As the Future’s Week approaches here is some of the background of the recent campaigns to help understand where we are today regarding buying futures 2016. There is no doubt that the vintage is a very good if not great one, but the climate has changed and consumers are preferring to buy ready to drink bottles at the same sort of price as the futures without having to wait….
The precision of winemaking today however is producing wines of incredible power but with an elegance and purity of fruit that Bordeaux has never experienced before. Found not just in the classified wines but also ‘outsiders’ too; Cru Bourgeois Médocs, Haut Médocs, Médocs, Moulis, Listrac Grand Cru Saint Emilions, Castillons and Fronsacs where winemakers are focussing on the grass roots, the vines and their soil. The raw material of what is coming through the cellar door has never been of such a high quality as before.
The Drink’s Business, 24 January 2017
Bordeaux has regained its position as the big hitter in the Liv-ex Power 100, and the top five brands are the five first growths. Patrick Schmitt MW appraises its resurgence.
It’s been a while coming, five years in fact, but Bordeaux is back. And this is no anecdotal claim from an excited winemaker, critic, or merchant. Rather, this is the key finding from the trade’s most comprehensive and revealing annual report: the Liv-ex Power 100 (value and volume traded, as well as price movement over the past 12 months – the report highlights, quite simply, what brands the major merchants have been moving).
In 2016, those wines were mostly claret, and in its most classic form: the great classed growths – the five most powerful fine wines of 2016 are Bordeaux’s five first growths – selected as leaders as long ago as 1855 (except, of course, for Mouton, which became a premier cru in 1973).
Now, this isn’t the first time we’ve seen such a result since Liv-ex began compiling this study in 2004 – the famous quintet took all the top slots in 2010. But, that was at the peak of the fine wine market.
It was a year when Bordeaux was enjoying its most successful en primeur campaign of all time with the 2009 release, and it was a period when Asia was the driver of demand. So what, you may be asking, is the parallel with today? Well, there is a similarity.
The nature of demand in 2010 was, in hindsight, a blip, fuelled primarily by a temporary surge in the buying of the greatest names for an unfamiliar market – China.
As we reported at the time, this nation, as a newcomer to fine wine, was looking at the most straightforward way of ranking wines, which the 1855 classification provided. Consequently, the market became “absurdly concentrated” on the left-bank first growths, with 61% of the Liv-ex trade in that year made up by those five wines.
Fast-forward to 2016; the China bull market is merely a memory, but 2016’s ranking also appears to be due to a short-term acceleration in demand for the fine wine market’s most famous and liquid labels through London merchants from buyers outside the UK. And the reason for the sudden escalation? The fall in the value of the sterling following Britain’s decision to leave the EU, announced on 24 June.
Liv-ex director Justin Gibbs observes how Sterling’s weakness has prompted dollar- and euro-based buyers to purchase high-value fine-wine power brands from UK-based sellers.
For Simon Staples, Berry Bros & Rudd sales director for Asia, the story is the same: “All levels of Bordeaux have done well but demand in favourites have continued – Lynch-Bages, Figeac, Gruaud, Grand-Puy-Lacoste, Giscours, Haut-Bailly – and of the first growths, Lafite has remarkably bounced back far more than I thought possible, while Latour and Mouton have followed.”
PEAK OF THE MARKET
With history seemingly repeating itself, Gibbs then looks back at what’s happened over the past six years. Starting with 2010, he says: “It was the peak of the market, and the five first growths were the top five wines, the 1855 classification was basically shaping the market.”
But by the time 2011 had finished, the market had peaked, and buyers were moving away from the first growths, but still shopping within Bordeaux. As a result, the rising stars of that year were the so called ‘super seconds’ (labels such as the Pichons and Cos d’Estournel) and the ‘flying fifths’ (such as Lynch-Bages and Pontet-Canet).
The first growths were still within the top 10, but the taste for Bordeaux was broadening, says Gibbs, primarily because buyers were looking for less expensive alternatives to those at the top of the classification.
Moving to late 2012, however, and the only first growths in the top 10 were Lafite and Latour, and DRC had become the world’s most powerful fine wine brand. “Bordeaux was heading south,” says Gibbs.
As 2013 drew to a close, the new high-flyers weren’t from the 1855 classification, but comprised Right Bank labels, the top three being the recently upgraded Pavie and Angelus along with fine wine investment stalwart Petrus.
The first growths were still high up in the survey, but led by the cheapest – Haut-Brion was at number five – and a general search for value was driving trade for brands from outside Bordeaux.
By 2014, Gibbs says: “The bear market was long in the tail,” and the risers were from a surprisingly broad array of regions (northern and southern Rhône, Sauternes, Tuscany, Piedmont, Napa, Champagne, and Australia all featured in the top 20). Meanwhile, he adds: “Bordeaux was on its knees.”
Then, last year, “the market had stopped falling, Bordeaux was stabilizing, and three first growths were in the top 10, but those were the least expensive: Haut-Brion, Margaux and Mouton,” records Gibbs. And what about 2016? “This year, for the for first time since 2010, the first growths are in the top five.
Having discovered the quality, and investment potential, in first-growth equivalents from the likes of Tuscany, Piedmont and Champagne, they are continuing to buy and drink more broadly than they did before the market fell in 2011. (Champagne and Italy have more labels in this year’s Liv-ex Power 100 than ever before).
So, while Bordeaux may have more brands in the report than six years ago, in terms of its share of trade by value on Liv-ex, it is much smaller: 75%, compared with almost 96% in 2010.
And as for the first growths, their share of trade is less than half what it was when they peaked at 61% in 2010, accounting for 26.6% by value this year. In fact, the fine wine market of 2016 is broader than ever before.Gibbs explains: “The biggest change we’ve seen is the US, which has grown from quite a low base: it used to account for less than 5% of the demand on Liv-ex.
Today it is around 18%; it is the fastest-growing. And the Americans don’t obsess about Bordeaux or the big brands from Burgundy like they do in Asia. America is a far more sophisticated market, it doesn’t need to overspend, and it has a long history of buying wines from Italy, and the Rhône, as well as, of course, the wines of California.
“Bordeaux is back, but it is not necessarily taking market share, and that’s because other regions are now part of the furniture.” He adds: “When Bordeaux gave up its share it was filled by other interesting stuff from great vintages… and those wines are holding their own.”
It should also be noted that Bordeaux lost its share of the market dramatically because of the poor performance of en primeur campaigns with the 2011, 2012, 2013 and 2014 vintages.
And while 2015 has proved a better release, the trend for buying large quantities of claret before it’s bottled hasn’t resurfaced.
Hartley says: “2015 Bordeaux was a lot better for us than the previous three campaigns, but was it back to the levels of 2005, 2009 or 2010? Absolutely not.
“I get a sense that there is a generational change, a sea-change in the way people are buying. Fewer people understand en primeur; we live in a world where people want instant gratification, and I see fewer younger customers buying en primeur; they don’t mind spending £1,000 on a case of wine, but they want something they can drink tomorrow.”
Furthermore, collectors looking to restock their cellars tend to go for the likes of Lynch-Bages, Talbot, Giscours and Gruaud Larose because these slightly boring, old fashioned names have a strong heritage and they are affordable.”
But these are bottled wines. Gibbs stresses: “The 2015 en primeur release was actually expensive, and while a few merchants said they had a good campaign, most found the price rises too much.”
Consequently, Gibbs says: “People coming back to the market are not buying en primeur. They think that Bordeaux is still playing its old games, so they are buying physical wines, names they know well, wines that have been tasted several times, have decent notes, and cost between £30 and £60 a bottle.
In contrast, Gibbs says that in 2015, for the first time, not even the first growths sold out, leading him to conclude that “there are huge amounts of unsold wine building up in Bordeaux”.
Alarming as that sounds, he adds: “There is a feeling that the châteaux can afford to keep it, and would rather have the supply in Bordeaux than the UK or elsewhere, so they can control the market.”