so he is basically saying prices are soft in the secondary market (seems right) but producers are still refusing to cut prices on new vintages despite increases in supply? And, more speculatively, he sees the possibility of Burgundy eventually going the way of Bordeaux in the oughts (losing market share along with stagnant to falling prices in real terms)?
I don’t buy much high level Burgundy but based on spectating auctions agree that prices seem soft in the secondary market compared to the insane increases we saw over 2020-2022. And I also agree that producers are unlikely to cut prices unless the market really forces them to and we are a long way from that point. But I still feel like Burgundy is in a fundamentally different situation than Bordeaux…
It’s only going to affect the producers that have been pushing to maximize the market price of their product. Places that sell from the cellar door for far less than market value have built in margin and will have no problem continuing to sell out and continuing their modest price increases each vintage.
I’m not seeing a softening in Burgundy for older wines, so much as a lowering of the rate of increase. At least at the auctions I’ve been attending. However, I would agree that for 2014-2020 years, I’ve gotten some bargains.
The article highlights a seismic shift in Burgundy’s wine market. Despite claims of Burgundy’s affordability, the high-end wine market faces a downturn. Even esteemed producers like Rousseau and DRC experience sales at 30-40% below standard prices. Newer names struggle to sell due to prior high buying rates. Recent investments risk substantial losses upon resale, with market prices plummeting in the past few months. The anticipated 2022 and 2023 vintages, despite good volume, won’t likely lower prices due to scarcity from preceding small-volume years. Strategic changes by wine houses and reduced purchases by exporters exacerbate market challenges. Comparisons to Bordeaux’s oversupply history raise concerns about Burgundy’s potential fate if market equilibrium isn’t found, questioning whether Burgundy can shed its expensive reputation earned over time.
William Kelley made a great point in another thread to say that grapes for 750ml of Corton Charlemagne is now 133euros . That’s before you process it , package it, market it, make a margin and then the importer and retailer get their margins.
So the Negociant in particular can’t really drop prices unless they stop buying fruit. The Domaine’s with good debt equity are probably the best placed to hold prices or react to the market, but it’s certainly in my mind going to be a period where buyers might start rejecting long standing allocations based on price.
Well typically you extract 700 liters from a tonne, so a tonne roughly equates to 900 bottles so in round terms that’s 120000 euros or around $US130,000
Like with Bordeaux in the mid 2000s, future appreciation is now mostly priced in for Burgundy on release, so buying current vintage Burgundy is not attractive from a purely financial perspective (excluding allocation/cellar door pricing).
Secondary market is currently overvalued very badly, and no one is willing to mark down inventory.
I think the first one is pretty obviously true, especially with certain producers trying to sell their wines direct to consumers at secondary market pricing.
I think he misunderstands markets with respect to the second point; in the even of a large counterparty liquidation, you never get market pricing unless the relevant market is deeply liquid. So, yes, if someone had to liquidate 7 cases of Bizot tomorrow*, they would not get current pricing, but that would have been true a year ago - that’s just not how markets for illiquid assets operate. The current auction prices have been soft, but they have by no means collapsed (and that has been in a period of high interest rates). Suggesting wine prices won’t hold in times of stress is mostly just stating the obvious.
*In the deeply unlikely event someone were sitting on 7 cases of Bizot, of course.
I can tell you that long time buyers that we have are comfortable spending a ton on wine, but have pulled back recently based on release prices… Grivot is now reaching $1k, even Drouhin are over $1k per bottle for top GC bottles… customers are feeling taken advantage of and now Burgundy is paying the price…
totally see that, i’ve stopped buying a lot of new release burg now. Doesn’t make much sense to buy current release wines for the same price as secondary pricing for back vintages for most producers that haven’t had a big change in pricing.
