fair market values. What determines fair market value? Roughly in order of importance: demand, grape or wine quality, appellation, quantities and payment terms. Of course, determining grape or wine quality involves subjective judgements. Demand also comes and goes and is not easy to measure. So providing guidance on price is far from an exact science and requires experience and a bit of humility. Accurate market information can add many dollars of value.
The avoidance of a multitude of totally inappropriate matches. If you are selling, you want to connect with as many qualified buyers as possible. If you are a buyer, you want to visit as many appropriate vineyards and to sample as many appropriate wines as possible. Of course, the key words are “qualified” and “appropriate”. Sellers and buyers don’t want to waste time and resources on a multitude of inappropriate matches. This can add up to many hours of time saved. So the fundamental role of the broker is to find as many appropriate matches – and as few inappropriate matches – as possible. In a business with a thousand wineries and many thousands of growers, in a business where each winery and each grower may have multiple varieties, and in a business where production volume is hard to predict and where sales fluctuate dramatically, everyone always has too much of some items and too little of others. And what they have and what they need changes rapidly. Because a broker specializes in making a market, they are in constant contact – in person, by telephone, by e-mail, by fax, by newsletter, by web site – with potential buyers and sellers.
Follows up to make sure samples arrive and get tasted and – if possible – result in negotiations for a sale. Follow up is key to successful sales. The establishment and support of a protocol for grape and bulk wine sales is also a crucial function of a broker. Although actual problems are infrequent, potential problems are numerous. Some of the potential problems with regard to wine in bulk are: wines may be moved or blended after samples are sent, buyers or sellers can change their minds after agreeing to a deal, the potential buyer who makes the first offer may not get a proper chance at a counter-offer, the wine may not seem to match the samples when the truck arrives, the buyer may not take all of the gallons agreed to, the buyer may not ship the wine by the date agreed, the buyer may not make deposits or payments according to the terms agreed upon. Grape sales have at least as many potential problems as bulk wine sales.
Not all of these potential problems are easily dealt with by means of legal contracts. In actual practice, the best way to prevent these problems is to have a trusted third party facilitating the process. Virtually everyone who buys or sells grapes or wine in bulk does so over and over again. A reputation as a solid player who deals fairly with others is important to any company that wants easy access to a wide range of buyers and sellers. As a result, the vast majority of sales go smoothly and any difficulties are quickly solved.
Avoidance of an up-front fee. Simply, we only charge when a deal is completed, the grapes or wine has been delivered and the check is in hand. If there are problems, we’re there to iron them out.
Confidentiality. We keep your bulk wine sales and purchases confidential. Another key function of a broker is credit information. Actually, it’s more than credit information; it might be called performance information. The wine business has become more formal but friendly cooperation and trust still play a large role in the markets for grapes and wines in bulk. The vast majority of buyers and sellers are happy to adhere to an established protocol with regard to how wines are offered and prices set and offers entertained and offers countered and agreements written and agreements honored. The broker has the sometimes uncomfortable role of encouraging compliance with established protocol if one party or the other is not playing by the rules.
Long Range Planning: A significant and growing part of our business involves another level of service. Many grower and winery clients are interested in medium and long term strategic planning. How should a grower go about developing a suitable customer base for his grapes? What should a winery do to assure a flexible, high-quality and competitively priced supply of grapes or wine for a growing brand? What are the strengths and weaknesses of potential suppliers? What is the likelihood of price decreases over the next few years? Does it make sense to commit long term or keep commitments short? The experience gathered from over 40 years of selling grapes and wines in bulk helps us to address issues like these. Of course, in a dance between fickle consumers and an equally fickle Mother Nature, there are no guaranteed strategies. But there are ways to reduce risks and increase the rewards.
The functions outlined above, including matching buyers and sellers, avoiding inappropriate matches, providing pricing and performance information, and mediating disputes, are all part of the standard services of a good broker.