In some places it’s already happened but be prepared for the wider ripple !!

I’ve been expecting it to happen, and it now seems that there’s a chain of events underway that will be difficult to halt, or maybe even to slow down.

For a while now the price of burgundy wines has been so resilient that you would rightly wonder what might be required – in a geopolitical sense – to apply the brakes to this runaway pricing train.

The region like to point out that the average price for their wine is quite low; after I published their most recent key figures, Vice-President of the BIVB, François Labet commented “This is a real blow to those who constantly say that Burgundy is too expensive. More than 70% of Burgundy’s production includes wines costing less than €10 (in French supermarkets). It is true however that a good 10% is more expensive….. but it is a very small part of the whole production.”

But life is more complicated than this view – as phrased.

I will not use the names of the traders or producers that have provided the following info, as we have no beef with anyone who tells it like it is – but maybe their colleagues might prefer that this stays, for the longest time, under wraps:

The high-value secondary market
A merchant who has business in this market confides, for a large part of this year the secondary market for ‘high-end’ wines has taken a tumble, there was no immunity even for the blue-chip producers – for instance, Rousseau and DRC – their wines are still selling and are still seen as ‘safe bets‘ but their actual sales prices have been trading at a discount of 30-40% of ‘sticker-prices.’

If that’s the case for blue-chips, what about the much talked about new names? I could use Bizot or Lachaux as examples – an auction contact in ‘Asia’ tells me that those wines are currently unsellable – at least, not with the reserve prices wished by the sellers – and that’s largely because those sellers already bought high!

In the current context of the fine wine market, you can look at it like any other investment; if you bought at release pricing, or invested a few years ago, you can still be very happy with the resale value of your wines – if that’s an important consideration for you. If you bought at or near the peak of pricing – ie in the last 1-2 years and need to convert that investment to hard cash, I believe the appropriate metaphor is – you will be taking a bath!

Outwardly, this is not visible if you scan the price lists of the major sellers of traded fine wine, and that’s because, ‘If we were to update our spreadsheets with the actual prices that have been traded in the last 3-6 months, we may have to write down our whole trading book by close to 50% – which will, of course, affect the valuations of our stocks and so our company too! Currently, our worst nightmare would be a client who came to us needing to urgently ‘liquify’ a large parcel of named wines – they certainly wouldn’t achieve half of what our pricelists indicate – assuming we can even find buyers!‘

As another contact puts it ‘The people with the money and the interest in these wines still have both but they can smell the blood in the water and seem pretty confident that they will be able to buy all these same wines in the very near future for a much smaller price than today!‘

Anyone who has listed some of their cellar with traders in the last year will recognise the paucity of transactions…

New wine coming onto the market
I have, for probably too long, been suggesting that a pricing correction is inevitable. I still think there is the possibility of even higher pricing for some sectors of the market where rarity is an important factor – but we have to talk about the bulk of burgundy wine – the 70% that is regional and villages wine.

We, and the region, are more than happy to have seen the delivery of two vintages with volume – 2022 & 2023. To the largest extent, neither of those two vintages are on the market yet but the January – sometimes December – ‘en primeur’ offers (of UK merchants) for the 2022s will be winging their way to your inboxes very soon.

2021 pricing jumped (again!) due to frost and a very low volume. 2022 has returned to a normal volume. So 2022 can be cheaper? Nope!

Whilst some domaines have indicated to me that they will not increase their 2022 prices – or may even reduce them a little – the vast majority of François Labet’s ‘70%’ will be based on the bulk pricing of wine: 2021 was a small volume vintage that followed 2 other small volume vintages (2019 & 2020) so the bulk wine of 2022 came onto the bulk market in the context of almost no stock – so increased in price again as people fought to have something to sell. But there is pushback:

• Look at the new strategy of Artemis – owners of Château Latour and now Clos de Tart, Eugenie and Bouchard Père et fils; 80% of Bouchard’s production was a handful of, non-domaine, regional cuvées. In 2023 they refocus only on domaine wines – so the equivalent of millions of bottles of ‘Bourgogne’ have been released back into the bulk market – ie there is less bulk demand at the same time that there is more available wine.
• Other large Beaune ‘maisons’ tell me that they have significantly cut their 2023 purchases on the bulk market, citing that they won’t be able to sell those wines at a profit.
• Even exporters from the region are telling me that they are very pessimistic for the 2022 campaign to come ‘At village and regional level I haven’t been able to sell wine for 6 months but at the same time, some of our producers are preparing price increases for 2022!‘
• One step closer to the consumer a UK importer told me that a well-known producer in the Côte de Beaune made a cuvée of Pouilly-Fuissé for them. In 2021 the price went up 25% – and the merchant understood and accepted – you can’t escape the frost and hail! When they came to talk about 2022 the producer was asking for an additional 30% – so the importer simply walked away.

Did I say that there was no stock? I should have been more precise – low stock in Burgundy.

Despite such a low volume vintage, you can still find plenty of 2021 on store shelves and from merchants in your region. This is an issue with the route to market for wine; the producers may successfully sell all their 2022 wine to agents/intermediaries and cavistes and assume that all is well – but if those wines don’t sell to the end-customers, those same agents/intermediaries and cavistes won’t be nearly so ready to buy any 2023s – so the producers have some period of insulation from the true market.

Here I can make parallels with Bordeaux: When I first moved to Switzerland in 2000, the wineshops were full of the 1997s – a modest yet more expensive vintage than the better received 1996s. The Bordelaise twisted the arms of their customers with the threat that there would be no allocations of the vintage with the magic number ie ‘2000’ if they didn’t also buy plenty of 1997. It was 5-6 years that those wines clogged up the Swiss supply chain – unloved and unsold – before we suddenly saw 50% discounts to move the seemingly unending stocks. Bordeaux soon became the watchword for expensive wine and lost much custom because if it – it was a reputation earned.

Reputations ‘Earned’
Today, the majority of Bordeaux is not that expensive – at least compared with the current pricing expectations of the Burgundians – but 20 years later, their reputation as ‘expensive’ endures – it was a reputation earned. You can also look at what bad Beaujolais Nouveau did to the market for Beaujolais’ best wines – another reputation earned. Is it too late for Burgundy to shake off the reputation for expensive? – have they earned that reputation? If they have, it will also hang around their necks for a generation…