Bordeaux 2022: A vintage of the century, cheered experts and critics. But that is only half the truth: the rising prices are causing the system to crunch, reports Robbie Stevens, Senior Broker at the London wine trading platform Liv-Ex, in an interview with Matthias Stelzig.
Robbie Stevens has been Senior Broker of the international wine trading platform Liv-Ex (London International Vintners Exchange) since 2014 and brokers top wines to traders, investors and investors from 42 countries. Liv-Ex was founded in 2000 by two wine-loving stockbrokers. With the advent of the Internet, Liv-Ex developed into the world's largest trading platform and the most important barometer of the performance of highly traded wines in the fine wine market. First and foremost: Bordeaux.
Let's start with the Bordeaux 2022 vintage, which was recently sold with the En Primeur campaign. The growing season was record-breaking with the highest temperatures and the lowest rainfall. In the end, however, the vines coped well. In addition, the critics gave it very high ratings...
Robbie Stevens:...not everyone had expected such a good vintage. So higher prices were no surprise.
A premium of seven or eight per cent was generally expected.
Robbie Ste vens: On average, it was 20.8 per cent this year. As a result, a case of 12 wines costs over 3,000 euros instead of 2,500 euros.
Fine wine buyers have already become thoughtful in 2021. Many critics rated the vintage lower on average than 2020.
Robbie Stevens: Nevertheless, prices have risen and the 2021 campaign was one of the most unsuccessful in recent years. 2022 at fair prices could have revitalised this market and attracted new, younger buyers. Instead, many retailers left their buying options and wondered why they wasted two months of their time on a campaign whose purpose and sustainability has become questionable for them.
Despite the high scores from critics?
Robbie Stevens: The influence of the critics is not the only deciding factor. The vintage does not fit into the price structure. Prices have continued to rise in recent years, while high ratings - and the interest of buyers - have declined. Well-rated wines from years such as 2009, 2010, 2016 and 2019, which can already be drunk, are cheaper than 2022 wines. That is unreasonable. But the market is fragile. Champagnes have lost nine per cent and Bourgogne wines eight per cent.
Originally, the en primeur system had great benefits. The négociants buy the harvest from the winegrowers at a discount, but pay before bottling. This kept the winegrowers financially solvent, and the brokers continued to sell the wine options during this time.
Robbie Stevens: I know from many Négoçiants that they now offer discounts to their customers in order to increase sales. This means that part of their profit falls by the wayside. However, purchasing policy is often involved in these decisions: the middlemen are allocated fixed quantities. In order to retain them, they have to buy at least a certain number of bottles in each vintage. Otherwise they lose their rights. At today's prices, many château owners no longer need all this. Collectors who want to buy locally are frustrated. They can no longer find fine wine at a favourable price in the Bordelais. "What's the point?" was asked more and more often during the campaign.
Have the château owners become too greedy?
Robbie Stevens: They haven't realised that the world has changed. Bordeaux Grands Crus are no longer the measure of all things for more and more fine wine buyers. Because Bordeaux wines have become increasingly expensive in recent years, they have sold less well. 2016, 2019 and 2020 had better ratings. However, some châteaux are keeping prices high even without corresponding demand because they think they can increase their brand value in the long term. If they have the cash flow to pull it off, it could work. But it doesn't have to.
A château can sell its harvest in a single morning if the price is right.
Wouldn't it be wiser to demand realistic market prices?
Robbie Stevens: A château can sell its harvest in a single morning if the price is right. If it is too high, it may have to wait for years - or forever.
Château Angélus asked 38 per cent more than last year. Château Troplong Mondot added 44 per cent. Older vintages from both wineries are being traded seven and 14 per cent cheaper wholesale.
Robbie Stevens: Château Figeac took the cake with a 55 per cent mark-up. This could be due to the 20 per cent smaller harvest and the classification as Premier Grand Cru Classé A last year. But it is still a huge house number. Many château owners seem to think there is no way around it. On the other hand, the Liv-Ex 100 has risen to 457 points in the past twenty years. A whopping 350 per cent gain.
The biggest price jumps took place at the end of the campaign. Wineries held back beforehand to see how far competitors' prices would rise.
Robbie Stevens: Liv-Ex measures the relationship between price and quality using the fair value method. This sets the critics' ratings plus the prices for older vintages in relation to the prices currently being asked. According to this method, 2022 is 36 per cent above the fair value.
What does this mean for the price trend?
Robbie Stevens: The Liv-Ex Index 100 fell by 3.3 per cent, the Index 1000 by 4.8 per cent. This makes the rising prices a paradox. It is no surprise that there is now a pause. The châteaux would have made better use of it with prices that attract more buyers to this declining system. However, because wines from the 2018 to 2020 vintages are available on the market and cheaper, they have sold less. This particularly affected second-tier châteaux, which achieve smaller profit margins than the big houses. The situation is not exactly rosy for the lower tiers.
Would that be a tip for newcomers and price-conscious buyers?
Robbie Stevens: Possibly.
Due to climate change - and the possibilities of cellar technology - wines are maturing much earlier nowadays. This usually means that they don't keep as long as they used to. The period in which collectors can relax and hope for an increase in value is therefore getting shorter.
Robbie Stevens: I don't want to speculate on that.
Vintage 2022 is 36 per cent above fair value
What about the development of Barolo and Brunello?
RobbieStevens: The Italy 100 Index has risen by 57 per cent in the past five years. Sassicaia and Ornellaia are in demand and are generating demand. In Barolo, the 2016 vintage received great acclaim. The quantities are right, and this quickly creates a snowball effect: buyers are observing this and are also interested in other vintages.
Which regions will play a more important role in the future?
Robbie Stevens: Bordeaux used to dominate 95 per cent of the secondary market. Today it is still 35 per cent. Bordeaux has not lost any volume - there is simply a large supply from other growing regions. Bourgogne and Champagne have been in the mix for a long time. Italy now accounts for 15 per cent. In the past 15 years, we have seen many Californian wines. South Africa, Chile and Argentina are coming, Georgia not so soon. As a rule, such origins establish themselves on the secondary market first.
How much further will fine wine prices rise?
Robbie Stevens: I'm not making any predictions. Five to ten years ago, Domaine de la Romanée-Conti was traded for 5,000 or 10,000 pounds. Today it's £20,000. Who's to say it won't be 30,000?
How about investing in German wine?
Robbie Stevens: People know names like Egon Müller, Wittmann and J.J. Prüm. But the market share is minimal, so a lot can happen. In 2018, Germany held 0.1 per cent of the market, in 2020 it was almost one per cent, in 2022 only 0.5 per cent. So you could say that the market share has increased fivefold since 2018. But you could also say it has halved in the past year. It's all a question of perspective.