Market post - First Growth price premium

[JimS]

The more wine I drink in this "modern" era of Bordeaux (post 2010), the less and less difference I feel many FGs possess relative to the rest of the pack. And if so, I just wonder how/why they would be able to retain the pricing premium over the rest of the market that they've historically had (well deserved historical reputations aside - many of these wines are simply magical/pinnacle in the right years of what can be achieved). Is it possible we see the rest of the market catch up? or FGs catch "down"? or do we see nothing at all? I'm curious to get other folks' takes on this, because I am finding that after tasting pretty well all the way up and down the quality spectrum in many vintages, I just don't feel like many of the FGs are making wine that is objectively superior to non-FGs to a large enough degree to justify the price premium. I know scarcity aside on the Right Bank (Pomerol) will have its place in this debate, but give me Montrose over Mouton in most vintages, qualitatively. Anyway, random Friday afternoon in middle of summer and have this lovely 2014 Pichon Lalande open that I picked up for a song....got me thinking.....

[stefan]

>>
I just don't feel like many of the FGs are making wine that is objectively superior to non-FGs to a large enough degree to justify the price premium.
>>

I agree and would go further. For example, I bet that it is rare vintage in which all three first growth Pauillacs make better wine than all other Pauillac estates. This hypothesis can be tested by having a single-blind tastings of, e.g., 1st growth Pauillacs and a careful selection of several, say 10, other classified Pauillacs, all from a single vintage.

[AKR]

I think the price premium is more a function of wealth distribution (HHI etc.) than a warranted qualitative premium. But that's ok!

I'd rather a Beijing billionaire is making Lafite/Cola cocktails, and pumping up prices in a category I would not participate in, than dabbling in estates where I'd rather there is not the marginal new buyer.

[Musigny 151]

At the time of the 1855 classification, the differential between first growths and the top seconds was around 40%. The largest gap ever was around 2012, when Lafite increased to 800%, and the other firsts around 500%. This coincided with the height of he Chinese Bordeaux craze; the difference is now down to between 200-300%, while as OP said the quality differential is almost negligible. The old adage is true- the more expensive the item, the more you pay for marginal quality increments.

But then a good portion of FG purchases have little to do with value. It has much to do with the label and the prestige it gives to the buyer. So a sensible buyer will take three bottles of Montrose, five bottles of Rauzan etc, and miss out on Lafite.

[Musigny 151]

I think the price premium is more a function of wealth distribution (HHI etc.) than a warranted qualitative premium. But that's ok!

I'd rather a Beijing billionaire is making Lafite/Cola cocktails, and pumping up prices in a category I would not participate in, than dabbling in estates where I'd rather there is not the marginal new buyer.

The days of adding Sprite to Lafite are long gone. If anyone is doing it at all it is to DRC and Roumier. I am pretty sure that stopped some time ago; the movement to Burgundy has led to some incredibly knowledgeable Far Eastern collectors.

[Comte Flaneur]

I don’t disagree strongly with what has been said.

But to push back a little if you take Pauillac I don’t think there is any doubt that the three top producers are Latour, Lafite and Mouton.

Notwithstanding the very great wines made at the two Pichons and, of course, Lynch Bages and even GPL in recent vintages.

The way I think about this is that the lesser (second growth) wines have ‘more ground to cover’ than Mouton, Lafite, Latour, but the first growths will on average over time make better wines because of the superior terroir they are blessed with.

I also think that on the right bank things are a bit more fluid in this regard. It may be the case that VCC is consistently making better wine than Petrus? If so VCC does not look so over-priced despite all the price hikes in recent vintages.

Then the final point to make is that if you are an ‘investor’ more than a ‘consumer’ sticking with the FGs has generally been a more winning strategy. That of course may or may not continue. As a consumer I have been inclined to buy seconds, as an investor firsts.

[Musigny 151]

I would agree with you that the top wines in Pauillac are the three first growths, although I thInk Mouton is the weakest of the three as it is far less consistent. That being said, the original question was about value, and is the marginal increase in quality worth the massive increase in price?

In this case I can buy seven bottles of GPL, five bottles of Lynch and Baron or three bottles of Lalande for the price of a bottle of Lafite. I can’t say I have ever sat at a table with an open bottle of Pichon Baron, and thought I wish it was a Lafite. Buying a bottle of Lafite is a combination of many factors, only one of which is the quality of the wine.

The huge increase in the pricing differential reflects more about status but it also highlights the lack of knowledge of the neophyte or someone who has little interest in wine, has money and doesn’t want to look cheap or stupid. Nobody is going to think bad thoughts when you pull out a bottle of First Growth.

[Musigny 151]

Re Right Bank I would totally agree with you. VCC is for me is equal or superior in some vintages to Petrus. On the two occasions I have had them side by side I have also preferred it to Le Pin. But when 2022 came out at $350, I passed. Not sure why, as it is the first vintage of VCC I have not purchased since 2013, but the 60% increase over 2019 in price stuck in my craw, and I could not bring myself to buy it.

I have been predicting that VCC would hit $500 a bottle, and given Petrus is over $3000, it would still be a bargain. But there is a group of people like me who bought 2014 for $130 and 2019 for $220 a bottle, and it’s hard to reconcile that with the current market. Some won’t buy annd will back fill instead. But we will be replaced by many who don’t have our memory baggage, and who see it as well priced.

[DavidG]

Not denying their status as best, but the price differential significantly exceeds the quality differential. I consider them Veblen goods.

[JimS]

Pretty well agree with most points raised so far. I guess another component to the argument is whether or not since the advent of modern technology/winemaking, knowledge share, etc. of course terroir and the raw ingredients still carry a lot of weight and matter, but I guess does it matter as much as it did in the past? I feel like the quality gap in general is actually closing more and more, and hence my view that pricing probably should too (in the longer run as perceptions re value change). In the past, I probably would have argued that the First Growths deserved their price premium MORE simply because I felt they outperformed by a wider margin than they currently do in the modern era.

I think the "blue chip" / financializing of wine as an asset class will always favor the FG given the liquidity to which cases can be traded as well as the brand name / quality cache established over many decades worth of history. But non-FG bordeaux, relative to Burgundy and other regions, as an enthusiast who enjoys drinking great wine, has probably never screened better.

[Musigny 151]

Pretty well agree with most points raised so far. I guess another component to the argument is whether or not since the advent of modern technology/winemaking, knowledge share, etc. of course terroir and the raw ingredients still carry a lot of weight and matter, but I guess does it matter as much as it did in the past? I feel like the quality gap in general is actually closing more and more, and hence my view that pricing probably should too (in the longer run as perceptions re value change).

I would phrase it differently. Terroir gets obliterated as alcohol increases. With the new paradigm, where alcohol routinely hits 14% and higher, the quality that comes with superior terroir all but disappears.

[JimS]

Pretty well agree with most points raised so far. I guess another component to the argument is whether or not since the advent of modern technology/winemaking, knowledge share, etc. of course terroir and the raw ingredients still carry a lot of weight and matter, but I guess does it matter as much as it did in the past? I feel like the quality gap in general is actually closing more and more, and hence my view that pricing probably should too (in the longer run as perceptions re value change).

I would phrase it differently. Terroir gets obliterated as alcohol increases. With the new paradigm, where alcohol routinely hits 14% and higher, the quality that comes with superior terroir all but disappears.

Ahh yes - you are spot on, Musigny. Your rephrasing was exactly what I was getting at - I simply misattributed the cause to modern winemaking as opposed to ABV creep, which, as you stated, does cause terroir difference to take more of a back seat.

[Comte Flaneur]

Quite a high proportion of wines on the left bank were over 14% in both the 2019 and 2022 vintages, and most right banks are routinely over 14%, notably including VCC. Lafite I think recorded its highest ever ABV in 2022 at 13.7% and Chateau Margaux weighed in at 14.6% in 2022 above Haut-Brion even, which was 14.4%. Estates like LLC and Pichon Baron are regularly up at 14%. I don’t agree with the proposition that terroir differences get obliterated above 14%. It makes no sense because taken to its logical extreme you would just buy much cheaper wine like Cru bourgeois. VCC 2020 one of the greatest young wines I have tried had terroir expression out of the barrel and is 14.5% abv.

Getting back to the original question, people pay large premia in other luxury goods to get a bit more ‘performance’ - sports cars and carbon road bikes are both good examples. In the UK cycling has become very popular. You see fat middle aged guys cycling around Richmond Park who are 20 kilos overweight and dressed in lycra - not a pretty sight - paying £5k more to trade up to a £10k fancy label carbon road bike which is 750 grams lighter than the £5k carbon road bike. The same people who drink Mouton Rothschild rather than Lynch Bages.

[Musigny 151]

Of course not totally obliterated, but terroir definitely begins to disappear north of 14% and if it does hit 15% I get absolutely no sense of place and no complexity. It doesn’t help that the balance goes awry, and there is an overall impression of heat.

Still waiting on my 2020 VCC, but the ‘15 was high, and I really did not like it despite all the positive reviews. I sold almost all my bottles leaving enough for verticals.

[DavidG]

I agree wholeheartedly with the comments on ABV. However, I think that is only part of the story.

There were other things happening that improved quality prior to or paralleling ABVs spiking. Simply by cleaning up their cellars and paying more attention to what’s happening in the vineyard, many of the 2nd-5th growths reduced the quality gap between themselves and the first growths. Chateaux that benefited from increased pricing and applied some of those resources to more severe selections, reduced yields, and/or introduction of a second wine were also able to up their quality.