I am sitting here wondering if we – and by “we” I mean wine merchants – are witnessing a rather big mistake. It’s common practice in Bordeaux to make a conditional offer to merchants that ties in a different wine at En Primeur to the one being sold. In effect you are sometimes forced to buy cases of Chateau X when you only really want Chateau Y to seal the deal. En Primeur is a speculative business – you are buying wines whilst in barrel to secure your supply at a price that – hopefully – will be lower than the bottled price when it comes on to the market 2 years later.
In the old days selling at En Primeur was a way which chateaux ensured they had enough funds to carry on with the current harvesting and wine making. The 2010 En Primeur prices, as we all know by now, have shot through the roof and having to take cases of wines that you don’t really want squeezes your purse strings. At these prices wine merchants have little or no margin to make on the wines and for some wines there is no market at all as few people are buying. Not naming names but one negotiant has already gone bust in Bordeaux this year. I am not blaming the negotiants – they are having to put a brave face on the prices chateaux owners are demanding. Privately negotiants are telling me they dislike the situation as much as I do but their hands are tied. The classic case in point this year is Chateau Rieussec.
Coming from the Lafite Rothschild stable Rieussec is being offered alongside Lafite’s more well known wines – Duhart Milon for example. The result has been that merchants are scrabbling for their allocations of Lafite etc and, as Rieussec is tied in to the conditions of sale, cases of Rieussec are now flooding the market. Comments on Twitter have been echoing this and suggestions as to what to do with it have been from running your car on it, swimming in it and having a party with it. Joking aside this is a real problem for a great wine and for wine merchants alike. Rieussec is considered second only to d’Yquem and this is not a good situation for such a wine to be in. Some merchants are offering a “buy one, get two” and if you take Bill Blatch’s advice over at Bordeaux Gold it would be a very good idea to snap this offer up asap:
“Driven by China and associated speculation red wine prices have increased dramatically. Sauternes prices have remained reasonable (until now) and currently represent fantastic value in comparison. For example, for 2010 En Primeur you can buy nearly 3 cases of Ch Coutet or Ch Suduiraut for the same money as a single case of Ch Pontet Canet, Ch Montrose or Ch Pichon Baron – Crazy! Now that it is legal to import Sauternes into China this situation will not last for much longer.
Frankly, I advise anyone to buy as much Sauternes as they can drink and afford. Old vintages or new there has never been such a glut of good Sauternes at reasonable prices.”
As wine merchants we bemoan the fact that we have to take Rieussec in order to acquire the wines from the Lafite stable that we want (please don’t think this only applies to Lafite as there are plenty more examples to choose from). However are we making a big mistake? We might be.
Bill mentions the fact that China can now buy Sauternes – before September last year Sauternes was banned in China due to its sugar content (see my blog Sauternes and Sweet Wine in China). This was because they contain more than 250 mg of sulphur per litre, more than the limit Chinese authorities established for all wines. (This was the international norm for dry wines; not for sweet wines.) Therefore China is only just waking up to the delights that Sauternes can offer . . . and the Chinese do have a penchant for sweet wines. Ice wine is extremely popular in China already; China itself is home to the largest Ice Wine estate in the world at Liaoning as well as being a top importer of Ice Wine from Canada.
Last May Christie’s auction of the Liquid Gold Collection in Hong Kong smashed all their previous sales records. The lot consisted of 128 bottles and 40 magnums of Château d’Yquem that span three centuries, the largest collection of Château d’Yquem ever to come to auction. The lot sold for just over HK$8 million, making this the most valuable wine lot ever sold globally by Christie’s, and is the world auction record for Château d’Yquem. This seems to reflect an appreciation of Sauternes and a demand within China . . . but the buyer was from Europe.
D’Yquem’s parent company LVMH already has a good business network in place in China – in 2008 LVMH acquired a 55% stake in one of China’s top producers, Wenjun Distillery. Wenjun Distillery make a a premium baijiu (the traditional spirit of China) and is the first Asian brand to be owned by the LVMH group. LVMH are planning the appointment of a permanent d’Yquem ambassador for China.
Jane Anson has reported in her excellent The New Bordeaux that Chateau Guiraud is to open two storage cellars for its wines in Asia, one in Hong Kong and one in Shenzen, China: “Marc Brugalière, a Hong Kong-based representative for Bordeaux negociant The Wine Merchant, said, ‘It seems a positive development, and certainly logistically makes it easier for us to arrange tastings on the ground. If every chateau started doing this, it might get complicated, but overall it should be positive for Sauternes to have someone proactively promoting the region.’ ”
Latest figures from the Bordeaux Wine Bureau (CIVB) recorded that sales of Sauternes wines to Hong Kong and China rose by 50% over 2010. Jing Daily (which reports the latest news about crucial developments and current trends in China’s luxury, business, arts, and cultural markets) noted in May that Château d’Yquem is quietly becoming something of a “must-have” for some of the more fashionable drinkers in Shanghai and Beijing and that sweet Bordeaux wines are an area that they will probably see rapidly growing in visibility in coming years.
Will wine merchants regret selling the First Growth Rieussec at Fourth Growth prices in years to come? Probably. If it does take off in China Rieussec might be like gold dust one day. Those who are wine investors may see a return if they can sit on the wine for a couple of decades . . . maybe less if China continues its rapid growth in wealth. But who can afford to wait for decades? The wine drinker in me is delighted that I can snap up such a great wine at such a silly price – however the wine merchant in me is saddened by the crazy practices the Bordelaise chateaux get up to in the business of selling wine. At this rate the bubble will burst and certain chateaux will lose the traditional customers they have always had.