(This editorial is the executive summary of an exclusive VitaBella report)(More wine news on www.vitabella.fr).
Chateau Lafite Rothschild and Chateau Mouton Rothschild announced their 2009 primeur prices to negociants: €450 per bottle. Then negociants will add their margins before selling to wine merchants who will also add margins. In fact as negociants did not get a lot of wine in the first tranche of their 2009 en primeur (the amount of wine released in a tranche is a fraction of the actual production), they have to wait for the second and maybe the third tranche (prices will increase at each level) and then the price of €450 per bottle will be an old story. Already at this level of €450, Lafite is up by more than 300% compared to last year and around 50% compared to 2005' En Primeur price. Lafite not only repositioned itself in terms of price but also in terms of leadership, being the first with Mouton Rothschild among first growths to announce its EP price. If We often read and hear that the chinese market is sending prices to the roof, we may wonder if these 2009' Bordeaux First Growths are not overpriced and if chateaux are not creating a speculative bubble that will soon explode. In fact, another conclusion could be that first growths are not overpriced but that some other Bordeaux wines truly are as the luxury wines' market is facing a new environment. In the VitaBella report entitled "Are 2009' Bordeaux First Growths overpriced?", some examples of overpriced 2009' En primeur Bordeaux wines are given and some details are highlighting the facts that 2009 First growths may not be overpriced but some other En Primeur Chateaux Prices may be much too high. This report actually mentions three important points:
- The first growths are a strictly limited number of chateaux which produce long ageing wines with a unique taste. Every wine lover in the world dreams about having, one day, the experience of tasting one of them. In this wine lovers' community which expands globally, some people are ready to get this experience at a high price or at any price... So if the question is "Who will drink these highly-priced bottles?", the answer would be "Some of us and certainly a new clientele compared to the one who bought first growths over the last 20 years ago".
- Demand is changing: First, for price reasons, French Hypermarkets are not buying 2009s as heavily as they did in the past. This has a minor down effect on the speculation bubble on first growths but may impact strongly other Bordeaux wines which decided to increase dramatically their prices in 2009. Secondly, the market is pickier: the economy is still convalescent and the reputation for conservatism of first growths helps as buyers move away from the "showy" wines of upstart brands.Thirdly, a new clientele is coming in with a "Flying to quality" approach which makes the prices for 2009 first growths very high. This did not happen for 2007 and 2008 as "quality standards" were not met according to this new clientele.
- The impact of the increased liquidity on the secondary market is strong on the prices of First Growths Bordeaux wines.For sure, investors are attracted by good returns but liquidity is a major indicator they consider in their investment decision process. And over the last few years, the secondary market has never been as liquid as it is (transparency also increased thanks to a better and faster information). Recent wine auctions and new online trading platforms (such as the coming platform Berry Bros’ BBX, the Berrys’ Broking Exchange launching in July) are also showing positive signs to buyers of en primeurs first growths. But investors will mainly focus on the top wines which are regularly traded and not at other Bordeaux wines. Even if these wines got excellent scores and were priced at a very high price at an early stage of their life which we call En Primeur...
- The first growths are a strictly limited number of chateaux which produce long ageing wines with a unique taste. Every wine lover in the world dreams about having, one day, the experience of tasting one of them. In this wine lovers' community which expands globally, some people are ready to get this experience at a high price or at any price... So if the question is "Who will drink these highly-priced bottles?", the answer would be "Some of us and certainly a new clientele compared to the one who bought first growths over the last 20 years ago".
- Demand is changing: First, for price reasons, French Hypermarkets are not buying 2009s as heavily as they did in the past. This has a minor down effect on the speculation bubble on first growths but may impact strongly other Bordeaux wines which decided to increase dramatically their prices in 2009. Secondly, the market is pickier: the economy is still convalescent and the reputation for conservatism of first growths helps as buyers move away from the "showy" wines of upstart brands.Thirdly, a new clientele is coming in with a "Flying to quality" approach which makes the prices for 2009 first growths very high. This did not happen for 2007 and 2008 as "quality standards" were not met according to this new clientele.
- The impact of the increased liquidity on the secondary market is strong on the prices of First Growths Bordeaux wines.For sure, investors are attracted by good returns but liquidity is a major indicator they consider in their investment decision process. And over the last few years, the secondary market has never been as liquid as it is (transparency also increased thanks to a better and faster information). Recent wine auctions and new online trading platforms (such as the coming platform Berry Bros’ BBX, the Berrys’ Broking Exchange launching in July) are also showing positive signs to buyers of en primeurs first growths. But investors will mainly focus on the top wines which are regularly traded and not at other Bordeaux wines. Even if these wines got excellent scores and were priced at a very high price at an early stage of their life which we call En Primeur...
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