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Food for Thought

Posted: Jun 19, 2007 4:52am ET

I went to the international press dinner last night during Vinexpo, which the Conseil des Grand Crus Classes en 1855 organized. This is the annual dinner during Vinexpo that all the châteaus of the prestigious Bordeaux classification host. I have been going since the early 1980s.

It’s always amusing to see all the château owners and winemakers in one place. It’s a pretty friendly event. And it is supposedly to thank the journalists of the world for writing about the wines of Bordeaux. Some are more thankful than others, depending on the ratings of their wines, but that’s business.

Even the actual host of last night’s dinner, Baroness Philippine de Rothschild, mentioned how happy she was with the high rating of her 2006 Mouton. This is one of my wines of the vintage in my 2006 en primeur (futures) report.

Unfortunately, neither she nor any of the other four first-growths have come out with their prices yet for their 2006 futures. And I have to wonder why. The 2007 crop is already on the vine. It’s getting too late and I am not sure many consumers are going to buy the wines as futures this late. I guess the trade will have to hold the stock, for the most part. This has happened before, and the trade made enough money with 2005 to hold the bag this year.

Even the great 1990 vintage was not sold through to the consumer the first year it was released. And, if I remember correctly, the 1996 vintage was sold late as well. The top 2006s will sell one day. There are many good to outstanding quality wines.

Anyway, I am not sure prices will come down enough, especially with the first-growths, to generate much interest at the consumer level for futures. This is especially true in the U.S. market, where we went large with the 2005s and the dollar is very weak at the moment. So far, I have heard that second-growth quality 2006s that have sold from the château for 50 euros or more a bottle are not selling through. I think, for example, that Cos d’Estournel has not sold well. This is despite its 2006 being about half the price of the current bottle price in Bordeaux for its 2005 and 2003.

Maybe the first-growths can stimulate the market for 2006 futures? So, what do they need to release their prices at to generate interest in the market? I don’t have a crystal ball. I know that many consumers who used to buy first-growths can’t afford them any more. So I don’t think 2006 prices will be low enough to bring them back. My guess is that whatever they release at you are not going to see much change from three hundred-dollar bills. Maybe even four!

Rothschild asked questions along the same lines during a speech before the food was served at last night’s dinner. “What are our Grand Crus Classes today?” she asked. “A luxury product, or something to share with friends? Something to be drunk, or a speculative investment? Should we fear that wines will one day quit the cellar for the strong room, the table for the display case? And does the bottomless wealth spawned by globalization promise a reassuring future for our wines, or just a bubble of prosperity that could easily burst if one day those new buyers look elsewhere for the symbols of their success?”

I suggest that all the château owners, particularly the first-growths, ask themselves these questions when they next price their wines. It’s a new market, a new world out there for their wines. But Bordeaux, the top names in particular, needs to maintain the market and consumer demand it has built since the second World War. Prices need to be more reasonable.

Guus Hateboer
Netherlands —  June 19, 2007 2:34pm ET
So, Madame Rothschild wants to know what the Grand Cru Classes are today? I think it is more interesting to know what she wants it to be!? If she wants it to be a luxury product, not for consuming with friends, she should keep her prices high. If she wants the GCC's to be consumed by wine lovers around the world, she needs to come down with her prices. It is that simple, isn't it?
Jack Bulkin
June 19, 2007 3:20pm ET
Terrific and thoughtful post James. Unlike the last WS post of Cos' Mr Prats. He was happy to pat himself on the back for his 06 pricing at the same time that he picks the pockets of wine buyers. The negociants are now left holding the bag for all but the First Growths and most highly rated/sought after wines. When will they turn the other cheek to the new Bordeaux pricing model?
Glenn S Lucash
June 19, 2007 3:36pm ET
James...I don't understand your quote "where we went large in 2005"? Are you saying that many people actually bought 2005 futures in the US? From what I have heard from everyone, no one bought any firsts. Some dabbled on highly rated others under the one hundred dollars a bottle range, but that was all. I'm sure the firsts sold all their 2005 to the global pool of monied investors and collectors. There is just too much money in play. The real test will be with vintages like 2006 with the possibility of backlash from former loyal customers. I think the firsts will always sell out due to the amazing wealth that has been accumulated throughout the world. So be it.
Kevin Krawchuk
Vancouver B.C —  June 19, 2007 3:49pm ET
I, like MANY others I'm sure, couldn't agree more with the Baroness. Its time that the top Chateaus take a close look at their pricing. They may think there will always be a demand, but when enough say its enough, they could be holding the bag of a lot more than just a single vintage! Its time they gave their heads a shake, and I hope that happens soon. Here's to lots of sore necks in the very near future! ;)
William Delaney
Arlington VA —  June 19, 2007 5:16pm ET
One ominous sign the Bordelaise haven't caught on to reality was embedded in an email I got yesterday from a respected and fairly priced wine store. 2006 Forts de Latour futures for $92 a bottle! That is a shade less than the initial 2005 futures. I only bought one case of 2005 Bordeaux and I promise I will buy zero of this significantly poorer vintage if prices do not come down significantly. Spain and Italy are producing such nice wines these days, Feh! I say to the Bordelaise, Feh!
Karl Mark
Geneva, IL. —  June 19, 2007 10:01pm ET
The Bordeaux pricing bubble has burst. Pop! fzzzzzz..... How about that Brunello 2001! I love Bordeaux but I won't be buying many at these prices, not in this vintage.
David A Zajac
June 20, 2007 6:18am ET
When pricing mediocre vintages in this range, I can only imagine what the future holds. Lets face it, when you look over the last 10 vintages in Bordeaux, from what the pundits say, 2006 probably only surpases 1997, 1999 and 2002 and is probably on par with 2001, 2004 and 1998 (Medoc, but not right bank). So its decidedly middle of the pack, yet prices have increased to where 2006 is the second highest in history...based on what?
Guus Hateboer
Netherlands —  June 20, 2007 9:36am ET
David,The bread that I bought yesterday at the bakery tasted exactly the same as the bread that I bought a year ago, and the year before that, all at the same bakery. No quality increase or -decrease. However, the price that I paid yesterday was the highest in history!
David A Zajac
June 20, 2007 12:05pm ET
Guus, you need to do more shopping for sales! The world is a pretty big marketplace these days and I will pay anywhere from $1 for a loaf of generic white bread for the kids to make their sandwiches to $5 for a specialty loaf to have with a variety of cheeses. Wine is the same way, except the marketplace is the world, not your bakery/grocer up the street. Has the cost of your bread increased by 250% over the last 10 years? For the record, I bot 1994 futures and bot all the first growths (granted, not a great vintage but not a washout and certainly servicable at the least) for $55 - $60/bottle, as I recall, I passed on the 1995's because they increased prices to about $100/bottle for the first growths...need I really say more?
Jack Bulkin
June 20, 2007 3:27pm ET
Gus if you are interested in buying my usual 10-12 cases of Bordeaux futures, feel free to take them all. Maybe you can enjoy them with your expensive loaf. I have and will pass on 06 and beyond. I can't wait for the next Vintage of the Century. Maybe the Bordelais will find a way to charge even more for their fermented grape juice. In this liquidity inflated World's economy they can charge whatever the market will bear. That is their right. We as long time buyers of their wines have no expectation of rights or discounts offered to us because of our prior purchasing loyalty. However, we do as wine buyers have the right to be offended by the odor of swine in the mud.
Karl Mark
Geneva, IL. —  June 20, 2007 8:42pm ET
Wine is very popular right now and I think that the French are missing a very good opportunity to win over American wine drinkers, much like Australia has. These high prices will be a major setback. I would be very interested in hearing more about how the 2006 futures are selling as the year progresses.
Guus Hateboer
Netherlands —  June 21, 2007 4:08am ET
Jack, I did not say my loaf of bread was expensive. The price I pay today is nevertheless the highest price in history ever paid for that bread (from that same bakery, for the same quality produced for years and years)!! But don't get me wrong...if my bakery charges a ridiculous price, I will shop elsewhere. There are certainly some chateaus in Bordeaux that make good quality fine wines and sell it for a reasonable price. Moulin Haut Laroque (Fronsac), Meyney (St Estephe), Plince (Pomerol), to name just a few. And if I want a few magnums or double magnums, the only easy way to get those is by buying futures; so that's what I do.
David A Zajac
June 21, 2007 8:27am ET
Guus, I agree with you in that there are still some very good wines at reasonable prices in Bordeaux. Unfortunately more and more are becoming less reasonable and pricing themselves out of the market (Leoville Las Cases, Palmer, Pichon Lalande, Cos) and there are others, as you aluded to in your original entry here, that need to decide whether they want their wines in a hedge fund or to be drunk by wine lovers the world over. Lets be honest, the owners are already multi-millionaires/billionaires, so is it about more money aka greed or for the love of wine? If its only so these multi-millionaires can become billionaires, then I resent it.
David Nerland
Scottsdale —  June 21, 2007 9:49am ET
I would rather hear about the Latour dinner!
Jeffrey Ghi
New York —  June 21, 2007 10:39am ET
I can't wait for the 100+ ratings from spectator or advocate =) Actaully I believe WA struck first with a 100+ rating... HAHAHAH what a farce.
Anacleto Ludovic
paris france  —  June 21, 2007 11:01am ET
Guys , just to recall, a rolex is always a rolex even if they build a million of them (its true) and use the same parts as Longines or tudor (its also true) but people still buy it for at least 2000 usd( at least, not the daytona). So wine is the same, if there is in this world people that can and want to spend one trillion dollar for the "vintage of the century"(short century by the way, just 7 years old! well.... let them do it. Like watches, if its too expensive for me I don't buy. If i could afford it, i will be buying 1000 cases of the 1st grown. just for fun. But well for now i stick to small toro producers. Sinceres salutation et bonne speculation amis boursier! regards to all ,my fortunate friends in wall street, enjoy speculating in juice, remember eddie murphy and dan ackroyd in the 80¿s with the orange juice? well today is grape juice!Ludovic
Jason Fernandez
Boston, MA —  June 21, 2007 11:11am ET
I hoenstly think it has a lot to do with prestige and ego. I think that the Bordelaise see the prices coming out of Napa in mediocre vintages and say, "Bordeaux is a superior product, it should command similiar, if not greater prices." This is a little flawed as there are other factors affecting pricing (i.e. availibility), but can be reasonable. I mean if you are going to ask me to pay $100 for either Pontet-Canet or Plumpjack, I would take Pontet-Canet every time. I think first-growths see Harlan, Sloan, and Colgin (etc.) commanding huge prices without the Bordeaux pedigree and see their product as superior. I am not saying this confidence is a bad thing, I want a vineyard to have confidence in their product. I just think that it is a situation spawned from us paying unreasonably high prices for many (not all) average domestic wines, combined with the fact that Bordeaux does not take pride in being a high quality bargain wine (nor should they).

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