2006/2005: Should We Buy? Part 1

by Chuck Hayward

by Mike Supple

"Are '06 futures worth buying at all? From what I have been reading, unless the prices come down measurably, there will be great resistance, especially in the USA. If that is the case, I wonder if one should make exceptions for futures buying of such things as Petrus, Le Pin, Ausone and maybe Latour. I guess the question comes down to...are some wines always worth collecting?"
-Richard H.

That really is the big question. My immediate short answer is: I don't know yet. I definitely agree with your thoughts on resistance in the US market. Another possibility is that the release of 2006 at high rices could drive the sales of existing futures inventory in the US market by making those prices look better as a relative value. This is the same effect the 2005 release price had on all older vintages of Bordeaux still in retail possession, especially the 1990s vintages. That being said, the proof is always in the glass. Yes, the prices will undoubtedly be high, but seeing how prices of Bordeaux seem to climb every day, even if the 2006 prices are high, will they be worth it, and will they provide the same return that previous vintages have? If the quality is there, then my gut reaction is that there will be demand, especially for the wines you mentioned specifically.

Of course whether or not the quality is there for the 2006 vintage remains to be seen, but preliminary reports tend to intimate that the vintage is going to be quite a bit better than many had guessed early on in the season. The top Chateaux (about 150 of them is the number Robert Parker is suggesting) are all increasing the quality of their wines dramatically every year. They are being more selective, choosing to drop more fruit, improving wine making techniques and technology, and putting more of the juice in their second labels and less into the first labels. The result is that even in what would be viewed as classically worse vintages, these wines are still stunning. This is a huge difference in the wines being made today than, say, those of the 1970s and 1980s.

I think I can safely come out and say that for most of use the pricing of the 2006 vintage will be disappointing. With all the hype surrounding the 2005 vintage, we expected prices to be high, but we never expected them to be what they actually came out at. I think the same thing will happen with 2006: the prices will be lower than 2005, but not nearly as low as people are hoping. The marketplace has totally changed, and the American consumers are no longer the powerhouse that drives the sales of Bordeaux. Emerging markets in Asia, Eastern Europe and South America represent a huge new force of buying power, and a key factor is that they are incredibly label driven - this forces the prices up on the top estates no matter what the quality is for the vintage. What this unfortunately means for everyone is that regardless of the pricing of the 2006s, there are people with stronger currencies and/or stronger desires for these top wines that will keep the prices high.

All that aside, when it comes to the great wines, even if you don’t get involved in the futures campaign, 750ml bottles will always be available (albeit at very high prices). However, knowing that you collect large format bottles, I feel it is important to mention that large format bottles are not nearly as popular in Europe as they are here in the US, and consequently production of large formats is lower than we would hope. Most of the Chateaux that I have been to only produce the large formats after they receive orders for them. This means that large format bottles will only be produced based on the demand from futures orders. This, I feel, lends itself to the reality that yes: some wines are always worth collecting.