Wednesday, September 02, 2009

Dutch Auction or just a free-for-all?

A real Dutch (flower) auction

I may be having deja-vu, or perhaps I'm just getting old and repeating myself, but it's that time of year when we start the annual scramble to buy grapes. The phrase I have used in the past to describe our negotiation is a 'Dutch auction', but I have since realised that this might be a slight mis-use of the expression.

Strictly speaking a Dutch auction is where the auctioneer begins with a high asking price, which is then gradually lowered until a prospective customer eventually accepts the price on offer. This is not quite how it works in Galicia, so perhaps a more accurate expression might be free-for-all!

Whilst we are fortunate enough to have many very loyal grape suppliers, who sell to us year-on-year without too much argument, we still have to ensure that our scale of payment is adjusted to reflect the open market price. To supplement this we also incentivize our growers by paying on a sliding scale - the higher the quality, the more we pay.

In some cases however, this is not enough, especially in difficult years when grapes might be in short supply. Many unscrupulous growers simply sit on the fence, do not commit to any one Bodega, and wait until they achieve the very best price. Whilst I do understand this, and many will say that this is good business practice, it simply does not provide for good continuity, and merely serves to artificially inflate the market. More significantly for us this can have a knock-on effect on our final bottle price, and in the long-term can potentially damage the market for AlbariƱo as a whole. Unfortunately these few 'renegade' growers refuse to accept this logic and therefore persist in causing grape prices to fluctuate.

As viticulturalist, our own in-house negotiator is Angela, and I have to admit that I really do not envy her in this task.

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