Bordeaux 2012: An Insider’s Look at This Year’s Pricing and Strategies

by Chuck Hayward

My fourth consecutive visit to Bordeaux en primeur was accompanied by the usual meetings with negociants and wineries. It wasn’t long before I began to pick up on the topical trends that began to occur with every conversation. At first, there’s always a discussion of the weather – understandable given the way it shapes the quality of the region’s star commodity. Then the chatter turns quickly to the quality of the recent vintage. If there’s a bit more time, everyone asks how Bordeaux is selling in China and America.

But eventually, the discussion turns to the topic of utmost importance: the pricing for the new vintage. It’s here where things get interesting. Negociants inquire about what pricing it will take for the upcoming campaign to be a success, while at the same time buyers are asking around as well, trying to ascertain how prices will pan out for this vintage. The conversations can get quite animated – strong opinions are posited while each party tries to discern the mindsets of chateau owners and wine buyers. The 2012 vintage has done nothing to change this ritual. If anything, the discussion about pricing has been more open than in the past. Rather than playing poker this year, the cards have been laid out on the table.

In our appointments with negociants, many claim to have recommended that chateau owners consider some severe discounting for this year’s en primeur offerings if they are to have a chance at success. Many wineries still have stock from the more expensive 2010 vintage, while the 2011s currently in barrel saw little demand when they were offered last year. In addition, consumers can buy older vintages at pricing that rivals the prices for ’09s and ’10s, which could lessen the demand for the younger 2012s.

The inside word is that there will be lower prices compared to last year; it’s just a question of how much discounting we’ll see. In confidential discussions with some negociants, it was apparent that a few chateaux have already set their prices, well before last week’s 
en primeur activities began. Agreement on pricing with significant discounts at this point already represents a significant step, and could encourage other wineries to follow suit.The pricing target cited most frequently by Bordeaux insiders has been the futures pricing for the 2008 vintage. Those prices represented a severe drop compared to the 2007s, a very difficult vintage that saw high prices for variable quality and few standout wines. The low prices and pent-up demand made the 2008 en primeurcampaign quite successful.

One big question concerns the timing of this year’s campaign. Many negociants predict a quick one, with wineries sending out pricing to the negociants as soon as tomorrow (three chateaux offered their pricing today, marking the traditional first day of sales). The idea will be to sell as much as possible before Robert Parker releases his scores at the end of the month. Others argue that if the discounts are uniformly high across the board, and released at the same time, it will demonstrate that Bordeaux is listening to the market.

Another possible twist to this year’s campaign revolves around the role of the first growths. Traditionally, the prices for the premier grand cru classes and the top wines of the Right Bank come out later, often when about 60-75% of the chateaux have been offered by the negociants. The theory is that wineries who release their wines late in the campaign are trying to get higher prices in a battle of one-upmanship with their neighbors. Additionally, by waiting until others set their prices, the last wineries can better gauge the market and set a price that will ensure the wines will sell, while also maximizing profits.

While this year’s discounts will determine whether the 2012s will sell at all, the ability to get allocations of this year’s top wines will prove to be even more important. Pomerol is on a roll, producing some of Bordeaux’s best releases for four years in a row. Most of the top Pomerols are made in minute quantities, so merely finding them is the main problem; especially in 2012, with yields down 10-15% on average. If prices for these wines drop significantly, the smart money will snap them up quickly. Don’t say we didn’t warn you!!
Some negociants have predicted that the first growths may try to set the pricing for the entire campaign by releasing their wines very early. If they take a significant hit on their pricing, it will encourage other wineries to follow. The kicker here is how much wine will be offered on the first tranche. The first growths could cover their discounted pricing by holding some wine back and releasing more at higher prices if the first batch sells out quickly. It will be interesting to see if this theory plays out in the next few weeks.