by Tim Atkin

2009 Bordeaux en primeur: will the bubble burst?

A friend who works for a City hedge fund calls it “the taxi driver moment”. His theory is that when London cabbies start talking about a guaranteed way to make a fast buck — other than switching on their meters after midnight — investors should start worrying. By the time they were telling their back seat passengers about their buy-to-let properties in Romford or East Acton a few years ago, the housing market was already heading south.

Has the 2009 Bordeaux campaign reached this point? Almost before a grape was picked, merchants in the UK and elsewhere were telling punters that this “vintage of a lifetime” offered unparalleled investment opportunities. It’s certainly true that, in recent years, the return on blue chip claret has far outstripped what you’d make if you put your money in a savings account or played the stock market. Plus, there’s no tax (other than duty and VAT) to pay on wine. But like those taxi drivers, anyone thinking of buying 2009s now purely for investment has probably left it too late.

Will top Bordeaux continue to increase in price, delivering the returns that wine funds, investors and many thousands of ordinary punters have been led to expect? Or could we witness something like the property crash of 2008? One London merchant told me that “we’ve got at least another ten years of fun on this”. But what happens if he’s wrong and we’ve already reached the top of the curve?

It’s worth considering the state of the market for a moment. In the long history of Bordeaux, the prices of the top 100 or so Left and Right Bank wines have never been so elevated. The average “prix de sortie” from the châteaux to the Bordeaux négociant, CVBG, was E48 in 2009, compared with E40 in 2005 and E24 in 2000. This excluded the likes of Valandraud and Pétrus, but still gives you some idea of prevailing price levels before the wines were even offered to the market.

Even at such prices, there was no shortage of buyers, at least in the UK. The Far East wasn’t as enthusiastic as many people predicted, and the US appears to have given Bordeaux 2009 the middle finger, but the Brits (and the Swiss) bought big. There were a couple of comparative failures (Ducru-Beaucaillou and Figeac), but the campaign was still a huge overall success. To give you some idea of the excitement it generated in the market place, Berry Brothers, Farr Vintners and Bordeaux Index sold in excess of £150m worth of 2009s between them. Berrys shifted more wine in one afternoon (£7.5m) than it turned over annually on all wines in 1997.

Are the 2009 prices too high? Yes and no. It’s ridiculous when punters can purchase bottled wines of comparable quality cheaper than they can the still-in-barrel 2009s from the same châteaux, but people are prepared to pay the asking prices. Even if you take a jaundiced view of the opportunism of some châteaux owners, it is plain silly for the wine critic Robert Parker, who gave 21 wines a potentially perfect score of 100 points and has garlanded the vintage with superlatives, to accuse them of “greed and arrogance”.

Top Bordeaux is all about supply and demand. Always has been, always will be. The Bordelais are salesmen above all, and they respond to the market. You can rail at their hucksterism — as Benjamin Lewin MW points out in his excellent book, “What price Bordeaux?”, they have declared vintages of the century in 1929, 1945, 1959, 1961, 1970, 1982, 1990, 2000, 2005 and 2009 — but it’s hard to criticise them for maximising profits. After all, this is a region where multinational oil, luxury goods, property development, financial, mining, petroleum and supermarket empires all own châteaux.

Will the prices hold up? That depends on a number of factors, not least the quality of what’s produced in 2010 and 2011. Great vintages depend on scarcity value to retain their lustre. If succeeding vintages are as good (or not far off), prices may plateau or even start to decline. If, on the other hand, there is a run of lesser vintages, as happened between 2001 and 2004 and 2006 and 2008, they may increase even further.

The other major factor is the world economy. “Since wine is not as essential product,” comments Lewin, “it is particularly susceptible to fluctuations of the general economy. The economic crisis of the Great Depression had a devastating effect on prices in the 1920s…and Bordeaux was crunched again by the oil crisis in the 1970s.”

Who knows what state the global economy will be in two years, when the 2009s are finally shipped, but there could be a lot of people and investment funds anxiously looking to offload cases of claret. As with gravity, the prices of top Bordeaux cannot rise for ever. The question is when, not if, they will start to fall.

Originally published in Off Licence News

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