Bordeaux 2017: A more amenable market but at what price?

The market for en primeur has improved immeasurably since the 2013 nadir says Liv-ex but with the 2017 vintage Bordeaux is immediately faced with the challenge of a small, frost-struck and potentially heterogeneous vintage and the pitfalls of pricing it.

Although it was not without its faults – being over long, the holding back of stock and then rising prices among them – last year’s 2016 en primeur campaign was a return to form and the most successful since the 2010s went on sale, netting UK merchants some £82 million in total notes Liv-ex (though even that was still some way off the £200+m the 2010 campaign realised but this is partly explained by the reduced volumes being released by the châteaux as well).

In its now annual look at the Bordeaux market ahead of the trade decamping to the region for the pre-campaign tastings, Liv-ex has studied the ground and pointed out what it thinks will be crucial factors in the broader strategic sweep of the coming campaign.

First and foremost of which is the point already made – en primeur, after several poor years which have only increased scepticism of its places in today’s market, is back in a much better position after a decent 2016 ticket.

Admittedly, it is now clear that as a vehicle en primeur is only really effective for a select few top estates – Liv-ex suggests 30 though it may be bit higher – that are, “typically the wines that are highly scored, keenly priced and can be difficult to source in the primary market.”

Typically, no sooner has a modicum of trust and momentum begun to return to the whole process than nature has thrown a curve ball into the mix.

No plan, however well laid, survives first contact with the enemy and nor, one might add, with the weather either.

The savage frosts of April 2017 cut a swathe through the region causing a reduction in the final crop of 350m litres (around 467m bottles) – a 40% reduction on the 2016 crop, 33% down on the 10 year average and making it smaller than even the 2013 vintage.

On the other hand, while it is of no comfort to those growers who lost as much as 100% of their production, the damage to the important Left Bank communes was not as severe, indeed Pauillac and Saint-Estèphe recorded rather large crops – although Saint Emilion and Pomerol and the Right Bank were very badly hit.

As such, those estates to which en primeur is the most relevant should have at least reasonable amounts of wine to sell – only two major châteaux, Fieuzal and Climens, have announced they are making no wine at all in 2017.

Furthermore, after the frosts the rest of 2017 passed off reasonably smoothly, with several producers already noting that but for the frosts it would be considered a rather excellent vintage.

All taken into account, however it seems as though that this is going to be a very heterogeneous vintage for quantity and quality and as Liv-ex notes: “With recent movements in the world of wine criticism, there may be some divergence of opinion over which are the wines to buy, quality-wise.”

Palmer is one estate holding back increasing levels of stock

Stocks and ladders

The other impact of the overall reduction in crop levels will be on the pricing of this vintage and stock releases and retention.

As mentioned above, one of the emerging themes of the 2016 campaign was the amount of stock being held back by top estates.

Some, such as Palmer and Pavie, are now only releasing around half of their production en primeur (with ex-cellar stock being released at later dates) and while no other châteaux seem on the cusp of withdrawing from en primeur entirely, à la Latour, the effect of this policy means there is now more wine in estate cellars “than at any point since 2011”, says Liv-ex.

The report continues: “The purpose of this strategy, and its long-term impact on the market, is not entirely clear. On the one hand it may simply be part of a normal restocking cycle. On the other, it is possible that the strategy of restricting supply is intended to help maintain price levels.”

Price is the eternal (and infernal) question that dominates every en primeur campaign.

In a vintage such as 2017 the tussle of opinion between trade and châteaux over the ‘right’ or ‘correct’ level for the wines will be fiercer than ever.

The rumble from the trade already is that – regardless of frost damage – prices cannot go up on the 2016s – especially since, while the en primeur system is recovering somewhat, the only really consistent buyers are the UK and Europe – Asia is still not interested and the US is still very selective in the vintages it will take in any quantity.

What the trade would like to see and what the châteaux envisage happening are not always one and the same.

Liv-ex lays it out very clearly: “If wine critics deem the 2017s to be below average, the chateaux will want to sell as much stock now at the highest possible price, which could leave either négociants or international merchants with stock they are unable to sell.

“On the other hand, if the wine is deemed to be above average, it’s likely that merchants might struggle to get their hands on stock that is being withheld to sell in the future for a higher price.”

The optimum middle way must surely be for the châteaux to, at least for this campaign, ease up on their current retention policies, release as much stock as possible which would therefore allow them make a token but important gesture to the market at large by being seen to reduce prices on the 2016s.

The 2017s would not go down in history as one of en primeur’s most rip-roaring but a solid, positive campaign would set Bordeaux and the wider fine wine market off on a steady course for the rest of 2018.

Liv-ex concluded: “The market has made steady progress in 2017 but is now showing signs of slowing down. An overpriced campaign with suppressed volumes could negatively affect sentiment.

“On the other hand, a sensibly priced campaign, with wines released in decent volumes, will boost confidence and satisfy all members of the supply chain. As always, this is surely what the trade will hope for as the campaign begins.”