The "new" economy, wine, Port & pricing

[Roy Hersh]

Obviously something has to change, as nothing stands by idle during times like this. However, different cities, states, provinces and countries are all experiencing vastly different market forces.

Some report prices dropping while others have been mentioning sales that are currently exceeding expectations. So what is the truth? I have my opinion, which is that 1st quarter of 2009, we are going to see the "demand" part of the equation, cool off far more than it has so far in the 4Q of 2008. If that happens and I think it will, how far will pricing drop? How will this effect the en primeur campaigns of wine in general and 2007 Vintage Port in particular?

What is going on with pricing today in your local area?

This discussion can be about Port or any other wines you care to mention.

[Roy Hersh]

Wow, a friend who already just read this post ... emailed me this, which he found on the Parker site, this coming from the mouth (or hands typing) of Mr. Parker himself:

The wine market is already going through a serious correction...the first major one since the early 70s...keep in mind top end wine has generally been recession proof over the last three decades..but that is changing dramatically....auction sales are beginning to show less interest and lower prices...retailers are buying very little...wholesalers are feeling the squeeze as their inventories go unsold...importers are reluctant to purchase new stocks...and of course this is just beginning to snowball....the wine trade is hoping the big holiday season buying by consumers will mitigate the carnage...but it will not....this crisis will only get worse over the near term...especially in the USA as we are in limbo politically until the end of January....it will be great to see lower wine prices..but there will be plenty of casualties...small, high quality wineries, retailers, importers with little liquidity, will likely crash and burn....and the result could be less and less competition as we see more and more consolidation(and that will be horrible)...I am just finishing my year end huge report on most of the top north coast California wineries....as wonderful as many of their wines are...who is going to being paying $60 and up for chardonnay....$75 and up for pinot noir...$150 and up for cabernet?....that market segment is shrinking dramatically...of course no one predicted the global crisis..and no one can predict when things turn around...but IMHO the next 8-12 months look dreadful for the wine business...and also one of my favorite distractions.....high end restaurants...just so you realize...this is my personal opinion...and of course..I am the quinessentially glass half full personality....
PS....Jim....wish more people agreed with you...inspite of all the failures in 2003...the finest wines of 2003 will be future legends...and that includes the top reds from Guigal....easiest his greatest vintage since 1969,1976,or 1978....I would say you could take that to the bank...but I don't trust the banks anymore.

[Andy Velebil]

I'm seeing auction prices for ALL wines drop in recent weeks. Things are still selling but at or below the low estimates at auction. I think that is even going to slow down after x-mas. Certain markets can be a little slow to follow major economic downturns and wine is one of them.

I've also read and spoken to some wine retailers who have told me sales are down and the high priced stuff is barily moving. You can even find 2005 Bordeaux now at prices below original release price That tells you something right there!

[Derek T.]

Interestingly, we have yet to see any major price reductions in UK supermarkets in the lead-up the Christmas. For the past few years those of you from across the pond have watched us scoop up some unbelievable bargains at this time of year but I have not yet seen a VP at a significant discount in any of our main supermarket outlets. What I am seeing is an avalanche of Dow LBV/Trademark and similar selling for £5 per bottle. Could it be that the producers and supermarkets have been very clever and decided not to punt the good stuff this year because fewer people will be prepared to buy it, even at 25-50% off?

Personally, I am looking forward to Q1 2009 when all these guys need to off-load tons of stock to help their cashflow :devil:

[Roy Hersh]

No question about it, the first quarter of next year is going to be fascinating in terms of wine buying.

I am also interested to see if American's are going to stop over-paying for popular wines at auction. I can still hear Nancy Reagan, "just say no to Reserve prices."

But if I had to pick one key "market watch" element that I am going to be most intrigued by, it will be the en primeur and release prices of 2007 Vintage Ports. That will be very insightful. :type:

[David Spriggs]

Agreed. I'm watching and waiting for next yer. I can say that some auctions, espcially in the UK have been disaterous. The Bonham's auction last week failed to sell a huge number of wines. It was hard for me not to buy at those reduced prices... but I'm waiting ---- hate to pay VAT which is sometimes an issue. I wonder if Uncle Tom has any comments about the Nov. 22nd Bonham's auction?
-Dave-

[Ray Barnes]

In Metro Vancouver BC I have seen no apparent change to the price of wines of any kind. Since they were overpriced prior to recent global economic events, this remains doubly troublesome.

The only what I would call quasi serious madeira offered for sale here is the Henriques & Henriques 10 year old Boal, being offered for $61.03 Cdn. That price has been the same all year. Only one store in my area appears to have it, and it has many unsold bottles on hand.

Or another example..the local Liquor Board, in a clever marketing ploy, has released a series of 1998 wines as a "retrospective". This includes Chateau Potensac, managed by the Delon family of Chateau Leoville Las-Cases, for $70 a bottle. Spending that kind of money for a 1998 Cru Bourgeois Superieur left bank Medoc, a very tough vintage in general for them, is pretty crazy imo.

Perhaps 2009 will bring some welcome changes here.

Ray

[Moses Botbol]

Some auction houses are lowering their buyer's premium, so you know they (the houses) must be feeling it.

Early next year will be the time to strike. There will be a lot of "left-overs" at the B&M's and who knows what will happen on the auction markets? Most likely, they will have to lower their auction lot estimates or reserve prices.

[Eric Ifune]

I have, and am planning on making some lowball bids on recent and upcoming auctions to see what happens. If I get them, I have some nice things at nice prices. If not, oh well, no loss.

[Moses Botbol]

Do you think there could be a pull back from sellers at auction if they see Lots not selling or not getting a previous reserve price? Will some sellers wait a few months to see if the market changes?

Many buyers will have a better idea of their play money a few months into the New Year. Dust should be settled on who's getting laid off or whose jobs are in jeopardy.

[Mike C]

I'll be keenly watching this--for the first time in at least a year.

Having gone through a prolonged period of financial insecurity (but I held on to the vintage port--stored it with my folks so I'd elude temptation!), I've landed a terrific job that'll endure just about any downturn. (If there is still a US government, and it's still concerned about infectious diseases, plague, and bioterrorism...I should be good! )

I put my port aspirations on hold for a while--shelved them, I guess--and am now dusting them off. I'm in no hurry. After the holiday cheer, what there is of it, and the heat of the inauguration wear off, come February-ish I'd like to see what's going on. As Moses suggests above, I do believe serious investors may well hold on through the bad times. That's what serious investors in anything do, after all. But I'm hopeful (and unashamed to say it) that retailers may need to reduce inventories. Who knows--up in NYC, too, there may be some collections moving to market as their owners buckle under the margin calls...

[Roy Hersh]

Yes, I would not be surprised at all to see auction houses reducing their reserve price levels in order to capture a greater number of sold lots.

[Andy Velebil]

Yes, I would not be surprised at all to see auction houses reducing their reserve price levels in order to capture a greater number of sold lots.

I know a couple that already have done that.

[Michael Hann]

I just stumbled across this thread. I'm interested in any comments anyone may have that brings this thread up to date with the wine economy news over the past year.

[Moses Botbol]

I know someone who bid at a lesser known auction house and all 5 lots of port he was the only bidder (about two weeks ago). Acker I think has actually got more action. Not sure why? It's rare to score a deal from them now.