HDH Wine

New Whine: China Pushes Bordeaux Prices Higher



In early July, Hart Davis Hart Wine Co. began advance sales of Château Lafite Rothschild's 2009 Bordeaux at $18,000 a case.

Within four days, the Chicago-based retailer and auction house had sold out. But its supplier's price had risen, and Hart Davis Hart now sells the 12-bottle cases for future delivery at $23,000—about $1,900 a bottle.

"That is much more expensive than we have ever seen in a previous futures campaign," says Ben Nelson, president of Hart Davis Hart Wine.

Word is spreading that the top 2009 Bordeaux wines might be the best ever. And if they aren't the best, they're likely to be the priciest.

Part of the reason is near-perfect weather in western France last year.

But wine makers and merchants also credit booming demand from emerging economies, especially that of China, where labels like Lafite and Margaux have joined Prada and Hermés as badges of wealth. Last year, China passed the U.S. to become Bordeaux's biggest export market by volume outside Europe.

Other wines also might benefit from last year's weather and China's thirst. But that won't become clear until those wines are bottled and sold. Bordeaux is unusual in that for the elite 5% of its wineries, futures contracts are exchanged while a vintage is still in barrels. The 2009 Bordeaux won't be bottled until next year at the earliest.

Bordeaux's wine quality also changes year to year more than that from most other regions. A big reason is Bordeaux's location on France's Atlantic coast, which produces varied weather, says William Echikson, author of "Noble Rot: A Bordeaux Wine Revolution."

Bordeaux also has local regulations, such as a ban on covers to protect grapes from the rain, that put the grapes more at the mercy of the weather.

Last year, the Bordeaux summer was hot, with daily highs averaging 79 degrees Fahrenheit in July and August. That made for ideal ripening conditions, according to the Council of Bordeaux Wine, which represents the region's wine industry. In September, just before the harvest, the days were warm but the nights, cool, keeping pests away.

"Nature was very generous to us," says Pierre Lurton, general manager of Château Cheval Blanc.

The reputation of the 2009 Bordeaux took off this March, when a wine expert tasted the latest vintage. Robert Parker, one of the world's most influential critics, wrote in his Wine Advocate newsletter that certain 2009 Bordeaux wines "may turn out to be the finest vintage I have tasted in 32 years of covering Bordeaux."

Of the 2009 Château Lafite Rothschild he wrote, "this sensational wine's technical numbers are off the charts," referring to the acidity and alcohol content.

The prices are all the more extraordinary because they are for wine that will remain in barrels until next year or 2012. Bordeaux's top 200 or 300 wineries use a system called sale en primeur, or presale, for part of their product. Early each summer, they exchange futures contracts with middlemen known as negotiants, who then sell the wine contracts to collectors, investors and fine-wine retailers.

Normally, prices climb after a wine is bottled. The 2008 Lafite Rothschild—considered good, but not outstanding—sold from the château at €185 ($238) a bottle last year. Today it sells for more than €1,000, according to Philip Gearing, sales director at wine investment firm Cult Wines Ltd. in England. He says the 2009 version costs €860 from the château. A spokeswoman for Lafite Rothschild declines to discuss pricing.

"The pricing of the 2009 wines is way, way above what's been seen before for any previous vintage," Mr. Gearing says.

A big factor is China. The volume of Bordeaux bottled wine exported to the country last year was 39 times the volume in 2000, according to the Council of Bordeaux Wine. Exports of 2009 Bordeaux to China increased 97% by volume and 40% by value from 2008.

"China is now our most important market, even before France," says Paul Pontallier, general director of Château Margaux, which recently opened an office in Hong Kong. "It's really taken off over the past six to twelve months."

Wine merchants believe Hong Kong investors are purchasing futures with the expectation of selling the wine in coming years to people in China, who have become big purchasers of older vintages. That has helped fuel huge prices increases: Lafite Rothschild 1982 has increased in value 14 times over the past 10 years, according to Cult Wines.

"I have a hunch that a lot of the speculative demand is indirectly driven by current mainland Chinese demand," says James Rowell, a sales manager at retailer Altaya Wines in Hong Kong.

Château Smith Haut Lafitte co-owner Florence Cathiard says Chinese purchases en primeur are higher than ever and the château has started offering brochures in Chinese.

"It's incredible," she says, "because the Chinese were not used to futures."

Château Smith Haut Lafitte sold 80% of its 2009 Bordeaux within six hours, at double the price of its 2008, Ms. Cathiard says. She forecasts the 2009 vintage will retail around $100 a bottle, compared with $50 to $60 for a typical vintage.

But some critics—including one who helped feed the frenzy—say that while the 2009 Bordeaux will taste nice, the prices are inflated. Mr. Parker's secretary says he "finds the prices for the top 25 or so wines 'absurdly high.' "

Read this article directly from The Wall Street Journal.