Ditton Wine Traders’ fine wine blog

With the somewhat opportunistic title "Bordeaux – wine boom may be over", Decanter has published an interesting article on their website. In the article, several people indicate that this might indeed be the case. To use the words of Cesar Compadre, 'The speculative bubble of Bordeaux's great wines is currently exploding,' Cesar Compadre, wine journalist for regional newspaper Sud-Ouest told decanter.com. 'It's the end of the Belle Epoque.'  To quote further, Simon Staples of London wine retailer Berry Bros & Rudd also believed there was 'huge pressure' on the negociants. He said the market was in a fragile position. 'All it needs is a chateau or a negociant to go bust and it all crumbles,' he added.

As with the wider economy, Bordeaux is having a difficult spell. The 2005 en primeur campaign filled the bankaccount nicely, 2006 and to a larger extent 2007 did not. It's impossible to say how much of a buffer the Chateaux and especially the negociants have, but is is clear that lower demand and lower prices do have a big negative effect. And with the banks being in the state they are, credit lines are not available easily, so there's not much of a safety net.
 

The 2008 en primeur campaign might add to the woes. It's highly unlikely this will be a cash cow for the Chateaux nor for the Negociants. Unless prices are dropped to the point where merchants and the public think it's actually cheap (2004 price levels?), volume will be (very) low.

So, the outlook is a bit grim. But does this mean it's the end of the Belle Epoque? Will we see a Chateau crumble? I don't think so. Certainly none of the famous chateaux will go bust and even if one were, there would be queues of buyers. Imagine, Haut Brion up for sale! I do think prices will be rather more modest in 2009 and – unless there will be another great vintage – will probably remain that way during the economic turmoil. However, the fundamentals are still intact. Wine is still a great investment as demand will continue to outstrip supply, as long as one sticks to the top, trophy wines. In fact, the smart money is now going into wine again, profiting from much lower prices and in some cases, very favourable exchange rates.

We might see a negociant go under and I also expect some of the wine merchants to fold. Is that a bad thing? No. A more challenging environment weeds out the less well run companies who have only been allowed to exist grace to the easy conditions. The survivors then have it easier and might actually use such a window of time to their advantage, building their business to be in pole position when the economy turns again. As it always does, also the micro Fine Wine economy.