Liv-ex Fine Wine Market Blog

We have a winner

With all the major chateaux having released (bar Petrus and Lafleur) we can now see how accurate the respondents to our 2008 Bordeaux En Primeur Survey were in predicting the release prices of our basket of ten wines.

The actual release prices for the ten wines totaled €1,006 ex-Bordeaux, some €144  euros (or 13%) more than our survey predicted. Overall, the wines were released 30% down in price on 2007.

The closest respondent - who works as a Senior Wine Advisor at a major UK fine wine merchant - was just €12 away, with a predicted basket price of €1,018. He wins a six pack of 2004 Haut Bailly for his efforts.

A table summarising the results is below:

Reforming en primeur

In the May edition of our Fine Wine Market Report, as a follow up to an excellent piece by John Stimpfig(Primeur Suspects, 24th April 2009) in the Financial Times’ How to Spend It magazine, we look at how the en primeur system is in desperate need of an overhaul to make it more transparent and provide greater protection for buyers. There are three main reforms that would greatly improve the current system and protect its long-term future:

• A central registrar to record transfer of title
• Greater transparency of production figures and volumes offered for sale at the en primeur stage
• Independent verification of tasting samples

The En Primeur season is both exciting and provides a powerful marketing platform for the Bordeaux Chateaux. When working as it should, en primeur enables consumers to obtain the new vintage at an advantageous price and in hard-to-find formats. In return, the chateaux gets access to capital to finance the vintage two years prior to delivery. It also keeps Bordeaux in the headlines for 2-3 months each year and has no doubt contributed to maintaining Bordeaux’s position as the pre-eminent wine region in the world. Nevertheless, the fine wine market has changed beyond recognition in the last 10 years (outside of Bordeaux, at least) and much of the mechanics of the en primeur system is looking increasingly anachronistic. As such the need for reform is pressing.

The areas that require immediate attention include:

A central registrar to record transfer of title

The end buyer of en primeur Bordeaux has no legal title to the wines until they are physically delivered. This means that buying en primeur is unnecessarily risky for both the trade and consumer. In the current climate, asking both groups to pay upfront on a promise of delivery two years hence is unacceptable. One possible solution is that a central registrar is established in Bordeaux (or in a neutral location) so that title for each case of wine could change hands prior to delivery. This would remove the risk of loss should a supplier in the chain go out of business and make for a much deeper and more interesting market.

Greater transparency of production figures and volumes offered for sale at the en primeur stage

The current opaque system is increasingly out of date in a market of instant information and increased price transparency. Information from the Chateaux on the size of the latest harvest and breakdowns between first and second wines remains ambiguous at best. Equally, the question of how much of the total production is being offered to the market at the en primeur stage has become a moot point, with many Chateaux holding back large portions of their productions, creating an artificial market in their wines. These figures should be published and independently audited so that all customers are able to make an informed decision about the relative pricing of each Chateau’s offering.

Independent verification of tasting samples

In a world where the difference between 90 and 95 points or 95 and 100 is often worth millions of euros, it seems sensible to get tasting samples independently verified so that consumers can be confident that samples provided at en primeur tastings are representative of overall production. There have been advocates of such a system by the Bordelais themselves, most notably the proprietors of Domaine de Chevalier and Durfort Vivens.

In summary:

There will be many that will argue that these changes are unnecessarily complicated and expensive and that the current system works fine. After a more successful en primeur campaign than many had expected this year, there will be little pressure for reform, but there is a strong case for Bordeaux to be proactive. If we can learn anything from the current financial crisis it is that the impossible happens and the cost of doing nothing might be very high indeed. The failure of a large player in the supply chain would do untold damage to Bordeaux’s golden goose. There is little doubt that everyone – from the proprietors to consumers – would benefit hugely by an effort to shore up the system. We welcome the fact that a debate has begun.

Tanzer on '06, plus '08 scores

Stephen Tanzer - who runs the influential International Wine Cellar (IWC) newsletter - decided not to travel to Bordeaux this year to taste the 2008 vintage, and instead concentrated on re-rating the 2006s. As he explains: "It was hard to work up much enthusiasm to play the Bordeaux game and taste six-month-old wines from a vintage unlikely to attract much futures interest." IWC did publish scores for the 2008 vintage, however, courtesy of Tanzer's colleague Ian D'Agata.

Looking at the 2006 scores first, it is clear that Tanzer is something of a fan. He states that the "best 2006s have plenty of natural alcohol and tannic support; they show a lovely combination of fresh fruit and soil character thanks to sound natural acidity, and they convey energy and definition." He describes the better Right Bank wines as "downright sexy today, [and] should be good mid-term agers". The top wines of the Médoc "could certainly enjoy at least 15 to 20 years of positive evolution in bottle".

He goes on: "As was the case with 2001 and 2000, there are numerous 2006s that are more pleasing in the early going than the corresponding 2005s. Many of these wines may well give greater pleasure over the next 15 years or so. And drinkers of a more classic bent may actually prefer numerous 2006s to the riper and often high-alcohol 2005s. But the 2005s are generally deeper, richer, more structured and ageworthy wines—a fabulous vintage for collectors with patience."

Below are his top scoring wines, many of which scored significantly better than the ranges he gave when tasting the vintage for the second time last year. Tanzer is usually rather more parsimonious with his scores than Parker (he has never awarded 100 points to a wine) so these scores can be seen as a ringing endorsement of the vintage.

Those wines with a * after the score were only tasted once, in May 2007. Source: www.internationalwinecellar.com.

 

The issue with all 2006s, of course, is price. With 2008 now looking the value pick - if Parker is to be believed - the 2006s will have to come down in price further to find an active secondary market (in the short term, at least). If prices do drop, however, these scores would suggest the vintage may well be worth picking up. What price, then, is the right price?

Turning to the 2008 vintage, Tanzer decided well in advance that he would not travel to taste it. With the vintage clearly one of the most interesting we have ever seen, he is probably now wishing he did.

Ian D'Agata - who usually covers Italy for the IWC but is said to have 25 years experience of tasting in Bordeaux - reported on the vintage. D'Agata describes the wines as having "remarkably deep colors (indeed, these are some of the most deeply colored Bordeaux I can remember at a similar stage of development), high but harmonious acids, and, on the whole, smooth tannins and good overall balance." He terms the vintage "better than anything made here in ’02, ’03, ’04 or ’07", but stops short of including 2001 and 2006 in the equation - in contrast to Parker. Interestingly, his scores as a whole are remarkably similar to James Suckling's (Wine Spectator).

His scores are below:

May Market Report Released

In summary, the May Report includes:

•  Trading Activity – down 21% y-o-y

•  Liv-ex 100 Fine Wine Index – up 4.1% in April

•  Major Movers – upwards pressure on older vintages

•  Critical corner – Robert Parker on 2008 Bordeaux

•  Final Thought – The En Primeur debate

Login and the full report under the analysis menu.

Please note that if you are not subscribed to a Liv-ex Cellar Watch package you will not be able to view the full report. 

View the Liv-ex Cellar Watch package options here.

You can also view a previous report here.

2008 Bordeaux Most Traded

With the 2008 Bordeaux en primeur campaign now moving into its final weeks, we thought it was time to see which wines have dominated trade on the Liv-ex Fine Wine Exchange. Below are the top ten most traded by value and by volume (12x75cl cases only).

It's no surprise to see Lafite Rothschild sitting at the top of the rankings, both by volume and value. In contrast, Haut Brion, which came out later and at higher price than its First Growth peers, is yet to really register on the secondary market. Indeed, it fails to make the volume rankings entirely.

This year's campaign can be seen to be a particular success for Duhart Milon, placed second by volume, and Pontet Canet, which despite releasing a fortnight later than most of the other wines on the list has already made an impact. The campaign so far will be covered in further depth in next week's May Market Report.

BY VALUE

BY VOLUME

Notes: 'RP score' refers to the score awarded by Robert Parker (see his website for the full notes and scores).

Liv-ex 100 Fine Wine Index up in April

The Liv-ex 100 Fine Wine Index is the industry's leading benchmark. The value of the index as of 30th March 2009 was 213.32, a rise of 2.8% on the previous month. The index is up 4.1% year to date, and down 17.2% year on year.  To trade futures on the Liv-ex 100 visit Intrade.