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Jefford on Monday: Drinking with Mammon

And now for the grubby business: money.

As I mentioned last week, Robert Parker’s ‘definitive’ scores on the 2009 Bordeaux vintage have added at least £100 million, and probably much more, to its overall value. They will of course have made most Bordeaux proprietors very happy, but they will also have made many of the ‘little’ wine investors who bought the wines en primeur (many of them, I understand, based in the UK) pleased with themselves and with ‘Uncle Bob’, too.

It looked unlikely when the wines were sold, but the new scores have made some en primeur purchases a worthwhile short-term as well as long-term investment, which they hadn’t been in recent years. Given the wording of Parker’s en primeur notes, you didn’t need much of an algorithm to work out that a punt on Cos d’Estournel ‘09 or Pontet-Canet ’09 might be worth taking.

Not everyone got the lowest opening price, of course: around £1,000 in the case of Pontet-Canet. The new score, though, has put an ‘instant profit’ of £500 on cases bought at the wine’s intervening trading price of £1,300. If you happened to have been percipient enough to have backed Clos Fourtet (which opened at £750-£780 and has traded at around that point ever since), you would have more than doubled your money overnight on February 29th. Smith-Haut-Lafitte at £1,600 may have created a new ‘low’ for Bordeaux 100-point Parker wines, but anyone who bought it prior to March won’t regret the purchase. There will now be much poring over the runes for 2010.

I’m puzzled as to why the ‘wine funds’ – whose sole aim is an investment return — remained aloof from the en primeur fray in 2009. It always looked likely to produce a gaggle of 100-point wines. Moreover so much cash has now been buried in bottles with those four magic figures on them that it seems hard to envisage any fund making much headway with this vintage in the near or even mid-term future.

Chris Smith of The Wine Investment Fund doesn’t seem worried. He pointed out that the en primeur price of many 2009 wines hasn’t moved much; that there may be a price correction of 2009 downwards over the next few months as heads cool; and that Parker’s final scores on the 2010 vintage may have a softening impact on 2009’s prices. Above all, though, he underlines the fact that the decision made by Bordeaux châteaux, more or less from the 2006 vintage onwards, to hang on to much more stock than was the case in the past (from almost nothing to a full two-thirds of a particular harvest) has changed the game.

“Price,” he says, “is a function of supply and demand, and the traditional story of wine investment is that supply of any particular wine can only reduce over time as bottles are opened and drunk.” If all of the stock of a particular vintage, though, is either held by private investors or retained by the châteaux, the traditional narrative falls apart, and top Bordeaux ceases to be what The Wine Investment Fund calls “the only asset class with a perfect inverse supply curve”.

Of course, 2009 is young, but almost all of the top wines appear at this stage to be owned either by the châteaux themselves, or by investors who have no intention of drinking them. This will also be true of 2010. The Wine Investment Fund won’t even consider 2009 until 2013, and may then leave it alone. The ‘lower risk approach’, Smith insists, is to continue to invest in pre-2005/6 vintages within his fund’s ‘universe’ of 35 châteaux. Those are the wines which are being guzzled. Guzzling is essential. Who will start guzzling Pontet-Canet 2009, and when?

The death of the en primeur system has been announced many times over the past couple of decades, usually by those with no medical qualifications other than a degree in jealous animosity. Even if 2011 is a flop (and hefty price reductions seem necessary for a flip), the system will remain in rude good health.

Stealthily, though, it has undergone a sea change. It used to be a way for the châteaux to use good vintages to underwrite poor ones, and it left the Bordeaux merchant stockholders in the driving seat. Now the châteaux are the absolute masters, and en primeur has become their way of testing and teasing the market. Where did the stock of 2009s which suddenly materialised after Parker’s revised scores come from? I’d be very surprised if it wasn’t the châteaux themselves, who suddenly saw an advantageous moment to release a new tranche or two.

Yes, I know that all this harping on about the price of fine Bordeaux leaves ‘real drinkers’ feeling queasy. I’m as sorry as anyone that the comfy little world we once knew, in which the not-very-well-off could enjoy the odd first-growth without trembling at the financial implications, has gone now. When French police raided the vast, five-floor, 101-room apartment of Teodoro Obiang Nguema (the son of the president of Equatorial Guinea) on Paris’s chic Avenue Foch in February this year, among the ill-gotten gains they confiscated were eleven supercars, a three-million euro watch, Michael Jackson’s glove — and an enviable stock of Pétrus and DRC. That’s our world; that’s the kind of homes where you find these wines (and I’m sure Christian Moueix and Aubert de Villaine are as discomfited by this as anyone). It will be truer still in the future, as the pool of the super-rich grows. We’d better get used to it.

Written by Andrew Jefford

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