Has the recession made the 2005 and 2006 Bordeauxs more appealing?

  • Monday 8 June 2009

Don’t want to risk entrusting your money to merchants on the still-in-barrel 2008s in these uncertain times? Stephen Brook asks whether the recession has made the bottled 2005 & 2006 more attractive buys?

I’d like to be able to tell you whether or not to buy the Bordeaux 2008s, but since the vintage has only just been tasted and prices are only just emerging, such advice is premature. The 2007s are not alluring; it wasn’t a vintage to set pulses racing. But the 2005s and 2006s are another matter. The quality of both, certainly on the Left Bank, is beyond dispute. As always, it comes down to price.

The 2005s were expensive from the outset, but a high price was both predictable and defensible given the quality of the wines. Back in summer 2006, when the en primeur prices were announced, there was still plenty of cash sloshing around and demand, at least for the top 50 wines, was feverish. Prices soared. Few merchants could recall a vintage that was so heavily speculated.

But, as the small print on financial ads constantly reminds us, prices can go down as well as up. Had it not been for the credit crunch, buyers of 2005s might still be congratulating themselves on how swiftly the value of their wines, bought en primeur, had grown. But the credit crunch dealt its blow, and things no longer look so rosy, even though purchasers of the top 2005s still remain ahead of the game.

Nor is the situation a simple one. Jack Hibberd of wine trader Liv-Ex, notes that the relative price of your wine depends on the currency used to buy it. Liv-Ex, which is sterling-based, records a 20% drop of the world’s top 100 wines, which includes some 2005 Bordeaux. Because the pound has weakened overall by 20% since last summer, those in Asia or America stocking up with wines from British merchants are at an advantage compared with those purchasing from European or American sources.

‘This increased purchasing power certainly benefits merchants buying more stock,’ says Hibberd. ‘Whether it translates into much lower prices for individual consumers isn’t so certain.’ Sam Gleave of Bordeaux Index agrees that the drop in prices for 2005, combined with sterling’s loss of value, can be attractive to foreign buyers: ‘Wines such as Pontet-Canet and Léoville-Poyferré, even from the expensive 2005 vintage, can offer good value - unless you buy in sterling.’

As for 2006, the vintage did not get particularly good reviews, and it is true that there was a good deal of rain and rot, requiring severe selection. Nonetheless, some excellent wines were made. The whites were mostly delicious, Pomerol excelled, and wines with a high proportion of Cabernet Sauvignon, which resisted the weather better than the Merlot, fared well. My own tastings revealed some very good wines in Pessac-Léognan, St-Julien and Pauillac.

The problem in 2006 was price. The 2006 Mouton, admittedly one of the top wines of the vintage, was only 8% cheaper than the 2005, while 2006 Cheval Blanc was released at the same price as the previous vintage. The proprietors were encouraged by a still buoyant Asian market, and saw little reason to drop their prices. If Asian buyers were undeterred by the prices, Europeans certainly were.

Price comparisons

Gleave still finds the 2006 vintage commercially discouraging. ‘There are some very good wines, such as Lafite and Mouton. But unlike the 2005s they are likely to remain closed for many years. If you bought the 2006s for investment, you are going to have to wait a long time to recoup it, if at all. And given the high prices demanded for the vintage, it’s very hard to see why you would want to buy a middle-of-the-range 2006 when, for a small premium, you can still buy the same wine from the benchmark 2005 vintage.’

The 2006s, which are now beginning to arrive on export markets in bottle rather than as a theoretical notion, are also vulnerable to offloading, as consumers take possession of wines they may no longer wish, or can afford, to cellar for a decade. Merchants too will be receiving wines for which the market may well have shrunk, as trade customers such as restaurants and retailers reconsider their requirements in the light of the current economic situation.

Gleave argues (although he has a vested interest in the argument) that anyone expecting to make appealing profits on 2005 and 2006 should think again. In his view, the price comparisons the consumer should be making are not between these recent vintages, but between them and more mature vintages.Bordeaux Index confirms that it recently sold 2006 Mouton-Rothschild at £4,850 a case, but are offering the 1998 at less than half that price. But this differential is not constant across the board; the same merchant has sold 2006 Lafite at £3,650 a case, while listing the 1998 at £3,900.

The real value

For the top growths, prices of the 2005s almost doubled since release but have since dropped by 20% to 40%. That does not necessarily mean that these wines are now good value. A case of 2005 Latour would have cost you about £12,000 in 2008, but can now be found for £8,000. These price reductions affect those who buy wine for investment, but have little impact on we mere mortals who buy wine because we like to drink it and share it. However, Bordeaux lovers who are keen to have some bottles of the top wines of any vintage in their cellar may well be tempted to take advantage of these reductions, although it is arguable, if improbable, that by waiting a few months more the prices may decline further.

This is less applicable to the 2006 vintage. Even though a few wines have dropped in value, all started off at a very high level only justified by a handful of individual wines. Moreover, 2006 simply doesn’t have the cachet of 2005, just as 2001 (arguably the equal of 2000 on the Right Bank) will never command the prices of the 2000s. A few wines such as Lafite and Mouton have been given a boost by Robert Parker’s mostly upward reassessment, but that may not be enough to revive the fortunes of the vintage in the long term. It’s also possible that, as merchants increasingly feel the pinch, they may reduce prices on the 2006s they are holding, so it’s worth keeping an eye out for bargains in the year ahead.

But bear in mind that not all Bordeaux wines are the object of speculation. There are countless properties that simply cannot raise prices with the impunity of the top growths. Such wines include the best crus bourgeois, some fine Sauternes, and wines from less prestigious areas such as the Côtes de Bourg, Côtes de Bordeaux and Lalande-de-Pomerol. The leading estates made wonderful wines in 2005. It’s feasible to buy a bottle of a favourite growth – a Poujeaux, Aiguilhe, or Clos Haut Peyraguey, for example – and actually try it before deciding whether to lash out on a case. These, surely, are the wines to contemplate buying as the fine wine market falters. They will still cost you £20 to £30 a bottle, which may give many wine lovers pause for thought in these stretched times. But these are wines for drinkers not speculators, and that should make them viable propositions for most of us.

As for the top wines, it is hard to think of any good reason to buy 2006s at their current price (and even harder to think why one should buy the still-rather-costly 2007s given their middling quality). For British consumers, the 2005s remain very expensive despite the overall drop in prices; but there are some fabulous wines out there and for those who missed out on en primeur, this could be an astute time to buy some middle-ranking and generally undervalued wines such as Branaire-Ducru and Domaine de Chevalier. Meanwhile, it pays to keep an eye out for older vintages – 1995, 1996, 1998, 2001 – which now look relatively inexpensive and are in many cases ready to drink.

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