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2007 Bordeaux Futures Failing to Sell

The weak American dollar and a good but not great vintage have created little demand for the wines

Tina Benitez

Posted: Tuesday, July 08, 2008

American wine retailers are calling the 2007 Bordeaux futures campaign one of the worst in years. Unseasonable weather and mildew throughout Bordeaux in 2007 led to a good, but not outstanding, vintage. The lackluster reviews, combined with a sagging economy, a weakened U.S. dollar, a hangover from the powerhouse 2005 campaign and prices that are lower than 2005’s but not low enough to attract interest have put a strain on consumer demand.

"[The] 2005 [futures campaign] was one of the largest responses we've ever had to Bordeaux, and 2007 is one of the weakest," said Steve Wallace, owner of Wally's Wines & Spirits in Los Angeles. "It's like comparing Château Margaux to Beaujolais."

Still, some wines are selling, particularly wines that are always rare, such as Château Pétrus, or are considered good smart buys, like Château Larcis-Ducasse in St.-Emilion. And some consumers are choosing white over red—both Sauternes and dry whites enjoyed a much better vintage.

Futures, or en primeurs, give consumers the chance to make advance purchases of Bordeaux while the wine is still aging in barrels—usually 18 to 24 months before it is bottled. The 2007s will hit shelves in 2009. Châteaus sell their futures to négociants, importers and retailers, who then sell them to consumers.

In great vintages, futures allow the producers to make money while the wine is still trapped in the cellar and give consumers a chance to buy the wines at a price lower than the eventual release prices. That was the case with the 2005s, which have soared in price since they first went on the market as futures. Other vintages don't do as well. Many 2004s ended up selling for about the same price on release as they did as futures. Many wines from 1997, a vintage similar in quality to 2007, sold at a discount once released. Consumers who bought the wines as futures lost money.

Château owners did drop their prices this year (see chart below), but not as much as négociants and retailers hoped, especially when prices are already higher in the two biggest futures markets, the U.S. and the United Kingdom, thanks to weak currencies. Several U.S. retailers said prices were still too high for a vintage that doesn't pique consumers' interest. Some retailers believe the prices now are the same prices they'll see once the 2007s are released in 2009.

"I think the perception of the 2007 vintage was that it was a pleasant, drinkable wine, but the [price cut] was not deep enough for people to buy as a future," said Bill Blatch, president of Vintex Wine Négociants in Bordeaux. "We didn't do a bad campaign. America's [sales] were really awful. It was the same in Canada and England." According to Blatch, several of the retailers he deals with discounted some futures by 15 to 25 percent.

Larcis-Ducasse of St.-Emilion was a hot seller, because it had a good reputation and good price, and Sauternes was tops, according to Blatch. "The star was Sauternes," he said. "In a vintage where people didn't know what to do with the reds, Sauternes and dry whites did very well."

In New York, at Morrell & Co., futures sold, but not as well as in previous years. The dollar and pricing were a factor, but "futures fatigue" was another, according to Nikos Antonakeas, the firm's managing director. "We had 2005—which was good—2006, and now it's 2007, and people may not want to buy as much," he said. "In the current economy, people are cautious about where they spend their money." Whites sold, but are still a small part of the futures campaign. Morrell saw a slight jump in sales of whites, from 37 cases last year to 47 this year.

Château d'Yquem and other Sauternes were the big sellers for Wally's Wines in Los Angeles, but some reds like Château Pontet-Canet sold. "White wines in 2007 did much better than red wine,” said Wallace, who sold Château d'Yquem at $669 a bottle. "It's a better vintage. They had big scores, and people buy by scores. People that collect wines want to collect only the finest vintages."

New York's Sherry-Lehmann started selling futures just over a week ago, but executive vice president Chris Adams is expecting a slow campaign because of the current economy. Popular futures so far have been Sauternes such as Climens and Rieussec and top reds like Pétrus. "Traditionally, the American market, with these vintages, is less interested in en primeurs," said Adams. "Châteaus invest a lot into making good wine, and it costs a lot for them to produce, so their incentive to come down [in price] wasn't there. In some instances, we had to shrink our margins."

Many Bordeaux producers hope that other nations will pick up the American market's slack, but economic signs from the other major buyer, the U.K., are not encouraging. "Fuel prices have gone up 40 percent," said Simon Staples, sales director at Berry Bros. & Rudd. "It's not a year for average wine lovers to purchase wine at all." Staples said futures sales of Château Larcis-Ducasse and Pavie-Macquin were strong, because of their good prices. Other popular futures included Lynch-Bages, Haut-Bailly, Pontet-Canet and several Sauternes.

Berry Bros. & Rudd had much better luck in Asia. Hong Kong was "huge, huge," said Staples. "Lafite went from 600 cases [sold] to 1,200 in 24 hours. We've had huge business there since the drop in tax in March. Hong Kong is the cheapest place in the world to buy wine."

Collectors account for approximately 40 percent of wine business in Hong Kong and mainland China, spending an estimated $1.2 billion annually, according to a recent study by the Hong Kong Wine & Spirits Industry Coalition. But Blatch thinks Chinese futures sales may be overrated, even if the country is one of the fastest-growing markets. "The Chinese market sales are strong, but they don't buy futures," he said. "Only a few big houses buy futures. There isn't that weight of vintages as there is in America. It's the same in other Asian markets. Everyone keeps saying China is taking up the slack, but I'm not sure."

Selected Bordeaux Futures Prices Per Bottle, 2005–2007

Château	2005	2006	2007	Change '05-'07
Ausone	$1,415	$928	$887	-37%
Cheval-Blanc	$743	$831	$648	-13%
Cos-d'Estournel	$197	$126	$114	-42%
Haut-Brion	$571	$545	$428	-25%
Lafite Rothschild	$616	$550	$438	-29%
Larcis-Ducasse	$131	$50	$49	-63%
Latour	$766	$566	$442	-42%
Léoville Las Cases	$280	$202	$160	-43%
Margaux	$723	$553	$435	-40%
Mouton-Rothschild	$573	$612	$436	-24%
Palmer	$246	$195	$198	-20%
Pavie	$321	$268	$209	-35%
Pichon-Lalande	$127	$123	$101	-20%

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