Bordeaux 2018: What market awaits?
The Bordeaux 2018 vintage faces a “benign” market where a combination of factors means buyers will not “chase at any price”, Liv-ex predicts.
In its annual pre-primeurs report, Liv-ex has examined the current state of the fine wine market, the possible effects of previous campaigns and current geopolitical factors to give an idea of what sort of environment the 2018 clarets will face when primeurs begin this spring/summer.
As is now well known, there is a real sense that the 2018 vintage in the Gironde has produced a good to extremely good vintage.
Volumes have bounced back strongly in most areas after severe losses to frost in 2017 but, as previously noted, isolated pockets of hail and larger outbreaks of “aggressive” mildew mean that certain châteaux suffered considerably and won’t have large amounts to offer.
So what’s the overall view? As Liv-ex noted, despite this apparently “desirable vintage in barrel”, the market is currently a complex place.
To begin with, as the Power 100 list made clear at the end of last year, the fine wine market is now a much more rounded place and while Bordeaux is still dominant within it, it is nowhere near as dominant as it was in the past.
Liv-ex said: “2018 saw Bordeaux prices hold steady, while its share of trade continued to decline, reaching a new annual low of 59%.”
There’s also the problem that after the extremely good 2015 and 2016 vintages (the ‘new’ 2009/2010 duo) and a patchy 2017 campaign, “both collectors’ cellars and négociant warehouses are well stocked with young Bordeaux.”
And these factors alone make it, “improbable that buyers will chase Bordeaux 2018 at any price.”
Then there are other compounding factors. A big one has been the very clear policy from the campaign of the 2016s in particular (though several estates began doing so as early as 2010) for the Bordelais to hold back larger and larger amounts of stock in their own cellars.
This has been done with the hope of releasing at a later date, to help beef up years when stocks are small (such as 2017s) but also to try and achieve higher prices.
The problem, said Liv-ex, is: “The medium- to long-term impact of this strategy is difficult to compute but the rather lukewarm reaction to stellar in-bottle scores for the 2016 vintage hints at a possible supply-side cap on prices.”
Then there’s the problem of Brexit and the ‘will it? When will it? Won’t it? When won’t it? What’s going on?’ palaver of the whole thing.
As Professor Colin Hay wrote recently for the drinks business, the effect it has on the value of the pound could very well be a determining and decisively so on the outcome of the campaign.
A stronger pound against the euro will have the obvious effect of making prices coming out of Bordeaux look more attractive than a weak pound and strong euro.
And it needs to be remembered that the UK remains the most single important foreign market for Bordeaux futures (a fact well-known since 2010 and made abundantly clear when the 2016s were released).
The US is a little more active than before but China and the rest of Asia-Pacific has not been a key buyer of en primeur since the 2010s were released. It is a market that prefers vintages ready to drink – hence another reason for estates to hold back stock – and anyway is going through an economic rough patch where the RMB is losing value too. So the UK should remain the focus of the Bordelais when considering who is actually going to buy these wines.
Another issue therefore is the news that one of if not the most influential British critic when it comes to Bordeaux, Neal Martin, has said he is sitting out this year’s pre-campaign tastings due to a health matter (though he has said he will taste the wines albeit at a slightly later date).
So in a key market like the UK where Bordeaux is less of a ‘must-buy’ than it was previously, cellars are full, the pound may be fatally weak and one of its leading critics is out of action, Liv-ex stressed that: “It is therefore more important than ever that release prices reflect the reality of the vintage’s quality, current market conditions and the very real political and economic uncertainties.”
On the other hand, added Liv-ex giving a little plug for its ‘Fair Value methodology’: “The conditions do seem ripe for a sensibly priced campaign. Both buyers and sellers have never been better equipped to make informed decisions. The market is more transparent today than it has ever been.”