. Energy News .

Prices plunge as China turns sour on top Bordeaux
by Staff Writers
Bordeaux, France (AFP) Jan 17, 2012

Speculators and China's super-rich have turned sour on Bordeaux's most prestigious, investment-grade wines, causing a deep dip in prices, year-end figures have revealed.

In Hong Kong at the weekend, a hotly anticipated Sotheby's fine wine auction fell well short of its estimate, as top-ranking wines from the French region, from Chateau Lafite to Margaux, failed to find buyers.

Robert Sleigh, head of Sotheby's Wine, Asia, attributed the disappointing sale to a tailing-off in demand for younger Bordeaux vintages.

The auction came as a key industry index, which tracks the price of 100 investment-grade wines, 95 of them from Bordeaux, revealed a sharp fall over the past year -- suggesting that a speculative bubble is bursting.

"The Liv-ex Fine Wine 100 Index fell by 22 percent since its peak at the end of June 2011," Jack Hibberd, head of data and research at the London-based Liv-Ex, which analyses fine wine markets, told AFP by email.

"For the full year the fall was 15 percent."

For example, the price of a bottle of 2009 Chateau Lafite plunged by nearly a quarter last year, from 1,305 euros ($1,653) at the beginning of January to 988 euros at the end of December.

Xavier Coumau, president of the Wine Broker's Syndicate, told AFP, "I think of this as a market correction."

Hibberd said there were several reasons for the drop in prices, "from fears over the economy, particularly in the eurozone, to the overpricing of the 2010 Bordeaux vintage, which robbed the market of its momentum."

"Key, however, has been a slowdown in demand from China -- the main driver of the market over the past 24 months," he said.

To put it bluntly, "China is not buying at silly prices any longer," said Antonin Michel, coordination manager at the wine merchant Diva.

The outlook for the heart of Bordeaux's production remains good, Coumau says, with the volumes of everyday wine exported to China still growing exponentially.

But it's the Classified Growths, referring chiefly to wines ranked in a historic 1855 classification of Bordeaux vineyards, that are of key concern to wine critics, investors and analysts like Liv-ex.

These wines account for little more than five percent of the 733 million bottles produced annually in the region, but generate big revenues.

At negociant Diva, for example, two-thirds of its 33 million euros in revenue last year came from Classified Growth, according to Michel.

-- "Presenting a bottle of Lafite is not fashionable any more" --

For the last seven years, Liv-ex has shown nearly uninterrupted price increases in Bordeaux's blue chip wines, with the only other significant drop occurring during the last six months of 2008.

When China entered the game three years ago, the market caught fire.

Demand exploded in particular for names such as Lafite, Latour, Mouton Rothschild, Margaux and Haut Brion, wines that were named as First Growths -- the very top rank in the 1855 classification.

Chateaux and speculators, hoping to cash in on China's thirst for luxury products in the form of these First Growths, pushed the prices "sky high", says one wine merchant.

Many other Classified Growth wines have been riding on their coattails.

When the chateaux released their wine as a futures commodity last year, wine merchants took their allocations of wine for fear of losing their supply next year -- but were unable to resell some of the wine.

This left the merchants in a "cash crisis with very high levels of stock", according to Michel.

The futures campaign ended just as prices peaked on June 28th, 2011. And since then the bullish market has turned bearish, with prices visibly softening.

Some suggest the 2010 futures campaign left a bitter taste in the mouths of Chinese clients, many of whom were buying Bordeaux futures for the first time.

"We explained the risks, but their passion is wine. They wanted to be part of it. Now our mainland customers say they felt desperately cheated by the 2010 futures," said Simon Staples, sales director of London wine merchant Berry Bros and Rudd, in a telephone call from Shanghai.

Other experts suggest a degree of investor fickleness is involved.

"Some of the Chinese super rich are getting tired of Lafite," Georges Tong, vice president of his family's toy company and prominent Hong Kong wine collector, told AFP.

"Presenting a bottle of Lafite as a gift is not as fashionable as before. Gift recipients are now demanding Domaine de la Romanee Conti," referring to the Burgundy wine that can easily cost 12,000 euros a bottle.

At the same time, fear of a deep eurozone recession and a real-estate bubble in China encouraged skittish investors to sell their most speculative wine investments.

"There's fear of the property bubble that is making people anxious," said Don St. Pierre, Jr., CEO of ASC Fine Wines, with 24 offices across China and one of the most powerful importer-distributors in the region.

"People who have been holding these speculative wines are selling, so that's bringing down prices."

New Chinese regulations, which restricted the amount banks can lend their customers, have also left cash-strapped investors reconsidering their Bordeaux investments, Tong said.

According to several sources, the credit squeeze coupled with doubtful returns, prompted some Chinese customers to commit the ultimate Bordeaux taboo, and cancel their 2010 futures orders.

"There has been a wave of cancelled orders after the last futures campaign," confirmed Michel. "All of these elements combined can account for a steady drop in demand for First Growths."

Related Links
Farming Today - Suppliers and Technology

Get Our Free Newsletters Via Email
Buy Advertising Editorial Enquiries


. Comment on this article via your Facebook, Yahoo, AOL, Hotmail login.

Share this article via these popular social media networks
del.icio.usdel.icio.us DiggDigg RedditReddit GoogleGoogle

China struggles to meet surging demand for dairy
Beijing (AFP) Jan 16, 2012
Despite a major safety scandal in 2008, China's demand for milk is surging as people grow wealthier, but the country's poorly kept and often undernourished dairy herds are struggling to keep pace. Mass milk consumption has grown rapidly in China over the past three decades and today yoghurts and dairy smoothies - particularly with an Asian twist, such as green tea or peanut flavours - are ... read more

Half price DMCii 2011 country image pack in New Year sale

A step closer to mapping the Earth in 3D

Ziyuan III satellite sends back hi-res images

NASA Radar to Study Most Active Volcano On Hawaii

First Galileo satellite GIOVE-A outlives design life to reach sixth anniversary

USAF Awards Contract to Lockheed Martin for GPS III Launch and Checkout Capability

ORBCOMM Announces Launch of VesselSat2

Association of Old Crows Recognizes the Dangers of Persistent GPS Interference

Brazil says no evidence loggers burned indigenous girl

African rainforests said to be resilient

Guyana, Germany ink deal to protect Amazon

In Romania, a pledge to shield bastion of Europe's forests

US looks ahead after ethanol subsidy expires

U.S. backs plan to produce algae crude oil

Good parents are predictable when it comes to corn

Algae for your fuel tank

Here comes the sun

Private investments in renweables jump

Philippines pushes renewable energy

Trina Solar Announces Complete Large Rooftop Solar Solution

Power generation is blowing in the wind

Spain's Gamesa wins Chinese wind turbine contract

Mortenson Starts Construction of Rim Rock Wind Project

SA Opposition wind policy threatens $3 billion investment

Gloucester, Yanzhou in giant $8bn coal play: report

Four trapped miners found dead in China: Govt

Five rescued from collapsed Chinese mine

Coal mine collapse traps 12 in China

China's city dwellers overtake rural population

China village revolt leader named party boss

China arrests village head for arson: rights group

US ambassador sees China rights worsening


The content herein, unless otherwise known to be public domain, are Copyright 1995-2012 - Space Media Network. AFP and UPI Wire Stories are copyright Agence France-Presse and United Press International. ESA Portal Reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement,agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement