Plummeting prices for Bordeaux first growths in the last three years serve as the latest cautionary tale in a long history of boom and bust for chateaux and negociants, according to Liv-ex co-founder James Miles, who sees no end to the pattern.

Pickers in the Bordeaux vineyards. How chateaux and negociants handle the 2014 vintage will be crucial, says Miles.

Prices for several top chateaux, including Margaux and Haut-Brion, have sunk to levels not seen since the aftermath of the Lehman Brothers’ collapse in late 2008, Miles told an audience at the Hong Kong International Wine & Spirits Fair.

‘It’s as though the China boom never happened,’ he said, referring to a surge in interest for Bordeaux’s 2009 and 2010 vintages from Chinese buyers.

Miles, who is also Liv-ex managing director, said the tale fits a long-running narrative of boom and bust for Bordeaux. ‘The last decade has been a pretty normal cycle by historical standards. The Bordeaux first growths appreciated 4.5 fold between 2005 and 2011, before falling 41% between 2011 and now.’

Speculative bubbles for fine wine are not new, Miles said. Cru Classe prices quadrupled between 1970 and 1972, only to see all increases eroded by 1974. ‘Most of the leading negociants of the period were wiped out in the process.’

No end to boom and bust

Miles added that he sees no end to the pattern of 10-year boom and bust cycles.

Recent months have seen several market observers, including Liv-ex and Bordeaux Index, reporting a slight upturn in demand for Bordeaux Cru Classe – leading to speculation that the market has turned a corner after three-and-a-half years of consistent overall decline, and particularly for the left bank.

Miles told the Hong Kong conference, organised by HKTDC. that the speed of recovery depends heavily on how the 2014 vintage Bordeaux en primeur campaign is managed.

‘In my mind, after three – arguably four – failed campaigns, 2014 just has to work and prices will have to fall further than many in Bordeaux currently appreciate,’ he said.

Wine investment here to stay

On a more optimistic note, Miles said he believed that, in the 21st Century investment world, ‘it is perhaps fair to say that wine is now pretty well established as an alternative asset.

‘A 2012 survey by Barclays found that 25% of high net worth individuals had a wine collection and that about 2% of their wealth was tied up in wine.’

He cited a study released earlier this year that found consistent annual returns of around 4% on Bordeaux’s first growths, reinforcing their credentials as a long-term investment asset.

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Bordeaux 2014