Bordeaux 2012 Prices Seen Resisting Pressure for Cuts

Bordeaux Winemakers
Bordeaux winemakers are predicting futures prices for the 2012 vintage will resist pressure for cuts from buyers even as speculative demand cools. Prices for the 2011s were slashed by 40 percent or more six months ago in recognition of the difference in quality between that crop and the previous two years. Photographer: Ed Jones/AFP/Getty Images via Bloomberg

Bordeaux winemakers are predicting that futures prices for the 2012 vintage will resist pressure for cuts from U.K. and U.S. buyers even as speculative demand cools.

Prospects for the vintage, due to be sold through brokers next spring, improved late in the season as the weather turned more favorable. Producers surveyed at London tastings said 2012 prices will probably stabilize around 2011 levels, still well below the peaks reached for higher-quality 2009 and 2010 wines.

Futures prices for the 2011s were slashed by 40 percent or more six months ago in recognition of the difference in quality between that crop and the previous two years, which had drawn strong speculative buying from Asian collectors. Winemakers’ assessment of the low-yielding 2012 vintage indicates they see stability returning to futures prices when they are decided next year, with 2011 levels providing a likely benchmark.

“I would suspect that the price of the 2012 will be very much in the region of the 2011, because the global economy is not very good,” Herve Berland, managing director of Saint-Estephe second-growth Chateau Montrose, said in an interview during a Decanter tasting in London last month, while cautioning it’s too soon to predict. “I don’t anticipate any big jump.”

An unusually cold, wet spring delayed flowering on the vines this year. Hot, dry conditions from early August through mid-September enabled surviving grapes to recover and fully ripen. Top chateaus were able to bring most of their crop in before rain struck during the September harvest period.

Chinese Market

Montrose’s 2012 wine is showing signs of being better than 2011 and 2008, with “lots of tannin, lots of fruit,” Berland said. “I don’t want to speak too early, but what I’ve tasted in the vat is very, very good and very consistent.”

Declines in secondary-market prices for recent vintages have driven the London-based Liv-ex wine market’s Bordeaux 500 Index down 6.4 percent since the start of this year, as Chinese buying has become selective and debt concerns in Europe and the U.S. curb fine wine demand. The Liv-ex Fine Wine 50 Index, which includes just Bordeaux first-growths, is down 10.6 percent.

At Chateau Palmer, a Margaux third-growth property, there was a contrast between the earlier-ripening Merlot grapes, characterized by strong fruit content, and the later-maturing Cabernet Sauvignon, fresher and lower in alcohol, according to managing director Thomas Duroux.

He compared the quality of the 2012 vintage to 2008, rather than the more powerful, distinctive wines of the past three years, and said it’s too early to predict pricing.

‘Strong Brands’

“It’s not the easiest time for Bordeaux,” Duroux said at the Decanter magazine tasting. “It went super-high with the top vintages, ’09 and ’10, and with the arrival of the Chinese market. It settled down a little bit with ’11, and we’ll see what happens with ’12, but I don’t see it increasing again.”

Christian Seely, managing director of Pauillac second-growth Chateau Pichon-Longueville, part of Axa Millesimes’ wine estates, said pricing policy will vary among producers.

“There are some chateaus that move much less and others that move much more,” he said in an interview. “We’ll see the same thing in 2012. Chateaus that have strong brands, that are firm with their pricing in the market, I think will do well.”

The market price tracked by Liv-ex for Pichon-Longueville shows its 2011 vintage available for about $1,140 a case from European merchants, compared with $2,406 for 2010, $1,943 for 2009 and $1,171 for 2008.

Speculative Demand

The lower prices for the 2011 and 2008 also apply to Montrose, a property owned by French construction and media moguls Martin and Olivier Bouygues.

The 2011 is available for $1,140 a case and the 2008 for $1,008, according to Liv-ex data on its Cellar Watch site, while the 2010 and 2009 vintages, boosted by higher quality and demand from Asia, are on offer for $2,265 and $3,415 respectively.

That pattern of pricing over the past four vintages, shaped by the speculative demand chasing the 2009 and 2010 wines and a switch in focus by Chinese buyers toward rarer Burgundies over the past year, is reflected across the Medoc.

“The prices that came down were the ones that were getting a bit frothy,” Seely said. “There was a little bit of a shakeout which I think was entirely healthy, because that type of speculative price rise is not good for anybody.”

Declines in prices for 2009 Bordeaux wines bought as futures may deter some investors, John Kapon, Chief Executive Officer of New York-based auction house Acker Merrall & Condit, said in a phone interview.

Sustainable Futures

“If you’re going to ask people to pay for something in advance and then it’s down in value, I don’t know how that’s sustainable,” Kapon said, while noting that the global wine market has stabilized and “activity is healthy again.”

Michael Saunders, managing director of London-based merchant Bibendum Wine Ltd., said the 2012 vintage would be smaller than last year because of lower yields and rigorous grape selection, and that pricing may pose a challenge after the difficulties selling some of the 2011s.

Although prices for the 2011s did come down, “it wasn’t enough to attract more people into the market,” Saunders said in an interview at a tasting organized in Covent Garden last month by Bibendum and the regional producers’ association Union des Grands Crus de Bordeaux.

“I think there’s still a lot of stock left in Bordeaux,” he said. “It’s a challenge to know what’s going to happen to the 2012 campaign.”

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