2010 Bordeaux - Parker w/ sensible comments?

I received an email from Max @ WineConnection this morning with the following take from Robert Parker:

"Any serious introspection of the global wine market for Bordeaux over the last two years has to include the fact that it is impossible to determine the amount of 2009 Bordeaux futures (and in a few months, 2010 Bordeaux futures) that have actually been sold to consumers. Throughout Bordeaux there is talk of the massive market in Asia, and the increasing significance of the English wine investment firms, but there are those (and I wouldn’t dismiss their opinions) who tend to think that such assertions are grossly inflated. Moreover, they argue that there is a real bubble that is in danger of bursting if the right external influences unfold. One theory is that the Big Eight (which includes all the first growths of the Médoc as well as Haut-Brion and the trifecta of unofficial first growths of the Right Bank, Petrus, Cheval Blanc and Ausone) are actually hoarding huge inventories of their wines to inflate prices. This theory also suggests that the super seconds and many of the other cherished names in Bordeaux are doing the same thing. Why? They are trying to manipulate the market price. The appearance of little or no appreciable quantities of wine from two great vintages equals higher and higher prices. Is there a falsification of the demand from Asian consumers? The fact is, no one seems to know the answer. While some 2009s have not held their initial opening prices because they were too high, many have. If much of the 2009s, as well as the 2010s, are not sold through to wine consumers, who are the true marketplace since they actually drink these wines, and then tend to replenish their stock, buttressing the marketplace, then this is a bubble. Despite huge warehouses filled with reserve stocks of great vintages, prices could be set for a major adjustment, just as we have seen in the United States with the real estate market. What, if any of this, is true?

I raise this issue only because it is a possibility. The fact that no one can (or wants to) provide the actual sales figures of how much 2009 (or over the next six months, how much 2010) is actually being sold through to consumers is astonishing. If most of the stocks of these two vintages are held by importers, négociants, wholesalers, or on paper by investment firms, then it is obvious the consumers have not purchased 2009 and eventually 2010. In any event, I think this scenario has to be raised, given the overheated marketplace and the sometimes absurd rhetoric about how popular these wines are at prices of $1000 or more a bottle." Robert Parker, May 3rd 2011

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• Having just finished reading The Big Short by Michael Lewis, I can’t help but wonder what would happened to the current marketplace of Bordeaux if indeed a ‘bubble’ has been artificially created and factors pressure any said bubble to the point of causing its deflation, whether mildly or with a full blown burst of vapor. Given the perceived profits that many of the top producers have likely banked over the last 3-4 years/vintages (since the grand 2005 vintage and possibly even before) - I’m not sure they would really suffer if their esteemed possessions took a 50% hit it market value. In fact, I’m not real sure anyone could ever quantify these potential losses other then maybe the wineries themselves.

What I do perceive is this: prices are incredible high and continue to climb based on hype, hyperbole and perception. There are still values, but only on the mid to low end of the scale. As a younger ‘consumer’ of Bordeaux (mid 30’s), I never had the luxury or opportunity to buy many First Growths when they were available at more market-reasonable prices. Never have I seen a First Growth for $100/bottle. Hell, I rarely see them for under $200/bottle these days - with the except of an auction lot here and there. Instead, a good deal on an off vintage is more in the realm of $250-$500 a bottle depending on the name and of course the perceived popularity of a wine label to the elite in China. Does this make me bitter? Not necessarily. Does this make me envious of days past? Of course…I like to ‘experience’ wine and learn about wine in every facet possible. Over my short years exploring Bordeaux, the ability for a newcomer to experience and explore these wines at the upper end of the spectrum has been taken away. With a mere $10,000 yearly budget, you are likely to purchase 20-25 (frugality might get ya 28-30) bottles of the best wines which you would likely want to consume 20-30 years down the road at ‘peak maturity’. If you dared to consume them any earlier and appropriately had an ‘off bottle’, how many excuses are in the Bordeaux playbook to cover up the expectations built into the system?

I hope there is indeed a bubble.

I hope it pops with a thunderous sound heard all the way through the walls of our cellar doors.

Did Bob stand up against himself in some sense with these comments?

Its yours to debate…and I still might open a Bordeaux tonight!

RPs comments are interesting, if nothing new in content… it’s good to see him talk about the hoarding possibility. But it always amuses me to see how Bordeaux buyers will lament the price of Bordeaux… and then refuse to move out of the top 50 or so labels as if the other wines are somehow beneath them.

I have to say I hope the bordelais are hoarding. If they are, there will most assuredly be a day of reckoning, and when it comes they will pay a fearsome price for their arrogant play.

Wow, Parker really wrote this? This is genuine consumer advocacy. Good for him.

There is also the issue of “hoarding” by collectors. Top level Bdx is not removed from the supply chain until actually consumed. There are a lot of individual consumers who have bought 3 cases of a wine with the idea of flipping 1 or 2 of them down the line. Just food for thought.

Don’t know if it was RP or not. I didn’t catch any … in the quoted text.

A little late to the show, however. When many of his (often former) subscribers raised issues such as this on his forum in regard to past vintages, he didn’t seem nearly so customer-focused in his advocacy.

Moreover, has there ever really been good transparency or insight into what is truly selling? Perhaps in the past, people were just more willing to accept the hype, buy, and therefore support the market clearing price? After many were burned by 2005 (or at least it fell short of their desires for appreciation), consumers are wiser and may be less willing to accept the marketing claims of the Bordelais at face value.

The Bordelais and the negociants have every financial incentive to overstate demand and sales, and understate production. But other than that, I believe everything that they say…

Bruce

Lew - this certainly plays into the equation, but a few hundred to maybe a thousand cases might be what is getting ‘sat on’ by collectors. How much could be held in stock by the wineries themselves?

Someone get a needle and prob the bubble a little bit

I don’t pay enough attention to Bordeaux to have any particular knowledge on the question of whether the chateaux are piling up huge inventories of unsold wine. But I don’t think they are, because one would expect to see a breaking of the ranks to move some wine. It is not possible IMO that the 50 or 100 top chateaux would toe the line for a sustained period of time. Consider OPEC, an open cartel of just 12 members and even fewer who are significant, which cannot maintain discipline to curtail oil production for the collective good without some members trying an end run for their own individual good. Its been a while since I’ve studied the oil market closely, so I could be wrong on that, but I don’t think so.

Lance, to say collectors own Bordeaux stocks beyond what they will actually drink amounts to “a few hundred to maybe a thousand cases” sounds really, really low to me. I think it is many, many times larger. There is a lot of wine in individual private cellars that will come back on the market at some future point.

That was my initial thought, but on further reflection, for a consumer advocate, he really does not take this thought very far. With his depth of contacts over the many years, why not a deeper piece of investigative journalism? Point blank ask each of the major producers whether there is hold-back of current vintages to keep price and demand in some semblance of structure that they prefer. Would love to see more depth here.

Practically speaking, the effect of the top producers hoarding, if this is true, is that eventually something else will take up the space. In the 90s I bought almost only classified growths. Since 2000 I have bought far more “unclassified” growths. Lots of quality Bdx out there for reasonable prices.

De Beers has been able to keep their racket going for a while. I am not holding my breath waiting for Margaux to come back to $100 like the good old days.

If there is anyone on this earth that should have the inside scoop on what the Bordelais are up to, wouldn’t you think that it would be the dude who has made them filthy rich for 30 years? It speaks volumes to me that the French will hang medals around his neck, but yet would not tell him the truth if their lives depended upon it. Instead, the great man offers only speculation and conspiracy theories that would not rank among the best on this or any other wine board. C’est les Bordelais…

Many on the old Parker Board pointed this out years ago. Did he just wake up or is he pulling our archived posts for ideas to write about.

I have little doubt that teh first growths are holding out, which may partly explain the huge multiple between the firsts and the best of the seconds. That being said, the Asian market seems to be scooping up the first growths in large quantities.

Lew - my point on the amounts was on a ‘per vintage basis’, not necessarily a total amount ‘lifetime’ amount that was being squatted on. I should have clarified that a bit I guess. That being said, I too have no idea what the real amount is/could be. Looking at some generalized production numbers below, there is clearly enough ‘margin’ in terms of production to hold back a significant percentage of stock to influence, or create, a market.

As some food for thought, here are some rough estimates of the number of bottles produced each year (variance applies based on yield of course - general internet search):
Margaux: 150,000 bottles/12,500 cases
Lafite Rothschild: 180,000 to 300,000 bottles/18,000 to 25,000 cases
Haut Brion: 120,000 to 170,000 bottles
Mouton Rothschild: 240,000 to 300,000 bottles/20,000 to 25,000 cases
Latour: 220,000 bottles
Petrus: 50,000 bottles
Cheval Blanc: 150,000 bottles

Super 2nds: Just a few…
Cos d’Estournel: 200,000 to 380,000 bottles
Ducru: 240,000 bottles
Montrose: 230,000 bottles
Leoville Las Cases: 540,000 bottles

Right – Lance’s estimate seems off by several orders of magnitude. Given how long Bordeaux ages, I would think almost all recent vintage high-end Bdx should be counted as “sat on” by collectors for potential sale, regardless of the intent on buying it. How many people here sold their Lafite when the price shot up, even if we had intended to drink it when we bought it? As long as you haven’t popped that cork you could potentially sell it. Even though I basically never flip (I think I’ve sold three bottles in ten years of collecting) I could and would if the price went high enough and I needed the income.

For whatever it’s worth, I think current high-end Bdx prices are unsustainable. Certainly the rate of increase is unsustainable. Lance’s post implies over 2 million top-end bottles being produced a year. I can’t imagine that there are hundreds of thousands of people on the planet who would buy a case a year of $1000+ per bottle wine solely for drinking (as opposed to investment) purposes. People are clearly in that bubble stage of betting that the asset will appreciate.

While an enormous amount of wine is produced in Bordeaux, your figures are far too high. Most properties produce at least 25% less wine than the figures you have stated.

*** Some people have asked about how much estates hold back. On average, most chateaux hold back about 10% of the production per vintage. A few hold back more, up to 30%. In the Right Bank, they probably hold back less as they produce a lot less wine.

Each property works with negociants. Some spread the risk far and use over 100 different negociants. Others, use less than 10. A few do not use negociants at all and only sell direct to wholesalers or merchants.

Some negociants hold back stock. That helps get them through years like 207 and 2006. Others sell every bottle they get. It depends on their business models. Most negociants do not inform the chateau where they sell the wine, or if they hold back wine.