Sichel predicts 30% drop in primeur prices

Bordeaux en primeur prices could drop by up to 30% compared to last year if one takes into account a newly weakened euro, believes Allan Sichel.

En primeur prices could fall for US and UK buyers by as much as 30% due to a weakened euro

Sichel, who is vice president of the Bordeaux Wines Council (CIVB); president of the négociants union, and managing director of Maison Sichel, told db that exchange rates could positively influence next year’s campaign when discussing the 2014 vintage in Bordeaux last week.

“We are lucky with the drop in the euro, which is about 15% down against the dollar,” he said, adding, “So I’m thinking that there will be a 10-15% drop in the release price overall which will be massively helped by a 12-15% drop in currency.”

According to Sichel, the combined impact of a weakened euro and lower release prices should increase the demand for en primeur Bordeaux after three campaigns in a row that have failed to entice buyers.

“Together this can give a real boost to the whole en primeur campaign without being too expensive for the négociants,” he said, noting that the négociants generally take around a 12% margin on wines sold en primeur (compared to around 20% on bottled stock in their possession).

Predicting a 10-15% decrease in release prices from the negociants, Sichel said, “As a négociant, the campaign with the 2014 vintage is a fantastic opportunity to re-adjust prices and give to the market a strong message that Bordeaux is here, and has good wine, and at price points which the market is expecting today.”

Continuing, he stressed the importance of a successful en primeur campaign for the region. “En primeur is very important for generating early cash, and it brings a worldwide focus on Bordeaux for two months… we are lucky to have that and we want to maintain that.”

While he told db that he believed that buyers of 2009 and 2010 cru classé Bordeaux en primeur will benefit from price appreciation on the wines in the long term, he admitted that the 2011, 12 and 13 vintages may have been overpriced on release, and may never bring a profit to those who bought them en primeur.

“The fantastic 09s and 10s were very expensive but in 10-50 years time there will still be there and will still be sought after,” he said, adding, “There is just a timing lag [in price appreciation].”

Allan Sichel is vice president of the Bordeaux Wines Council (CIVB); president of the négociants union, and managing director of Maison Sichel

Continuing, he admitted, “But with the 11s, 12s and 13s, there was less of the speculative dimension, so the pricing wants to be closer to consumer expectations, so maybe they were too expensive [on release] and the proof of that is that they are not worth more than when they were released, although there are some exceptions of wines that were released at a reasonable price.”

He also suggested that a larger quantity of wine produced in this year’s vintage would assist a planned price reduction compared to the 2013 harvest.

“We have relatively low stocks at the moment which is putting pressure on pricing, but 2014 will replenish stock levels: 2014 is about 5.5 million hectolitres, while 2013 produced 3.9m hl,” he said. (2013 marked a 30% drop on the region’s average production level of around 5.7m hl).

However, he stressed that “it is not enough just to get the volumes in” and described the 2014 vintage as a “massive relief: things looked uncertain until the end of August, but we had a fantastic September and October which led to what will be a good vintage”.

Continuing, he said the wines from this year’s harvest “have a lot of colour and depth,” while describing them as “pure aromatically, fruity and with a fairly low tannin content”.

Summing up, he highlighted the need for higher quality and lower priced wines compared to those from 2013.

“We need to reassure the whole community that there is sense in buying en primeur. For this, the quality of the wine has to be guaranteed – we can’t afford to have a deficient level of quality – and then it’s about the price point.

“Buyers want to make sure if they are buying early then they are buying at the lowest possible price that the wine will be offered at, and that is the dimension that is insufficiently taken into account by les crus classés themselves.”

Sichel’s comments echoed those made by Liv-ex managing director James Miles at the Wine Industry Conference in Hong Kong earlier this month.

“A well-priced 2014 vintage is a vital precursor to any kind of sustained recovery,” said Miles on 6 November.

“There are some tentative signs the market is recovering, but if it is going to have to absorb another loss-making Bordeaux en primeur vintage, there’s a very real risk of a very extended crisis,” he told db.

“What’s interesting is the cycles in Bordeaux tend to begin and end with good and bad en primeur campaigns. While external events are incredibly important, these boom and busts tend to be self-inflicted,” he added.

Aware that the négociant system may have helped cushion château-owners from reality, he commented: “It may well take a 1970s-style disaster when almost all the négociants went bankrupt before the châteaux woke up. The problem is this would release a lot of distressed stock onto the market which would depress the en primeur price.”

Indeed, Sichel also told db: “What effects the market [for cru classé Bordeaux] very negatively is when someone with too much stock flogs it at a 20% discount, and even if it’s only a few cases, because with websites such as Winesearcher.com, everyone sees it.”

Notably, he also said that new technology would exacerbate the impact of any release of low-priced bottles onto the market. “The effect of this will be much more powerful with new smartphone apps,” he stated.