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Saturday 29 November 2014

High prices will not protect Bordeaux ‘brand’

1st May, 2014 by Rupert Millar

With the pricing of Bordeaux futures a large part of the failure of three successive campaigns, the depreciation of recent back vintages shows that high pricing does not help châteaux protect their “brand”.

electrical dangerBefore the 2013 campaign began in earnest, several merchants discussed with the drinks business how the Bordelais would approach pricing with the overall consensus being, who needed to make money and who wanted to protect their brand?

Although quite a few châteaux have priced their 2013s to make them the cheapest on the market others, despite cuts in double figures at times, have missed that mark while a stubborn few were determined to bow but stiffly to calls for deeper cuts.

A châteaux may price as it wishes of course and no one is under the obligation to buy it if they think it too expensive. Nonetheless, if châteaux believe that a high release price will preserve their brand they are mistaken.

The fact is, price high if you wish, the market will drag that wine down to a level it finds acceptable.

Liv-ex recently focused on the 2011 vintage on its blog and found that out of 26 wines spanning the Left and Right Banks, only four have risen in the last two years and just three are were worth more than their release price at the last trade (Calon Ségur by a mere £2).

Liv-ex noted further: “For 17 of the wines the last trade price on Liv-ex is more than 10% below market price, suggesting that the 2011s are being discounted by merchants, and that the market price is heading lower.”

There’s a difference of nearly -40% between the release price of La Mission Haut-Brion (€216 per bottle ex-négociant, the same price as the first growths this year) and the last trade on Liv-ex.

Liv-ex focused on the 2011 vintage because it is newly physical and Robert Parker’s in-bottle scores are expected this evening (UK time).

However, a graph looking at the 2012, 2010 and 2009 vintages would tell a similar story.

On the back of the wildly successful and expensive 2009 and 2010 vintages and campaigns, the Bordelais badly misjudged the mood and overall fatigue of the market in 2011, charging too much for the wines and releasing too much at once.

Max Lalondrelle of Berry Bros & Rudd told db at the time that it was the “worst vintage in recent memory”, although the 2012 and 2013 campaigns may now give it a run for its money.

Overall, Liv-ex noted: “Now they [the 2011s] are in bottle, are the wines more interesting? With Parker’s scores imminent, the 2011s at their current prices are certainly more appealing than upon release. Perhaps they also give us a clue as to where the 2013s are heading.”

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