Bordeaux Grape Damage Squeezing Top-Rated French VintnersRudy Ruitenberg
Even with the smallest grape harvest since 1991 in Bordeaux, France’s biggest wine-exporting region, producers of the most-prestigious bottles will see prices fall as buyers shift to cheaper alternatives.
Output of wine from Bordeaux will drop 23 percent this year to 4.07 million hectoliters, or 543 million bottles, after grapes failed to set and were damaged by hail and summer rot, government data show. Top-ranked vineyards, or chateaux, may cut prices for the 2013 vintage more than 25 percent next year on weaker demand and perceived lower quality, said Allan Sichel, the head of Bordeaux’s UMB union of wine merchants.
The Liv-ex Fine Wine 50 Index of leading Bordeaux wines, which were classified at the demand of Emperor Napoleon III in 1855, has tumbled 7.9 percent from a peak in March, heading for a third straight annual decline, after reaching a record in 2011. The region accounted for 29 percent of the 7.84 billion euros ($10.5 billion) of wine shipped last year by France, the world’s top exporter. Sales of red Bordeaux to China, the biggest importer, fell last year for the first time since 1999.
“Basic growing conditions over the course of the 2013 vintage were poor,” Miles Davis, a partner at Wine Asset Managers LLP, a London-based fund manager that invests in fine wine and has $20 million under management, said by telephone on Nov. 14. Between 2008 and 2012, “the rate of price increase in Bordeaux has been greater than anywhere else,” he said. “There’s not a lot of sympathy around for the place.”
China’s imports of bottled red Bordeaux slipped 0.3 percent last year to 325.9 million euros, ending 12 years of rising sales, even as volume rose 5.7 percent and demand increased for less-expensive wines from the regions of Languedoc-Roussillon and Cotes du Rhone, trade data show. Chinese importers paid 4.79 euros on average last year for a bottle of red Bordeaux, down from 5.78 euros in 2011.
“Chinese demand has dropped dramatically, and no one is taking up the slack,” Davis said. “The old-fashioned Bordeaux buyers are not prepared to pay the new prices.”
A 12-bottle case of 2009 Chateau Lafite Rothschild sold for 6,750 pounds ($10,864) on the Liv-ex market on Oct. 18, taking the vintage to a record low amid selling pressure on top Bordeaux as investors focus on other regions. That’s down from 10,000 pounds in May 2010, immediately after its release to market, and less than half the 14,300 pounds reached in November 2010 as Chinese demand was peaking.
The Bordeaux slump comes amid price declines for most commodities. The Standard & Poor’s GSCI Spot Index of 24 raw materials is down 5 percent this year, heading for the first annual drop since the recession in 2008 after plunges for corn, silver, gold and coffee. The Bloomberg U.S. Treasury Bond Index lost 2.6 percent since the end of December, while the MSCI All-Country World Index of equities advanced 17 percent.
Bordeaux’s classified estates from Angelus to Vieux Chateau Certan sell wine “en primeur,” or still in the cask, to merchants in a futures market. Many 2012 Bordeaux wines quoted on London’s Liv-ex exchange have dropped below the price at which they were first offered to consumers and investors.
The average of all 344 Bordeaux wines from 2012 offered en primeur was down 7.6 percent compared with the 2011 vintage, Decanter magazine reported in June, citing data from wine broker Tastet & Lawton. That was still up 30 percent from prices in 2008, before the peak of Chinese buying.
“It certainly doesn’t sound promising,” Jancis Robinson, a U.K wine critic and editor of The Oxford Companion to Wine, wrote in an e-mailed reply to questions on Nov. 13. “The market for the last two vintages has been more sluggish than I can remember for consecutive vintages. I can’t imagine that demand will be at all strong for 2013s at 2012 pricing levels.”
Growers including Beychevelle, Palmer, Pichon-Longueville parent Axa Millesimes, a unit of French insurer Axa SA, and Mouton Rothschild said it’s too early to discuss 2013 pricing because the vintages still need to be assembled.
The poor harvest may tempt the most prestigious estates to keep prices near those of recent vintages.
“There could be tension on the prices of the most sought-after growths, taking into the account the volumes that are well below those of 2012,” and leading to higher quotes, according to e-mailed comments from Philippe Dhalluin, the director of Chateau Mouton Rothschild.
Bordeaux’s top wines aren’t too expensive, said Xavier Pariente, who runs Chateau Troplong Mondot and cut the price for his 2012 vintage to 54 euros a bottle from 57.60 euros.
“Quality comes at a price,” Pariente said by telephone on Nov. 14. “Don’t think for a second that a great bottle creates itself. We know every grape bunch, stroke it every day, if there’s a blemish, we remove it.”
The vintage this year will be the smallest since the 2.59 million hectoliters produced in 1991, when spring frost destroyed flower buds on both sides of the Gironde estuary that separates Bordeaux’s left and right banks.
This year, a colder-than-normal spring affected flowering and led to berry losses, particularly for merlot grapes. Warm and rainy weather at the end of September caused the botrytis fungus to spread through vineyards, prompting estates such as Mouton Rothschild and Palmer to harvest earlier than planned.
Vines flowered around June 25, two weeks late, according to Olivier Bernard, head of producer group Union des Grands Crus de Bordeaux. Hot, humid conditions three months later led to rot in ripening grapes. Some growers started the merlot harvest by the end of September rather than in October.
The city of Bordeaux had 38 millimeters (1.5 inches) of rain on Sept. 28, 45 percent of normal for the entire month, while maximum temperatures of 26.1 degrees Celsius (79 degrees Fahrenheit) that day were 2.2 degrees above the month’s average, according to weather office Meteo-France.
To head off rot, Mouton Rothschild mobilized the office workers of its holding company Baron Philippe de Rothschild SA to help its regular pickers bring in the estate’s 83 hectares (205 acres) of merlot and cabernet grapes, the grower said.
At Chateau Beychevelle, yields were the lowest ever after “worrisome” levels of botrytis forced an early harvest of grapes that were less mature than vintners desire, according to Philippe Blanc, the domain’s managing director. The estate produced no more than 32 hectoliters per hectare (342 gallons per acre), compared with 42 hectoliters in 2012, and first-wine output of 12-bottle cases will total 10,000 to 12,000, down from the usual 20,000, Blanc said.
Producers cut prices in 2011 in recognition of the difference in quality with the two previous vintages, and most lowered them again for last year’s issue.
Beychevelle this year cut its 2012 vintage to 40.80 euros a bottle from 45.5 euros, according to prices tracked by Liv-ex. That’s still almost double the 2008 value of 21.50 euros. Mouton Rothschild dropped to 240 euros a bottle from 360 euros, having raised the price to 660 euros in 2010. The estate had priced its 2008 vintage at 120 euros. Chateau Palmer 2012 carried a merchant price of 160 euros a bottle, down from 162 euros in 2011 and 215 euros in 2010.
The higher prices of recent years are boosting demand for wine from other regions and prompting investors such as Davis to prefer Champagne and Italy’s Tuscany as well as older Bordeaux vintages.
“En primeur prices of the two last vintages have been so high and completely out of kilter,” said Davis at Wine Asset Managers. “The Bordeaux market is dead. People are fed up with en primeur pricing.”
Average prices for the 2012 vintage of the 50 top wines in the Liv-ex Bordeaux 500 Index have slipped 3.8 percent in the past three months, led by a drop for Chateau Petrus. The same basket of wines from the 2011 vintage has added 2.6 percent in the past 12 months, compared with a 6.7 percent increase for 2010 wines.
The average cost of a 2012 bottle of the top Bordeaux wines quoted on Liv-ex is 158.75 euros, ranging from 24.42 euros for Lagrange Saint Julien to 1,725 euros for the most-recent Chateau Petrus.
“No one will be excited about the 2013 vintage, so it’ll be complicated to justify high prices,” Sichel of the UMB said. While some estates that carry low or no inventories of unsold 2011 and 2012 may be tempted to charge last year’s prices, those will be “exceptional cases,” he said.
The young wine that Sichel has tasted so far, while lacking the green notes of unripe fruit, doesn’t have “a lot of depth” and may have difficulty developing a lot of complexity, with bottles that may be best drunk young, he said.
Estates need to price 2013 “realistically” or “risk losing the market completely,” Chris Smith, an investment director at the Wine Investment Fund in London, said by telephone on Nov. 14.
“It’s going to be a small crop of fairly low-quality wine,” Smith said. “When you get Bordeaux chateaux saying it’s an average year, that’s about as bad as it gets.”