2011 Port Futures

[Al B.]

Graham - paid £32 - inflation adjusted = £36.62 - add storage = £39.62 - current retail £38 - current auction estimate £30.50 = approx 23% discount
Noval - paid £33 - inflation adjusted = £37.76 - add storage = £40.76 - current retail £45 - current auction £36 = approx 12% discount
Vesuvio - paid £30 - inflation adjusted = £34.30 - add storage = £37.30 - current retail £43.33 - current auction £34.66 = approx 7% discount
Vesuvio Capela - paid £50 - inflation adjusted = £56.80 - add storage = £59.80 - current retail £100 - current auction £80 = approx 34% premium to buy now and not on release

For inflation I used the movement in the UK Consumer Prices Index; for storage costs I used my current actual storage cost of £0.75 per bottle, per year; for current retail I used WIne Searcher (not pro) low for UK suppliers; for auction I simply used my general guide that I would expect to achieve a 20% discount to retail if I buy at auction.

assuming you used the 2.2% I think you're overadjusting your inflation by alot.
2009 to 2013 is only 4 years worth of compoudning.
or 1.090946826256.

I believe you're calculating a 3.5% inflation instead.

I didn't use compound rates of inflation, I used the UK government CPI figures given here. This tells me that the UK CPI Index was 110.9 in July 2009 and was 126.9 in October 2013. That calculates out to be 14% inflation over the 4 years.

[Glenn E.]

I think you're asking two different questions:
(1) Is the 2011 vintage over-priced?
(2) Will bottles of 2011 vintage port be cheaper in 2-3 years?

My opinion is that the answer to (1) is no.

...

But I do think there will be an opportunity to buy 2011 ports for less money in the next 2-12 years. Pure supply / demand economics says that when sellers are forced to dispose of wines over the next few years with only a limited number of buyers, the price will have to be less than it is today.

Aren't those contradictory statements?

If the 2011 vintage is not overpriced, then its price should not drop in the coming years. A price drop implies, to me, that it was overpriced to begin with.

These aren't cars. Their value doesn't drop with time because they're being used. If anything, the value of a bottle of Port should go up with time because it is being aged, and aging Port makes it better.

[Eric Menchen]

Does any have 2011 Nacional for sale in USA?

wine-searcher.com pro gives seven sources from $500 to $2000. Showing up in wine-searcher isn't a 100% guarantee that they have it, but I bet you can find a bottle. The $500 listing is at Total Wine & More, Bellevue; and going to their website shows it OOS. The next few listings don't have great websites; I suppose you could call them. winemadeasy.com has a price of $719.20 and reports:

Limited inventory.
2 bottles or less in stock; we will confirm your order by email.

[Eric Menchen]

My opinion is that the answer to (1) is no. Most 2011 ports from the big names have sold through and there is nothing left. ... But I do think there will be an opportunity to buy 2011 ports for less money in the next 2-12 years.

Like Glenn, I too found Al's statement to be at least somewhat contradictory. The stuff may have sold through from the lodges, but there is lots left, on retailers shelves and in the supply chain. wine-searcher has 9 pages of hits for 750s of Taylor VP. (A bunch I consider duplicates as Total Wine & More lists all of their locations; but still, I think there are probably on the order of 100 listings.)

[Moses Botbol]

My local store said they are sold out on 2011 Nacional's. I'd buy one if at a decent price. I doubt I'll ever drink it, but could be a good one sell/trade 10-15 years down the road

[Andy Velebil]

My local store said they are sold out on 2011 Nacional's. I'd buy one if at a decent price. I doubt I'll ever drink it, but could be a good one sell/trade 10-15 years down the road

Iirc a store had to order 4 full cases (48 bottles) of regular vp to get one bottle of 2011 Nacional. Not many stores got more than a couple bottles. So not hard to "sell out" of it. Lol

[Russ K]

Does any have 2011 Nacional for sale in USA?

I ordered 2 from Premier Cru at 499 ea, but they only had 18 for sale at the time. Last I looked they had none left.

[David Spriggs]

Most 2011 ports from the big names have sold through and there is nothing left. You can still find stocks from the smaller, independent producers but you have to look hard to find someone who is importing them or do this yourself. Some of those independent producers have made some absolutely fabulous wines this vintage but just don't have the market presence to be able to find homes for their bottles - I feel sorry for them because the quality of their Port is just stunning. Because sales have pretty much matched up to supply, I don't see the initial release prices as being too high. In fact, for some of the garagiste cuvees I actually think the price was too low - look at the current retail price of Stone Terraces, Capela, VVV and Nacional and compare those to the first release prices.

I agree with you with respect to the UK market. Many wines have sold through already. Some were virtual wines and none was available. (Vesuvio Capela for example). The market in the US is quite different. 2011 Dow and Graham are still on the shelf at below average prices at my local Costco. I'm the only one who has bought the Dow. Not a single bottle of the Graham's has sold. Vesuvio Capela? I'm the only one that has bought any bottles from my local wine merchant. They received a six pack and there are now 5 left. (I'm probably picking up at least one more of these soon). Graham's Stone Terraces? I have seen many offers. I purchased a couple, but there are still more sitting on the shelf. VVV and Nacional.... mostly gone.

I will say that prices for all the wines are higher here. The UK cost is closer if you add in VAT and duty, but the UK still ends up with a lower price. That means that it's easier for the prices to fall in the US. If the price rises much, then US importers will bring it in from Europe.

So hard to say if the price is right here in the US. Seems a bit high to me, but I suspect that many will eventually sell out over the next year or so.

[David Spriggs]

I was offered Nacional at $535... and passed.

[Tom Archer]

Trying to predict where VP prices are going to go is very difficult. Whilst it is possible to find out sales volumes from the IVDP, no-one knows how much is actually being drunk, so it is impossible to establish whether or not production is outstripping consumption.

Note the distinction however, between consumption and demand. 30 - 50 years ago there was big appetite for corporate investment in port that pushed demand way ahead of consumption. We still see the legacy of that era - Warre '77 is still the most frequently seen VP at UK auction.

Looking at the 2011 campaign, there is anecdotal evidence, that may well be true, that demand was fuelled by private wine investors who felt that the Bordeaux producers had not made enough price concession for relatively weak recent vintages.

Wine buyers who have not previously invested in vintage port may also not realise just how bad the investment track record of VP is when bought at release. When inflation and storage costs are factored in, one has to go back to 1970 to find the last vintage that has rewarded investors at all, and 1955 to find one that has made sound returns on invested capital.

My suspicion is that much of the 2011 vintage has been bought by people who have no serious intention to drink it, and that much of the stock will ultimately find it's way back into the secondary market.

Will they then command higher prices than at release? Possibly, but I very much doubt that investors will see good returns. One factor that is very evident is that rising prices for wine massively affect consumption, another is that the price gulf between VP and LBVs, Crusteds and Reserves is awkwardly wide.

I felt that the release prices for 2011 were broadly where they should be after the wine has had twenty years of cellarage. I suspect that in twenty years time they will be trading at auction at much the same price (inflation adjusted) as they are today.

[Andy Velebil]

Does any have 2011 Nacional for sale in USA?

I ordered 2 from Premier Cru at 499 ea, but they only had 18 for sale at the time. Last I looked they had none left.

So they ordered about 72 cases of Noval? I find that hard to believe and I'd be curious to see if they pre-sold this prior to actually having them in stock or guaranteed. I know for a fact some retailers took orders for some 2011 VP's before they were given their allocations from distributors. The question is with Premeir Cru is, how long will it take to fulfill that order?

[Eric Menchen]

I ordered 2 from Premier Cru at 499 ea, but they only had 18 for sale at the time. Last I looked they had none left.

The question is with Premeir Cru is, how long will it take to fulfill that order?

While they may have claimed to have had 18, and now have none, that doesn't mean they took orders for 18 bottles. Perhaps only reality set in and they adjusted their inventory.

[Andy Velebil]

I ordered 2 from Premier Cru at 499 ea, but they only had 18 for sale at the time. Last I looked they had none left.

The question is with Premeir Cru is, how long will it take to fulfill that order?

While they may have claimed to have had 18, and now have none, that doesn't mean they took orders for 18 bottles. Perhaps only reality set in and they adjusted their inventory.

Very possible. But they have a habit of selling things they don't have yet (or so it appears) and then taking years to deliver (or not) said bottles. There is enough people on other wine boards who've complained about having orders cancelled or waiting years to get stuff from them that I refuse to buy any pre-arrival things from them. However, If they have it physically in stock they are a great store to buy from.

[Glenn E.]

If they have it physically in stock they are a great store to buy from.

I have no experience with pre-ordering from them, but I can +1 this. Great store to buy from when they have it in stock!

[Al B.]

I think you're asking two different questions:
(1) Is the 2011 vintage over-priced?
(2) Will bottles of 2011 vintage port be cheaper in 2-3 years?

My opinion is that the answer to (1) is no.

...

But I do think there will be an opportunity to buy 2011 ports for less money in the next 2-12 years. Pure supply / demand economics says that when sellers are forced to dispose of wines over the next few years with only a limited number of buyers, the price will have to be less than it is today.

Aren't those contradictory statements?

If the 2011 vintage is not overpriced, then its price should not drop in the coming years. A price drop implies, to me, that it was overpriced to begin with.

These aren't cars. Their value doesn't drop with time because they're being used. If anything, the value of a bottle of Port should go up with time because it is being aged, and aging Port makes it better.

I don't see these as contradictory statements, but accept that a different situation might exist in the US.

The reason that I don't see the statements as contradictory is that I can't see something being over-priced if it has sold out. If you sell everything you make, you underpriced or fairly priced your product. UK allocations of the 2011 ports have sold through (to a combination of retailers and individuals) and there are none left with wholesalers. You can still find retailers who have stocks, but these are generally quite highly priced and are offered by retailers who are looking to manage demand through price. From this situation I conclude that prices (at least in the UK) were realistic and not over-priced.

But the supply / demand balance changes with time. Right now there is a high demand for 2011 ports but in 2-4 years time the publicity and profile of the vintage will have fallen away and demand will have dropped. If anyone has stocks to sell, they will find that there is not as much interest and in order to sell, they will need to compete against the demand for the newly released 2014 vintage or the mature ports from the '80s and '90s thus the price will need to be less to appeal to the bargain hunters who will be the only ones willing to buy at that time.

Both prices are fair, but one is higher than the other.

[Daniel Jewesbury]

Both prices are fair, but one is higher than the other.

Quite agree. This is simple economics. The measure of whether a price is too high is whether people are willing to pay it. That willingness may be different at different times, even when considering the same price.

[Glenn E.]

If you sell everything you make, you underpriced or fairly priced your product.

I can see that perspective.

The reason I disagree, though, is because of the kind of market we're talking about. The 3-tier system in the US almost forces retailers to order at whatever price is offered just to have something on their shelves. Port in particular is also usually purchased to age, so the bottles purchased today are still effectively on the market until they are consumed. (Present company mostly excepted, as most of us don't plan to ever sell.) In effect, a lot of people buying the 2011s right now are speculators whether they realize it or not. If they turn around and sell at a loss in 5 years, they overpaid today.

I'm not immune - I'm reasonably certain that I overpaid for the 7 bottles of Stone Terraces that I purchased. I'm probably safer with my 4 bottles of Capela, as those were less expensive to start with and past history for Capela indicates that they hold pretty steady or slightly increase in price. There is no past history for Stone Terraces, so I couldn't be sure.

So why did I overpay for Stone Terraces? Because I wanted to make sure that I got some. Due to the limited quantity, I was afraid I would miss out. So in that sense I did not overpay, as not paying that price now might have prevented me from getting any at all, at any price, now or in the future.

I'm not concerned about that for any other 2011. I feel confident that I'll be able to pick some up later - in 5, 10, or 20 years - for less than what I would have had to pay now (adjusted for inflation if in 10-20 years).

[Tom Archer]

The situation is a bit unsatisfactory..

I'm satisfied that in terms of a declared year, 2011 ranks above averarge, whilst falling a little short of some 2009s, that were really exceptional.

But once again, the release prices seem more in line with semi mature VP, rather than first release - the maturation journey, both in terms of storage costs and capital tie-up are not accounted for.

There was a time when VP was shipped, bottled and laid down, usually without labels, until it was ready for consumption. After that it was labelled and presented to market.

Whilst that doesn't happen today, except for the late release SQs, market economics do not prevail against it. After looking in detail at the available data on price vs consumption and cost vs profit, I am in no doubt that if the producers of VP trebled the production of VP and at the same time time halved the price, they would both reduce the money needed to promote the product and increase their profit.

The current strategy of benchmarking VP against Bordeaux prices only serves to push VP into a niche sector with ever decreasing sales (and profit) volumes, while the other premium products are left far behind.

Enforced scarcity does no favours to the big league, whilst leaving the market open to the young turks, who have made an impressive presence with their 2011s...

[Daniel Jewesbury]

I don't think it's completely crazy to say that I agree both with Tom and with Alex here. Yes, the market can bear the price of the new VPs, but that doesn't mean that they aren't pursuing a rather small niche. Hence my question elsewhere on FTLOP about who will really benefit from an upturn in the market, the big boys whose product is becoming more and more expensive, or the 'young turks' as Tom calls them, who are quite happy to supply a market that's to some extent being left behind. Either way, there are products out there at a price that I can still afford, and I will buy and drink them. I have no idea how sustainable this market model is, but I suspect that the answer is 'more for some than for others'. The big boys may be the 'others' rather than the 'some', once all this has shaken down.

[Al B.]

If you sell everything you make, you underpriced or fairly priced your product.

I can see that perspective.

The reason I disagree, though, is because of the kind of market we're talking about. The 3-tier system in the US almost forces retailers to order at whatever price is offered just to have something on their shelves.

But presumably the retailer will only buy if he expects to sell. No sane retailer will buy any product he does not expect to sell at a profit.

Port in particular is also usually purchased to age, so the bottles purchased today are still effectively on the market until they are consumed. (Present company mostly excepted, as most of us don't plan to ever sell.) In effect, a lot of people buying the 2011s right now are speculators whether they realize it or not. If they turn around and sell at a loss in 5 years, they overpaid today.

I completely accept this. If a person makes a purchase expecting to sell later at a profit and instead sells a loss, then that person overpaid. I don't necessarily see this as the same as the product being over-priced though. Although it could mean that demand was higher than it ought to have been and therefore the vintage was over-priced. Hmmm. I need to give this some more thought...

I'm not immune - I'm reasonably certain that I overpaid for the 7 bottles of Stone Terraces that I purchased...So why did I overpay for Stone Terraces? Because I wanted to make sure that I got some. Due to the limited quantity, I was afraid I would miss out. So in that sense I did not overpay, as not paying that price now might have prevented me from getting any at all, at any price, now or in the future.

But you didn't overpay. You wanted some, you were offered a price. You thought "Ouch, that's expensive but I might not get some in future years." You put a value on the certainty of having a stock and decided to pay the price - effectively you are option trading. You might not be able to sell for a profit in the future, but that is not the same as having over-paid today since you are not looking to sell at a profit in the future.

I'm not concerned about that for any other 2011. I feel confident that I'll be able to pick some up later - in 5, 10, or 20 years - for less than what I would have had to pay now (adjusted for inflation if in 10-20 years).

I completely agree - well, pretty nearly completely. There is a small chance that port market economics will turn on their head in the next 5-20 years with a big, new market for vintage port suddenly shifting the demand curve but if that happens you can have some of mine at cost (including inflation, storage, handling, shipping, national taxes, state taxes, county taxes, town taxes, wife taxes and capital return) if I haven't drunk it all.