- Thursday 21 August 2008
Bordeaux is on the move again. ‘It’s bye-bye America, hello China,’ says Jonathan
Stephens of Farr Vintners, metaphorically packing his bags. Others are doing so literally: Goedhuis has opened a Hong Kong office, with US merchant Acker Merrall & Condit doing the same; Berry Bros, already ensconced in Hong Kong, is opening in Japan. Everybody, it seems, is heading east. All the while, British wine lovers cry: ‘What about us? Does nobody care about us? We’ve been drinking claret as long as we can remember. Don’t we count any more?’ Well, yes, we do, but probably not the same section of ‘us’ that counted 20 years ago. You may have had your first taste of Latour at your grandfather’s knee, but unless you grew up to be a hedge-fund manager you probably don’t buy much these days. And remembering how little your grandfather, your father, and indeed you, used to pay for Latour only rubs salt in the wound. A new Shanghai millionaire, on the other hand, has only been aware of Bordeaux prices for the past couple of years. As far as he’s concerned, that’s what it costs. Bordeaux goes where the money is. It always has; it’s just that for a long time, the only demand for the top wines came from Britain, Germany, Belgium, Switzerland, the Netherlands and Denmark, and later the US and Canada. These, for many years, were the traditional, stable markets. Go back 20 years and they were taking over 85% of exports. Fast forward to the mid-1990s, and Hong Kong and Singapore had entered the picture. What they liked were small-production Pomerols and St- Emilions – there’s more face, says Stephens, in serving wines that are seen to be rare. ‘It seemed as though these wines were going up on a weekly basis.’ But in October 1997, the tiger economies crashed, and America took over. Wines that had been sitting in containers in Far Eastern docks now sat in American docks, sometimes without even being unloaded in between. If shipping cargo
could clock up sea miles, some of those cases would now be able to travel anywhere in the world for free. But then came 9/11. ‘In the 12 months after that, America, which had taken 35% [of Bordeaux exports], took 1%,’ says Stephens. With the British economy growing nicely, British buyers took up the slack. Until now. Suddenly, everybody’s looking east. And Hong Kong has obligingly removed all duty on wine imports (it used to be 80% of value,
then went down to 40%. Now it’s gone completely). ‘On the day it was removed, we had the most astonishing 18 hours ever,’ says Simon Staples of Berry Bros. ‘We sold £4.5m’s worth. Seventy per cent of that went to British speculators and 30% direct to Hong Kong buyers.’ A US year Bordeaux, then, is like a river that constantly changes its course: one year this way, the next that. And it’s complicated by the fact that what is imported here isn’t necessarily drunk here. Farr Vintners re-exports about half of what it buys; across the board it is estimated that about half of Britain’s purchases of Bordeaux are re-exported, mostly to Hong Kong, Macau and China. Bordeaux négociants organise their allocations to their various customers around the world
according to what those customers bought the previous year; but if you’re a wine merchant in Hong Kong with a lot of thirsty new customers with
fat wallets, you can make up for your lack of allocation by buying what
you need from merchants in Britain – or Belgium or Switzerland, which are also hubs for trading. If you want older vintages, you can buy them atauction: up to a quarter of the wine sold at auction each year is reckoned to go to Hong Kong. There are complications, however, in this overall picture. One is that the market is different for each vintage; the other is that these days, there are effectively three tiers of Bordeaux, and three different markets for them. The main difference, vintage by vintage, is that there are US years and non-US years. Patrick Jestin of négociant CVBG Dourthe-Kressmann says: ‘In US
years, the prices go up and up and we lack wines. In non-US years, prices are controlled and the pressure is less. But the US comes only one year in three or
four: 2000, 2003, 2005, not in the other years.’ And not in 2007, if early indications prove right. In which case, where will they go? If America is deterred by the style of the vintage and the weakness of the dollar, British consumers may be deterred by the weakness of the economy and the weakness of the pound. Berry Bros, for example, will buy the wines, says Staples, and if the customers aren’t there they’ll simply hold the stock. Other European countries may buy. The Far East will buy. French supermarkets will probably take up the slack, making their foires aux vins very attractive to anybody with a
white van and a free weekend in a couple of years’ time. How much will the Far East buy? Nobody knows. For emerging markets like China and South Korea, less fashionable vintages like 2007 and 2006are an opportunity to get their foot in the door and establish their right to bigger allocations of the next great vintage. ‘Our Korean importers started buying a couple of years ago, and will buy significantly this vintage,’ says Charles Sichel of négociant Sichel. About 3% of Berry Bros’ sales are to Korea, says Staples, ‘but Korea took nothing a year ago’. For Chinese-speaking markets, he adds, the next great vintage may well be 2008: ‘It’s the luckiest number in China, and they’re superstitious. Unless it’s a complete dog, 2008 should be very profitable in China.
It creates a false market to some extent.’ Overall, the markets of the UK, US,
Germany and Belgium are pretty stable. Between them they take 59% of Bordeaux exports by volume, and 55% by value. In the past 10 years, Japan has become a big market: from taking almost nothing in 1986, it now takes about 7% in volume, and more than 8% in value. It’s a key market now, but the whole Chinese zone – China, Hong Kong, Taiwan,Singapore – outpaces it. About 10% of exports by value from Bordeaux and 5% by volume end up here: in other words, they’re buying top wines. ‘It’s the new El Dorado,’ says Jean-Christophe Mau of négociant Yvon Mau. The question is whether they’re prepared to buy en
primeur, just as Singapore and Hong Kong are, and as Japan is beginning to.
When we say they want the top wines, we’re talking about the top dozen or so. The first growths and their equivalents are vintage-proof – they’re
sold on the brand, not the vintage. Thenext tier down, the super-seconds, have
not yet made their mark in emerging markets the way the firsts have. The super-seconds ‘need people with more sophisticated knowledge’, says Christian Seely of Pichon-Longueville; and the price difference, which some decades ago was 30%, is now 400–500%. ‘We can’t go in on the coat-tails of the firsts.’ Demand for the super-seconds depends on the vintage: they’re not vintage-proof brands
in the way that the firsts are.
And the third tier of wines, the second growths which are not super-seconds,
and the rest? They sell everywhere, but nowhere in particular. They’re what British drinkers tend to buy now that we can’t afford the top wines. Slicing Bordeaux up like this is neat, but there are anomalies. Why, for example, is China so mad about Lafite? Most Latour ends up there these days, apparently, but Lafite – and Carruades (Lafite’s second wine), too – are the favourite tipple of the Chinese new rich. Some merchants say, cynically, that the Chinese think Lafite and Carruades are all the same thing. Carruades ‘has shot up beyond all sense’, says Farr’s JonathanStephens. Compared with other first growths’ second wines, it costs more than Forts de Latour, and is about twice the
price of Bahans de Haut-Brion (whichchanges its name to Clarence de Haut-
Brion this year, partly because nobody knew how to pronounce ‘Bahans’). Russia is another oddity: like China, it began to emerge in the 1990s, but it hasn’t matured to the same extent, although it’s thirsty for wine. It doesn’t buy en primeur: ‘Those who buy have so much money that they prefer to buy wine to drink,’ says Charles Sichel. The uncertain lifespan of oligarchs may also be a factor here. And then there’s Asian tourism: Serena Sutcliffe MW, head of
Sotheby’s wine department, points to this as an increasing source of sales of top
wines, and to Dubai as one of its centres. Even Britain can produce anomalies:
Patrick Bernard of Millésima reported at the beginning of this year that he was suddenly getting large orders of £10,000– 30,000 for shooting parties. ‘They buy double magnums, jeroboams, imperials. This is the first year it’s happened.’ Money is scattering through the world almost faster than Bordeaux can keep up with it. Brazil, Australia, India, Azerbaijan, Uzbekistan: all these places are moving on to the international trading map. And Britain? Well, for now, we can keep ourTalbots and our Beychevelles, our Cantemerles and our Lynch Bages. The new millionaires don’t want them (unless they buy them to cook with), so for the timebeing we can sit back and pretend the world is as it used to be. For the timebeing. As Jean-Christophe Mau points out, Beychevelle 2004 opened at €16, and the négociant said it was too expensive. The 2005 opened at €26, and today is trading at €40 on the Bordeaux Place. If Bordeaux is trying to keep up with the super-rich, the rest of the world is trying to keep up with Bordeaux.