Hello forumites! It’s that time of year again when En Primeur kicks off, buyers get grumpy recalling the release price of Bordeaux 1998, and we scratch our heads wondering why we should buy wine early when the producers have taken most if not all of the upside off the table.
Then of course there’s value destruction. The joy of seeing the cost of an EP purchase subside in the cold, rational light of day, economic headwinds, a pause in discretionary spend out of China and a general market downturn, leaving you wondering why you got sucked in…yet again.
Then every few years there’s a reset. The Chateaux come to realise that over-optimistic pricing is killing demand, putting off new market entrants, and ceding share of wallet to completely different categories, and that it’s not a given that the world will flock to buy Bordeaux as futures. And if they don’t buy futures, will they discover how brilliant Bordeaux can be?
The role of négociants is of course pivotal. After last year’s very poor campaign, which should have got market traction but didn’t due to unappetising pricing, you can imagine the conversation that took place.
“Guys, have you seen the rates on loans these days? Please don’t think we’re going to buy your releases this year if you don’t do something significant. We played the game when cost of money was low or negative (in real terms after inflation). But if we borrow more at market rates to fund working capital to buy your 2023 releases, we’ll be writing down the value of stock within months. There’s a real risk we’ll be insolvent.”
“If you value 3-tier distribution as an efficient mechanism for distributing 8-10 million bottles released each year by the top 60+ Bordeaux brands, then please take this warning seriously”.
“Oh, and please don’t it drag out for months like you normally do. It’s hopeless turning up at Vinexpo HK and telling buyers how great the wines are without being able to sell them a drop.”
2023 is the year of the reset. It has to be. It’s existential.
The last reset was when we thought the world was about to end in 2020. Whilst the sentiment isn’t the same this time around, the potential dangers to the world order are just as great, if not greater. And we need to bear in mind there are plenty of 2019 prices that have barely budged since release.
Cometh the moment, cometh the man/ woman. And it seems like the Chateaux are stepping up to plate.
So here’s a campaign that will kick off the week after en primeur week for professionals, and be more or less done and dusted before the end May. The big guns will lead the charge, with the advance party coming out early May, and the rest tucked in just behind.
Prices will be well down, and what remains to be seen is, will the reductions be enough to light the blue touch paper, entice buyers into the market and possibly to kick start the market more broadly?
I’ll be travelling a lot in May this year, so regrettably the amount of relative value analyses we’ll be able to do will be much reduced. But my colleague @josh.hawes will be helping out and we hope to at least cover the biggest releases. For everything else you can always run relative value analyses on Wine Collector.
