Anson: How the Bordeaux market is shaping up ahead of 2016 en primeur

Jane Anson looks beyond proclamations that 'Bordeaux is back' and analyses the numbers to see what might be in store for the region's wines ahead of the 2016 en primeur season, particularly in a UK market preparing to throw itself into the Brexit quagmire.

At the end of December 2016, a spate of reports fluttered across the UK press about how Bordeaux was back after four years of decline. I must have received three or four press releases saying the same thing from various sources – among them the Liv-ex trading platform, that reported strong trading over the last six months of the year largely due to a Brexit boost from the weaker pound.

Its Fine Wine 100 index lists wines from eight different regions but mainly Bordeaux and Burgundy, and was at its highest level in five years.

The Liv-ex report showed that Burgundy had continued to strengthen in the secondary market, but that ‘Bordeaux has undoubtedly been the main driver behind the broader market recovery’, consisting of around 75% of trades.

As we are now a few months away from the Bordeaux 2016 en primeur campaign, this is good news. Even if some of those Bordeaux wine sales are going overseas as buyers from America, Hong Kong, China and, no doubt, mainland Europe take advantage of cheaper prices, it is still a healthy sign of interest in the wines – and getting those bottles out into the market to be drunk is, after all, exactly what they are there for.

But just to offer a touch of balance to these reports, I thought it might be a good time to take a look at where the Bordeaux market stands in terms of its own exports, and how the UK is doing with regards to buying the wine coming out of Bordeaux today.

The figures for Bordeaux sales from June 2015 to June 2016 are doing the rounds here. These are figures with just one week of the post-Brexit world of course, but you don’t need me to tell you that the currency was fluctuating following the announcement of the referendum on February 20 2016.

The uncertainty perhaps had an impact on purchases of the Bordeaux 2015 en primeur, which was a high quality vintage that could reasonably have expected to do fairly well with UK merchants and traders but just to be clear, the figures I am looking at here are for payments made to Bordeaux, not advance orders, so will mainly account for the 2014 vintage.

2014 was still a quality year, even if not as good as 2015, and was relatively well priced, so traditionally should have been a strong buy year for the UK. And yet the export figures make slightly uncomfortable reading.

The total exports from Bordeaux to the rest of the world for the year to June 30 2016 stand at €1.7 billion, give or take. For 2014-2015, that figure stood at €1.8 billion. Both Hong Kong and China are healthy, up from €251 million to €276 million for Hong Kong, and €236 million to €300 million for China.

But look at USA and UK and it’s not quite so pretty. The US stands at €187 million, down from €196 million, and the UK at a rather more precipitous €160 million from €208 million. We know the highpoint for the UK was 2012, with €407,148,721 of purchases largely dominated by 2009 and 2010 en primeurs – but every year since 2009 the UK has always comfortably taken between €210,000,000-€380,000,000 of exported Bordeaux.

And the really interesting part of these figures is that they are broken down by price. Hold tight, because this is where you can see the fine wine world shift before your very eyes.

Of the UK figures, the only area of imports that have remained more or less steady are wines priced from €11.25 to €22.50 ex-Bordeaux, equaling maybe a £20 to £35 on UK shelves. They have remained steady and fairly robust. After that, things start to decline. Wines price at over €112.50 per bottle when they leave Bordeaux now account for €52,606,225, compared to €75,642,225 the previous year. That is still almost three times the value of that tranche of wines going into China (€35,357,726) but less than half of what goes to Hong Kong (€130,173,415).

Even the bottles priced €22.50 to €45 see exports of €38 million to Hong Kong and only €12 million to the UK. And all this before the impact of the weakening pound post-Brexit (remember the pound was just above 1.30 in February 2016 and is now 1.15 against the euro).

So, what are we to learn from this?

Firstly, figures never tell the whole story. First off, there is evidence that some estates have been holding a higher proportion stock back from en primeur. Many UK companies have outposts now in Hong Kong, Singapore and many other countries, and it is not clear (from the figures I have here) where they are declaring their imports. More UK companies can shift their base to mainland Europe or to Hong Kong in the future, of course, but they can’t take sterling with them. So we can reasonably ask if the pound can remain the dominant currency in the fine wine trade? The same questions being asked this week of the London financial centre equally apply to wine.

This matters because chateaux release prices have never been the prices that define the wine market – the London marketplace has long performed that role. Many chateaux here agree with that view, and most chateaux owners that I speak to point to the importance of having ‘neutral’ expertise as offered by London merchants. But as with the banks this expertise can’t exist in a vacuum. In fine wine, holding stock matters, something that is even more true when currency is fluctuating. And right now it seems the Hong Kong merchants are the ones prepared to do so.

The question now I guess is whether the UK will buy strongly in the Bordeaux 2016 en primeur campaign to maintain their place in the global market? It’s a vintage that the Bordelais are saying is a ‘2005 killer’.

And whether the trade can reinvent itself following the scheduled Article 50 triggering in March. There are plenty of people in Bordeaux who are rooting for it to do so.