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Three great forces rule the world: stupidity, fear and greed. - Albert Einstein
Following a recent spate of 'horror' stories regarding the alleged collapse of the Bordeaux fine wine market, I thought it necessary to react with a factual and realistic position regarding the same. . .
Much if not all of the news is centred on one particular vintage, that being the 2005. It is absolutely true that prices, particularly from the First Growths have buckled - Château Lafite Rothschild being the main centre of attention. If you recall I wrote about Lafite's plummeting prices in my email titled "So, What impact has this had on the fine wine market?" I hear you ask . . . which was sent on 7th October 2008. A copy of the same is available upon request or can be viewed on our website.
I have been resolute; some would say commercially naive, by not supporting many of the 2005 Bordeaux during the En-Primeur campaign (2006). My piers' relished the great Bordeaux vintage and in my opinion were thinking more with their wallets and not their heads. Perhaps that's were my commercial naivety comes into play and as a consequence, our 2005 Bordeaux En-Primeur sales were modest particularly compared to my fellow colleagues' in the trade.
I've just re-read the several hundred emails, which I sent out during the 2005 En-Primeur campaign. One dated 6th July 2006 was particularly poignant and was appropriately titled "Are the 2005 going to crash?" I have extracted the following:
"Cards on the table time. I have no intention of purchasing any of the 'top wines' as I truly believe they are over-valued and the market will witness a back lash - Forgive the language but a lot of people are extremely pissed off by the 05 campaign/politics and have no intention of supporting the Bordelaise/& or Merchants greed. It is a huge risk and my advice is to hold off. . ."
I firmly believe that the 2005's are not as great as many will have you believe - This is an extraordinary statement and goes fully against the grain. Every leading wine critic and 99.99% of the wine trade would certainly have you believe otherwise, particularly the latter however, how can they argue now? I predicated a 2005 Bordeaux crash/backlash in July 2006 and that is exactly what's happened! So, why have the 'top' Châteaux collapsed?
Put simply, stupidity, fear, greed and they're not as good as the 2000's, which I must stress are holding their prices firm - For the avoidance of doubt, price crashes are not endemic.
I re-ran an exercise to see how 'great' (allegedly) the 2005's are and I used Robert Parker as my only source for this data. Views & scores are subjective however, Parker is the most illustrious critic of our time and I wanted to have consistency with scores/& views from one leading critic.
Firstly, I compared the 2000 & 2005 scores from each main appellation. I took the obvious view and firstly looked at the '100' pointers. The alleged greatest vintage on record (2005) received two 100ers both from the right bank. I also wanted to see how many Châteaux received either 98 or 99 points. . . Fifteen Châteaux from the 2005 received these scores however, a whopping ten came from the same appellation of St-Émilion! This ties in with Parker's observation that "many northern Médoc's do not possess the fat, opulence, or charm of the top 2003s, and increasingly I doubt they are as well-balanced and compelling as the finest 2000s".
It was a comparatively similar story in terms of the right-bank dominating the 2000 standings however, nine Châteaux received the perfect 100 points (3 x left banks and 6 x right-banks) and seven Châteaux received either 98 or 99 points of which, three came from St-Émilion.
I personally believe that the 2000's offer more consistency in terms of quality compared to the 2005's. The right banks for both vintages were and are incredibly strong however, the 2005 left bank appellations (the northern Médoc's) were are still inconsistent and woefully overpriced. I firmly believed that many of the 'top' left bank 2003's offered much better value, particular during the 2005 En-Primeur frenzy.
I stumbled across an email, which I sent out on 22nd June 2006 concerning the first-tranche price for the 2005 Château Lafite Rothschild. "Note: - 2003 Chateau Lafite Rothschild (100 Parker Points) is currently selling at £3,100 per case IB. To be quite frank the Bordelaise are just being bloody arrogant & greedy. Why on earth would you pay upwards of £4,000 for the 05 (Parker 93-96) when the magical 100 pointer (03) is available £900.00 cheaper per case"!
"The 05 Pontet Canet scores higher in Pauillac than Lafite (94-96) - Available @ £495.00 per case IB - It is evident that Lafite has just given itself licence to print money".
For absolute transparency, the following 2003 Châteaux received 100 points - Lafite Rothschild, Latour and Ausone and five Châteaux received either 98 or 99 points. . .
Please do not get me wrong, I do believe and support that the 2005 Bordeaux vintage should be recognised as something special however, I will never support the prices or the sales tactics as used by many of my piers'. The collapse of some 2005 prices is sweet justice in my book and has long been on the cards. My only concern lies with those poor soles that purchased the 'top' left banks at around £9000.00+ per case. I fear they'll not see a return to these lofty prices for a considerably long time. . .
Perhaps this will be a big wake up call to the wine trade during the next 'great' En-Primeur vintage? There I go again, so naïve!
Q&A Time. . .
Is the fine wine market in a recession or heading for one?
Fine wine generally shows less volatility than the Stock Market and tends to flatten out in times of recession however, some prices have fallen but this has been very specific to certain vintages & Châteaux (as above). Demand for fine wine has understandably slowed during the past four weeks, which is due predominantly to economic nervousness. Much attention is needed with the running or maintaining the health of worldwide businesses and unfortunately, the luxury of fine wine has to take a back seat.
Should I sell now?
Put simply, no. Fear drives a recession and selling now would inevitably impact on your profitability. I personally think the fine wine market is currently suffering from a touch of the 'deflation' syndrome. There is certainly money out there however, those spenders are waiting for cheaper prices to come in. That being said, we have received significant demand from the continent for several 2006 Bordeaux - Mouton Rothschild being the most requested. . . (I suppose in preparation for Parker's 'bottling' scores, which should be released April 2009)
Is it a good time to buy?
Yes, but its very dependant on which wine & vintage. There are some real bargains out there as individuals dump stock at reduced prices - I suppose one mans loss is another mans gain!
I'm still nervous - What shall I do?
Call or email me. I would be very happy to talk at length about your individual portfolio.
My Very best wishes
Stuart McCloskey
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