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The Financial Backdrop to the 2008 Primeur Campaign

Never before has there been so much talk about the Primeur system and how it is time for things to change in Bordeaux. The Primeur is a particular Bordeaux phenomenon (although seen minimally elsewhere). This is due to the high percentage of new oak barrels that are needed to age the wine in for a period of 18 to 24 months. These barrels cost in the regionof 600 euro each and hold 325 litres. Most top growths use 100% new oak for the year’s wine.

‘En Primeur’ means selling the wine on the future’s market. The wine is tasted and evaluated this next week (always the first week in April regardless of the lateness of the harvest). Often the final assemblage (blending) has not been completed at this early stage  so samples are specially prepared for the Primeur tasting. The prices are then released in dribs and drabs end May/June. Chateaux wait to see what they neighbours are offering. The baby wine is bought while it is still in barrel and will not be ready to be bottled and shipped for another year and a half. This year importers such as Berry Bros & Rudd (over 200 year old wine merchants to the Queen) are seeking financial reassurances from the negociants in Bordeaux for the frst time in history.

Laurent Ehrmann Barriere Freres;

“All the classified growths will need to be very very attentive to their
pricing.

The fact that the quality is better than 2007, or that the yields were
low, is absolutely of secondary importance this year, and I don’t think
there is one person in the distribution chain or a private buyer who
cares.

It is now time to return to the fundamentals of finding the right
price. The en primeur window of opportunity is a spectacular one, and
if a large number of wineries aren’t capable of coming to the meeting
point, then there may be no campaign, or a half campaign.’

Bordeaux has shown it is capable of adjusting to market realities –
look at the 2004 first growths at 100 euros a bottle. In 1991 also
there were significant price reductions downwards, and again in 2002.
There may be interia, but Bordeaux does usually respond in the end.

‘Of the first growths, Mouton is historically market sensitive and
helps the others to come around to certain market realities.’

There have been calls for careful thinking of timing and pricing of the release particularly the First Growths to lead the way (even as early as immediately after the tastings)

Cesar Compadre (Sudouest local Bordeaux Newspaper);

‘The speculative bubble of Bordeaux’s great wines is currently
exploding,’ Cesar Compadre

The economic downturn, inflated pricing and lack of interest in recent vintages could also herald a significant shift in the power-politics of the region.

Wine sales between Bordeaux properties and negociants dropped by over a third in the last five months of 2008, reported Compadre in the Sud-Ouest last month. The wine market was ‘stuck in a ditch’, said the newspaper.

According to news agency Reuters, the value of Vintage Wine Fund, one of the largest wine investment funds in the world specialising in Bordeaux, fell 33% last year.

This year could also see the end of the dominance of the chateaux over the negociants and wine merchants. Previously, the former dictated the price of their wines. Now, Compadre said, there was a great amount of discussion between negociants and proprietors over the pricing of the 2008 wines.

Other Factors:

·        Sterling 15% weaker than last year

·        Still have abundant stocks of 2006 and 2007

·        UK negociants looking for pricing to return to prices between 2001 and
2004 (ideally 2002) ie 125 and 150 euro (tax inclusive) for firsts, and 60 to 75 euro for seconds (at least for first phase to gauge the reaction). 2007 average year but  prices stayed high

Haut Brion 05: 472 euro 06: 450 euro 07: 318 euro

Cheval Blanc 05: 622 euro 06: 622 euro 07: 466 euro

Mouton 05:480 euro 06: 450 euro 07: 318 euro

·        Normally 85% Grand Cru Classe sold en primeur (fewer forecasted to attend)

About nicolle

Wine bod living in Bordeaux whose passion is finding authentic wines and getting them to your doorstep

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