What are the 'glimmers of optimism' for La Place autumn releases?

Db’s Bordeaux correspondent Colin Hay reads the runes of recent fine wine market trends to tease out what we might expect to see from La Place’s autumn collection releases.

Optimism amongst fine wine market analysts – and, indeed, analysts of any market reliant on international trade – has been rather thin on the ground in recent months. That makes it difficult to turn to the prospects for La Place’s autumn collection releases without a certain sense of trepidation.

Yet a careful dissection of recent market trends suggests a few glimmers of optimism to lighten the gloom. Indeed, even Liv-ex, so often in recent years the harbinger of doom when it comes to La Place, is mildly upbeat in its most recent monthly survey of the secondary market. Yes, prices continue to fall and, yes, this remains resolutely a buyers’ market, but ‘the end might well be in sight’ for the longest downturn in the market’s recent history, it suggests.

To be fair, we’ve been here before. When the market is as depressed as it has now been for the last 18 months it seems logical, and certainly comforting, to think that the only direction in which things can turn is upwards. And, to be fair to them, Liv-ex are not saying that things are improving, merely that the pace at which they are deteriorating might have slowed – a little. That is the extent of their optimism. The champagne, presumably, remains on ice.

Tariffs and uncertainty

That is, of course, the starting point here. Market conditions are dreadful and they have yet to show any significant signs of improving. Part of the reason for this is that although it now seems clear that tariffs are here to stay, uncertainty about their precise level and duration remains.

The expectation was that August would bring clarity and an end to uncertainty about tariffs. And it has in a way. But not quite as imagined.

For the baseline 15% tariff on US-bound exports from the EU is higher than the 10% that most market actors would have settled for at any point over the summer. It is also far from clear that 15% is the final figure – with optimists still hoping that EU negotiators are capable of plucking what now seems an increasingly unlikely concession on wine and spirits from Trump at some point in a not too distant future.

That might sound good. But the effect is to provide merely the latest in a long list of reasons for the potential buyer to defer the point of purchase. After all, why expose oneself to a tariff of 15% if there is a chance that 15% might become 10%, or tariffs might even be lifted six months down the line? In short, put off until tomorrow what you don’t need to do today remains the pervasive market mood.

Whilst such a sentiment (and the uncertainty fuelling it) persists, the market continues to flat-line, with both prices and transaction levels scraping the market floor.

Needless to say, it is a long time now since we have had a release campaign that has exceeded expectations – at least in any positive sense.

Deglobalisation and La Place

More worrying, perhaps, is that what began in a context of globalisation now seems to be unfolding in what looks increasingly like one of deglobalisation.

That is likely to prove particularly tough for la place – an institution whose very creation helped build a world of global interconnectedness in the first place. This is, of course, precisely how the wines of Bordeaux came to be the most globally diffused and the most dependent on access to global markets as a consequence. In the process they became both the greatest beneficiaries – and now the greatest prospective casualties – of the rise and demise of the global free trade regime that today’s newly ascendant populist protectionism threatens.

But we need to be very careful in the inferences we draw from this, above all for the autumn releases. Yes, La Place has benefitted massively from globalisation and, yes, the prospects for La Place today would be much better were we to continue to live in a world of unchallenged and irreversible globalisation (as, until recently, we have tended to assume that we do).

But arguably, and as I have suggested before, la place remains the best distribution system yet invented to access global demand for fine wine wherever it is to be found. If that is and always has been its comparative advantage (bringing a competitive advantage to the wines it distributes) it is almost certainly more significant today, in challenging market conditions, than it was yesterday, in a much more benign trading environment.

Put starkly, if one is reliant on global demand to sell one’s wine and if that global demand is more difficult to find than it once was one needs the very best means to access it. More precisely, the market flexibility and capillarity that La Place famously provides becomes more, not less, important in an age in which tariff and non-tariff barriers are both rising and ever more volatile. That there is less global demand and that global markets are less easily accessible than they were makes the quality and geographical range of one’s distribution system more important than ever.

As that strongly suggests, the kind of (privileged) access to La Place enjoyed by the new hors Bordeaux elite is likely to cushion the blow of the transition from globalisation to deglobalisation that is the principle factor currently depressing global demand. Put in more bluntly commercial terms, these wines are more likely to find whatever global demand exists precisely because they are distributed through la place.

The autopsy of the Bordeaux 2024 en primeur campaign

A second set of issues to explore here are the lessons that can be drawn – and the lessons that are likely to be drawn – from the Bordeaux 2024 en primeur campaign. This, too, is tricky terrain.

The consensus on the Bordeaux 2024 en primeur campaign is clear. It didn’t work and while now is not the time to dissect that view in detail. But it is still important to note that the final picture, several months after the first releases, and as is often the case, is not quite as bleak as the initial assessment tends to imply. But even with that slight caveat, no-one is judging Bordeaux 2024 a success.

More significantly – and in a sense more alarmingly – in so far as it didn’t work, it didn’t work despite most of the ingredients for a successful campaign being in place. In that respect, the Bordeaux 2024 campaign is unusual, unprecedented even, in recent memory.

The wines exceeded the initial expectations of the critics. There were significant price reductions (with many of the top wines offered at around half the price of the 2022 vintage released two years earlier). Motivated perhaps by the desire to sell, and perhaps surprisingly, prices were initially rather well-received by the on-trade. There was strong price discipline (with properties not deviating much from a seemingly agreed script on pricing). A well-organised campaign unfolded that had been clearly and carefully coordinated by the courtiers. But there was little enthusiasm from the market itself, with US buyers in particular noticeable only by their absence.

There are important implications here for the autumn releases. But we need to understand precisely why Bordeaux en primeur didn’t work if we are to gauge those implications. That is the tricky part. For in picking over the bones of the campaign a variety of rather different interpretations have already been offered, some notably better informed than others. But a certain consensus now seems to have emerged.

The conventional wisdom has it that Bordeaux 2024 en primeur failed for two reasons. The first is that prices were too high to ensure that the wines sold through. The second, that today’s market is far less interested than it once was in young wines – and that, by implication, Bordeaux would have been better off releasing already bottled wines (livrables).

Both of these claims I think are false – or, at best, relatively crude simplifications of more complex realities. And both are capable of leading us to the wrong conclusions when it comes to the lessons to be drawn for the autumn releases.

The first fallacy here is to assume that this is all simply a question of price. The logic is intuitive and compelling: as long as a good is correctly priced it will sell through. Logically, then, if the good does not sell through it was incorrectly priced. This is, of course, often true; but it is true only if potential demand exceeds supply. That, I would argue, has not been the case in the Bordeaux market since at least the 2019 en primeur campaign; and, crucially, it is not true of the wider fine wine market today.

We reach a key step in the argument. If potential demand is likely to fall short of prospective supply, the implications are very significant. For if demand is not sufficient fully to absorb supply, there is nothing to be gained by searching for the elusive ‘clearing price’ (economist parlance for the price at which all of the good supplied to the market would sell through or ‘clear’). In the absence of such a clearance price the sensible strategy is to restrict supply by holding back stock whilst offering what is released at a price attractive enough to ensure that it is purchased.

The (hypothetical) case of Château Punchbowl-Lynchmob

Let’s make this a little more concrete with an example. Consider the (sadly hypothetical) case of Château Punchbowl-Lynchmob. In the 2024 vintage it produced 10,000 cases (each of 12 bottles). Let’s imagine that a 30% reduction in release price relative to the 2023 vintage (from, let’s say €50 to €35 per bottle) would see it sell 3000 of those cases. Let’s assume further that a 40% reduction in release price (to €30 per bottle) would see it sell a further 500 cases (3500 in total) whilst a 50% reduction in release price (to €25 per bottle) would see it sell a further 750 cases (3750 in total). What should it do?

A little simple maths helps us out here. 3000 cases at €35 per bottle generates €1.26M of revenue; 3500 cases at €30 per bottle also generates €1.26M (the higher volume sold perfectly compensating for the reduction in price per unit); but 3750 cases at €25 per bottle generates only €1.125M.

As the maths suggest, in a scenario like this there is a tipping point, the price above which total potential revenue starts to fall off (here somewhere between €30 and €35 per bottle). Any reduction in release price beyond this point will yield ever diminishing revenues to the producer (even if we discount the implications for the unsold stock that remains). The clear implication is that a property seeking to maximise its revenue simply cannot afford to reduce its price to the level that will see the most cases sold.

This, in essence, is the situation that I am arguing faced many Bordeaux châteaux on the eve of the en primeur campaign (whether or not they realised it). And a very similar situation now faces many hors Bordeaux properties (and their courtiers) as they contemplate their own release price strategies for the autumn campaign to come.

The second fallacy in the conventional understanding of the failure of the 2024 Bordeaux en primeur campaign is that the market is more interested in old vintages than young vintages. By implication, if only la place de Bordeaux were to abandon primeurs in favour of livrables things would turn out better.

It is easy to see where this idea comes from. But it, too is false – and for very similar reasons. It is true that, in current market conditions, older vintages typically fare better on the secondary market, with more positive price trajectories. But that is a simple reflection of the smaller volumes being traded and has little or nothing to do with the age of the wines themselves. The problem with primeurs is, very simply, the sheer volume of wine being brought to the market at the same time, not the specific characteristics of that wine. In any economic context in which demand is suppressed, the release of large quantities of wine onto the market is always likely to exceed demand. If the primeurs market were to be replaced with a livrables market (with the wines, say, released 2 years later) the situation would be essentially the same.

Complex implications…

The implications of this for the hors Bordeaux campaign to come are interesting, if a little more complex.

On the face of it, hors Bordeaux campaigns looks quite a lot like en primeur campaigns. But there are three potentially significant differences. The first, and as I have already implicitly suggested, the least important of these, is that hors Bordeaux campaigns see the release of bottled wine (livrables) rather than futures. But if it is not the age but the volume of the wines released that is the crucial factor here then that is unlikely to make much of a difference. The same cannot be said for the other two factors. The first of these is that hors Bordeaux volumes are tiny in comparison with en primeur. The market, as a consequence, is much more likely to be able to absorb the additional supply. What makes that all the more likely – the final factor here – is the sheer diversity of the wines offered to the market and, crucially, the rather different sources of demand they potentially tap into.

Again, it helps to make this a little more tangible with an example. The autumn collection will see around 10,000 bottles of German Riesling offered to the market and, for the first time, 360 bottles of Australian Riesling. It is not difficult to see that the chances of this saturating the global fine wine market for top-end Riesling are miniscule. The comparison with primeurs is stark. For, even at an average yield of a meagre 25 hl/ha, and with half of the production of the appellation not released en primeur, nearly 2m bottles of Pomerol alone were offered to the market in the 2024 en primeur campaign. Suffice it to note that Pomerol is one seventh of the size of the Saint-Émilion appellation. And that’s before we get to Pessac-Léognan and the Médoc.

German Riesling is but one example and, of course, not entirely representative. But what it reminds us is that the hors Bordeaux and en primeur campaigns are very different, above all when it comes to the crucial question of balancing supply and demand. La Place’s autumn collection releases, above all if they are well priced and the size of the initial releases well-managed, have the potential to breathe new life and, indeed, new demand into the fine wine market precisely because there is no risk that they saturate the market.

In a way, they have more of a symbolic significance than a real one. They are unlikely to make anyone rich. But they might just indicate – and in the process reinforce – the idea that the market has turned a corner and that new offers can find buyers, both new and old alike.

…especially for the campaign

If we put all of the above together, it is not difficult to draw out a few implications for the campaign to come. Let me conclude simply by listing them.

The autumn releases on La Place are most likely to prove a success in current market conditions if they are seen less as an attempt to sell the entire production of a given wine and more as the first offering of the wine to the market;
Properties are ill-advised in most cases to seek to match their release price to what they perceive to be the clearing price for each of their new releases;
A more realistic strategy is to offer a modest initial release at a price that is competitive in relation to previous releases of the same wine, with the aim being to sell through what is released and to establish a stable price point base for the vintage;
This is akin to what, in en primeur campaigns, is often referred to as ‘tranching’ (releasing the production of a given wine in a series of phases), but with the aim being to consolidate rather than to grow the price between consecutive tranches;
Properties pursuing such a strategy will need to hold back a proportion of what they would previously have allocated to their pool of négociants, possibly redistributing some of this to those markets – notably that of the country of origin of the wine itself – where they retain direct distribution;
There will, of course, be wines (typically, the most iconic of releases) for which none of this is necessary;
But, overall, I anticipate a cautious, even precautionary, disposition from courtiers and properties not wishing to burden négociants with allocations they can’t sell;
Crucial in all of this is to avoid a situation in which the release price doesn’t stick and the price on the secondary market falls after the first release;
This is the key ingredient in establishing or re-establishing buyer confidence;
In short, I anticipate the competitive pricing of smaller releases, with greater release-size management and restricted allocations to négociants in the first instance with the aim being to build confidence and demand for each wine over time.

With these basic ingredients in place there is a reasonable chance that we might look back on the autumn collection releases as a turning point, a genuine sign of optimism in turbulent and troubling times.

For the tasting notes on this year’s Hors Bordeaux campaigns, see here: Italy and Spain (reds); France (reds); USA (reds); Chile & Argentina (reds); Australia and New Zealand (reds); the whites; Champagne; sweet wines.

A note on the tasting notes: As regular readers will know, Colin is the Bordeaux and la place de Bordeaux correspondent of The Drinks Business. My specialism is Bordeaux, in particular, and northern Europe (especially Piedmont and Tuscany), secondarily. This should perhaps be born in mind when it comes to my tasting notes for other regions with which I am less familiar and which I encounter primarily through la place. My notes, as ever, are those of an enthusiast and a wine-lover and, for these regions above all, they are best read as such. All of the following wines were tasted either in Bordeaux at the offices of the courtiers or négociants bringing these wines to the international market, at trade tastings in London, at the property itself, or in Paris, from samples sent directly from the property – and, in many cases, multiple times.

NYT – not yet tasted (with tasting notes to appear in a later article).

What are the ‘glimmers of optimism’ for La Place autumn releases?

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