Crisis sees top Bordeaux wines under the gun

Bordeaux is awash in unsold wine, and merchants are pressuring the top wine producers to drop their prices on the 2008 vintage by 50 percent in order to jumpstart sales.

Sales have skidded to a halt since the economic crisis hit last October. Importers and retailers around the world, suffering from a credit crunch, have frozen new orders and sometimes even cancelled previous orders.

Next week these same customers arrive in Bordeaux for three days of non-stop tastings that herald the beginning of the 2008 futures campaign.

Bordeaux?s top wines, often referred to as classified growths, are sold each spring as futures commodities, one year prior to bottling.

The tastings allow journalists, critics and buyers to test the quality of the vintage and schmooze with the winegrowers, while everyone obsesses about one topic: prices.

Prices for Bordeaux?s top wines have skyrocketed in recent years, doubling and tripling, culminating in a speculative frenzy with the stunning 2005 vintage.

Prices have failed to return to this side of the stratosphere with the last two vintages, and customers around the world are fed up.

Major importers in Britain have threatened to ignore the 2008 vintage unless the majority of the estates drop their prices. The talk of slashing prices across-the-board, however, leaves the Bordeaux merchants exasperated.

"It would be absolutely asinine for the market to ask for an across-the-board price drop of all classified growth," said Laurent Ehrmann of Barriere Freres.

"Eighty percent of the estates have had highly stable pricing policies. Twenty percent are indeed more speculatively priced. There is market pressure for that category to significantly adapt their prices."

The so-called "speculative" wines are the fabled First Growths like Margaux, Lafite and Mouton Rothschild.

Fast on their heels are the so-called Super Seconds like Cos d?Estournel and Leoville Las Cases. A volatile combination of high ratings by US wine guru Robert Parker, new markets such as Asia, and speculation by mutual funds, created a bubble that has exploded.

For these wines, Ehrmann agreed that a 50 percent drop from 2007 prices was needed. "150-160 euros a bottle for a First Growth. That?s a fair price."

"For the First Growths and Super Seconds, there is a real problem," concurred Patrick Bernard of Millesima. In terms of prices, "they must really think about it. The economic crisis is here for everyone."

Nevertheless, customers should not expect fire sale pricing for the rest of the wines on offer.

Bernard expects stagnating prices at the lower end and a 10-30 percent decrease for mid-range wines. Ehrmann largely agreed, suggesting a 10-20 percent price drop for "professionally managed, international brands" such as Beychevelle, Lynch Bages and Chasse Spleen.

All of these winegrowers will take their lead from the First Growths, whose prices serve as an index for the Second Growths. The prices for the Second Growths then serve as an index for the next level, and so on down the line. In a difficult year, timing is everything.

"It would be a good idea for the First Growths to come out first and early if they want to have an impact on the rest of the market," said Ehrmann. "If they want to continue to disassociate themselves, they won?t."

Most feel aloofness is no longer an option. "Exports have melted down, the restaurant business has melted down. Why? Everyone is thinking of liquidating their stock," explained Bernard. "There is no export market that is working. When you?re a leader, you have a duty."

As Bordeaux?s 2008 futures campaign takes off next Tuesday, all eyes will be on the First Growths to give the market a much needed shot of adrenalin, show it the way out of its current paralysis and entice back disenchanted, cash- strapped customers.