Bordeaux EP 2023

Backfilling is not the answer if you want the prices to come down long term
Errr isn’t it? By backfilling the bordelais don’t sell through their current offering and after a time will reduce the price. If more and more people do this - and it seems this year might well be a turning point - prices will continue to drop and they will adjust future pricing to this new reality till the circus begins again.
 
I’m not sure that anyone in Bordeaux caught up in what one might call ‘the 1855 game’ can actually afford to drop prices, even if they know it makes longterm financial sense?

The châteaux won’t, because of the disastrous effect on the value of all the wine they’ve held back over the last decade or so.

The négociants can’t, because of the disastrous effect on the value of all the wine they’ve failed to sell over the last decade or so.

The banques, who’ve lent small fortunes to châteaux (to put up architect-designed wineries and to replant great swathes of vineyard and to ingest adjacent crus bourgeois) and négociants (to purchase overpriced vintages and to store them when they don’t sell), now find themselves in the awkward position of quietly owning any number of châteaux and several large négoces.

And so from every Gallic perspective the bubble MUST remain inflated at all costs and at any price – every campaign must be a ‘vintage of the century’, reviews must always be ‘best ever from this property', allocations must always be ‘precious’ and sales must always be ‘buoyant’.

As someone who formerly sold and bought en primeur with genuine enthusiasm, it saddens me that it's changed from a mechanism encouraging customers to buy wine to one that encourages producers not to sell wine.
 
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I am not sure I agree with you there Cameron as there is a lot of money illusion. Slowly rising prices rather than absolutely stable prices are the steady state (most central banks target 2% inflation). So for example let’s say you buy some 2023s today and the prices are stable - the same in 2029 as you paid in 2024 - probably not an unrealistic prospect given the supply demand imbalance in the market, you do not break even, you lose big time. For a £500 case the storage costs are about 3% per annum which is worth 16% over five years. But you are not just down by 16%, because you can put your money on deposit at 5% as well. You might be down by 30% or more after five years. It is hard to justify buying any of these wines at these release prices. I would get more interested if they were significantly 2019 release prices but they are not. And don’t forget grade inflation. A 92 point wine a decade ago is a 94 point wine today. This campaign is destined to fail like the previous two have which will deepen the crisis in the EP system.
 
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Christopher describes articulately the problem the Bordelais face. But as Ben notes market forces will eventually prevail unless an outside actor can bail out the system. That outside actor would be the European Central Bank. I can’t see that happening. And the French government is nearly bankrupt. We will be in a buyers market for some time to come.
 
If I was a major merchant I'd think about pulling a fast one. Advertising things slightly below the release price (say 5%) and getting the orders in but actually not buying anything yet and promising delivery in 2-3 years. Then in 2-3 years buy said quantities of wine at lower than release price and make some money and send the customers their wine. Win win no?
 
Ian's point that the Bordeaux EP pricing goes back further (and I think it has been an issue for decades, with a fine vintage selling too cheaply, prices then going up, and the Bordeaux trade taking much too long before accepting that there must be a correction) made me look up my Morris & Verdin EP offers 1995-1997. In the latter year we hardly offered any reds but sold endless mixed cases of Sauternes. The reports came out before most prices were offered, though I have tracked down a few

A few specific examples for cases of 12:

Poujeaux 122 went up to 133

Calon Segur 145 to 180 then back to 148 for 1997

Pontet Canet 148 to 184

GPL 165 to 290

La Fleur Petrus 295 then 275 (less good on the right bank in 1996 and Moueix came down across the board) then back to 295 for 1997. In contrast it ws the start of the explosion for l'Eglise Clinet: 285/12 in 1995 and 550 in 1996.

First Growths 590 to 895*

* Except Haut Brion which came out very early for 1996 at 625 and so lost around £2.5 million assuming 10,000 cases.

Images of my thoughts on pricing at the time for the three vintages:

1995 EP.jpg1996 EP.jpg1997 EP.jpg
 
If I was a major merchant I'd think about pulling a fast one. Advertising things slightly below the release price (say 5%) and getting the orders in but actually not buying anything yet and promising delivery in 2-3 years. Then in 2-3 years buy said quantities of wine at lower than release price and make some money and send the customers their wine. Win win no?
Unfortunately this would be fraud by false representation (unless you were explicit about what you planned to do).
 
Unfortunately this would be fraud by false representation (unless you were explicit about what you planned to do).
I’m not sure it would be, unless something the merchant said or did implied that they held stock or had some kind of enforceable right to stock. It’s just uncovered short-selling.
 
I’m not sure it would be, unless something the merchant said or did implied that they held stock or had some kind of enforceable right to stock. It’s just uncovered short-selling.
I'd argue that selling EP represents that you're giving someone the right to stock - which would not actually be the case. Could be a good Moot problem no?
 
I'd argue that selling EP represents that you're giving someone the right to stock - which would not actually be the case. Could be a good Moot problem no?
Quite a tough argument I reckon! I suppose with ep you'd have to run some kind of argument that as a matter of standard market practice wine merchants will only offer for stock they have or have rights to and that's what the reasonably informed consumer would understand from a simple offer to sell ep. But is that really market practice? And uncovered selling is such established business practice generally (outside the market for some types of financial instruments). I can agree today to sell someone 3,000 sacks of refined sugar for delivery next week even if the only sugar I own right now is an open packet of Tate & Lyle caster in my kitchen cupboard. That's not fraud, it's just risky.

I do wonder what kind of commitments the average ep-hawking merchant receive to cover their commitments to customers in practice. It wouldn't surprise me if the commitments they receive are less robust than they (or their customers) would like in some cases.
 
In wine terms, wildly unethical to boot in my opinion. Two examples have been mentioned above but there are more I am sure.

In terms of commitment that we receive, an invoice from the negociant you buy from, and in quite a few cases, the property knows what you buy. Latour, for example, know exactly how many cases of 2015 & 2017 I bought.
That to me seems very robust particularly where the property knows (and therefore presumably keeps an account of) what you and everyone else has been sold (in the sense that an agreement to sell has been reached) so you have a kind of full traceability 1:1 through the chain (assuming the accounts are accurate).

To contrast another example from another industry: when you might think you actually own some shares in a listed company, the position can be very very much more tenuous than that.
 
In wine terms, wildly unethical to boot in my opinion. Two examples have been mentioned above but there are more I am sure.

In terms of commitment that we receive, an invoice from the negociant you buy from, and in quite a few cases, the property knows what you buy. Latour, for example, know exactly how many cases of 2015 & 2017 I bought.
Did the 2017 Latour sell well Tom?
 
Did the 2017 Latour sell well Tom?
Sort of - not amazingly. Everyone wants the 2016 but not the 17! It showed rather well when I tried it in April - not a blockbuster by any stretch but extremely good wine, and should be a bit more approachable than the usual timeframe for Latour. I took a bit of extra stock for the 2017 to up my allocation for 2016 and I'll sell it 1:1 next year.
 
Everyone wants the 2016 but not the 17! It showed rather well when I tried it in April - not a blockbuster by any stretch but extremely good wine, and should be a bit more approachable than the usual timeframe for Latour.
So worth the current retail price of something like £500 per bottle (and over £1000 in any self-respecting restaurant), would you say?
 
In the eye of the beholder, surely. Is Rousseau worth £1k a bottle en primeur and £2.5K+ in the open market? I love GPL at the £50 a bottle IB mark, but does it have the sheer finesse of a Latour or a Lafite? No - but is it worth 10 times the price? To some it is, others not... I will indulge myself in a few bottles of very top wine this en primeur - probably Lafite and Cheval Blanc and I will drink them on special occasions. But I don't have the level of disposable income to play regularly at this level.

The only Latour that's blown my mind is the 1970 from a cold cellar - although I am coming to realise that I'm probably a Lafite guy.

To put it a different way - much as I'd love a Ford GT (in Alan Mann Racing colours, of course), I'd also be very happy with a Dark Horse Mustang. The price differential is not dissimilar.
 
All this talk on the merits of the EP campaign has made me thirsty – I’ve pulled the trigger on some Pontet Canet and La Lagune. Some more to follow I expect.

That said, I’m determined to make this my last campaign (though I did also say that in 2020). At 51, my runway isn’t getting any shorter and I’m slowly learning that there can sometimes be more value found at Auctions.
 
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In the eye of the beholder, surely. Is Rousseau worth £1k a bottle en primeur and £2.5K+ in the open market? I love GPL at the £50 a bottle IB mark, but does it have the sheer finesse of a Latour or a Lafite? No - but is it worth 10 times the price? To some it is, others not... I will indulge myself in a few bottles of very top wine this en primeur - probably Lafite and Cheval Blanc and I will drink them on special occasions. But I don't have the level of disposable income to play regularly at this level.

The only Latour that's blown my mind is the 1970 from a cold cellar - although I am coming to realise that I'm probably a Lafite guy.

To put it a different way - much as I'd love a Ford GT (in Alan Mann Racing colours, of course), I'd also be very happy with a Dark Horse Mustang. The price differential is not dissimilar.
Very well put. Exactly the same applies to cars! You can buy a good Elan 26R replica for £100k, a Porsche sports racer of similar vintage might be $2m... does it drive any better? No, nothing drives better than the Elan. The difference with cars of course is that you don't consume them by using them! Although there is always transaction cost to consider and the market may move of course

The old trick was always to buy 2n cases at EP, then sell n cases for a profit and drink cheaply or for free. But I'm not sure this trick can be pulled any more unless you spot the up and coming properties. As others have pointed out there is zero case for investment when 2023 is higher price than 2019.

that's why I haven't dipped into 2023 yet in case you were wondering Tom :) I still might though
 
I like the the line I read recently - a tale of wine trade success and wine critic oversupply.

How many times have I seen potential 100 point wine hit my inbox this campaign in an average vintage. Pass the sick bucket.
 
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