Ditton Wine Traders’ fine wine blog

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.