Dr Vino's wine blog

Bordeaux prices may be coming down sharply. But then will they be going up?

Diageo Chateaux & Estates was a major buyer of Bordeaux futures for the better part of the last three decades. In fact, according to one California wholesaler quoted in an AFP article, their buying (along with Costco), created “an artificial level of implied demand from the US — the wine estates set their prices based on this perceived demand.”

But things changed. The wines of the rainy 2007 vintage received weak reviews on the whole and demand slackened for pre-buying during the recession. Diageo Chateaux & Estates had committed to the vintage as they had in the past. Now, they are left with a large inventory of wine that needs to be significantly discounted as it arrives in the US. According to the AFP story, they are dumping the 2007s and previous vintages on the US market to such an extent that trucks are even coming from Mexico to scoop up bargains!

While lower prices sounds like good news, the AFP story neglects the question of future vintages. The low prices of the 2007s may be fleeting because Diageo has now decided to get out of the Bordeaux futures business. As of the 2008 vintage, US retailers have had to pursue different, smaller scale strategies for buying Bordeaux wines as futures to the extent that there has been demand. Now the 2009 vintage has gotten huge advance praise and financial markets have rallied, replenishing the bank accounts of some Bordeaux consumers. So while the demand side for future vintages may be coming back, the economies of scale that DC&E had on the supply side have been removed making a tempting conclusion that prices will move higher.

However, if the Diageo demand was “artificial” as witnessed by the current dumping, the prices could remain lower for several years. And with so many lavishly praised recent vintages already available in the market, Bordeaux buyers may think twice about the need to buy futures on unbottled wine. Indeed, American buyers are “skeptical” according to a recent article on Dectanter.com.

For any retailers out there, what is your recent experience with Bordeaux futures and how will Diageo’s bowing out affect the way you do business? And for consumers, is it “game over” or “game on” for Bordeaux futures?

On Wednesday evening I attended a tasting of fifteen wines from Bordeaux 2005. The vintage was widely hailed as superb and pre-recession demand drove the prices into the stratosphere. Aside from the outrageous apparent quality of the wines, the tasting had two other attractions: the ability to taste some of the top wines blind and to do so in the company of Robert Parker.

Over 100 of us packed a room in a midtown hotel for the event, organized by Executive Wine Seminars. I arrived fifteen minutes early and it was already hard to find a seat at a table. Five wines were pre-poured into five ISO glasses, and there was some bread and cheese. At my table were people who had come in from Chicago, Wisconsin, Delaware and Napa. And they had paid a lot of money too: $795 each (I was fortunate enough to have gotten a ticket from someone who couldn’t attend). The air practically buzzed with anticipation.

Even though the tasting was blind, everyone knew the lineup of wines and it included some of the most heralded wines of the vintage as the Parker scores (in parentheses) indicate:
Angelus (98) • Cos d’Estournel (98) • Ducru Beaucaillou (97) • Haut Brion (98) • Lafite Rothschild (96+) • La Mission Haut Brion (97) • Larcis Ducasse (98) • Latour (96+) • L’Eglise Clinet (100) • Margaux (98+) • Montrose (95) • Pape Clement (98) • Pavie (98+) •Le Gay (95) • Troplong Mondot (99)

In addition to my excitement about tasting these wines, I was eager to see Parker engage in a blind tasting. Blind tastings are incredibly challenging, of course, and can humble even the most accomplished tasters. On the other hand, Parker is known to be a formidable taster, and he has made some impressive claims about his own tasting abilities. In the famous profile of Parker published in The Atlantic (that Parker displays on his web site) back in December 2000, the author wrote that Parker “stores the sensation of each [wine] into a permanent gustatory memory. When I asked him about the mechanical aspects of his work, he told me in a matter-of-fact way that he remembers every wine he has tasted over the past thirty-two years and, within a few points, every score he has given as well.”

2005 is a vintage that is obviously very fresh in his memory (and he has said it is the greatest Bordeaux vintage he has experienced in his storied career), and given his apparent total recall of the wines he tastes, I was obviously very keen to see how he’d fare in a blind tasting–particularly one involving his favorite wines of the vintage. Read more…

SPIT and SIPPED: Bordeaux 2008
After better-than-expected but still largely tepid reviews, Bordeaux 2008 took a shot in the arm form Robert Parker who raved about it. All the action is summed up nicely, with charts of price action, on FT.com’s Alphaville blog. Quotage from Simon Staples, aka BigSiTheWineGuy and a buyer at Berry Bros and Rudd in London: “He [Parker] went crazy about 2003 (all on his own) He missed 2005 (everyone else loved it) He’s now potty about 08(a few very nice wines)Plot?Lost?”

SIPPED: wine growing
Wine in London, yes. But vines? Apparently so. But a terroir de double decker diesel may be avoided: Decanter reports that a horticultural college about 10 miles north of St. Paul’s has planted 1,500 vines.

SPIT: red wine stains
A South African winery blog posts with the results of their tests on various red wine stain removers. The winner: hydrogen peroxide! It’s a cost-effective result considering hydrogen peroxide costs something like 99 cents a gallon at Duane Reade. [ht: Tasting Room]

SIPPED: plastique
Wolf Blass, an Australian producer, announced two new wines in plastic (PET) bottles that resemble a traditional glass bottle.

SIPPED: fighting garden thievery
The BBC reports that Hugh Johnson, renowned wine writer and avid gardener, had “a late 17th Century astronomical sphere and urns [stolen] from his historic garden.” He has posted a £1,000 reward for information leading to the return of the items.

Rivalries and conflicts simmer throughout the world. At least one was resolved peacefully last week in a historic vertical tasting of the wines of the two Pichons.

Around 1850, faced with the inheritance laws of the Napoleonic code, Baron Pichon split his Pauillac estate among his five children: his three daughters got the larger share of the property but his two sons inherited the chateau itself and two-fifths of the vineyard. This action not only set up a rivalry between the two properties but also doomed legions of wine consumers to confusion between the two adjacent estates now colloquially known as Pichon-Baron or Pichon-Lalande. Read more…

SPIT: corks in Champagne!
Champagne house Duval-Leroy has announced that they will be replacing the cork with a “revolutionary” metal cap. Full details will be announced next month. The BBC reports that it will “still produce the familiar “pop” and spray beloved of generations of racing drivers on the winner’s podium.” But how will this affect the Japanese corkslinger?

SIPPED: wine as a tax revenue source
New York State will raise the excise tax on wine sold or made in New York from $0.18 a gallon to $0.30 a gallon, effective May 1. This rate increase of roughly two cents a bottle may be too little to pass on to consumers thus may fall to producers or wholesalers. In order to avoid channel stuffing, there will be a “floor tax” levy imposed on warehouse inventory as of May 1. So will there be mega sales in NY wine stores between now and then to draw down said inventory? [NYT]

SIPPED: fraud
Fraudsters posing as buyers for British wine retailers have bilked French producers out of an apparently large amount of wine. Sad. [Decanter]

SIPPED, surprisingly: Bordeaux 2008
If in 2008 grapes were, in the words of Jancis Robinson, “swollen with summer rain,” vineyards are “ravaged by mildew and threatened by rot,” would that make for a good vintage in Bordeaux? Despite all odds, Robinson in the FT and Elin McCoy on Bloomberg attest to finding some surprisingly good wines. McCoy asks the money question: “But dropping prices dramatically in a good vintage? It’s not in the Bordelais DNA.” But some have gotten the message as she quotes Chateau Ducru-Beaucaillou, owner Bruno Borie: “We have to go back to basics, go back to the consumer, instead of the speculators.” Subsequently, Decanter reports several releases down 20 – 40% from last year’s prices. What will happen ultimately to the weak and expensive 2007 vintage? A caution against buying wine as futures…

SIPPED: English wine
Well, now that all the serious business of the G20 meeting is over, we can turn to what wine lovers wanted to know all along: what did they drink? Gone were the lavish dishes of last year’s G8 summit. Jamie Oliver, chef for the dinner at Downing Street, put together a menu showcasing the “best of British cuisine,” which was expected to include Nyetimber, a sparkling wine from West Sussex. (The spouses’ table seemed like the most laughs that evening–Joachim Sauer excepted.) [timesonline.co.uk]

SIPPED: a shot glass of sanity?
Chateau Angelus is the first of the top Bordeaux properties to release their 2008 vintage: 50 euros a bottle, or 40% less than the 2007, which was not a strong vintage in the region. Our previous discussion highlighted how mush pricing is relative and based on perception, rather than actual costs. And Simon Staples is back again, quoted as saying that he wouldn’t even be a buyer of Angelus at 30 euros. [Decanter]

SIPPED: wine in the USA
While worldwide wine consumption fell by one percent, Americans tacked on a 1.8% gain in wine last year, the fifteenth consecutive annual gain according to the new edition of Impact Databank.

SPIT: cakes!
On March 23, we laid out the Layer Cake/Cupcake confusion/silly naming. March 26, Layer Cake’s producer (One True Vine) sues the Cupcake producer (The Wine Group) for trademark infringement claiming the name is “confusingly similar.” [Wines & Vines]

SWIRLED IN CONTEMPLATION: Australia
Australian wine “has moved from being revered to being reviled” with tremendous speed, writes Jancis Robinson at FT.com. She asserts this is largely because of the success of “ubiquitous and vapid” low end wines and the high alcohol wines that receive big scores from the Wine Advocate. Then add a glut followed by a drought and fires, industry consolidation and a global recession and it’s not difficult to see why the sledding has gotten a little rough. I’m quite interested in the story of Australia, particularly the one that is not much exported to the US. That’s why I’ll be joining a group wine writers and sommeliers there in June for the Landmark Australia tasting.

SPIT: Bordeaux futures
In recent years, Bordeaux futures ran up to tremendous highs (see above chart above for three top chateaus ex-cellars; compiled from data from The Times of London). Now, they may be poised to fall back to 2002 prices, which is what British buyers told the Times they were willing to pay. A Bordeaux insider told me recently that the first growths really should not cross the €100 threshold. But he admitted that they probably will after they hear nice things about their wines at the en primeurs tastings in early April.

SIPPED: Bordeaux past
In a blast from what seems a distant past, a new investment fund for wine is opens this month with allegedly 15 to 20 million pounds of assets. Investors will need to meet the 500,000 pound minimum for the closed-end fund. Send checks to Richmond Park partners Steven Berger and Pascal Maeter who will manage the Lunzer Wine Investments Institutional Fund. [Bloomberg]

SIPPED: industrial waste over Givry
The Burgundy village of Givry has to contend with plans for a new industrial waste treatment plant on the outskirts of town. Last year’s mayoral campaign was fought largely around this issue with an anti-plant activist winning town hall. But the regional authorities later approved the plant, winemakers sued, and now a tribunal has suspended the approval. Score one for the winemakers! Check out the story at washingtonpost.com.

SPIT: excise tax
California’s legislature approved a new budget without increasing the excise tax on wine.

SIPPED and SPIT: wine blogs
The wine blog award winners have been announced. Alas, this blog is not among them. But thank you for your clicks of support! And hearty congratulations to the winners! [Fermentation]

SIPPED: insurance!
A “Master of Coffee” (not Mister Coffee) in England has insured his tongue for £10 million ($13.95 million) via Lloyd’s of London (not to be confused with the newly nationalized Lloyds Banking Group, ahem). Take that Robert Parker–his policy is 14 times bigger than your policy! [BBC via sdelong]

SPIT: Wine tasting menus!
John and Dottie, WSJ wine columnists known for their sunny outlook, go negative on NYC wine pairing menus. Le Bernardin takes it the hardest. To the tape: “”Very little went right. The sommelier didn’t hear a word we said…Each white wine was served in the same kind of glass…not one of the seven wines we were served was poured from a full bottle…Most important to us, the pairings themselves were uninspired….We felt very much like we had been treated as hayseed tourists who ordered the tasting and wine-pairing menus only because we didn’t know how to pronounce the names of any of the dishes or wines.” Price: $280–for the wine only. And a parting shot on the phenom: “when we order the tasting menu, the restaurant puts us on its schedule, which is generally too rushed.” [WSJ]

SIPPED: Amazon swirls and sniffs
Move over Manuka honey: Amazon may soon sell wine along with its growing non-perishable grocery line according to the Financial Times today. This would be a welcome entrant into the brier patch of online wine retail. The more retailers, the merrier the wine consumer! The story has a mention of fellow wine blogger Tom Wark. [FT.com]

SIPPED: foreign owners in Bordeaux
Properties producing mid-range wines on the periphery of Bordeaux have been squeezed in recent years. But they may find relief from foreign buyers as evidenced by Haiyan Cheng, 28-year-old daughter of “vastly wealthy Chinese businessman,” Zuochang Cheng. She bought a property–a first for a Chinese buyer in the region–for $3 million and plans to renovate it and expand the vineyards. [NYT]

SPIT: Merlot (again), this time for headaches?
Merlot can’t get no lovin’. Malolactic fermentation may improve the taste of red wines but it also fills them with tyramines and histamines, which cause allergic reactions in many people. “Merlots seem to be particularly high,” UC Berkeley Professor of Chemistry Richard Mathies said although his research is inconclusive. [Red orbit]

SIPPED: Amen to that!
Taking Communion may soon help Chilean farmers get a fair price for grapes. The clergy and parishioners at Manchester Cathedral evaluate the wine today for potential introduction as possibly the world’s first “Fairtrade” Communion wine. Seventy percent of the churches in the Diocese serve Fairtrade tea and coffee. [BBC]

SIPPED: Drink for causes, part II
“For each bottle of wine you purchase as futures from his Lookout Ridge Winery, [Sonoma vintner Gordon Holmes (and former Wall Street publisher)] donates a wheelchair in your name to one of the world’s 100 million needy people desperate for mobility.” Andy Erikson of Screaming Eagle fame is one of the winemakers. (find this wine) [Bloomberg]

Mike Steinberger, who is one of the greatest wine writers on the planet, has a piece on Slate about his quest for 1947 Cheval Blanc (find this wine), which he calls “The Greatest Wine on the Planet.” Consider it essential reading: savor the story since the wine itself is much more elusive.

And if you didn’t catch it, last year Mike went on a quest for a $700 bottle of 1996 Coche-Dury Corton-Charlemagne.

Image: Michael Steinberger