Why Big Red Diary?

Random ruminations…

The Market
A trade source tells me that there are significant quantities of 2003, 2004 and 2006 that are still in the ‘pipeline’, and with hardly any 2007s sold, the coming 2008 en-primeur campaign could be very messy – that’s before you factor-in whether January will still be too early to show some wines!

In the end, the wines will have to find their correct price/position if they are to sell – but before we focus on prices, what exactly is selling?

Another trade source, this time in the UK, tells me that there is plenty of business if you are prepared to fight for it – even a growing business versus 2008 – but that business is in wines to drink, priced at £7-15, the market for wines @ £40+ simply stopped for them in 2009. The market in France is reasonably ‘steady’ as they were not as badly hit by recession as UK/US/Germany, but the more pessimistic producers now see the US market as only an ‘opportunistic market’ i.e. one that wants highly rated vintages, others will only sell in close-out deals; this is already happening for the 06s, and will likely happen for 07 and 08 before they overpay (again) for 2009s…

Back to pricing, and a simple way to illustrate the problem for the burgundy producers; remember that successful £7-15 price-range in the UK(?), well in my market, it’s equivalent to 12-26 Swiss francs – now let us look at the pricing of 2007 Bourgognes offered in Switzerland in the last months – and I mean Bourgognes:

  • Domaine Arlaud (Morey) Bourgogne Rouge Roncevie 24 SFr
  • Domaine Guyon (Vosne) Bourgogne Pinot Noir 26 SFr
  • Domaine Leflaive (Puligny) Bourgogne Blanc 38 SFr
  • Domaine Leroy (Auxey) Bourgogne Rouge 25 SFr
  • Domaine Pierre Morey (Meursault) Bourgogne Pinot Noir 18 SFr
  • Domaine Pierre Morey (Meursault) Bourgogne Chardonnay 24 SFr
  • Domaine Marc Morey (Chassagne) Bourgogne Chardonnay 24 SFr
  • Domaine Morey-Coffinet (Chassagne) Bourgogne Chardonnay 21 SFr
  • Domaine Denis Mortet (Gevrey) Bourgogne Blanc 28 SFr
  • Domaine Denis Mortet (Gevrey) Bourgogne rouge Cuvée de Noble Souche 33 SFr
  • Domaine Thierry Mortet (Gevrey) Bourgogne Pinot Noir 24 SFr
  • Domaine Tollot-Beaut (Chorey) Bourgogne Pinot Noir 24 SFr
  • Domaine Régis Forey (Vosne) Bourgogne Pinot Noir 20 SFr

Now that’s sobering; and note that Switzerland is usually a cheaper market than the UK, yet most of these wines would struggle to find a buyer in what was the largest market for burgundy wines in the world (the UK), – how then will villages, 1ers and grand crus sell?

For the 15 years I have been buying burgundy, these entry-level wines have been a cheap entré, a slightly dirty window if you like, to the ‘jewels’ of the Côte d’Or, but many worthwhile bottles are to be found in this segment. Historically (2000-2006) villages wines have cost 20-35+ SFr, 1ers 25-50+ SFr and Grand Crus 45+++. Pricing of this order has made strong and consistent markets for producers, okay the weather has helped too, but the first cracks began to appear with the 2005 vintage; in truth, in very many cases it wasn’t the producers, it was the intermediaries, surfing a wave of Burghound scores that decidied to cash-in on an exceptional vintage with prices 2x what went before for middle-range wines, and 3-5x for the ‘covetable’ bottles. It wasn’t just the merchants though, some producers also spotted an opportunity; Joseph Drouhin, a long-time watch-word for value and quality had many 2005 bottlings at 2x the price of their 2001s – note, domaine bottlings too, so their costs had remained relatively constant in this case.

When 2007 villages wines become routinely priced at 70 SFr it’s clear that a ‘correction’ will be needed, the first step seems to be the lower prices reported in my diary for 2008 Henri Boillot and Domaine Leflaive wines, but it’s not enough yet, if the domaines want to retain ‘historic’ markets. Some might point to opportunities new, such as Hong-Kong; a trader offers me the following rough metrics: Perhaps 60% of all the fine wine sold in the UK in 2009 (11 months) went to Hong-Kong, a significant proportion of which will find its way into mainland China by some more ‘tax efficient’ route than standard channels – though that is overwhelmingly bordeaux wine, not burgundy. From a very small number 2 years ago, there are now 2,400 registered wine merchants in Hong-Kong – impressive huh?

Hmm – go east my son – maybe they will pay 70 SFr for a villages!!!

Premature Oxidation
There are no smoking guns here, but I thought it worthwhile to commit to ‘print’ the thoughts of one of the most important producers of white burgundy. By any measure, Bouchard Père et Fils are one of the most important producers of grand cru whites. After shortly haranguing Philippe Prost over some of my own oxidised 2002 Meursault Perrières, Phlippe was very open on his current thoughts, and kindly allowed me to print them as part of this report.

DRC and Corton
If I am totally honest, I have to say that I think that the wines of Domaine de la Romanée-Conti are largely irrelevant to the wider burgundy market, they are predominantly high priced trading ‘materials’, just like gold, cobalt or whatever. It’s not particularly the domaine’s fault, it’s just a function of the cachet of the domaine’s name.

Where I think the domaine has real significance, is its attention to detail – no expense spared – in the vineyard and in the cuverie. The work that they do has a trickle-down effect that so many concientious producers can find value from. So when they had new vineyards in Corton to work on, it was time to sit up, and take notice, to see what their opening decisions would be – with the exception of committing the vines to biodynamic methods of cultivation, it seems that they changed very little in their first year.

My short report is here, but thinking purely out loud; Aubert de Villaine seemd so enthusiastic and motivated by this new challenge when we met in December, that I really think it may be enough for him to place on-hold any thoughts of retirement while he tackles the reds of the Côte de Beaune!

Finally – En-primeur 2008 !
Back to the potential commercial debacle that awaits. I really think that some brave merchant, expecting 100+ customers and journalists to come and taste their part-ready 2008 barrel samples, whould be better off showing a little testicular fortitude and surprising them all by showing only bottled 2007s instead. Rather than sweep the vintage under the carpet, show the stunning whites, and particularly reds that don’t just charm the birds from the trees, they also have the potential to do it every single day of the next 10 years – of-course, pricing’s another matter altogether…

5 responses to “Random ruminations…”

  1. Chris L.

    Bill –

    Nice to have your thoughts on pricing. Burgundy has always been expensive, but the producers definitely seem to have fallen out-of-touch with their consumers since roughly 2003. There are a lot more fancy cars in driveways, and a lot fewer working-class Burgundies, and I don’t begrudge the community that at all — growing Pinot is a lot of hard work, and the production is small — but the end result has been that 95% of these producers look on their wines as a luxury product that will always find a market based on quality alone. But when you take that attitude and establish high benchmark prices, you compel consumers without vast bags of cash to pick and choose. They can’t afford to drink village Burgundy every week, any more. So guess what? They will in the end buy fewer bottles and choose highly-touted vintages over quieter ones. Especially if the prices push the wines into “investment grade” status, where auction prices for 2005 wines are 2 times higher than for 2004. But it seems to me the biggest issue was producers’ seemingly broad inability to drop prices after 2005. I’ve heard some rumblings laying this at the feet of the growers, but given how much is estate-bottled these days, how true can that be? And it seems peculiarly French that producers should be so at the mercy of growers anyway. Or could it truly be that perhaps all the organic and bio-dynamic practices are coming at too high a price? I wonder if the grandfathers and great-grandfathers of some of these producers wouldn’t wince a bit. Drop your prices and sell some wine, guys. You need to re-establish your long-term relationship to your public.

  2. chambolle

    Something’s gotta give. Unless these wines can find a market at any “sky is the limit” price in a new area — like the Asian market — an equilibrium must and will be found. Here in the US, I see many 2004s and 2006s offered at retail that are a fraction of the original ‘asking price.’ When you see retailers offering ’04 Mugneret-Gibourg NSG Chaignots at $30 a bottle, ’04 Boillot Beaune Clos du Roi at $20 a bottle, ’06 Bouvier Marsannay Les Longeroies at $17 a bottle, ’06 Chandon de Brialles Savigny Lavieres at $20 a bottle, tenths of ’04 Jadot Gevrey CSJ for $20 each, well sir, you know someone in the food chain is taking a bath to just move the wine the heck out of the warehouse, put some cash back in his pocket and get on with the business of buying and selling more wine. And as US pricing for ’05s had reached absurd levels — at the peak, the Rousseau Gevrey CSJ was offered at $800 a bottle! — these have ratcheted back very considerably as well, with reductions of 50% to 60% in some cases. Still extremely pricey, but falling back to earth.

    You’ll recall the 2008 Bordeaux “futures campaign,” with the 1st growths offering at $200 a bottle. More of the same may be on the way in Burgundy, although scarcity certainly provides more price support for Burgundy. It’s a lot easier to name your price for 1000 bottles of Musigny than it is when you have 100,000 bottles of Latour to move.

  3. Ned

    Consumers of Burgundy in the US have increasingly found themselves at the mercy of several factors that fueled an irresponsible speculative bubble in pricing.
    A trend that began with the ’99s, got boosted by the ’02s,
    wasn’t helped by the tiny production of ’03, and exploded with the ’05s, has ended badly due to the economy. I have to say I blame the critics for inciting the frenzy and the trade, as the gatekeepers, for exploiting it. It was all about maximum short term gain. It may have been the prior parallel insanity with ’05 Bordeaux that helped cloud judgement. ’05 Burgs mostly left cellar doors at the same prices as ’04s. “06s however were sold
    at new higher prices which was a mistake. Producers and the trade need to return to a model of steady, consistent fair pricing and if some years see some secondary trading, so be it. They seemed to think we had entered a permanent new era of pricing. There are examples of AC wines, retailing for nearly $100 here in the US. The region will see itself permanently marginalized if that keeps up.

  4. John A Guentner

    The problem of pricing burgundy wines lies with in the vineyards themselves. That it to say, How can a “Domaine” of .50ha produce enough wine to make it profitable? Some Domaines produce only 900 or so bottles a year…. so do the math… (900 btls $20 USD is a measly $18,000 gross for the year. Hardly worth firing up the tractor for……..

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