China is sucking wind and that is seemingly taking down the rest of Asia and is having a real affect on Europe and the US. Can we expect a decline in auction pricing for Burgundy, Bordeaux, and Piedmont and perhaps even new releases as demand will be diminished? It’ll be interesting to see how this plays out over the next 6 - 12 months.
No.
I don’t think anyone can look at a few days of uncertainty and predict six months out. And if there’s a vintage of the century this fall, then what happens in China won’t really matter as the US market will pick up all the slack.
I think what will affect the market is a huge economic slowdown in China.
I was waiting for a thread like this!
I think the better question to ask is if the US markets continue to decline, right now we’re at about a 10% retracement from the all-time highs, we could reasonably see the markets drop another 20% over the next 3 - 9 months. This would not be an unreasonable correction from a technical trading perspective. (at least that is what the old futures trader in me believes)
That being said if we are in a true bear market for a year or two, which is again, very possible, what impact if any would that have on the high-end wine trade? Will the producers feel the pinch?
Look at 2014 BDX futures, they are at lows not seen for years and 14 is reportedly a good if not great vintage. First Growths are $350-$450 compared to over $1000 a few years ago. This seemingly is a direct result of the declining Chinese markets.
Now will SE drop to $500 anytime soon i doubt it, a big reason being that high end US wine are made in such small quantities that there will always be wealthy buyers, same can be said for DRC etc. For BDX though there are 150,000 + cases made every year of just the major first growths and a few other Grand Cru’s like LE Pin, Petrus, Haut Brion etc. I just dont see anyway the market can absorb that much high end wine in its current deflated state. If you like Bdx then wait a few months and the auction market will i think start to decline
I don’t remember the futures market pricing first growths at $1000, even in 2009. I’m happy to be told I’m wrong though, as I wasn’t a buyer.
It wasn’t all that long ago we could buy first growths at around $100. It’s funny how irrational bubbles affect our perspective on pricing.
Back to the original question, in 2009 there were many large discounts on truly fine and rare wines, and I bought what I thought was a lot. I wish I had bought far more, now. A stock market blip will not recreate that condition. A bear market will not recreate that condition on a large scale. Another financial crisis… well, at least then, there might be a silver lining.
Alan isn’t far off. 2010 First Growths were priced at $860 per bottle on futures.
The Lafite bubble has burst in the past couple of years.
http://www.bloomberg.com/news/articles/2015-08-10/is-now-the-time-to-buy-a-case-of-chateau-lafite-
The 14s are (supposedly) the best since 10 and no one is biting… and where the stock is technically “sold” you’ve got to ask yourself how much of that is “sold” to importers or distributors rather than the consumer. Futures are correcting already. Auction seems to be a somewhat different game.
The 2014s may be the best since 2010 but that’s only because there have been even worse vintages. It’s the lame horse in a race of three-legged horses. I know a lot of people didn’t like the 2009s, and I was surprised by the ripeness and alcohol levels of some, but the 2014s aren’t in the same ballpark as either 2009 or 2010, at least those I’ve tried.
That may in fact be a positive for a lot of people.
In addition, economic downturn aside, w/out scores from critics who matter, it’s not going to be the same market anyway.
Finally, the top chateaux can hold inventory if they need to, at least for a while. They’re unlikely to dump product and risk lowering their base prices. OTOH, if demand is slack, some of the smaller wineries might become better buys.
So, 5 years later, where are we?
14 was the most recent low in the bordeaux market, 19 comes close in some wines but not overall.
what gets more interesting is you’re getting to a phase where backlogs of wines will be getting sold, that will put downward pressure on prices. Similar to this: Coronavirus: France's champagne industry goes flat amid pandemic - BBC News
I’d heard some merchants returning allocations of first growths in 17, 18, given 13 was a flop, 16 was somewhat aggressively priced, I’d wager some chateaus and negociants are carrying all time record levels of stock…
You cannot return an allocation. You can refuse to take it however. Assuming you’re talking about Bordeaux, 2016 and 2019 should increase in price. 2018 should remain stable and move up slowly. 2017 should decline in price.
2020 is on target to be a very good vintage. They do need rain. Though it’s still too early to call. No idea on the world economy in June 2021, so no idea on pricing.
Generally speaking, with stock prices up, there is a lot of money out there for high-end wine. A large market decline would depress prices.
Personally, I’ll take the high stock mkt with high prices over a market crash and lower wine prices.
My guess:
Bordeaux - yes.
Piedmont - no, small supply.
Burgundy - maybe.
Given how odd release pricing is, I think these charts area bit better at showing what’s happening
While not perfect, I think the auction market is a bit better at showing the trend.
This latest round of asset inflation + shifts in spending should lead to fresh highs in markets like Burgundy albeit at a slower pace. I think, in looking for value, other markets (lower tier Bdx, Rhône, Jura?) will see larger price changes.
I think the pandemic’s impact on the restaurant & hospitality market will be interesting, as it’s pretty unprecedented compared to other economic downturns. Not trying to self-promote, but I work for a business that purchases surplus barrels of high-end wine and we’ve been able to get some great deals on wines that were originally destined for Michelin restaurants. With restaurants being shut down for months, their wine inventory isn’t moving and they aren’t purchasing more - at least not of the higher end California wine. Can’t speak authoritatively on the First Growths, premium burgs, etc.
Like…de Negoce style?
Is there THAT much excess ‘high end’ wine out there to support multiple businesses that have similar models? Genuinely curious, as the closest I get to wine country these days is drinking wine in my backyard.
Few ways to answer this…
first - yes there is a lot of surplus wine, especially given the incredible yields of 2018 and 2019 (in CA). Also there’s been a LOT of vineyard planting over the past decade or so. Sometimes the surplus means barrels and barrels of wine; other times it means wine that’s been put in bottles already, but unlabeled and waiting for a home, aka “shiners”
second - recent trends/pandemics aside, the wine market is just very inefficient. Supply can vary tremendously based on yield, blending decisions, vineyard plantings, and is determined years before the product is ready to hit the market. Demand, on the other hand, is relatively fixed, especially for higher end wine and wineries who like to remain exclusive and sell through specific channels (allocation lists, restaurants, etc.)
third - our models are similar, but not identical. We operate on a much smaller scale, 3-5 barrels at a time, because we think this is where there’s both value (with bigger lots, brokers for bulk wine often get involved) and quality (more control, likely these barrels were truly intended for bottling by the original producer as opposed to “scraps”). And we target wine that’s $100-200 and sell for ~$30-50, rather than wine that’s $50 and sell for $15.
Happy to explain more via DM - I’m wary of turning this into an ad for the company I’m working for, but obviously happy to talk more about it. Will soon have an official intro/offer to the broader Wine Berzerkers community though!
So interesting! Thank you very much for the education/detailed response. Will be very curious to see your offer to the WB community.
And just to confirm - Would you say the main differences between your company and de Negoce are price point (yours being higher end wine) and overall quality of the juice (theirs being scraps/leftovers and yours being intended for bottle)?