POP IDOLS

How does 2004 Bordeaux rate on the “bangs per buck” scale?

Activity in April picked up despite the faltering 2004 en primeur campaign. Trade through the Exchange was up 17.3% on March and 50% year on year. Stock held by the leading UK merchants was flat for the month and the Liv-ex 100 rose 1.7%.

With the 2004 campaign finally finding its feet, we thought we would make a stab at the theoretical fair value of the top wines. In the analysis we have taken 25 of the bestknown Bordeaux brands and looked at their latest prices and Parker scores in all but the worst vintages from 1982. In total the analysis covers 18 vintages and 450 wines. It takes into account three things: a) prices of wines that are already available in the market from back vintages; b) the quality of the wines as determined by Robert Parker; c) the opportunity cost of holding the wines.

Evaluating fair value for a commodity that generates no monetary income is not straightforward. The only income that wine generates is pleasure (of which the best benchmark remains Parker’s points system). As such we have developed a loose method of valuing wine by dividing the price by its score to measure how much pleasure each pound generates. We call it the POP ratio (short for price to points).

To give each point more relevance we shorten the traditional 100-point system to 20 points, by subtracting 80 from the score (ie 95 = 15 points in our scoring system). The reason for this is twofold; first, a wine with less than 80 points would not be considered investment grade in the secondary market. Second, the impact on price between 95 and 98 points is much greater than 3%, so shortening the score to 18 and 15 respectively (a 20% difference) goes some way to reflecting this.

The main decision everyone faces when buying en primeur is, should one buy now or wait until the wine is ready to drink, because almost without exception, well-cellared Bordeaux is still available in the market 20 or 30 years after release. For this reason, we have factored in a calculation for opportunity cost (ie the return one might have got by doing something else with the money). To do this, we discount the average POP ratio for each wine by 5% per annum, which roughly equates to the returns achievable on deposit.

The average score in 2004 for our selected wines is 91 points, which equates to the average for the past 22 years, making 2004 an average vintage. Latour is the only wine in the selection that merits an exceptional score of 95 points, against 17 wines in 2000. Of the seven wines released to date from this list, five have come in under our fair value calculation, which is encouraging, but given that 2004 is a huge crop and a no more than average vintage, there is probably no rush to buy the wines.