Bordeaux 2014: a question of price

In the aftermath of the 2014 Bordeaux En Primeur tastings, the question on everyone’s mind is what prices will these wines be sold for?

Bordeaux En Primeur imageEvery year, the En Primeur tastings draw the world’s media to Bordeaux, who evaluate and rate the wines, trying to identify specific strengths and flaws. Stakeholders unanimously hold their breath until the publication of tasting notes, which award some wines as “excellent”, while others « could improve » and some are even ”banished to the corner…”.

Until a few years ago, the most awaited report was that of Robert Parker. But earlier this year, it was announced that this famous American critic would not visit Bordeaux to taste the 2014 wines. However, Wine Advocate will still publish En Primeur notes, with Parker’s associate, Neal Martin, taking over this responsibility – with the many critics who all deliver their own verdicts, his influence will evidently be less. The various reports will be published throughout the month of April until the start of the En Primeur campaign itself, when the châteaux announce their sales prices.

A showdown of prices
It is from this viewpoint that negotiations begin between the various stakeholders in the distribution chain: owners, brokers, traders and at the end of the chain, the distributors.

Bordeaux En Primeur imageBut is this a negotiation or stand-off? Each party hones their respective arguments. In an open letter to the Bordelais a few weeks ago, a group of English merchants called for a return to the 2008 En Primeur prices, emphasising their threat of not buying 2014 if they are not heard. The response from producers was quick and positive on the 2014 vintage, which was dubbed more successful than the previous three. The « miraculous » vintage, “close to 2010″, or « 2009 » or « 2000 », the « best vintage of the last 20 years »… We hear a lot of things, but in the end, what price will the châteaux set? This question is undoubtedly complicated.

Last year, the production volumes in Bordeaux were very small, which is why the châteaux had to make the drastic choice of maintaining their prices or agreeing to a tiny decrease on 2012. However, released on the market at visibly excessive prices, given the quality of the vintage, the 2013 wines sold poorly and are currently widely available. But can the 2013 prices be used as a basis to set the 2014 ones? While this logic marks the qualitative difference between 2013 and 2014, it is without being certain about a revived interest by the market for purchasing En Primeur. Remember, sales are driven by the hope of making a profit, so when buying En Primeur the price should be at least 15 to 20% less than when it is released.

The fact that we can find almost all of 2013 on the market today, means that the potential capital gain is zero at the moment. On the other hand, the price of 2013 was set at such levels that allow the same money to buy ready to drink wines from older vintages. That, according to the iDealwine estimates. The table below demonstrates that buying 2013 En Primeur is not justified at the moment, since wines from previous years – some that are ready to drink now – are available at similar prices. So why would one take the risk?

En Primeur 2013 En Primeur 2013 Price release* Other Vintages Current iDealwine estimate*
Château Margaux 2013                      €300 Château Margaux 2006        €304
Château Mouton Rothschild 2013                      €300 Château Mouton Rothschild 1996        €300
Château Angélus 2013                      €227 Château Angélus 2003        €223
Château Palmer 2013                      €210 Château Palmer 2005        €210
Château L’Évangile 2013                      €138 Château L’Évangile 1998        €132
Carruades de Lafite 2013                      €124 Carruades de Lafite 2006        €125
Cos d’Estournel 2013                      €108 Cos d’Estournel 1996        €112
Château Léoville Las Cases 2013                      €107 Château Léoville Las Cases 1998        €108
Château Ducru Beaucaillou 2013                        €93 Château Ducru Beaucaillou 2008          €94
Château Pichon Longueville
Comtesse de Lalande 2013
                       €82 Château Pichon Longueville
Comtesse de Lalande 2008
         €84
Château Montrose 2013                        €77 Château Montrose 2001          €72
Château Troplong Mondot 2013                        €76 Château Troplong Mondot 2008          €76
Château Pichon Longueville Baron 2013                        €72 Château Pichon Longueville Baron 2006          €74

* VAT incl.

Regarding the demand by the English, namely the return to 2008 prices, is it acceptable, desirable and realistic? Desirable, for sure, for the buyers anyway! The 2008 campaign sold a few months after the sub-prime crash, yet offered great added-value to buyers, with the wines particularly popular in the Asian markets at the time. For example, Château Léoville Poyferré 2008 sold En Primeur for €36 incl VAT – compared to the current iDealwine estimate of €58, it gained 35% in the process. The same goes for Angélus 2008: sold for €84 VAT incl, the price increased by 121%, currently trading at €179 on fine wine auctions.

So, is this price lowering demand acceptable? With very large yields in 2009 and 2010, the consequent En Primeur sales prices skyrocketed. The following years – 2011, 2012 and 2013 – were not marked by a return to normal prices, close to that of 2008, and this is perhaps what brings the English merchants to request lower prices, as they already did without success in the last few years.

However, it is unclear if the owners would be willing to lower their prices of 2014, a vintage better than the previous three. Bordeaux En Primeur imageSuch a decision would instantly render the 2013 stock – and also those of 2012 and 2011, which is still present in the traders’ cellars – unsellable.

So is this request for lower prices realistic? A gradual rise in prices should be supported by good reports, which will be published over the next few weeks, but the market expects a moderate increase in prices regardless.

An increase that could be accepted by some buyers, since it involves the effect of currency: in markets outside the euro zone, buyers will benefit from the devalued euro. So, if the châteaux adopt a moderate position in setting their prices, it should revive the interest in buying En Primeur, an interest that has declined in recent years due to a succession of disappointing vintages, both in terms of quality and price.

 

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Translated from the original French article written by Angélique de Lencquesaing for iDealwine

 

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