U.S. market trepidation for Bordeaux 2009

The following is a version of an article I wrote that was published in the June issue of Decanter magazine. At the moment I write on this blog – late May – we still have not seen first tranche prices of most top Bordeaux wines…. Some say you can expect ‘the worst’ in terms of price. But who knows? Some underrated wines may prove very attractive, and I am thinking in terms of St. Pierre in St Julien, for example, or – for the higher end – Calon Segur in St. Estephe. My complete tasting notes HERE.

Despite the hype, American markets remain anxious over Bordeaux 2009

Panos Kakaviatos for Decanter

American merchants took a breather from the hectic en primeur week to enjoy a 1985 Cos d’Estournel among other wines over lunch with winemaker Jean-Guillaume Prats and Cos d’Estournel development manager Dmitri Augenblick at the famous chateau. While much praise was heaped on the 2009 barrel samples, pricing talk could have been appropriate enough for a smoke-filled back room.

‘What will your wine cost?’ the merchants asked several times. While Augenblick mostly listened, Prats replied coyly that ‘one of the mistakes Bordeaux has made is to price futures higher than available bottles of comparable quality’. Given a still fragile economy, Bordeaux wines which will obtain ‘high rankings and realize substantial demand should not come out with prices above 2005s in bottle’, he said, without suggesting that Cos will fall into that category.

‘In a good economy we talk about allocations, and in a difficult economy we talk about price,’ said Dave Sokolin of the Sokolin & Co in Bridgehampton, N.Y. ‘My hedge fund friends are not feeling good about that [having paid $700 a bottle for some first growths in 2005]’, said Sokolin. ‘If Latour comes out at $600 a bottle, I think it will sit. At $400, it has an opportunity.’

‘My clients will be very sensitive to pricing this year,’ said Mark Wessels of MacArthur Liqueurs, a Washington D.C.-based importer. ‘We did not talk nearly as much about price’ during the en primeur campaigns for 2005 and 2000.’ Wessels sees less demand for first growths, and customers ‘will not choose wines like Angélus, Léoville Las Cases and Palmer’ which were among the most expensive non-first growths from the 2005 campaign. ‘They will buy the best wines at the best prices; money no longer grows on trees.’

During a 2009 barrel tasting at Bordeaux negociant Barriere Freres, buyers for California-based importer JJ Buckley were enthusiastic about the wines but were focussing on lower price-brackets. ‘The action is going to be at the €15 to €20 level,’ said CEO Shaun Bishop. ‘There is a lot of competition in the €50 to €100-level wines and we have already seen high-end Napa and Italian wines come down by 30%.’ Bishop insisted prices must come down because ‘we are tired of getting burned’, alluding to the 2005 campaign which saw record en primeur prices later matched ‘and even beaten’ by lower on-the-shelf prices, he said. ‘We do not want to have the feeling that two years later we can find the same wine for less. There should be a financial incentive to put up money today and to get a good deal. If we do not get a good deal, then the system is flawed.’

Many wine buyers are ‘trading down,’ said Paul Chaconas, Bordeaux buyer for Total Wine, a chain of some 60 wine stores mainly along the East Coast. Sipping through a vertical at La Conseillante in Pomerol, he explained that his top Bordeaux sellers were Lynch Bages and Léoville Barton before the financial crisis, but now they are Haut Bages Libéral and Dauzac. ‘The world has changed,’ he said. Chaconas will still buy first growths and super seconds, even if prices prove comparable to the 2005, because ‘some of my customers will want Lafite no matter what, but we certainly will buy less of them than we did in 2006.’

Furthermore, the absence of Diageo Chateau & Estate from the en primeur campaign will dampen demand for more Bordeaux, some say. For decades, purchased thousands of cases of top names as futures every year. Restaurants and retailers viewed Chateau & Estate as Bordeaux’s ‘central bank in the US,’ said Paulin Calvet, until recently with Bordeaux negociant Moueix. ‘They could find wine easily because Diageo bought so much.’ A soured economy and excess stocks has put downward pressure on prices for recent vintages like 2007 and 2006, and no big company has stepped in to replace Diageo as a major buyer of futures, he explained.

‘The glut of good wine from previous campaigns still available at close to opening prices may have a sobering effect on the willingness of retailers and consumers to reinvest [in a new vintage],’ said James Ryland, a Bordeaux-based wine seller.

But with a big vintage like 2009, [Diageo’s absence from the en primeur campaign this year] ‘is one of the greatest overstatements I have heard in the last 12 months,’ said Barriere Freres’ Laurent Ehrmann. ‘All of the retailers in the US will be able to find 2009 futures immediately; it will not be complicated,’ he said. Ehrmann concedes however that customers who can find an older vintage of comparable quality for less money, in 2000 or 2005 for example, would be smart to choose the available bottle rather that tie up their money for two years. But he is also hopeful that the dollar/euro exchange rate will improve enough to make prices friendlier to American buyers.

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