Cash-strapped US, British buyers back on Bordeaux market

Cash-strapped US and British buyers are back in force on the market for Bordeaux wines as a blockbuster vintage threatens to push prices sky-high.

As Bordeaux rolled up the red carpets on Friday following a week of non-stop tastings that officially launched the futures campaign, many were anticipating a desperately needed economic turnaround.

In a system unique to Bordeaux called "en primeurs" or futures, wine is released for sale between April and June, more than a year before bottling, allowing buyers to secure a supply and hedge against future price increases.

While only a small percentage of Bordeaux wine is actually sold on futures, those wines set an index on price and quality for the entire 661-million-bottle production.

This year's barrel tastings attracted a record turnout of 6,450 professionals, topping the frenzy that surrounded the release of the 2005 vintage. The 2006, 2007 and 2008 campaigns each left a bitter taste thanks to poor pricing, a lacklustre vintage and the economic crisis.

"For two years no one has come. For the 2005 vintage campaign, 700 people came to Cheval Blanc for the tastings. This year we have 1200 people. That's how we measure the interest," Pierre Lurton, general manager of Chateau Cheval Blanc and Chateau d'Yquem, told AFP.

As the crush of visitors sipped, swilled and spat their way through hundreds of wines, conversation has quickly focused on prices.

Release prices are heavily influenced by ratings doled out by market-makers like Robert Parker and Wine Spectator critic James Suckling. While Parker has not yet handed down his verdict, Suckling has released scores of 97-100 for Bordeaux 2009.

"From the Twitters and blogs pouring forth there seem to be some legends in the making," Justin Gibbs, director of London's Liv-Ex Fine Wine Exchange, told AFP.

High prices are especially vexing for the major US and British buyers who were back in force this week after two years of tepid interest. While overall Bordeaux sales dropped 23 percent last year, UK and US sales plunged 33 percent and 44 percent, respectively.

"It's a great vintage, first of all, it's clear that we've tasted a number of wines that are benchmark wines for various chateaux," Chris Adams, chief executive of Manhattan retailer Sherry-Lehmann, told AFP.

"But there is a very difficult, challenging economy in the United States right now. We have high unemployment, difficult access to credit, the housing market is unstable: it's not the same scenario as when we introduced the 2005 vintage in 2006," Adams said.

The most robust futures campaigns quickly gain momentum as buyers watch prices rise.

"In order to create enthusiasm and excitement for a great vintage in a bad economy, price is going to be critical," said Adams. "If the price is too high at the inception, we are not going to see the prices go up, and that is what feeds an exciting en primeur campaign."

Prices are bedeviling British traders as well.

"Prices will be high but that is more due to the euro to sterling (1.10 to the pound as opposed to 1.45 during the 2005 campaign) and no it is not Bordeaux at any price," said Sam Gleave, sales director of Britain's Bordeaux Index.

"Both the merchants in the UK and our private clients are experienced enough to know when to say NO and realise where the threshold for sensible pricing lies," he added.

Grousing over prices aside, British traders expressed enthusiasm for the vintage.

"Having just tasted them with my team we can all vouch for the incredible quality of the wines," said Gleave.

"They are very interested, indeed. Farr Vintners came with 18 people, that shows great interest," emphasised Jean Pierre Rousseau, managing director of merchant Diva. "They really like the appealing character of the wines."

Of course, it's never clear whether British dealers are buying for their domestic market or for their outposts in Hong Kong. "They're not very transparent," said Rousseau.

Hong Kong, which serves as a gateway to China for wine, will certainly increase pressure on prices.

"We have huge funds lined up already for the vintage and we are sure this will be a record vintage for the company," said Doug Rumsam of Bordeaux Index (HK).

"We have seen more people than ever here and many more Chinese buyers. Demand for First Growths will be intense and that will be the focus for Asian buyers I suspect."