Bordeaux in crisis as buyers lose their bottle
Saturday 06 February 1999
The telephone is NOT ringing. The gravel of the chateau drive is NOT crunching under the BMW and Audi tyres of the most influential wine brokers and shippers.
After several years of speculative inflation, the bubble in the prices of the finest red wines in the world may be about to burst.
The 1998 vintage - although an excellent year, by all accounts - is being treated with a coolness bordering on glacial frost by the French and foreign wine trade.
Advance bulk sales of last year's top chateaux wines, not yet bottled, are due to begin in about six weeks.
By early February the market would normally be buzzing with gossip and pre-negotiation negotiations. Not this year.
"The telephone is not ringing any more. It's almost got to the point where we have to ask our friends to call," said one chateau manager.
"There is no market in fine Bordeaux at the moment. What you have is a poker game. Both sides are waiting for the other to blink first," said Nick Faith, a British wine writer and Bordeaux expert.
In the past four years the cost of the best young Bordeaux reds - even moderate-to-good labels - has soared out of the reach of all but the wealthiest wine-lovers.
In 1997, which was reckoned an "average" year (ie pretty bad), the chateau- gate prices of some of the best- known names jumped by 70 per cent.
Some have tripled in price since 1994.
Whatever the price demanded by the producers, the shippers - especially the foreign buyers - continued to buy every bottle on offer, defying the laws of economics (and, perhaps, of common sense). All that may be about to change.
Lower-quality - pounds 4 to pounds 5 a bottle - Bordeaux is little affected. It operates in a different market, with peaks and troughs of its own.
Higher-quality Bordeaux of a drinkable age - say seven years old or more - is subject to the laws of the international wine market. Its price is already tending to sink (though not collapse) because of the Asian recession.
All eyes in the international wine trade are now turned towards the producer- fixed price of the best young clarets, still years away from drinkable age. Until the mid-1990s the second-rank but high-quality labels might have sold off the estate at about pounds 10 to pounds 15 a bottle. Last year they sold at pounds 30 to pounds 40 a bottle (beyond the means of all but the most devoted, cellar-owning claret-lover).
The problem can be summed up in one word: greed. Retail prices for mature, drinkable Bordeaux - and especially for the most sought-after vintages, such as 1982 - were driven up in the 1990s by a boom in Asian demand and a fashion for claret in America, fuelled by the wine guru Robert Parker. Even relatively young wines, three or four years old, were being sold at four times - in the case of Petrus 1994, 10 times - what the chateau had originally charged.
Some time in the mid-1990s the chateau owners - now as likely to be a multinational company as a local family - gazed at these inflated retail prices and the profits made by the shippers and traders and asked "Why not us? We make the stuff, after all".
They ramped up the asking price for young Bordeaux (primeur) and, having got away with it one year, did it again, the next and the next.
There is, nominally, a "market" in the young, unbottled crus classes - claret of superior quality.
In reality, the trend of prices is fixed by the leading estates by processes which are difficult to define, based on a) quality and b) what the producers think they can get away with. If anyone tries to defy the trend, their life, in the words of one shipper, is "made very unpleasant for them".
Jasper Morris, managing director of Morris and Verdin, a specialist British wine importer, said: "Going around the estates last year, everyone would say `It's not a good year. I know these prices are too high but my neighbours over there in the next chateau insist on putting up the prices'. You would go to the next chateau and get the same message. It was always the fault of the other chateaux."
For a few years a number of factors sustained the price bubble in young Bordeaux.
There were good vintages in 1993, 1994, 1995 and 1996. There was good demand from "traditional" customers in Europe and the US.
There was feverish demand from "new" customers in Asia (mostly Japan and South Korea).
There was also speculative buying by City traders, hoping to cash in on the increasing price of the maturing wine.
Last year all the markets fell flat at once.
Cases and cases of the 1997 recolte (vintage) of high-class clarets remain unsold in wine traders' cellars all over the world. One British shipper explained: "The 1997 vintage sold easily from the chateaux on to the Bordeaux wine market. It sold with some difficulty to the shippers, who knew it was a poor year. In the end, most people in the business reluctantly went with the flow. A big mistake. It hardly sold to their customers at all."
While these stocks remain on their hands - over 50 per cent in some cases - shippers are reluctant to pay a high price for the 1998 vintage, however good it might turn out to be. Many growers accept that the prices should come down but they are reluctant to make the first move. It is a late- 20th- century reworking of the dilemma of the marriage feast at Canaa. How can you agree to sell a good vintage for less than a bad one? Besides, the producers argue, if the 1998 wine goes cheap, there will never be any reason to buy the 1997. Result: deadlock.
One leading Bordeaux wine broker said: "The market is paralysed, immobile. It is clear - and we've been begging the producers to understand this - that the 1998 prices must come down, however good the vintage is.
"Everything we hear suggests that the wine is either good or very good. No matter. The estates have to swallow their pride to get the market moving again. I believe we need a fall of 30 to 40 per cent - more for the really expensive wines and less for the moderate ones."
The danger is that, while prices remain high, Bordeaux may lose part of its traditional markets in Europe and the US - and even its new market in Asia - to the New World producers now turning out wines of great quality in the claret style.
The Bordeaux broker said: "We are playing with fire. OK, Bordeaux will always be Bordeaux. We are not going to lose our reputation and markets overnight. But enough is enough. The prices were pushed to absurd and unjustifiable levels last year. There must be a correction this time."
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