Is it possible that the 2009s are not selling well?

[JimHow]

I was just reading the little introduction in the recent issue of He Who Shall Remain Nameless. At one point he says: "...it is impossible to determine the amount of 2009 Bordeaux futures ... that have actually been sold to consumers." He says that "there are those" in Bordeaux who think that claims of massive markets in Asia and heavy involvement by English investment firms are "grossly inflated." There are those in Bordeaux who think there is a big bubble in the Bordeaux market, says HWSRN, and that the Big Eight are hoarding their wines to manipulate the market, and the second growths and other top names are doing the same. "Is there a falsification of demand from Asian consumers?" he asks. "The fact is, no one seems to know the answer."

One of the reasons why I ask the question is because I have been following the futures campaign at PJ's Wines in Manhattan. As usual, they have some of the lowest prices in the country. Some of the 2009s I am interested in purchasing from PJs include the following:

2009 Branaire: $63.97
2009 Cantemerle: $32.97
2009 Chasse Spleen: $29.97
2009 d'Issan: $61.97
2009 Giscours: $57.97
2009 Grand Mayne: $44.97
2009 La Lagune: $55.97
2009 Lanessan: $17.97

Etc., Etc... I'm only half way through the alphabetized list.

Now, obviously, these wines are not cheap. And wines like Lynch and Pontet Canet, etc., have increased into the $130-150 range.

But the point is that, for the most part, despite the fact that this is one of the three greatest vintages in the history of mankind, we have seen prices like this before. At least in this vicinity. We've seen it for the 2003 vintage, and the 2005 vintage... even the 2007 vintage.

In the past, PJs futures have "sold like hotcakes." They are usually almost completely sold out very early in their futures campaigns each year. Most of their Bordeauxs have never seen the shelves because their futures prices have historically been so much lower than anyplace else. That does not seem to be the case this year. All of these wines seem readily available at prices that, while expensive, are not ridiculously higher -- at least at PJs -- than was the price for most of these same properties in years like '03, '05, etc.

Add into the equation the fact that these wines were released in the middle of the global financial meltdown.

I have no idea what is going on with Lafite, and Duhart, and Carruades, etc. But is it possible we are seeing the beginning of the Big Bordeaux Bubble Burst of 2011?

[JonoB]

There was a debate like this on Wine-Pages Forum.

Lots of merchants will tell you that by both quantity and value it was the nest campaign ever. Despite that fact, it is almost impossible to find 08s but a lot of 09s are available at original prices barring a few in the UK: to be fair there are usually bits and pieces left over but not at the same prices a year later. So perhaps there has been over buying on the merchants part in the hope of even greater sales than they originally had, or alternatively there is a constant trickle from Bordeaux.

In any vintage there is no way of telling how much was actually released but in 09 I think it was a fairly large chunk when compared to 06, 07 or 08. There are however other rumours that it isn't the Chateau doing the hoarding but the negociants!!

[AlexR]

Hi Jim,

A couple of comments.

Seeing as the market is global, sales can be bouyant in one part, and depressed in another.
It is quite possible that US importers bought wines that they are having trouble selling and have maintained or even decreased their prices.

But other parts of the world have definitely taking up the slack.

A lot of this has to do with exchange rates and the general health of the economy.

I have yet to hear a knowledgeable analysis of the effect of Chateau & Estates dropping out of the game has had...
It could be that the market for great growths in America has been seriously and lastingly shaken.
You'd know better than me...

However, maybe we could be optimistic and hope that the economy will be turned around.
And that up-and-coming Bordeaux drinkers without the frame of comparison most of us on this board have will give new impetus to the love affair between the US and fine Bordeaux.

Best regards,
Alex R.

[DavidG]

Jim, I think you are right, though it's pretty hard to generalize based on observations of just one store. This debate raged last year and is raging even louder this year on multiple wine boards. Have the top chateaux built larger storage facilities so they can hold back more wine? Are the negociants hoarding it? Are the UK wine funds hoarding it? And on and on. I would think that Chateau and Estates departure from the market would have had a huge effect on availability and sales in the US, but that if demand for the wines was there, other importers would have risen to the occasion. But this is just speculation.

There is more comprehensive data on volume and value of Bordeaux sold over recent years in the attached reports. This is from the CIVB, which is probably best described as a trade promotional group for the wines of Bordeaux. They represent a large number of producers, but I don't know if they represent the top 10 or 20 or 50 that we seem to be most interested in. Perhaps Alex can fill us in. In any case, the data suggest that sales are trending downward or are at best flat worldwide. A significant drop in US and EU sales is not being offset by much smaller increases in total sales (not percentages, look at the scales on the graphs) elsewhere (e.g. Asia).

[DavidG]

Here's a link to the story with some tables derived from the CIVB report. I can't figure out how to attach a PDF of the original report which contains a lot more details. From the Shanken report it appears that volume and value worldwide are flat or slightly declining despite the increases from Hong Kong and China. But what exactly is being measured here? Are these wines that have actually sold through to consumers, or are they sitting in warehouses belonging to ???

Apparently it is not possible to upload spreadsheet or PDF files to this site, presumably for security reasons. Other sites seem to be able to manage it safely so I wonder if you can look into that Jim?

[Houndsong]

David, you can upload a pdf to a site like scribd and then post that URL here.

The prices for 2010 futures that have been released so far don't convince me the bubble has burst.

[DavidG]

Good idea Hound, try this link. It's a 2010 document that covers sales up to 2009, so it doesn't address the current futures campaign.

I agree that there is no evidence that the bubble has burst. The futures prices being announced are not going down. But neither is it clear whether wine has been sold through to consumers or if it is piling up in warehouses somewhere. If the former, a bursting bubble would seem less imminent. If the latter, conditions might be ripe for prices to tumble. The perception among some that wine has not sold through is partly based on snatches of observations that may or may not be an accurate projection of the larger picture, or it may be only wishful thinking. Time will tell. Count me among the wishful thinkers.

[JonoB]

However much inlike the style of 2010, I really want the bubble to burst, and I think it is a bubble, simply because everyone who wants prices to rise are putting their eggs in the China basket without realising that the people who are buying wine are the elite. They have always bought theese wines... They just didn't flaunt their cash at auctions until q few years ago because if you were seen spending money you got a visit from the "corrupt" members of the army/police/government. I.e pay up or go to jail! So now their previous spending is obvious, the speculators are jumping on board. Including those in BX and elsewhere. There is a big game of pass the parcel going on.

Yes some in China drink but they have always drunk. I'm going to stick y neck out here, because my father lves in China and my mother is Indian and both parents have worked in both countries and still do, and I have visited both more than is physically requiresd. china was the present yesterday. The rich are makin it obvious they are spending as oppose to a real emergence of a middle class. India has a realmgrowin middle class and has more billionaires than Russia and USA put together. India is the future... I'm not adocating speculation, but rich Indians want what Brits have! I predict China to crash and wine prices to fall, and India to pick up the slack but in a similar way to the UK... Only buy ifthe price is right and you like the wine!!

I think this will be within the next 10-15 years!

[DavidG]

10-15 years? That's too long to be of any help for me. Jono, could you arrange it so that the bubble bursts in 1-2 years instead?

[JimHow]

One of the columnists in the increasingly-irrelevant New York Times -- Krugman, or Friedman, or one of those other ivory tower lightweights -- was writing on Sunday that India is going to surpass even China.

If India starts buying Bordeaux, we're doomed, aren't we?

[DavidG]

Doomed? Hey, it's only wine. I trust the SF BWE Convention has recharged your Bordeaux batteries, Jim?

India's got the population and the political climate to go further, faster than China. If... well, there are always so many pesky ifs. As far as doom is concerned, I'd be more worried about China selling than buying. US Treasuries, that is... I'm guessing that's about as likely as the Bordeaux bubble bursting and first growths suddenly becoming available at under $200/bottle. Then again, it may be time to trade in some stocks for real estate.

[JonoB]

Jim, if India buys Bordeaux, it will be along the lines of an Anglo-Saxon spread, including little guys that Alex champions, so thus creating a more even playing field IMHO. So the big boys will sta where WE want them to be but the little guys may rise in price.

Too much speculation from the ignorant so 1-2 years maybe impossible, but I can speak to some people who know some people, who know some people and maybe we can arrange it for within 5-10 years.

[JonB]

It IS a world wide market.....but just because demand could increase doesn't necessarily mean prices will go up.....there's been large increases in supply of quality wines. My guess is that the high quality 2010 vintage has had a dampening impact on sales of 2009s (because it takes away from the "rarity" of quality vintage), and if 2011 is also high quality (the weather looks good so far) people will realize that this isn't just a once in a century, or once in a decade, type thing, and that there is an ocean of product.

There appears to be lots of 2009 futures still unsold at U.S. retailers, and other than a very few wines, most are at opening release prices.

[JimHow]

Interesting point, Jon.
All I know is that PJs, which I monitor closely every year, has never had so many wines still available this "late" in their futures campaign.
Now I have no idea how much they actually have available, or how much they have had available in past years, but all I know is they have an unusually large number of 2009s available, many at high-but-not-ridiculous prices.

[Houndsong]

I guess this means they sold too cheaply in other years Jim.

[oldwinenut]

I have been looking at '09 future prices as I have not bought yet but am interested in doing so. I agree with Jim. I have been looking at retail sources around the country and receiving e-mail offers. PJ's, whom I have bought from before and always look at before anyone else, actually discounted the '09 future prices. The new web site doesn't show this but I clearly remember thinking that it was the FIRST time I had ever seen discounting before the wines actually arrived in the marketplace.
The entire Bordeaux market place operates without any disclosure about sales. From what I have learned, a lot of wine transactions happen between negociants and between negociants and distributors (I understand that Chateau & Estates sold significant stocks of Bordeaux wines back to certain negociants because the trade wanted to keep the wine off the market). The entire method of the "futures" game, releasing wine in traunches at different prices to test the market is all part of this hype that the Bordelaise have used to keep prices high. When a marketplace is in the dark anything can happen. If the public did know about the actual number of cases produced, when and where it was sold, we could make informed opinions about buying. My thought the last few vintages has been that the bordelaise have taken the reason to buy en-premier off the table. It used to be that you bought futures to either get some of a highly allocated or small production wine or because you believed that the prices would move up significantly before the wines were delivered. The way that pricing is now set, the Chateau's now want ALL the profit and more. It makes no sense to give them our $ two years in advance of receiving the wines. Some of the older vintages of the century are priced better and the wines will be every bit as good. For example look at Chateau Ducru Beaucalliou. You can buy the '95, '96, '00 & "05 for about 1/2 - 2/3 the price of the '09 and '10 and you might be able to drink them in a mature stage before you die. Could the '09 and '10 be that much better? Look at the price of Cos 1990 at around $220 per and we know how good it is. It is hard to justify paying $300 plus for the last two vintages. It is all getting a little bit crazy. I just don't think it is going to end that quickly. We are going to have to realize that there is only so much Bordeaux which can be made every year and with less and less of their production go into their grand vins the supply has shrunk dramatically. Therefore if yearly only 1 % of the population in India and China become affluent, and 1% of those people decide to drink Bordeaux, we will end up with about 100,000 people each year who want to drink/buy these wines. What is that going to do to the pricing? In the long run it won't matter how many good vintages there are as long as the number of Bordeaux drinkers will increase at a rate that outstrips production. IMHO the bubble has just begun and it is going to spiral down to one of Jim's wines, Cantemerle.
Every time I think about it I get more and more depressed.

[Houndsong]

Some nonsense about 2010 futures from Decanter:

http://www.decanter.com/bordeaux-2010/e ... en-primeur

Not sure what they mean about the Beychevelle. The 2010's asking like $100, while the 2009 is offered at +/- $70.

[JimHow]

The 90-point 2007 Lagrange (which I like a lot) has been selling for $35 in NH.
The 89-point 2008 Lagrange is going for $55 in NH.
(Is this attributable more to the departure of Chateau & Estates or the Bordelais?)

I got 2008 Lagrange for $35 in SF at K&L.

If I can get wines like 2007 and 2008 Lagrange for $35 going forward, I'm going to be fine.

Are Pontet and Lynch REALLY selling for $150?

I wonder....

[oldwinenut]

Jim: I agree the 2007's are lovely and I have had a few which have what I call a delicious factor and the pricing very reasonable.

2007 was the vintage where Chateau & Estates pulled out on half way thru. I bought de Sales for $12 retail. To bad I only got 10 bottles as it sold out quickly. The local retailer told me that he bought everything he could from C & E as a liquidation sale. The '08 de Sales was 2x the price.

[JimHow]

Interesting stuff, oldwinenut, I still need to get some of that HWSRN90 2008 Gruaud Larose for $39 at PJs.
I'm going to pick up a case of 2007 Lagrange in NH at $35 per. One of those "drinking well now and for the next 10-15 years" kind of wines. Probably longer.
$63 for the 2009 Branaire (at PJs) was about what the price for the 2003 Branaire was selling at upon release, if I'm not mistaken.

[DavidG]

My thought the last few vintages has been that the bordelaise have taken the reason to buy en-premier off the table. It used to be that you bought futures to either get some of a highly allocated or small production wine or because you believed that the prices would move up significantly before the wines were delivered. The way that pricing is now set, the Chateau's now want ALL the profit and more. It makes no sense to give them our $ two years in advance of receiving the wines.

Well said. I defied the excellent reasoning above and in a fit of passion trumping logic went ahead and bought some '09 futures anyway. Stupid, stupid, stupid.

[JonoB]

I think the problem with the new drinkers is like knowing how much BX is actually being released each year.

How much of their drinking is fad... A friend who went their recently said, the blending with Coca Cola in China is a myth, it is Sprite! So it is basically a fad. When it is a fad, those who have an interest get disillusioned by the price and loom for quality alternatives. As I said above. The bubble WILL burst because there is no transparency as to what is going on and no idea as to whether China will become a BX connoisseur nation or find a new love child... The current prices of Mao Tai from the 50s says the latter is more likely!

I think that India will be more even in their drinking habits and may actively promote Indian wines as a viable alternative and increase quality there... Personally, for drinkers, I think the future is bright.

Perhaps a quick look at the Fine Wine 50 here, may shed more light on the fact that things may take a downturn/ stabalise and consumers then adjust their thinking.

[oldwinenut]

Jim: I just checked my receipts and find that Branaire '03 at release (which I bought at PJ's) was 32.92. The '05 (purchased at Wine Library because PJ's was more) was 55.95 The '00 (purchased at PJ's) was 29.08.

Somehow I did not record the release price of the '00 Branaire and I found the original PJ's receipt.

[stefan]

Why not buy five cases of '07 Lagrange, Jim? Maybe it will turn you into a mid week drinker.

I have never gone wrong buying a lot of a Bordeaux I like when I thought it was underpriced. For example, I regret buying only 3 cases of '96 La Lagune (<$25) and of '96 Leoville Barton ($25-$30).

[JimHow]

I am indeed going to buy more Lagrange, Stefan, I think it is becoming my new favorite Bordeaux when you factor in QPR, now that Lynch and Pontet are getting up into the $150 range.