Bordeaux 2007: exchange rate worries for en primeur March 20, 2008
Jane Anson in Bordeaux
The weakening pound combined with an historically weak dollar is proving a threat to the Bordeaux 2007 en primeurs.
As the pound this week dropped below €1.30 producers and industry-watchers at pre-en primeur tastings in London, Paris and Bordeaux were low-key.
Many said that, despite the quality being better than expected, unless wine producers take real notice of international currency issues, this will be a very hard vintage to sell.
Neil Somerfelt of London merchants Jeroboams told decanter.com, 'Ex-chateau prices are of course the first hurdle to get over, but the general economic instability, together with the exchange rates, can only compound the problem.'
With low yields for the 2007 vintage, prices are not, however, expected to move much from 2006.
Alain Raynaud, director of the Cercle du Rive Droite grouping, told decanter.com he is 'worried' by the exchange rate and what it would do to the market.
'It is not favourable. The main En Primeur market is made up of 50 Bordeaux properties that have become luxury brands, and are not affected by the vintage or the exchange rate. Their market is one of speculation rather than consumption.
'In our case [the Cercle du Rive Droite], our wines are made to be drunk, not for speculation and the current situation leaves me a bit worried.'
Later he told Bloomberg News how difficult he found it to bring down prices. 'Our own production costs are soaring. Transportation costs have risen 15% in two years, and we don't have the cheap labour other countries have to pick our grapes. If a bottle of our wine costs US$10 to make, we can't sell it for US$15 retail and make any profit.'
Dominique Vrigneau of Thierry's Wine and Food, who buys less wine at en primeur than throughout the year, has found some flexibility with his long-term partners in Bordeaux.
'The exchange rates crisis has come at the same time as the duty increases, which puts even more pressure on margins. But we have found negociants understand the market, and try to help where they can. Whether the chateaux owners will do the same remains to be seen.'
Read Alain Raynaud talking about the forthcoming En Primeur tastings in the May issue of Decanter magazine, out 2 April
Have your say... To post your comment on this story, email us at news@decanter.com, making sure the relevant headline is in the subject field
Maybe the prices can finally come out of the stratosphere. I know that the market is absorbing the $1000+ pricing on the first growths, but it cannot go on like that forever. I am interested to see if the estates will reduce prices to compensate since they made fortunes from the 2000-2006 vintages. Simple math here: 30,000 cases of first growth X at $1000 per bottle = $360,000,000 for sales of just the grand vin. These estates can whine about higher labor and production costs, but I think that was covered with the sale of the first 500 cases. Let's not even think about the second or even third label wines. Maybe I should buy a Rhone estate while I can….
Christopher Barrett, Houston, TX, USA
Don't cry for me argentina, just send us your wines. even francophilicoenophiles such as moi will tolerate malbec in the style of the bordelaise if the euro has its way with pricing. chile will throw a raft to bring us to a sea of carmenere and good cab for a bigger bang than the euro can give for the buck. even speculators will be hurt by the loft of the euro. all of europe has to worry about the affordability of their wines. they know there are alternate wine sources.
Anon
The exchange rate is also hurting us winemakers in California as the soaring price of French oak at this years auctions, coupled with the weak dollar, is causing the price of French oak barrels to go well beyond the $1,100 per barrel mark. We will no longer be able to use French barrels for wines under US $30 retail. We are cutting our French barrel program by 50% this year in favor of more eastern European and American oak. Hungarian barrels now cost as much as the French barrels did just 3 years ago. Wines $20 and under will probably not see barrels at all in favor of micro-ox in tanks on stave wood. As in France, our production costs are soaring on all fronts, primarily do to raw material and energy costs. The price of tin for capsules was $6,000 per ton four years ago; this year, thanks largely to the demand in China, the cost is $16,000 per ton. We are switching from tin capsules to aluminum capsules.
Robert Rex, Deerfield Ranch Winery
Register on decanter.com absolutely free for news alerts delivered direct to your email inbox, and our fortnightly newsletter with advance notice of what’s coming up in Decanter magazine, offers, competitions and more.
PLUS registration is a one-stop shop for the Decanter magazine Archive and Decanter Fine Wine Tracker.
