Bordeaux 2017 futures campaign: “underwhelming” and “spoiled”
8 July 2018
Dear readers, I am enjoying some fresh summer mountain air in the Swiss Alps as I post this text, coming from the informed people at Liv-Ex. But before you read their rather dour assessment of the #Bdx17 futures campaign, just a few words I have heard from Bordeaux. One negociant who has been in the business for many years has judged the campaign as “pourri” or spoiled. “Nearly 75% of the offerings have not been sold,” the negociant added. Basically, prices should have been lower – closer to 2014 opening prices. Indeed, that makes loads of sense, and Liv-Ex says much the same in their summary, so read on…
After a relatively successful 2016 campaign, the UK’s leading merchants’ En Primeur sales halved to £45 million this year, while the average sterling release price of the 2017s dropped 11.8% from 2016. Volumes sold fell by 60%. The sales balance was focused heavily toward ‘winners’ such as First Growths and popularbrands, while the majority struggled and will weigh heavily on the market for years. On the whole there was a reluctance to pay close to 2015 prices for wines considered to be around or below 2014 in quality.
The discourse of En Primeur
The current reference point for pricing appears to be an arbitrary percentage change from the previous year. Not only is this an ineffective way to establish a price, it is also an ineffective way to sell wine. Buyers of En Primeur have access to a wealth of information that allows them to decide on a case-by-case basis whetheror not a purchase is good value. There were a number of success stories for wines priced close to their ‘fair value’, both this year and last. This suggests that En Primeur sales could easily increase if fair pricing, based on readily available information about price and quality, is properly harnessed.
The squeezed middle
The large reduction in the number of cases sold by the trade implies that an ever-increasing volume of wine is building up earlier in the supply chain. This is a trend Liv-ex has been noticing and commenting on for the last few years. Negociants are caught in the middle between the chateaux, who, protected from market forces, price as they see fit, and their merchant customers who are driving hard bargains. Negociants arethus forced to both carry stock and squeeze their margins. Unfortunately for the 2017 vintage it’s likely to get worse for them before it gets better; the comparable examples of the overpriced 2006 and 2011 En Primeur campaigns, both of which are still showing negative returns, should serve as a warning that prices for the 2017s are more likely to go down than up once they trade physically.
Primary & secondary market tension
Greater friction is developing between the primary and secondary markets. While some producers understand the importance of the secondary market, many chateaux owners seem determined to prevent any kind of investment by carefully controlling their supply chain and pricing their wines at a level that leaves little to no value for the trade. This strategy is short-sighted. Without a healthy secondary market for their wines to trade up in value, owners will struggle to raise En Primeur prices in the future.
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Well-written analysis Panos but I think you might have tipped your virtual hat in the direction of those who did get their pricing right, wines like Beychevelle, Canon, Calon-Ségur, Carmes Haut-Brion, and Rauzan-Ségla. We could easily have sold more of any and all of these! As Laurent Dufau at Calon succintly put it: “Good wine at a good price is an easy sell.”