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30 六月 20102009 En Primeur – a first analysis

We are pretty much there. Except for Lafleur, all big name wines have released and most of them are into their 2nd tranche as well. After a very slow first month, the last 2 have really been full throttle with frantic buying and very few firm selling prices. By now however, we are starting to see the secondary market come to live with – although very little for the first growths – some supply counterbalancing demand and therefore some first proper price indications shaping up. So, time to form an opinion on whether to buy this vintage or not.

First of all, this primeur campaign has been absolutely bonkers. Release prices have surprised everyone, exceeding the highest estimates and then some. Not only are release prices easily higher than any previous vintage, in quite a few cases release prices are actually higher than current prices of previous top vintages like 2000 and 2005. We are truly in uncharted territory here. What's more, the secondary market (where the releases are traded on) has actually digested these stellar prices very well in most cases. For example, Lafite released its 1st tranche ex Negociant at GBP 5,500; it traded the next day in London at GBP 12,000. Latour, Margaux, Duhart Milon, Carruades, Pontet Canet, Lynch Bages to name a few have followed the same pattern. This of course encouraged the Chateaux to release their 2nd tranche at much, much higher prices. Having said that, not all wines are selling well at 2nd tranche prices, some dropping back towards the first tranche release price.

Secondly, allocation was a major issue. In most cases, allocations were halved. In some cases (Latour) it was even down to 20% of 2008. I hate to say it, but the Chateaux have really decided to milk this one: high prices, little stock, big demand, huge 2nd tranche prices with still little stock released and the money piles in. Big time. To illustrate the issue of scarcity, most of the major traders in the UK still have not released anywhere decent amounts of First Growths. Big, loyal, private buyers have been offered some, but in insultingly low quantities and at very high markups. Is this because the Merchants don't have the stock as the Chateaux and the Negociants are hoarding their cases? Is it because they do have it but are sitting on it themselves? Probably both.

Thirdly, what has been very apparent in this campaign is that it seems to be all about greed. How to cash in on the biggest vintage ever. I'm aware this is a sweeping generalisation and not true for all. In fact, two of my own Negociants have been very, very correct and have rewarded our loyalty big time. But apart from that, it has been a real spinning game of low stock, hype creation, high prices and fast releases to create a sense of "you have to buy now or else you'll lose out". And that also applies to the UK trade. Not very nice.

Please forgive me my little rant. Personally I like to do business differently: when you have bought from us in the past, you'll get your fair share this year as well, at a normal margin for us. Even if we could sell elsewhere at triple the profit. Because that's how the gentleman's agreement works. And because that's how you build your business for the long term. So yes, some of my customers have bought Lafite at 7,500 pounds – the market being at 12,000. I'm sure they will be back next year.

I firmly believe it's in nobody's interest if prices go up so hard and so quickly. Not for the chateaux, not for the trade, not for investors and certainly not for anybody who's actually going to drink it. Simply because it brings an element of unwanted speculation and volatility into an otherwise perfectly healthy market where the fundamentals are highly supportive of investing in blue chip wine. But there you go, that is what happened and as I said, we are in uncharted territory.

So, what will happen next? Will you have made a good decision buying into this vintage? The honest answer? I don't know. It has been a very bumpy ride and whilst prices were already going up massively, 2009 has broken new ground. There is massive demand for this vintage, even at these prices. Given that they are truly fantastic wines, prices might well be stratospheric a few years down the line and chances are that an investment in the top wines will see a very handsome return, given enough time. It is also very likely that some of the back vintages will go up further as some wines now look decidedly cheap in comparison with their 2009 peers. But as I said, it has been moving up rather too quick for comfort. Time will tell, I'll refrain from a prediction for now.

If you want more hard data on prices and price comparisons, do check out www.liv-ex.com. They have an unrivalled wealth of information and analysis on the 2009 vintage as well as comparisons to back vintages.

To conclude, if you do decide to buy into 2009, chose wisely. There are certainly some very good deals to be had. There are also some very bad ones. This is a vintage where you really have to do your homework. Some wines are trading below their release prices already. Others have increased massively. Still other wines have yet to show their potential. And finally, you really do need to take into account the amount of cases that have been released to date versus the total amount produced to "judge" how stable current prices are.

In the next blogpost I will try and point out some buying opportunities so stay tuned! If you have not already done so, you can subscribe to this blog by RSS feed so that you will be notified by email whenever there's a new posting. As always, I'm very happy to share my thoughts so if you want to know more, do get in touch!

4 六月 20102009 En Primeur – should you buy?

We are now getting very close to the big guns releasing. It has been rather long winded so far but this week has seen a big increase in activity. Yesterday Giscours was released, which is probably the highest profile so far with the exception of Duhart Milon. I wouldn’t be surprised if we get one or 2 other big names today and the next 2 weeks is when it really kicks off.

In terms of quantities released at first tranche, it looks like we’re down on last year by about 15%. The consequence being of course that loyal customers who might well have supported difficult vintages like 2006, 2007 and to a lesser extent 2008, will be disappointed.

As far as pricing goes, I would say the average release price ex Negoce, in euro, is about 10-20% up on 2005 which was the most expensive vintage to date. Although not too unreasonable when measured in euro’s, it is a massive increase in sterling due to the pound being so much weaker now. A pattern that is slowly emerging though is that the better the wine, the higher the percentual increase vis – a – vis 2005 prices is. Take for example Les Pagodes de Cos (second wine of Cos d’ Estournel) – just released today. It was to be expected that Monsieur Prats, the manager of Cos who has very high aspirations for his wines, would hike up the price. However, it actually came out at 36 euro a bottle (ex Negoce), 82% up on 2008 and 71% up on 2005. I think this is totally bonkers. This is a 91-94 Parker wine and a second label of a non first growth. If the first wine will see the same percentual increase, it will be 208 euro a bottle ex Negoce....

You could argue that the Chateaux are right to cash in. After all, everybody hypes the vintage. There is massive demand for it, as is clearly illustrated by live bids at stupid prices on Liv-ex. And lastly, a lot of the Chateau might feel frustrated that they have lost out on the profits that pretty much everybody else made on the 2008’s.

The argument against that and in favour of keeping prices reasonable comes when taking a longer term view. I believe we are seeing a dangerous and probably temporary development in prices. It is totally driven by investment motives and worse, pure speculation. It has nothing to do with fulfilling demand from drinkers. Current prices have driven away the vast majority of drinkers already, which is not a problem – now – as there are a lot of wealthy people filling the gap. But what happens if the Chinese millionairs decide that they no longer want to pay 8,000 pounds for a case of Lafite 2008 which was released at 1,500 pounds only 1 year ago? As a respected fellow wine trader kindly pointed out to me, it would be like a game of musical chairs, a sort of wine Ponti-scheme where the last man holding the wine would effectively have sponsored everybody before him in the chain.

I get the uneasy feeling that, the quicker and harder prices go up, the sooner this might happen. Mind you, I think the fundamentals behind investing in wine are as sound as ever and will most likely stay that way. However, as with any other market, if the market moves to quickly it will correct itself at some point, in some shape or form.

So, where does that leave you if you want to invest in wine? My advice would be to be very careful to buy 2009 at any price. If you can get a top grade wine at first tranche you will probably do well in the short run and most likely do very well in the longer run. If you have to buy at later tranches, I would carefully weigh the opportunity against other options. Most notably buying into backvintages. Any high scoring 2009 wine that also sees demand from Asia and that comes out at a significant premium vis–a-vis 2008 and 2005 will see its back vintages go up. This is what happened to Duhart Milon and I believe this pattern will be repeated.

We have not yet seen any really important wine come out yet so I might be too gloomy. Also, a lot of customers and traders are starting to voice their frustration and discontent so maybe this will go some way to keep prices down. Let’s hope so because I genuinely think it would be far more beneficial for everybody involved than short term, instant gratification seeking pricing. As ever, or maybe more than ever, don’t hesitate to get in touch with us to discuss buying strategies.

26 四月 2010Waiting for Parker scores Bordeaux 2009 Primeurs

Intel is not conclusive. Some say he will release on the 30th (Friday), some say Tuesday (late in the evening UK time) and some even say tonight...

This year, timing won’t be as crucial as it was last year. This time, none of the big names have released yet whereas last year, all of them had and consequently speed was of the essence in snapping up the high scorers at pre-Parker prices. This year the main effect will hopefully be that we see more, bigger names release. So far, it has been a rather long campaign without too much happening in terms of releases.

With Parker scores out of the way, we will have the total picture of all the critics. In theory, the Chateaux could then release en bloc. They won’t though as they will want to get as much info on the maximum prices they can receive as possible. And apparantly, that includes first hand information on Asian take up – to be obtained during Vinexpo in HK, the last week of May.

Speaking of prices, the estimates for the first growths are all over the place, ranging from 200 euro a bottle on release to 1,000 euro a bottle by the end of the summer. Sadly, there’s a lot of hype so prices will be very high. The first tranche hopefully not so much so, but each subsequent tranche will be higher until demand stops. It goes without saying that getting in at first tranche will be key, but will also be extremely difficult. Here’s the way to do it:

1) you have bought first growths and preferrably other wines as well, in previous vintages. Loyalty throughout the whole chain will be rewarded.

2) you are prepared to buy across the board and not just the gems – this is what the merchants have to do as well. That means including wines that are not on everybody’s list and particularly wines that the Chateaux "push". For example, Lafite will only allow Negociants to take Lafite if they also take Rieussec and Evangile. Mouton will oblige Negociants to buy Clerc Milon, Armailhac and even Baron Arques. Of course, you don’t have to but it would certainly put you in prime position if you would.

3) you are willing to send us a your wishlist – including quantities and ceiling prices – so we can immediately fulfill your "order" once released. We will add these wines to our own wish list and send them to the Negociants prior to release.

4) you are willing to pre-order. After payment of a deposit of 20%, you will get priority over customers that send just a wish list.

If you don’t manage to get in at first tranche, don’t despair. In exceptional vintages like these, prices will continue to rise over time. There’s still investment potential if you get in a later tranches. Bear in mind that Lafite 2008 is still being bought for investment, even though current prices are 4 times the first tranche price. One word of caution though, both to customers and Chateaux: the sky is NOT the limit. You should not pay silly prices, hoping they will continue to go up. Take the 2005 vintage, where prices started to fall after the initial demand had been satisfied and it then took until only recent for prices to get back to their previous highs. This is a real danger for 2009 as well. There is an awful lot of demand to be satisfied at the start. Correction, make that orders to be fulfilled. Once that demand falters and fails to prop up prices any longer, we could well see prices fall for a while.

Once Parker has released his scores, I intend to post our buy list on this blog. These will be wines that a) are always in demand, b) have received good scores, c) will help us secure our allocations and finally, d) have proven to be a good investment when bought en primeur.

If you want more information or help in deciding your best strategy, don’t hesitate to contact us – we are more than happy to help.

1 四月 2010Bordeaux 2009 primeurs – a first impression

Whilst I'm nibbling away at a belated lunch in St Emilion, I'd like to share my impressions on the 2009 vintage, after having visited many Negociants and tasted across the appellations.

It will be a very good vintage. It lives up to the hype. The left bank is consistently very, very good and it's definitely a Cabernet Sauvignon/ Cabernet Franc vintage. Very homogeneous with very few disappointments. Even, or even especially the Cru Bourgeouis are buys. Pretty much all St Estephes are buys, with Montrose potentially the best ever made (i.e. 100 points.) Pauillac is great (Pontet Canet!!!), St Julien and Margaux are right up there as well. Graves is spectacular at the top level, my personal value for money favourite being Domaine de Chevalier. Sauternes, or all stickies for that matter are awesome. At least on par with 2001! Will this finally be the vintage where Sauternes will take off? It should, IMHO. The only warning I'd like to sound is for the Right Bank: top Chateaux are spectacular, but it's not a Merlot favoured vintage – select well as some are high alcohol "soup".

Above is not just my opinion, it's derived from my own tastings as well as scores by James Suckling as well as all the Twitter feedback during the tastings from more accomplished tasters than myself. See also Jancis Robinson for Sauternes: she adores it! If you like more tasting notes, just check out the websites of BBR, Farr, Bindex etc.

The annoying thing about this praise is of course that it will encourage the Chateaux to hike up their prices. The quality does merit higher prices than 2008 for sure, but how much so? I will spend more time on that issue later on. For now, let's just hope that the Chateaux will understand that exchange rates, unemployment and the general, uncertain state of the economy should prevent prices to go nuts. As compared to the previous most expensive vintage – 2005 – the world is a totally different place. Even with new demand from Asia. Don't think that new demand will soak up prices at or above 2005 release prices. The "pain level" for my customers does not go beyond 2005 release prices!

So, now that us mere mortals have cast our votes, how will the campaign progress? It will likely be a "play the age-old game" campaign: nothing happens until Parker releases (end of April), except some chateaux that can't afford to release amidst a host of other names. The first growths will be last to release. The Vinexpo at the end of May will see a pause. So my best guess is we will only see the 1st Growths release mid June or even later.

First tranche is expected to be very small, alas. Second tranche will be much bigger and also much more expensive. There is talk of a third and even fourth tranche, although I think this will not go down well unless the 2nd tranche is priced sharply. Bottom line: allocation is key and those who have "played the game" in the past will be reaping the reward. For newcomers: expect to pay 2nd or 3rd tranche levels and be tied in with other wines. That's what the chateaux do, the Negociants do and therefore, the Trade has to do as well..I t's an aweful practice and we will try and avoid it as much as we can, but only to a certain extent.

On the upside, there are loads of non-first growths that are awesome and relatively affordable. Some even with investment potential but all fab to drink. And, if release prices are reasonable, all wines will be buys.

To be continued...

 

 

 

29 三月 2010Bordeaux 2009 primeurs – the tasting week

Fresh from the press on the first day of the En Primeur week.

I have tasted some myself. It's only Monday but fair to say 2009 so far is living up to the hype. Thanks to Twitter, I also have a lot of feedback from other tasters, and they are pretty much all very positive indeed. Also, don't forget Sauternes, which might be on par or even surpass 2001!. I have seen one note of caution from Decanter. On the whole though, superlatives galore.

But, and it's a big but: although 2009 apparently produced 15% more wine than 2008, expected first tranche allocations will be only 1/3rd of 2008, or so I have been told by one of my better Negociant suppliers. There will be bigger 2nd and 3rd tranches, but at (much) higher prices. This is going to be key. There's demand, very much so – although the pain barrier is not as high as some might think. There's very limited availability at release so anybody who get's their hands on First Growths at first tranche will likely be doing spectacularly well. If you haven't bought in previous vintages, I'd suggest not to hold your breath or be ready to pay 2nd/3rd tranche prices. We are doing everything we can to secure an allocation but so far, it's impossible to say how big it will be.

Finally, prepare for a long campaign. My prediction: earliest start beginning of May and First Growths to release mid June. Possibly even July. Bummer, I know and let's make sure the trade puts on as much pressure as possible to keep it a reasonable campaign... In terms of pricing, availability and lenghth.

To be continued...