US: Diageo exiting Bordeaux wine futures market
Diageo is exiting the market for first-growth Bordeaux wines in the US due to falling prices and lower market demand.
Diageo's fine wine arm in the US, Chateau & Estate Wines, did not participate in this year's sale of Bordeaux wines from the 2008 vintage and currently has no plans to return to the market, the company has confirmed to just-drinks.
The group is selling off existing stocks of Bordeaux in the US, where market conditions for so-called wine futures have deteriorated.
Bordeaux holds an annual wine futures sale, known as 'en primeur', where merchants buy new vintage wines from top chateaux with a view to selling them on at a later date for a higher price.
Some have accused Bordeaux chateaux of greed by elevating prices for what was considered a once-in-a-lifetime 2005 vintage and attempting to maintain subsequent vintages at this level.
"For 2006 and 2007 vintages, the wines were so expensive they didn't stand a chance at the price they were released at," said Chris Adams, chief executive of Sherry Lehmann, New York's flagship fine wine merchant.
Market prices for some top chateaux wines have since fallen by up to 50% in the US, Adams told just-drinks last night (10 December).
Potential buyers have become "cynical", said Adams, who added that this, together with a less favourable exchange rate and a weaker US economy, has caused a drop in demand.
Commenting on Diageo, he said: "Their existing strategy seems to be to get out as soon as possible. You could call it dumping, but what they're really doing is trying to find a price for the wines that the market can bear."
A spokesperson for Diageo told just-drinks that the firm is committed to fine wine in the US: "Diageo Chateau & Estates will continue to sell its remaining US inventory of Bordeaux and, in addition to its acclaimed US wine brands, continues to import many fine wines to the US from France and other countries."
She added: "Diageo remains strongly committed to its existing portfolio of wines from Burgundy, Alsace and Chateauneuf du Pape."
Earlier this year, Diageo integrated Chateau & Estate Wines with its US Guinness business, with the loss of around 150 jobs.
While maintaining a solid presence in the US, the drinks giant said it is looking to develop its fine wine business in Europe and Asia.
It owns London wine merchant Justerini & Brooks, which deals in Bordeaux futures and serves mainly private clients.
Diageo has also made its Bordeaux merchant business, Vignobles Internationaux, a part of the Diageo Wines Europe division, which the group said will be a "separated but complementary" business to Justerini & Brooks.
There are signs that the global fine wine market is shifting eastwards.
In October, leading auction house Sotheby's said that Hong Kong has overtaken established rivals London and New York City to become its most lucrative venue for fine wine auctions.
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