Latour copes with difficult vintage

Speculation mounts over rumoured sale to raise finances

VIGNOBLE DE CHATEAU Latour Vineyard, the company that owns Château Latour, says it has overcome reduced sales of its 2001 vintage to boost profits in the 12 months to December 2002, writes Ben Wootliff.

The company says its 2002 net income rose to €21.7 million, up from €14.9m in 2001, its highest earnings for the last 30 years.  The rise in earnings came despite a fall in quality of the 2001 vintage compared to the exceptional quality of the previous year.

The non-trading company Vignoble de Château Latour Vineyard is one of the five premières crus classés of the Médoc and Graves regions and was acquired in 1993 by Francois Pinault, the French luxury goods and retail billionaire.

Pinault, who controls Gucci and French department store group Pinault Printemps Redoute, has been under investigation in the US over the purchase of insurance group Executive Life, and could face more than US$1 billion in fines.

This has led to growing speculation that he may be forced to sell off Latour to raise finance for his business empire.  A sale of Latour would probably raise more than US$200m according to industry sources.

"Assets like Latour are unique and rarely come up for sale.  The prestige attached to a property like this means that it would attract a price disproportionate to its profit," says one wine industry financier.

Château Latour’s rise in profits came despite relatively poor sales of the 2001 vintage.  Sales were hampered by a depressed commercial environment, when some of the great wines managed to sell only 50% to 60% of their own production.

"The market had already stuffed itself with 2000 when the inferior 2001 came along," says Christopher Burr, managing director of Uvine.  However, Burr warned that it could be another relatively difficult year for Château Latour commenting: "Unless it is an exceptional year, sales of the 2002 will be not dissimilar."

"This vintage is having difficulty imposing itself, falling between the renowned 2000 vintage and that of 2002, a high quality Médoc," says the company in its annual report and accounts which were filed last month.

Tom Hudson of Farr Vintners says prices have fallen significantly: "The 2000 was selling at €170 per bottle, compared to €100-€110 for the 2001. No one has seen a vintage like 2000 in terms of the demand for it."

Château Latour says bottle sales resulted in a satisfactory level of earnings of €6.2m, but lower than the record of 2001.  It adds that the results reflect steady business at the start of the year, with prices that continued upwards from 2001, offset by a sharp downturn in the second half, with prices down 10% to 20% depending on the vintage.

The United States remains the primary overseas destination for the estate’s bottles, but "America is quiet at the moment due to the weakness in the economy and the weakness of the dollar," says Hudson.

Continued poor economic conditions also hit demand from Japan. Sales were considerably down in 2002 and were concentrated on the more affordable Forts de Latour and Grands Vins.

Wine consumption continues to increase in Japan by volume but average prices have fallen in the past two years.  Economic conditions also hit sales in Germany where, in 2002, for the first time some merchants declined part of their primeur 2001 allocation for premières crus.

Slow sales in Europe were offset by increased demand from Asia, notably the growth of buying in China, Taiwan and Korea.  Strong economic growth has helped create new demand in the region.

"There are one or two very rich people who have become collectors and I think it is them that are creating some of this demand," comments Burr at Uvine.