Fallout of 2009 prices



FIRST PUBLISHED WINE BUSINESS INTERNATIONAL, AUGUST 2010, UPDATED MAY 2011



Depending on where you stand, the Bordeaux 2009 en primeur campaign was either a huge success or a huge failure. The wines received more potential 100-points from Robert Parker than ever before (22 received the accolade, compared with 9 in 2005 - and 10 in 2010), and established an average price point that exceeded even the 2005 vintage (the last ‘vintage of the century’ to come out of the region - before 2010 of course). The average price rise, according to Tastet & Lawton brokerage firm, was 47.6% higher than 2008 and 18.6% higher than 2005 (this figure was taken in mid June 2010, with around 350 of the expected 400 wines released). This figure rises far more steeply when applied to just the top 60 (in terms of price) wines, where the average rise seen at this point in the campaign stood at, on average, 71% on 2008 and 23% on 2005. Around 85% of all wines put onto the market sold through down the sales chain (compared, however, to 92% in 2005), and the feedback from most merchants was that they had a shortage of wines to sell to eager customers.



Why then did so many people question the sanity of what was happening in Bordeaux? Francois Mauss, founder of the Grand Jury European and a leading voice in France, wrote on his blog at the height of the campaign, ‘What is happening with the 2009 en primeur market is catastrophic for the future reputation of the region... It’s not going too far to say that the spirit of Madoff, Kerviel and Lehmann Brothers has entered Bordeaux.’



Looking back, the problems behind the pricing were numerous. Firstly, the vintage saw rises across the board – many so-called ‘Super Seconds’ took the opportunity to double or triple their prices from 2008 (L’Evangile and Malescot Saint Exupery both saw three-fold price rises, but plenty of others weren’t far behind), and even smaller cru bourgeois seem determined to not miss out on the glut, as many perceive they did in 2005. Many of these wines operate within a highly competitive price point, competing for shelf space with Napa, Rioja, Argentina and dozens of others – and they don’t have the brand magic of the First Growths that takes buyers with them at whatever cost. Simon Davies at Fine and Rare, commented, ‘It looks like the chateaux are sucking the secondary market margins out at all levels of the pricing chain – hoping perhaps that they will end up in China. The problem is that these lesser wines are simply not known over there, and they may at the same time cut themselves off entirely from their traditional markets – and from the restaurant trade, which has long been critical in maintaining brand equity.’



The sustainability of this caused concern across the board, and has only got worse in the year that has passed since then. It has also drawn attention to the increasingly ludicrous discrepancies between the top and bottom of the market. At the same time as the big-name chateaux were setting these new benchmarks, the official price of ‘in bulk’ Bordeaux red (measured as the price per tonneau of wine, equivalent to 900 litres, or four barrels) starts at €650, but many are selling below that. The situation has led to demonstrations against negociants and courtiers, threats to sue the local wine council, heated debates on local radio and television, and to an increasing feeling of instability in the region. Mauss remains clear as to the cause of the problem, ‘What is the most upsetting is the damage being done to the image of Bordeaux by a few individual chateaux that most can no longer afford to buy but will reverberate through the other estates’.



Guillaume Fourcade of Chateau Broustet in Sauternes (he has since sold the property and now owns Ch Saint Marc) agreed, ‘There are 10,000 producers in Bordeaux, and 9,000 of them dying at that same moment. I don't think this is over simplifying things. Bordeaux wine is in crisis. There are a few luxury brands doing extremely well, but the majority of others are losing everything. The way we sell our wine is not working anymore. The negociant system is completely failing.’



Jean Moueix, owner of both negociant house Duclot and of Chateau Petrus, was also open about the inherent difficulties of the system. ‘Right now distribution is an open market, and we are just one of 400 wine merchants, so it’s impossible to control the price of our own wines. We strongly believe the prices today are crazy. People talk about pricing, branding, positioning... everything but the wine. This is sad; we have a wonderful product, but we deal with it as if it were an asset on the stock exchange.’



‘The difference between one bottle of Lafite at €2,000, and four barrels of AC Bordeaux at €500 is unconscionable. We strongly believe that this situation is enormously dangerous. If you are working like hell, losing money on every bottle that you sell, if you manage to sell it at all, it is impossible to understand how Petrus down the road can be sold for thousands per bottle. It’s a very dangerous situation.’



A year on from 2009, and many of the same chateaux owners are looking to maintain or increase their 2009 prices. But will they have to face up to some uncomfortable truths in the near future? Johan Bruwer, Director of Marketing Programmes at the University of Adelaide in Australia, was in Bordeaux during the 2009 campaign studying the market. ‘The huge variation in price points is confusing for consumers, and dilutes the brand image of Bordeaux. If nothing changes over the next 10 years, I see the situation as being, if not terminal for the region, at least terminal for some of the producers within it. And be careful thinking that China is the answer. It is not like the UK – China is a producing country, and it wants to export wine. The production costs there are lower than any other country, and they mean business. They import today around 18% of their wine, and France has the number one position, but don’t bargain on that lasting forever, because their own wine industry is coming on stream very fast.’ 



Meanwhile, smaller producers in Bordeaux are fast running out of options. Didier Cousiney, a grower in the southern part of the region, founded Collectif 33 five years ago in response to the crisis. ‘I began by demanding that the CIVB and the negociants did more to help, but today, I realise that we have to bypass the existing system entirely. The price that we sell our wine has got lower and lower, but the consumer has seen no corresponding drop in price.’ Today Cousiney sells 70% of his wine direct. ‘5,000 hectares of vines have been pulled up in Bordeaux over the past three years, and the average yield has been brought down from 60hl/h in 2002 to 41.8hl/h in 2009. But none of this has helped – we can no longer rely on anyone but ourselves.’



APPELLATIONS AVERAGE RISE IN 2009 FROM 2008 (to June 18, 2010)

Pauillac 72,75%
Saint Julien 63,30%
Saint Estèphe 56,27%
Pomerol 53,88%
Margaux 49,92%
Saint Emilion 44,98%
Pessac Léognan 39,94%
Haut Médoc 33,42%
Lalande Pomerol 32,00%
Barsac 26,89%
Moulis 25,38%
Sauternes 23,18%
Bordeaux Blc 5,66%