Bordeaux Worries About Decrease In Price Performance For 2023 Vintage

Bordeaux Worries About Decrease In Price Performance For 2023 Vintage
Bordeaux Worries About Decrease In Price Performance For 2023 Vintage

Bordeaux’s winemakers are concerned about glut of wine and the need to decrease prices on the 2023 … [+] futures.

Wine Lister

Global turmoil in the world’s wine industry hasn’t caused major wine regions to curtail production—at least not yet. But in Bordeaux there are fears of a cut-back in consumption at a time when there is a global glut of wine. I spoke with Tara Albini, head of Client and Marketing for Wine Lister, which consults on strategic recommendations for producers, regional associations and merchants, and just published a report titled “Scalpel, Please,” as to why there is now high anxiety in the industry.

Tara Albini of Wine Lister interviewed 57 Bordeaux principals for her … [+] report on current market conditions.

Wine Lister

Bordeaux, like Burgundy and most wine regions, has shown a decrease in price performance: -8% in 2023. What are the main reasons for this slow-down?

Over the past four years, socio-economic instability has cut the spending power of many of the buyers that once drove demand for the world’s premium fine wines, with the market taking a notable hit in 2023. With global economic turmoil incited by two major wars , ever-rising inflation, and ongoing recovery from the pandemic, consumers around the world have been forced to tighten their purse strings.

Coinciding with this phenomenon, release prices of Bordeaux’s top wines have increased to unprecedented heights, with the 2022 en primeur campaign seeing an average increase of 20%. As a result, the latest vintage entered the market at a similar, if not higher, price than back vintages that are currently in their drinking window, hindering immediate demand for, and interest in, Bordeaux’s historical en primeur system. With excess stock on the market, and a growing belief that a wine will be available to purchase in bottle at the same or a lower price further down the line, en primeur investments, and consequential price appreciation, has slowed down.

Why does Bordeaux suffer from “market fragility?”

Bordeaux’s production volumes are higher than in Burgundy or California, and there is a reported surplus of its wine available on the market due to demand slowing down. This means that consumers will be less sympathetic to major price increases and feel less urgency to acquire their wine during periods of economic instability. One specialist US merchant tells us, “Many of my buyers, who are collectors in other regions, don’t collect young Bordeaux because they know they can get wines entering or firmly in their drinking plateau from standard distribution.”

In addition to this, the low trade margins made by merchants similarly disincentivize them to focus on Bordeaux en primeur, particularly when there is an imbalance between pricing and demand. One UK merchant notes, “The fact most UK merchants can only make 10% margin, what is the point of investing in a campaign with such low margins, when all other merchants also sell the same wine to the same customers.”

The 2023 en primeur are wines sold within the trade before being released in the public market.

Wine Lister

You report there is “anxiety” over the higher production in the 2023 harvest. What impact will that have on prices?

Higher production volumes as an isolated phenomenon would not cause anxieties, but rather in the context of the current Bordeaux market, it has added to existing worries surrounding the surplus of stock on the market. Several trade members cited the lower quantities of recent vintages, such as the 2022, as a factor for inciting demand in the future, despite their increased prices. With volumes back to normal, or in some cases above average, scarcity cannot be used as a selling point for the 2023, meaning that prices will need to be more attractive in order to encourage demand.

Bordeaux experts comments on existing stock oil wine versus 2023 vintage.

Wine Lister

Yet your report says that Bordeaux’s “popularity” is up +8%. How does that coincide with the decrease in prices?

Wine Lister’s regional popularity ranking is a relative measure based on Wine-Searcher search data on the top 20 wines by Wine Lister pro score in each region (Bordeaux, Burgundy, California, Champagne, Piedmont, Spain, and Tuscany). Each region has seen average searches decrease for the top 20 fine wines examined over the past two years, but Bordeaux’s popularity has fared better than Burgundy, California, Champagne, Spain, and Tuscany, hence its relative position being up 8%. This is likely a result of Bordeaux’s strongest fine wine brands being so established over centuries, and being less subject to passing trends.

What are the top five “pro score improvers” in quality?

Wine Lister’s Quality score comprises an aggregation of our partner critics’ tasting scores (Jancis Robinson, Vinous (Antonio Galloni and Neal Martin), Jeannie Cho Lee, Bettane+Desseauve, Jasper Morris and Le Figaro Vin) and a modest weighting for aging potential ( the average length of our partner critics’ suggested drinking windows). Berliquet sees the greatest increase in Quality score over the last year (16%), followed closely by d’Angludet, which misses the top spot by decimals. Durfort-Vivens and Dassault appear in third and fourth place with 15% and 14%, respectively, while Fonroque takes the fifth spot with a 12% increase.

What programs or efforts are being made to improve demand for the 2023 en primeur campaign?

Bordeaux châteaux are putting more effort than ever before in marketing their wines and communicating with trade members and consumers. Having worked with over 100 of the world’s leading fine wine producers on various strategic consulting and marketing activities, Wine Lister’s communication division has seen increased interest from the region’s top producers over the last two years. We have worked with 18 Bordeaux estates on various types of PR collaborations, event organization, and marketing strategy advice. These estates recognize that, in an increasingly competitive fine wine market, it is not the time to rest on your laurels, and are instead making significant effort to connect with those that drive demand.

Meanwhile, many of the region’s top châteaux have made significant investments in their oenotourism facilities (for example, Pauillac’s Grand-Puy Ducasse will be opening its doors to visitors for the first time in 2024, thanks to the launch of its new tourist trail), to encourage visits from trade, press, and consumers.

You surveyed 57 people in the global wine trade as to whether a decrease in average market price vs compromise sales of existing sticks of recent back vintages would help sales, and the great majority of (91% of the Americans polled), said there would be no impact. Why would lower prices not affect the market?

There is consensus that demand for recent back vintages is compromised as a result of ever-increasing prices, with a feeling of disillusionment towards the en primeur system taking its toll on the region’s wines as a whole. Ten of the leading trade members surveyed explain that a pricing reset is needed to reinvigorate interest in both the en primeur system and existing stock of recent releases. One major Bordeaux négociant explains that “if the deal is good, and the trade can make a profit, demand will arise [and would] create goodwill. […] Prices will naturally rise again, making the old vintages attractive once more.” Additionally, nine respondents cite the quality and limited volumes of recent vintages as factors that would spur demand despite their pricing being relatively higher. Seven trade members explain that en primeur pricing strategies do not affect in-bottle sales, due to a separation in the consumer groups for these two streams, and general expectations for higher in-bottle prices, with one top tier UK merchant noting, “You “expect to pay a premium for wine in bottle.”

Several US respondents mention that demand among their consumers is influenced by the perception of the vintage (with recent vintages being widely praised for their quality), while others reiterate a separation between the en primeur and in-bottle buying streams.

One specialist US merchant tells us “Each vintage and price will be judged on its merits – people need wine in bottle”, while a top-tier US merchant tells us that it “Depends on vintage perception of prior stock”.

Are the prices of the First and Second Growths going higher? Have you demanded slipped with those rated as crus?

There is no obvious trend amongst First and Second Growths when it comes to post-en primeur release price appreciation. When looking at the relative percentage change between release prices and current market prices by wine (vintages 2018-2022), Lafleur sees the greatest appreciation (103%), followed by Les Carmes Haut-Brion (42%) (Petrus and Le Pin were not included in this analysis as they don’t release via the Place de Bordeaux system). Carruades de Lafite comes in third place (37%), with its demand no doubt catalyzed by its association with its Premier Cru sibling, Lafite Rothschild, which conversely appears in 22nd place on the list. Similarly, Margaux’s Pavillon Blanc appears in fifth place (29%), while the First Growth Château Margaux appears in 21st place.

While the wider subset of Bordeaux wines that will see post-release price appreciation will no doubt be predominated by Grand Cru Classé wines, there is no evidence to suggest that classification drives the highest demand. It is instead a reputation for quality and trade favorability that will increase interest in a wine – whether it is classified or not.

After years of increasing prices for Bordeaux wines, they are most likely to decrease with the 2023 … [+] vintage.

Wine Lister

Do you expect heavy discounting this year on Bordeaux?

This is something that has been unanimously called for by leading trade members in all corners of the international fine wine sphere, as revealed in our recent survey of 57 merchants, négociants, auction houses, and retailers from around the world (featured in Part I of Wine Lister’s 2024 Bordeaux Study). They believe that only a significant pricing reset can renew consumer confidence in buying en primeur and invigorate interest in Bordeaux as a whole. When asked the question of what they believe to be the maximum viable release price for the 2023 vintage versus 2022, our respondents suggest an average discount of -30% (with some suggesting as much as -50% discount would be appropriate), though the response from the Americas was less extreme, with a -20% discount called for on average.

We have just returned from 10 days’ tasting in Bordeaux, and nearly every château we spoke to confirmed they would reduce their price vs 2022. The news on the grapevine is that these decreases will be significant for certain top estates, who are also planning to release very early on, beginning on 29th April. Only time will tell whether these discounts will be substantial enough to answer the prayers of the international fine wine trade.

What was the 2023 vintage like?

The 2023 vintage required a watchful eye and sharp reactivity from winemakers across both banks of the Gironde. The growing season was marred by climatic challenges: with a wet and warm spring, mildew put many vineyards at risk, relying on the expertise and rigor of vineyard teams to ensure healthy vines. Fortunately, two heat waves in the second half of August and early September encouraged excellent ripening and yielded high-quality harvests across the region. Once again, careful and patient planning was imperative to picking grapes at their optimal ripeness. The resulting wines show great freshness, depth, and complexity – a profile that several of Wine Lister’s producer partners have described as “classically Bordeaux.”

 
For Latest Updates Follow us on Google News
 

-

PREV Viva Gold Reports Multiple High-Grade Gold Hits at the Tonopah Gold Project Including 90 Meters at 2.0 gpt Gold
NEXT Blinken To Herzog, Families Of Hostages: No Excuses For Hamas To Reject Prisoner Deal