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Traditional markets shun Bordeaux futures

Published on June 11, 2008

11 June 2008

BORDEAUX – With the majority of chateaux owners refusing to cut prices by any significant amount and as demand remains soft, the 2007 Bordeaux wine "primeurs," or futures, campaign is being seen as a washout.

"People are turning their backs on the 2007 vintage," said Jeffrey Davies, a Bordeaux wine merchant.

"We have had some emails bordering on nasty from the UK, and the silence from America is deafening," he said of the two main primeur markets.

"In fact, without sales to French supermarkets this campaign would have been nothing short of a disaster," he said.

So-called Bordeaux "primeurs" are sold while the wine is still maturing in oak barrels, about eight months after the grape harvest and two years before bottling and commercial availability. They are essentially wine futures bought by both wine lovers and investors.
The essential element of primeur pricing is that by paying two years early, prices are lower than the eventual in-bottle, retail tag.

This year, however, for reasons including meagre price cuts, generally between zero and 17 percent, and the strength of the euro against the dollar and sterling, many buyers are not interested, betting that most 2007 wines will be the same price in two years time.

This, combined with the overall weak quality of the 2007 vintage – seen at best as light, fruity-style wines, to be drunk young rather than stored – has dramatically punctured sales.

"We have known from the beginning this was a drinker’s vintage, not a collector’s," Davies said. "Everyone felt that if the wines were priced reasonably, close to the 2004s we could have made a lot of people very happy, and brought people back into the fold or even found new clients. Instead the reverse is true," he said.

"Why pay today for wines that will be the same price in 2009?" asked Jean Luc Thunevin, another wine merchant based in St. Emilion. "A price cut of seven percent is sadly not a cut," he said.

Both Thunevin and Davies, agree however, that Japanese, Swiss and Belgian markets have been stronger than expected, and that French supermarket buyers have also weighed in. But all these cannot replace Britain and the United States.
"I am even more concerned about the long term," Davies said. His view is that overall 2007 prices are projecting an image of "avarice and arrogance" around the world, which will, in long run, mean further loss of market share for Bordeaux, to Spain, other parts of France such as the Rhone, and the new world in general.
For their part chateaux owners excuse their prices saying the wet 2007 vintage was expensive, due to increased costs for chemical treatments against disease, and more manual labour costs.

There are also those who argue that because they didn’t raise prices too high for the 2005 and 2006 vintages, they don’t need to come down that much.

But ultimately, whether a particular wine sells or not is always down to a combination of factors, and where there is perceived value, says Davies, people are buying.

Of the limited number of 2007 success stories, three mentioned by merchants are Pavie Macquin, Larcis Ducasse and Chateau Beychevelle.

The first two came down by about 10 percent on their 2006 prices, but more importantly says Davies, they are good wines that are priced so that everyone in the chain makes a profit.

Plus, they show producers are actually taking the trouble to listen to the market and responding accordingly. Same for Beychevelle, which only came down by five per cent on 2006 but is also selling.

"It is not magic," said Laurent Ehrmann, managing director of Barriere Freres wine merchants.

"Beychevelle is a good quality wine, they haven’t been yanking their prices up and down, and they price so that negociants (traders), importers, wholesalers and retailers all make a profit," he said.

According to Ehrmann, it’s even sold to Britain and the United States, and Davies says the same of Pavie Macquin and Larcis Ducasse.

Bordeaux primeurs normally represent about five percent of Bordeaux’s overall production, but in a bad year like 2007 that can fall to two percent.

While the majority of the roughly 200 Bordeaux wines available as primeurs have now released their prices, only two big names, Chateau Margaux and Chateau Palmer, have issued theirs.

Margaux, one of the top five premier cru classe wines, sees a comparatively dramatic cut of 25 percent, down from 270 euros, ex-chateau to the Bordeaux trade, for the 2006 vintage, to 200 euros for the 2007.

Palmer however, which refused to give its ex-chateau price, only reduced its price by nine percent meaning the wine will sell from Bordeaux merchants to retailers at 114 euros, compared to 125 euros for 2006.

The move is hoped to be a signal that the top brands, for which demand generally exceeds supply no matter what the vintage, are taking the fragile state of the market into account.

Other big names such as Lafite, Latour on the left bank of the Garonne river, or Ausone, Le Pin and Cheval Blanc on the right bank, are expected to follow soon.

[AFP / Expatica]