Bordeaux en primeur 2016 and the Dory Syndrome

2017-08-08

Early afternoon 22 May 2017 word spread that Lafite was out. A few calls were made. But where was the wine? Allocations were down 50% but with the promise of another tranche in a couple of weeks’ time. Négociants waited, not wishing to be stuck with more highly priced second tranche releases.

In tandem the Chateau also attempted to revive its 2010 vintage strategy of tying other wines in the stable to allocations of Carruades and le Grand Vin. Either Rieussec and Carmes de Rieussec were being tied to Carruades, or Carruades was being tied with Duhart, or Duhart was being tied with Lafite.

As an aside, there was nothing subpar with Duhart this year, a properly serious wine in fact. But using it in a bait-and-switch move is unlikely to enhance the bait’s secondary market reputation.

Then, without waiting for the second tranche, more than one of the smaller négociants broke ranks on releasing the first tranche to customers, but estimating the cost of the second tranche and pricing at the intersect of the two. With lack of market transparency buyers were uncertain what fair value might look like.

In fact the majority of estimated intersect prices turned out to be the level of the second release price, handing merchants a handy profit of 20%, and suggesting Lafite were less aggressive with their second release pricing than they had previously signposted.

Thankfully, Lafite 2016 represents a big step up on the previous vintage, so the price increase will likely be justified in the medium term, if as expected, the secondary market adds 25% to its release price over the next few years. In fact Lafite 2016 is simply glorious: an absolute pinnacle of classicism in this great left bank vintage.

Notwithstanding, the Lafite release ‘strategy’ represents everything that is most unattractive about Bordeaux en primeur at its opaque worst.

None of which would matter, if it weren’t for the consumer. It wasn’t so long ago that the Bordeaux market was moribund: the market killed off by aggressive pricing of 2009 and 2010 vintages and a subsequent market collapse. As long as consumers end up nursing persistent losses, there is a high risk of a collapse in market confidence. Commodity-like collectible markets that wine epitomises are particularly sensitive to the maintenance of positive sentiment.

We’re certainly not back in territory as yet. Lafite 2016 released at almost 50% below that of 2010, whilst for UK buyers the collapse of Sterling has magnified price increases, whereas the strength of the US Dollar provides a tailwind for Bordeaux sales into the USA.

But the Bordelais need to be mindful of what happened following the mis-priced 2010 release. Lest we forget, it was barely 3 years ago that the Bordeaux secondary market was still in the doldrums. The remarkable market resurgence that started in late 2014 should not be taken for granted. The Chateaux have a profound responsibility to avoid the Dory Syndrome, named after the forgetful fish in the Disney film animation.