Bordeaux 2011 Part 2 - Will buyers and Châteaux arrive at an entente cordiale, or will they agree to disagree?
There is for a change, some kind of consensus between the Châteaux and the merchants and buyers, in that both sides agree that there has to be some kind of reduction on last years prices. The sticking point is obviously how much of a reduction is needed to stimulate the market?
On the one hand we have Jean-Charles Cazes of Château Lynch Bages stating in an article published in decanter.com on the 7th of March 2012 that “we always come at a discount to physical vintages of similar quality,” although he goes on to say that “merchant’s demands for reductions of 50% and more was neither meaningful nor realistic”.
On the other hand Liv-ex suggests reductions should exceed 37% of last year’s release price and Ditton Wine Traders argues that four out of five of the first growths should have a release price of at least 57% (ex-Négociant) less than the 2010 vintage.
These are seemingly opposing arguments, but the reality is that very few merchants can afford to take allocations they cannot shift, or have to reduce in price. Even the wealthy Châteaux have to move stock eventually, unless they intend to underpin the secondary market by holding onto their wines in a similar fashion to diamonds being held in reserve.
The 2010 vintage failed to impress the Chinese buyers, prices have remained flat and the market can hardly be described as buoyant. The reality is that there have to be buyers willing to tie up capital for a product that will not be delivered for two years and will then require a great deal more patience before it achieves full potential.
Irrespective of your views on wine investment, there clearly has to be some kind of reward, otherwise it makes much more sense to invest the money elsewhere and buy the wine a little cheaper in a few years time, thereby pocketing the interest earned and the difference in value.
The core of the arguments put forward by Liv-Ex and Ditton Wine Traders gave me the fundamentals for my own research into what would be a sensible price point and I then went further, looking at what the target prices should be for a large spread of individual Chateaux.
The overview is drawn from data relating to approximately 250 Bordeaux wines and relating to every vintage between 2000 and 2010. Prices are based on average merchant list prices and critical scores are based upon the aggregate scores from a number of reviewers.
I have split the vintages into 2 groups, group A (best years) and Group B (other years)
Group A Includes – 2000, 2003*, 2005, 2009, 2010
Group B includes – 2001, 2002, 2004, 2006, 2007, and 2008
*2003 was an A-typical year and my decision to include it in Group A is based upon price
Overview of results
a. The current price for group B is 38.4% cheaper than Group A – it must be remembered that these are market prices and not ex-Négociant.
b. Critical acclaim from a spread of reviewers shows the wines of Group A have an average score of 88.96, whereas the wines of group B have an average score of 87.05. The difference being 1.91 points.
c. The greatest difference between vintages is between 2002 which scores 85.9 and 2010 which scores 90.4.
Based upon Jean-Charles Cazes argument that Château Lynch-Bages will “come at a discount to physical vintages of similar quality”, one could reasonably assume the 2011 vintage will retail for less than £799, which is a discount of 38.34% on the previous release.
The figure of £799 is the mean figure based on current prices for the vintages of group B, the lowest price within this group being £680 and the highest £865.
To avoid the need to make calculations between retail prices and ex-Négociant prices, I have used the Average merchant price of £1,296, June 2011.
To further reinforce the argument for serious discounting, it is worth noting that Château Lynch-Bages has dropped to £1,250.
Minimum target release prices for Bordeaux 2011
Below is a table showing a selection of wines to which I have applied a similar target price. The wines are ranked from highest to lowest aggregate score for the vintages included in Group B.
In the event that release prices fail to impress
There are always wines available from recent back vintages as long as you have a Short list; both Jancis Robinson and Robert Parker are enthusiastic about the 2001 vintage for drinking.
With regards to the great vintages since 2000, I have added the table to the right which compares the aggregate scores and the current average price for the wines highlighted in the table above.
The 2005 vintage is the cheapest, followed by the 2010 vintage. It is true that the prices for many, if not most wines from the 2010 vintage have dropped since release. This in itself reinforces the argument for looking at back vintages if serious price reductions fail to materialise. However, whilst I am not suggesting that 2010 has reached bedrock, I do believe that highly priced 2011 wines will certainly make it more attractive.
How the wines of 2005 stack up against 2000,2009 and 2010 for price and score.
Using the same wines as shown in the initial table, although this time they have been ranked according to the highest scoring wines of 2005
How the wines of 2010 stack up against 2000,2005 and 2009 for price and score.
Using the same wines as shown in the initial tables, although this time they have been ranked according to the highest scoring wines of 2010
*All data is generated using Vinalytics database and comparison tools.
Published 3rd April 2012
Read Part 1 - Doctor, I may be suffering from Bordeaux Fever!
Part 3 - We all know that Sauternes is a swan yet we treat it like an ugly duckling