Spotlight - Overpricing threat to Bordeaux en primeur market
As Bordeaux châteaux prepare to release their 2006 en primeur prices, there are concerns that, carried away by the success of the extraordinary 2005 vintage, the Bordelais will overprice the altogether more modest 2006 wines. Chris Losh reports.
Later this week we can expect to see some of the heavy-hitting Bordeaux châteaux releasing the prices for their 2006 en primeurs. And already, even before the big names stride onto the stage, the world's key merchants are sounding a cautionary note.
Last week saw the release of Sociando Mallet and 'super-second' Gruaud Larose, with the price of the latter, in particular, coming in closer to that of the epic 2005 vintage rather than the average 2004, giving cause for concern.
"If people index their prices on the back of Gruaud Larose there will be far too many wines that will be too expensive," warned Oliver East, fine wine purchasing manager at London merchants Berry Bros and Rudd.
There is, of course, always a good deal of kidology involved in the pricing of the en primeurs, but there is a genuine concern among merchants and brokers that following the feast of 2005, when fabulous wines flew off the shelves at high prices, the next 12 months could be something of a famine.
The 2006 vintage is not a poor year, but nor is it much better than average, and merchants are concerned that over-optimistic pricing by chateaux, drunk on the success of last year, could leave them with an awful lot of unsold - and unsellable - wine in their cellars.
Bordeaux's en primeur pricing is driven less by the quality of the vintage than it is by the perceived buoyancy of the market. This explains why excellent years such as 1990 (released during the first Iraq war) were comparatively cheap, while poor years such as 1997 (released during the Asian boom) were expensive. The fact that price and quality are more loosely connected than might be imagined means there is real potential for getting things wrong.
And wine merchants the world over are worried that the massive sales of the exceptional 2005s have led the Bordelais to drastically misread the level of interest from consumers.
"There were an awful lot of new buyers last year," says Stephen Browett at London brokers, Farr Vintners. "We suspect that a lot of those were 'great vintage buyers' who won't buy again for 2006." Opportunists, in other words, not regulars. The quality of the vintage won't supply an inducement to such floating voters this year, and if the pricing doesn't either it's hard to see where big sales are going to come from.
The Far Eastern market is, broadly speaking, less vintage sensitive than the UK and the US, and one merchant recounts how one of Japan's biggest en primeur buyers skipped 2005 altogether because, exceptional quality or not, he felt it was too expensive.
Even so, it is doubtful that there is any great appetite in the Far East for good but not great wines that are 20% to 30% overpriced - and certainly not enough to make up for any apathy in London or New York.
Nor, it seems, is the US likely to provide much of a solution. For starters, that barometer of the Bordeaux market Robert Parker is decidedly lukewarm about 2006 ("better than expected" is hardly going to have Americans reaching for their cheque books). But, more significantly, the etiolated dollar would make even well-priced wines seem expensive. Wine prices that are overcooked to start with will be positively charred by the time Euros are turned into dollars.
"If the prices for 2006 come back 20% the Americans are going to be pretty much paying what they did last year," says East. "But they didn't buy that much then for what we thought was one of the greatest ever years, just because it was so expensive for them. US merchants who bought long last year still have a lot of stock."
While the next year is likely to be harder for the top-end wines, it's very much a case of 'as you were' further down the quality scale. Not, alas, that this is in any way a positive. Bordeaux is an economic basket case at present. Huge quantities of the region's wines go through the French supermarkets at EUR3 (US$4.07) a bottle for minimum profit, and with the grub-up scheme largely ignored, despite generous financial incentives, the crisis of overproduction looks set to continue.
"France overall is doing better than it was a year ago, but a lot of that is driven by areas like the Rhône," says Dan Jago, Tesco's head of wines and spirits. "And I don't get the feeling that there's a lot of changing behaviour in Bordeaux to try and turn their current situation around. They are still so product-driven rather than market-driven they lose out against very savvy customer-driven producers from the New World and emerging regions of the New World."
With likely inertia at the top end and seemingly unstoppable decline at the bottom, the next 12 months look bleak indeed for the Bordelais.
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