So I was thinking about this last night…
I have some buddies and colleagues who have gotten burned in both 2007 & 2008 because the short crop has left them with a surplus of new barrels. Most have gotten marching orders to sell them off, which at the moment is a “coals to Newcastle” situation.
Being as some of them have some interesting barrels, some of which can be harder to get, and because I’m such a nice guy, I’ve discussed buying a few from a few of them for 2009. However, they keep coming back to me with 10% below their cost, thinking that’s a deal!
Say you bought Euros last summer and bought a barrel for 800 Euros. At an ER of 1.50, that’s $1,200. They want to sell it to me for $1,080 (10% below cost).
In the back of the latest issue of my Economist, the published ER is 1.28. If the coopers don’t raise their prices (as most of them have assured me they won’t - we’ll see) I can buy the 2009 version of the same barrel right now for $1,024. Not to mention, in the very same issue, there are discussions of the policies of the ECB and the possibility of the Euro headed for highwater. So, needless to say, the very same Euro might cost substantially less in a few months (please don’t construe this as financial advice - if I was any good at this, I wouldn’t be making wine…I’d be living in the Bahamas sipping beer and fishing right now).
So, I can have a brand new barrel with my preferences and my stencil for $1,024 or buy yours for $1,080 that has been sitting in your winery and has your stencil and your preferred bells and whistles? Not to mention, in one case I need to pay you now, pick it up and take up square footage in my winery storing it. In the other, I sign a PO and can play the currency market to possibly make it cheaper (of course, the alternative is also true…) and it’s delivered when I want/need it?
Now, the prevailing wisdom, FYI, is always that you want to fill a barrel as soon as possible after coopering. In reality, I have had good experiences with holdover barrels. In fact, one vintage, our best barrels had been coopered 16 months before the vintage. Also, I am neglecting delivery costs, which can be a lot or a little depending on how well you organize it and how many you buy.
Basically, I don’t care what your cost basis was. If you want me to buy it, it better be a good deal. At the moment, it is not. Which I think is why there are so many available at the moment.
Rant over.