Bordeaux Prices to Drop Big in U.S.by
— "What's terrifying," said John Kolasa, managing director of Bordeaux chateau Rauzan-Segla, "is what will happen to Bordeaux wines in America now that Diageo has bowed out."
I was sipping his silky, charming 2007, one of the best wines from this lackluster vintage poured at the annual Union des Grands Crus tasting in New York, which never includes the first growths.
So far 2010 is awash in discounted Bordeaux and the mostly middle-rung '07s promise more. That's because the biggest U.S. importer of Bordeaux wines, Diageo Chateau & Estate Wines, a unit of British drinks giant Diageo Plc, announced last year that it was getting out of the Bordeaux business in the U.S.—and then started selling off its vast inventory in October.
Clyde Beffa Jr., owner of Bay Area K & L Wines and one of several retailers offered stock, said Chateau & Estate's list included approximately $125 million of top Bordeaux. Diageo Director of Communications Maire Griffin declined to provide numbers.
For the past four decades, Chateau & Estate dominated the U.S. Bordeaux business, purchasing thousands of cases of the region's top names as futures every year. Its large inventory of past vintages made it a one-stop shop for retailers and restaurateurs looking for Bordeaux. Diageo will continue to sell Bordeaux outside the U.S. through its London-based unit Justerini & Brooks.
"This is the end of a very nice story for Bordeaux," Emmanuel Cruse, whose family owns Chateau d'Issan, said in a phone interview. "The national system is dead."
For wine lovers, it's good news.
"Bordeaux will get cheaper," said negociant Ivanhoe Johnston, with whom I chatted over a spit bucket at the tasting.
Last fall Chateau & Estate and its distributors sent spreadsheets listing recent and older Bordeaux vintages to key U.S. players, such as Beffa and Chris Adams, president of New York's Sherry-Lehmann. Beffa said he scooped up wines at 40 percent to 60 percent off wholesale. He's already out of 2006 Chateau Trotanoy, which he sold at half off.
Sherry-Lehmann is selling bottles of some 2006s for 10 percent to 15 percent less than they cost as futures 2 1/2 years ago, Adams said. The 2005 Chateau Greysac, which was an exclusive with Chateau & Estate, can now be had in some shops for as little as $12.
'Sliced and Diced'
"No one had the means to take on all the inventory," Robert Wilmers, owner of Chateau Haut-Bailly and chief executive officer of M & T Bank Corp., told me at a Wine Media Guild lunch before the tasting. "It was sliced and diced."
In the past few months two Bordeaux negociant firms have stepped in to fill the void, snapping up the best Chateau and Estates stocks at very attractive prices.
"We bought mainly 2005 and older vintages," said David Milligan, president of Joanne USA, the New York office of the Bordeaux negociant, by phone.
Compagnie Medocaine, a unit of AXA Millesimes, which also owns several top chateaux, has teamed up with New York fine-wine importer Frederick Wildman, and started selling on March 1. Negociant Diva Bordeaux will open a New York office in May, Chief Executive Officer Jean-Pierre Rousseau said in a phone call.
"Nature hates a vacuum," said Laurent Ehrmann, general manager of negociant Barriere Freres. "It will be filled by different means."
Which brings me back to the unloved 2007s. According to Diageo's Griffin, the company begins unloading the rest of their 2007s this month.
That may be tough. Sales of high-end wines in restaurants are flat and everyone agreed the 2007 futures were overpriced for the quality back in spring 2008.
At their best the reds are fruity, early-drinking charmers that have lift and freshness but lack concentration. For under $30, look for firm, rich classics like Cantemerle and Poujeaux. I also liked pricier Beychevelle, Giscours, Haut-Bailly and especially Rauzan-Segla. Dry whites like Domaine de Chevalier and sweet Sauternes, like good value Doisy-Daene, are the stars. Watch for deeper discounts: K & L Bordeaux specialist Ralph Sands predicts "a bloodbath," with prices up to 50 percent off.
The buyer-friendly market won't last forever. The consensus among retailers is that bargains will be gone in six to eight months. Of course, if the financial markets crash again, all bets are off.
Chateau owners at the UGC tasting were hyping the reportedly spectacular 2009s (I'll report on those in detail next month after attending the annual en primeur tastings). In the minds of the Bordelaise, this kind of "vintage of the century" is supposed to translate into very high prices, as it did for the 2005s. But the global financial climate has changed.
Several chateaux told me they expect the Chinese will buy big during the futures campaign this year.
I've heard that one before.
(Elin McCoy writes on wine and spirits for Bloomberg News. The opinions expressed are her own.)