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On Bordeaux, Robert Parker and Bloggers

The topic of Bordeaux en primeur is hot right now. The current stir started with an article in Decanter. The article is about Americans (finally) realizing that buying futures in Bordeaux wine isn’t always a good idea, even in excellent years. The article seems to have been prompted, at least in part, by U.S. wine resellers that are wondering what they are going to do with all the 2008 and 2009 Bordeaux they’ve committed to buy, since they can’t get rid of their ’05, ’06, and ’07.  “The conviction that en primeur in a great vintage is always worth buying has been shaken and probably destroyed,” said Michael Glasby of Premier Cru in the pull-quote that launched a thousand tweets.

Much of the immediate response to this article has been breathless and at least a bit off-the-mark. Some people keyed in on this line from the Decanter article, “...they [American resellers] doubt that Robert Parker can score it [2009] higher than 2008 anyway.” The point being made by Decanter is that while Robert Parker came to the rescue of Bordeaux and, to an extent, American retailers by giving 2008 Bordeaux wines very high scores and thus propping up prices, he probably cannot maintain buyer enthusiasm for 2009 enough to prevent some sort of price crash and/or inventory glut. Decanter is correct.

Yet some writers went beyond that simple observation to say that the comment heralds an overall decline of Robert Parker and is even proof that bloggers have had a big role in that decline. One writer, prominent as both print journalist and blogger, went so far as to suggest that Decanter didn’t mention this impact of bloggers in the article because the magazine is concerned that acknowledging bloggers will undermine its own position. It is certainly possible, even likely, that Parker has reached his peak. He has been the world’s most influential wine critic for so long that some sort of decline is inevitable. But I cannot agree that the problems of Bordeaux en primeur are proof of Parker’s decline as an opinion leader, let alone that bloggers have been significant in bringing about such a decline.

I also believe that Decanter’s failure to mention bloggers in the article has nothing to do with a stodgy, fearful, old-media stance. It has everything to do with the fact that bloggers’ complaints against Robert Parker are almost completely irrelevant to the overall issues with en primeur and Parker’s predicted inability to rescue it again. Decanter’s including such comments would have been as out of place as it would have been for CNN to do a piece on New Orleans residents who left their faucets running during the Katrina flood disaster. There are a lot of reasons for the current concern about en primeur. But, if you made a list of the top fifty of those reasons, bloggers’ erosion of Parker’s status would be toward the very bottom.

So, what are the reasons for the current problem with en primeur? I could type contributing factors until my fingers bleed but I’ll give us all a break and just pound out my top ten. I believe these factors, when taken together, create the dreaded “perfect storm.”

1. A lot of the top Bordeaux wines purchased as futures in the U.S. (and Asia) have been purchased as an “investment,” [read “speculation”] rather than as a way to ensure a slight discount on one’s favorite drinking wines. Obviously, buying wines as an investment only works if the eventual resale value is higher than the purchase price. If the wines that are the object of this speculation start at ludicrously high prices, the likelihood of a profit for the futures’ buyer is much lower. And, as with any other speculative craze be it housing, tulips or Beanie Babies, there is always an end and it is rarely pretty.


2 .There has been, over the past several years, an inappropriate escalation in pricing for the top wines. While this has been fed by high scores, it has been bolstered to a greater extent by greed, stupidity and short-sightedness. Many “investors” saw the opportunity to “flip” their futures to quickly make tidy profits. Resellers also overstimulated the market because they were able to drive ever larger portions of their revenue and profit via futures sales. They and their end customers were willing to pay prices not justifiable in real economic terms. They also failed to see that the growing bubble would inevitably pop. In this respect, the situation is nearly identical to that of the housing market.

Today, it is possible to buy ten- or twenty-year-old bottles of Bordeaux from fine vintages, well-cellared, ready-to-drink and from great producers, for less than those same producers’ current offerings. Unless you are building a collection for your kids, why would you buy the new wine, pay to store it for fifteen years and absorb losses due to bad corks when you can buy a “drink now” first growth for less?

3. Production in Bordeaux is too high. Pricing in a market economy is usually a factor of supply and demand. Fueled by speculation, label envy and status seekers, prices for top growths have risen beyond what simple demand would dictate to levels that instead reflect frenzied buyers’ ability to pay. And, using the tools of en primeur and stepped releases plus the ability of the producers, brokers, exporters and resellers to sit on inventory because of their futures’ profits, the appearance of limited supply was created even though supply for most wines was not truly short.

Some producers also refrain from releasing production numbers that might help consumers gauge true value. If you search the Wine Spectator wine ratings database for 2005 Screaming Eagle Oakville Cab, you get a review, a score and a note saying 400 cases were made. Grace Family did 640 cases. Do the same search for Chateau de Beaucastel, 15,000 cases. Search Tenuta dell’Ornellaia Bolgheri Superiore, 11,660 cases. How about a good quality, low-prestige Bordeaux such as Chateau Beaumont, 35,290 cases. Top Bordeaux with truly limited production such as Chateau Ausone, 1,330 cases. Now, search Chateau Margaux. No production numbers. Lafite Rothschild, no production numbers. Mouton Rothschild, no numbers.

In reality, Lafite is huge, probably the largest of the first growths. I’ve seen production numbers quoted as high as 25,000 cases with 75% of that being exported. Which wine seems like a better bet for speculation if both routinely get high scores, one with a production of 25,000 cases or one with production of 400?

Some chateaux with truly limited production, such as Chateau Ausone and Chateau Petrus, wound up at price points substantially higher than those of big producers, giving the appearance of a supply/demand pricing structure. The fact is that all of the prices were inflated.

I toured the cellars of virtually all of the top Bordeaux producers in June of 2008, before the big economic crunch, and I can tell you that even then they were in no danger of running out of wine. I also spent time in an exporter’s warehouse that held upwards of 2,000,000 bottles of excellent Bordeaux wine, much of it back vintages. I’d hate to be in his shoes right now.


4. The failure of Bordeaux to listen to their customers has also been a problem. Some large Bordeaux-specialist resellers, such as KL Wines, saw the bubble emerging and the potential impact of the down economy. They urged, prodded, begged, cajoled and commanded Bordeaux producers to lower their prices substantially, starting with the 2006 vintage. Most did not listen. Rather, they used the high scores of 2005 as a reference point and kept the pricing for the lesser 2006 vintage at similar levels.

That is okay, in theory, if your production is low, if you can sell everything you want to sell and/or you and your resellers can easily afford to hold the unsold wine. But, if those things aren’t true you eventually need to drop your trousers. That’s exactly what happened. And even a blind man can detect a bubble if it pops in his face.

If you bought ’06 futures, whether as an investment or to get a good price on wines for dinner in 2016, but nine months later you realize you could have sat on your wallet and gotten a better price, you will think twice before buying futures. If you really got burned, you’ll think five times.

5. En primeur tastings are too early. For those people who are trying to buy quality or top points wines, it’s essential to be able to trust that reviews of the wines won’t change after you’ve written the check. But en primeur tastings take place in early Spring. The wines are fresh, boisterous, in some cases raw and, in others, completely closed down. This makes it extremely hard for even the best professional tasters to really know where the wine is headed. That’s why you see so many early scores with ranges as broad as five points. And that’s why the “BT” (barrel tasting) scores often vary substantially from the eventual scores based on blind bottle tasting.

Speaking of tasting, it’s hard enough to accurately rate a couple hundred wines a day in the comfort of your own office. Try doing three hundred a day over three days among throngs of other reviewers and with the producers breathing down your neck.

Wines are left to age many months in barrel for a reason. The most dramatic changes made by a barrel on wine, some of which are temporary, take place over the first few months. Time smooths these changes out. Simply moving the en primeur tasting from early Spring to June would make a huge difference in the reliability of the scoring.

6. The points system is partly to blame for the current problem. But it’s a double-edged sword. On one hand, points-based reviews have led to points-chasing on the part of producers, points-buying on the part of consumers, and price escalation on the part of those who achieve or covet high-points wines.

On the other hand, points-based scoring can be said to level the playing field by reducing the value of brands, tradition and marketing power. There is much to legitimately debate about the way points are given, the amount of good information they really convey and the way many resellers and consumers blindly use them to create buy lists. T”hey nonetheless provide an easy mechanism for comparison of multiple wines.

Points do not tell you what a wine looks, smells or tastes like. They don’t tell you what the varietal is, where the wine comes from or how it was made. But, it’s pretty safe to assume that a 90-points wine is really good, a 97-points wine is damn good and an 88-points wine is very nearly as good as the 90-points one.

The points seem to compel a consumer to ask, “Why should I pay $800 for a 93-points wine when I can get a 97-points wine for $250. Is it wise to pay $100 for a 90-points wine when there’s an 89-points wine next to it on the shelf for $30?” There are arguable reasons to buy the more expensive wines. But they probably aren’t reasons good enough to convince a majority of buyers in the long run.

Let’s get specific and back to Bordeaux in particular. For the 2005 vintage, Chateau Ausone was released at $2,000 and Troplong-Mondot at $200. Both are St. Emilion. Robert Parker rated Ausone at 100 points and Troplong-Mondot at 99 points. Why in the heck would you buy the Ausone? Even if you have A-Rod money and you want to spend it on wine, you would walk right past Chateau Ausone and buy 10 bottles of the Troplong-Mondot. Please, tell me that you would.

7. Despite all logical arguments against doing so, some people just buy labels. These folks have led to ridiculous escalation in the prices of not just Bordeaux, but also Burgundy, Chateauneuf du Pape, Napa Valley Cabernet Sauvignon and others. This led to market imbalances and fed the bubble. Then, when those people wised up, got layoff notices or found someone had Madoff with their savings, they popped the bubble with their pointy little heads.

8. One of the reasons for the problem with Bordeaux futures is the improvement in the quality of Bordeaux wines. That’s right. The better they are to drink, year in and year out, the worse they are as a speculative investment. Part of the reason that futures were a good idea in great years and that prices were higher for those years is that there used to be so many bad or mediocre years. It made sense to snap up the good stuff because it was relatively scarce. On top of that, the quality of the wines in Bordeaux were much more dependent on the terroir of specific producers.

Now, with the application of modern winemaking techniques, flying winemakers and copious investments in the vineyards and facilities, the problems caused by variable weather and a 3rd, 4th or 5th growth location can largely be remedied. Production can also be increased somewhat without compromising quality.

“Wine of Decade” and “First Growth” used to mean something because there were rarely more than a few good vintages in a decade and not many producers who could capitalize on them. Now, most vintages are pretty good and greatness is just a matter of degree. Effectively, this has vastly increased the supply of really good Bordeaux.

9. Improvement in wines outside of Bordeaux has had the same effect on a broader scale. Bordeaux was, for a while, the undisputed king of Cabernet and Merlot. That started to change with the famous tasting of 1976. The erosion of Bordeaux’s supremacy has snowballed recently. If you didn’t feel like spending the $200 on that 99-point 2005 Troplong-Mondot, you could have paid $120 for a 98-point Cabernet from Argentina or $150 for a 100-point Cabernet from Washington State.

Sometimes, the market does work. Global competition can bring down prices to the benefit of global consumers. But markets are neither subtle nor gentle. Bad things can happen quickly to companies and consumers that overlook the inevitability of competition.

10. It’s the economy, stupid. When there were a lot of people making more money than they knew what to do with and expense accounts were bottomless, mindless extravagance left daring and sped past cool to become... normal. But it’s not normal. Not even in modern history.

Hinging one’s business on the assumption that there’s an endless supply of rich guys bent on consuming conspicuously isn’t wise. Nor is paying too much for wine two years before you’ll ever see it because you think there’s somebody dumber you can resell it to.

The current and growing problem does not signal an erosion of Robert Parker’s power. It simply proves that both power and stupidity have limits.

If bloggers have had an impact on all of this, perhaps it’s in this respect; almost to a person, they show that it’s possible to enjoy good wine, share it with friends and celebrate life on a limited budget. For that, I award them 100 points.

This article is original to NorCalWine.com. Copyright 2010 NorCal Wine. All rights reserved.

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The following comments have been moved here from our 1.0 site.

3 Comments

alaingles

congrats, great article

regards

Thursday, November 5, 2009 - 06:08 AM

Ed

Chock full of great information and all seems to make obvious sense.  I have never bought any futures and based on this post, I probably never will.  You have seconded what I have been hearing recently about being able to buy aged Bordeaux that is accessible now at reasonable prices and am scouring winebid, winecommune and the like for such opportunities.

Thursday, November 5, 2009 - 06:14 AM

Fred

Buying futures can still make sense, you just have to be careful and selective. Buy quality and value, not labels.

Saturday, November 14, 2009 - 10:39 PM

Comments   

 
Alan Wortman
#1 Alan Wortman 2010-01-27 17:02
Hi Fred, great points about futures and the over-importance and decline of Robert Parker. I must say though that Parker's recent fascination with Spanish wines has helped me broaden my horizons and find some great reds at lower prices.
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