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“Short-sighted” Bordeaux En Primeur strategies leave little to no value for the trade

Published:  29 June, 2018

A “lack of wines priced attractively” has been blamed for a less than successful 2017 Bordeaux campaign.

In its latest report, fine wine index and trading platform Liv-Ex called price differences between the 2016 and 2017 vintages ‘arbitrary’, before going on to brand strategies an “ineffective way to establish a price” and “an ineffective way to sell wine”.

As a result, the platform reports its members have seen a decline in sales to £45 million for 2017.

This is just over half of total sales for the comparatively successful 2016 vintage and is closer to 2011, which carries a legacy of inflated pricing.

Volume sales fell by 60%. 

A number of success stories for wines priced close to their fair value for 2016 and 2017 showed En Primeur sales could easily increase if priced fairly, the report said.

But it concluded that a 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 leading to a “squeezed middle”, leaving negociants with no choice but to take on losses as merchants struggle to sell stock.

“Negociants are caught in the middle between the châteaux, who, protected from market forces, price as they see fit, and their merchant customers who are driving hard bargains,” reads the report.

“Negociants are thus 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.”

Earlier this year, Harpers’ Bordeaux correspondent and a producer in the region Gavin Quinney remarked that resistance from châteaux to reduce prices by enough to make the campaign “successful all around”, would cause problems for the campaign.

This was echoed in the Liv-Ex report.

While the main winners were First Growths and popular brands, the majority struggled, with a reluctance to pay close to 2015 prices for wines considered to be around or below 2014 in quality.

This will weigh heavily on the market for years the report said, particularly in the secondary market, when the wine is finally moved from barrel to bottle and shipped for sale to customers.

“While some producers understand the importance of the secondary market, many châteaux 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.”