Commodities

A Dismal Bordeaux Vintage Hits the Market


Wine producers in France’s Bordeaux region have enjoyed some fat years. Vintages from 34 top labels were fabulous enough to command average price hikes of 204 percent and 12 percent in 2009 and 2010, respectively. Chinese demand sustained the momentum.

The vintages of 2011 and 2012, though, were not so fabulous: British wine critic Jancis Robinson calls 2011 “a forgettable year,” and says most Bordeaux from 2012 “have a lack of depth and persistence.”

Prices have dropped some, but not nearly enough to please customers who are still paying 30 percent more than in 2008, before the great takeoff. Demand has fallen, and the middlemen and châteaux have been stuck with unsold stock from 2011 and 2012.

The 2013 Bordeaux looks the least fabulous of all the recent vintages. Damaged by cold weather in May, summer hailstorms, and rain and rot at harvest time, the grapes that survived were picked early and yielded the smallest harvest since 1991. Wine produced in Bordeaux, France’s most important wine region, will drop 23 percent this year, to 543 million bottles, according to French government data. Top-ranked châteaux may cut prices for the 2013 vintage more than 25 percent starting next April, when the wine’s price is determined. Weakened demand and perceived lower quality are behind the probable price drop, says Allan Sichel, the chairman of Bordeaux’s guild of wine merchants, the Union des Maisons de Bordeaux (UMB).

The crummy harvest comes as investors have soured on Bordeaux. After reaching a record in 2011, London’s Liv-ex Fine Wine 50 Index of leading Bordeaux wines, which received their current classifications (a ranking by quality) under Emperor Napoleon III in 1855, is heading for a third straight annual decline, tumbling 7.9 percent from a recent peak in March.

Sales of red Bordeaux to China, the biggest importer, fell last year for the first time since 1999. The Chinese haven’t lost their appetite for French reds; they’ve just been hit with sticker shock over the prices of high-end Bordeaux. Exports to China of less expensive French wines from the regions of Languedoc-Roussillon and Côtes du Rhône rose, trade data show.

Miles Davis, a partner at Wine Asset Managers in London, says buyers aren’t willing to absorb the Bordeaux that the Chinese no longer want. “The old-fashioned Bordeaux buyers are not prepared to pay the new prices,” says Davis of the mostly British and French consumers who find it too expensive now. A 12-bottle case of 2009 Château Lafite Rothschild sold for £6,750 ($10,864) on the Liv-ex market on Oct. 18, a record low for that wine. That’s down from £10,000 in May 2010, immediately after the vintage’s release, and less than half the £14,300 reached in November 2010 when Chinese demand was peaking.

Bordeaux’s classified estates—the top producers, including châteaux Margaux, Haut-Brion, and Lafite Rothschild—sell wine en primeur, or still in the cask, to merchants in a futures market. Many 2012 Bordeaux wines quoted on the Liv-ex exchange have dropped below the prices at which they were first offered. The average price of all 344 Bordeaux wines from 2012 offered en primeur was down 7.6 percent from the 2011 vintage, Decanter magazine reported in June, citing data from wine broker Tastet & Lawton.

The high prices of top-classified Bordeaux of recent years have sent investors looking for more affordable wine from other regions such as Champagne and Italy’s Tuscany, as well as older Bordeaux vintages. “The Bordeaux market is dead. People are fed up with en primeur pricing,” Davis says.

The latest vintage may bring the aggressive pricing to a halt. “No one will be excited about the 2013 vintage, so it’ll be complicated to justify high prices,” says Sichel, of the UMB. The young wine that he’s tasted so far doesn’t have “a lot of depth,” Sichel says, and may have difficulty developing much complexity as it ages. Says Chris Smith, an investment director at the Wine Investment Fund in London: The châteaux need to price the 2013 Bordeaux “realistically” or “risk losing the market completely.”

The bottom line: Overly ambitious pricing and China’s diminishing thirst for fancy Bordeaux are weakening producers’ pricing power.

Ruitenberg is a reporter for Bloomberg News.

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