Bordeaux 2007: performance of the First Growths

In his Bordeaux 2007 En Primeur report, Robert Parker predicted that “most consumers will probably love the style of the vintage’s top wines because they are so flattering, seductive, and fruit-forward”, adding that they “should age surprisingly well for 10-15 years”.

As we enter the tenth year since the vintage, there is some interest in how the wines have progressed. In a series of short blog posts, Liv-ex will examine how the prices of the wines have moved since release.

These posts will examine price variations – the highest and lowest Market Prices against the current and release prices – for wines within the Bordeaux 500 Index, starting with the First Growths.

At a glance

On average, the wines of Bordeaux 2007 are up 69% since release. Their performance has outpaced the broader market: since Spring 2008, the Bordeaux 500 index has increased by 41.9%.

The wines are 15.6% off their peak levels on average. Seven of the 50 examined are currently at their highest ever Market Price. These are Angelus, Cos d’Estournel, Grand Puy Lacoste, Le Pin, Palmer, Pavie and Vieux Chateau Certan.

Just one wine, Climens, is at a record low.

First Growths

Bordeaux 2007

The chart above shows how prices for the 2007 First Growths have varied since release. Lafite’s Market Price has varied the most over time. In April 2009 it hit a low of £1,900 per 12×75, but by July 2011 it had climbed to £8,200. Its current Market Price of £6,100 – still the highest of these wines – represents a 25.6% drop from peak.

Both Mouton Rothschild and Margaux are within 6% of their record Market Prices.

Bordeaux 2007 First Growths

For analysis on the remaining wines of the Bordeaux 500 index, check back over the next week.


Interview with Philippe Dhalluin of Mouton Rothschild

Phillippe Dhalluin, Mouton Rothchild

The Managing Director of Mouton Rothschild, Philippe Dhalluin, has been overseeing winemaking at the property and several of its other estates for over a decade. At the beginning of March, he met with Liv-ex Director Anthony Maxwell to discuss developments at Mouton, the fine wine market and Bordeaux 2015.

What makes Mouton Rothschild unique?

The estate has been known for centuries for its particular terroir: almost 100% pure gravelly soil facing south. Often called “solar” by experts, the place is expressed in the slightly toasted flavours of its Cabernets Sauvignons. People say that this is due to the new barrels, but this is not the case. Some of the previous cellar masters highlighted these qualities as they were typical of ripened Cabernets. I discovered them through the 2005 vintage.  The vines are very old – sometimes more than a century old – and they don’t produce a lot of grapes but their quality is noteworthy, whatever the vintage is.

Mouton Rothschild was the best-performing First Growth and most searched for wine in 2015 on Liv-ex, while Petit Mouton was the top performer of the second wines. What are the reasons for this success?

The actual success of Mouton and Petit Mouton is essentially due to the quality of the wines. Also, huge restoration works – from vines to vat-house – have been done since 2005. Now, we are beginning to reap the rewards.

I think it’s an important point for many people that Mouton has the tools: it is at the forefront of quality and image. Exhibitions of paintings for the label, which is linked to the image of Mouton, also explains this new dynamic.

How is the artist chosen for the label of Mouton?

The family decides: the process is very natural. Today Mr. Julien [de Beaumarchais de Rothschild, son of Baroness Philippine de Rothschild] is very close to the art world.

When you joined 12 years ago, did you look at Mouton and think: we have great terroir, great vines, great history, great tradition, but we need a bit of modernisation?

When I started, I told the Baroness Philippine, “The quality is already exceptional, because it is Mouton, but I think we need to improve your facilities – we need to revamp it, if not rebuild it.” So a long process started in 2004. The work to rebuild Mouton was huge. We started with Clerc Milon first in 2007 – a complete rebuild – and with Mouton in 2009, which finished at the end of 2012.  We worked on the winery, rebuilt the vat house totally and renovated the warehouses. All of the technical facilities were rebuilt or renovated, and we created new rooms for the art. This has taken a lot of time.

How about Petit Mouton, specifically?

The success of Petit Mouton is perhaps easier to understand: it is the result of the rigorous selection. Today, it is produced from plots that were formerly used for Mouton. If you ever blind taste a young vintage of Petit Mouton, you could believe that it’s the premium wine.

So you’re not trying to portray it as a second wine, necessarily?
Petit Mouton is clearly the second wine of Mouton Rothschild. It’s the second selection. If Mouton is 50% of the total production, Petit Mouton is only 25%. We don’t use the other 25%. This is a major change. Previously, the selection was not so severe.

Commercial demand is stronger now than 20 years ago and prices are higher, so this gives us the means to be more rigorous in our selections.

You mention rigorous selection. Is there any argument that in the best years, you can make big quantities of great wines? More than you are actually making?

In the 80’s, we didn’t need to make very heavy selections. 82 and 86 are the best examples. Naturally the vines produced much more than today. Everybody is producing less and less at the moment. It’s possibly to do with the replanting of the vines around those times. Clones were selected for their qualities and quantities, and we saw the peak of this effect in the 80s and 90s.

With increased knowledge, we were able to be more precise. In order to produce excellent quality wines even if the vintage is not so good, there is no solution except to reduce the yields.

So the clones these days are lower yielding?

Absolutely. There are probably multiple reasons – we don’t have the explanation of everything, but it’s probably linked with the age of the vines.

In the last 10 years, rainfall has also decreased, and we are not allowed to irrigate. So of course, you don’t have the amount of water as you did 20 years ago. Perhaps the production is affected. We have inclinations, but we don’t have proof yet. It’s an observation. In the last ten years, the global yields are reducing naturally.

2015 is an excellent example: it was a very dry year. In spring, we thought that we would have nice, good production because we had 20% more flowers than in 2014. In the end, we only produced 1-2% more than the previous year because it was dry and the berries remained very small. 2015 was not a big year in volume in the end.

Mouton Rothschild

How do you set about trying to determine pricing?

I want to point out that producing quality is not enough without appropriate price policy and distribution. For three years now, we have been totally involved in this approach: listen to our customers, explain how and why we do what we do, and offer our wines at the right prices.

Mouton always has done that: listen to consumers, Bordeaux wine merchants and the trade. We are very linked with the trade. In 2013 we decided to be the first on the market with the price, and we did so again in 2014. Getting good conditions for the trade is very important for the success of the En Primeur campaign.

Who do you speak to?

First of all, the courtier and the wine merchants from Bordeaux. We trust La Place a lot. Then we travel a lot, as everybody knows – more than we did 20 years ago.

Do you look at the volumes on the market as well?

We try to share the volumes between the three big parts of the world: Asia, Europe, Americas – of course depending on the quality of the vintage and the market. It is not so easy to monitor. We don’t monitor our distribution but we exchange with the merchants and we try to work with the market.

The balance for us is important. We have a strong market in Europe – France particularly – and it is important to balance everything.

When deciding on prices, do you look at the total volumes still available in the market?
It is very difficult to see what is available in the market. We have a good idea about the Bordeaux merchants. If they want to tell us, then communication is clear. If not, then it gets complicated.

Fine wine prices have been pretty volatile over the last 10 years, rising rapidly between 2005 and 2011 and then falling back to earth again. What is your take on recent movements in the market?

I think today people are concentrating more on the top estates. This is not new – I could say the same about the beginning of the 1990s and the 2000s. That is also the story of the En Primeur market.

We have noticed that the En Primeur market is entirely focused on the most prestigious wines and brands as long as they have a coherent price policy which offers a sufficient mark-up for the whole network. Several reasons might explain this evolution, which is not a surprise when you look in retrospect at the 1990s or middle of the 2000s. The emergence of new markets combined with wines of extraordinarily high quality flared up the 2009 and 2010 En Primeur campaigns, consequently causing a speculative bubble. Going back to more rational conditions was inescapable, so we have since seen an adjustment of the quotations, leading to a stabilized market.

The 2010 vintage monopolised the budgets of certain merchants meaning that they were deprived of cash to invest in other En Primeur campaigns. This had a strong influence on the markets, and to some extent it still exists today.

Market prices are returning to normal levels but a sense of cautiousness still remains. Everyone is very excited about the 2015 vintage and hopeful of a substantial Primeur Campaign. I think this will be the case but you never know. There is also a macroeconomic impact which is important. There is uncertainty in some markets that is similar to the situation in 2008. There are also factors such as varying exchange rates which have to be taken into account, particularly when we consider the UK market.

What factors do you take into account when you come to price your 2015?

The prices of physical vintages around the world. Of course if the economic situation is very poor, that will have an effect on the En Primeur campaign.

How about timing? How do you look to time your EP release?

There are no rules – we have no particular strategy for that.

You led the way recently…

Yes, because nobody moved: the market was slow. And so we decided to – why wait? For 2015, we don’t know yet.

Your strategy towards En Primeur appears to have evolved over the past decade – Philippe Sereys de Rothschild recently announced that you will be releasing fewer cases En Primeur going forward. What factors influenced this decision and what is your take on this?

During the last five years, we have observed an important evolution of the market as shown by your indicators. Globally, we have seen a shift in the market from significant Primeur sales, to wines that are in bottle and physically available now.

We have had good success with the En Primeur campaign, so we will not have to change our strategy dramatically. As I say, we trust in La Place. Of course, we have to adjust the En Primeur campaign each year. We have to establish what the demand is, and we will have a clearer view of that in a few weeks. For the moment, it’s business as usual.

What has been your experience of En Primeur in recent years?

What I know is that if you have a good position when you sell your wine En Primeur you are able to sell everything En Primeur or in a short time, even for vintages like 2013. Why? Because if you have the right price point and the right conditions, the final consumer knows that at that price they are getting a good deal. That is important for them.

2013 is very interesting because we did an excellent En Primeur campaign. It was not speculative: it was based on the demand of the consumer, who is probably not buying Mouton to speculate in a vintage like 2013. The 2014 was not speculative: it was not a special year. It might become one, and we did an excellent En Primeur campaign too. At the end the consumer wants a bottle – he wants the case – in his cellar.

Do you think 2015 will be speculative?
If it is considered a good vintage, you always have some speculation – I don’t know if it’s 1%, 10%, 20%. A little bit each time.

Is this good for the system?
I always say that at the end a bottle of wine is meant to be drunk. For 30 years I’ve been saying that. Don’t forget that. It’s not a diamond that you put away

How would you describe the quality and characteristics of your 2015 wines?

I am very conservative and I don’t want to influence the critics. I want to let them decide. I could accept comments saying we are not completely impartial about our wines, but you have to understand how passionate and lucky we are to vinify first growths at Mouton.

There has been some friction between merchants and Chateaux regarding En Primeur in the past few years. Some have called it “Bordeaux bashing”. As a Chateau spokesperson, what is your take on the system?

It is difficult for us to appreciate – I haven’t seen Mouton bashing! The reverse. But Bordeaux bashing exists, because many people are speaking about it.

Why? Simply because of the legacy of the very extreme pricing for the 2009 and 2010 which were, at that time, extraordinary vintages. I hope this Bordeaux bashing will stop because there is no real reason for it today. If you take the entire range, Bordeaux is the biggest producer of top French wines – at the best price points.

Why is Bordeaux not managing to achieve the prices of other regions?
Maybe people focus only on the top or exceptional phenomenon which is not the whole of Bordeaux. Also we have competitors and they are very aggressive. When you are the major region, everyone competes.

What can Bordeaux do to get that back?

Bordeaux does a lot of things already – price, quality. Fifty percent of producers have, for example, an environmental policy. So it is mostly a question of communication: to explain what we are doing and to make the world understand what we are doing.

Does Bordeaux have a responsibility to deliver something back – to get the consumer engaged into the system?

2015 is clearly the opportunity to do so. We have our own idea regarding our wines but I do not know the ideas of other Chateaux. It could be a good opportunity to get back a real interest in Bordeaux.

You worked at a Peruvian winery in the 1980s and have been in Bordeaux since. If you had to pick one more region to work in, where would it be?

I have the good luck to have a role at Opus One in California and Almaviva in Chile, and this is obviously extremely enriching. However, at the moment, I am passionate about what we are doing South of Bordeaux, in Limoux exactly. With Baroness Philippine’s children, we are working on something extraordinary: giving birth to a Cru, the Domaine de Baronarques. We have realised that it is a terroir with huge potential and we are in the process of trying to create a great wine which ages extremely well. I have been particularly amazed by the freshness and the fruity aspects of the wine even though the tannins are still a bit young.

When I am there, I feel more or less like a passenger of the Mayflower arriving in America. There is great potential. It’s a special place – a special terroir.

Does this allow you as a winemaker to be more experimental?
At Mouton we have three centuries of history. At Domaine de Baronarques we have 15 years. As the Baron Philippe said: “To make a great wine is not complicated, only the three first centuries are difficult…”. Domaine de Baronarques is something that I am hugely excited about. Despite the relatively small production, the wines are proof enough of its success.


Bordeaux 2006: performance of the First Growths

As we enter the tenth year since the 2006 vintage, Liv-ex will be examining the performance of the wines in a series of short blog posts. These posts will examine price variations – the highest and lowest Market Prices against the current and release prices – for wines within the Bordeaux 500 Index, starting with the First Growths.

Overall, 34 of the 50 wines from 2006 within the index have gained or held value since release. The average price change since release is +5.5%. The wines of the Second Wines 50 index have increased the most on average, and the three top performing wines come from this sub-index. The wines of the Sauternes 50 have lagged the most. Carruades Lafite is the biggest climber; Yquem has fallen the most.

Four of the 50 wines are currently at their highest ever price; two are at their lowest. The wines are 34.3% below peak on average in Sterling terms.

The First Growths

The chart below shows price variations for the five Bordeaux First Growths from the 2006 vintage since En Primeur release. Lafite’s Market Price has varied the most over time: it climbed from £3,000 in December 2008 to £8,550 in March 2011, just ahead of the market’s peak. Its current market price – still the highest of these wines – has fallen to £4,600 since, but remains 43.8% above release.

At the other end of the scale, buyers seeking relative value might look towards Haut Brion 2006. It is currently available at 13.6% below its En Primeur release price. Despite being among the higher scorers, its current market price is the lowest of the five – and is just 4.8% above its all-time low.

First_Growths_2006

For analysis on the remaining wines of the Bordeaux 500, check back over the next week.

You can see historic price information for the wines mentioned on Cellar Watch, by clicking below:

Lafite Rothschild, 2006; Latour, 2006; Mouton Rothschild, 2006; Margaux, 2006; Haut Brion 2006.

Cellar Watch subscribers can track the value of these wines by adding them to a cellar. To subscribe to Cellar Watch, please click here.


Second wines – back in focus?

First Growths and second wines over five years

During the bull market that drove the fine wine market to its peak in June 2011, the second wines of the Bordeaux First Growths saw exponential price rises. This was largely due to brand-driven Asian buying: “Little Lafite” and its peers were seen as extensions of the Premier Crus by Chinese buyers. By offering access to the brands at lower price points, they were first in line to benefit from rising prices, as Liv-ex observed in October 2010.

Eight months later as the market rolled over, they were first in line to fall. As the chart above shows, the price movements of the First Growths and their second wines have been following a similar path since: dropping until June 2014 and running roughly flat over the year that followed.

First growths and second wines over two years

Since July last year, however, the two groups appear to have parted course. While the First Growths have dipped – down 1.3% – their second wines have climbed 4.5% since July. When ranked by performance over 2015, three of the top ten wines within the Bordeaux 500 Index are second wines – and Petit Mouton takes the top spot by a comfortable margin. The Chateaux’s first wine, Mouton Rothschild, was the best-performing First Growth but achieved only 16th place in the table.

Performance of the First Growths and second wines in 2015

It is likely that the recent success of the second wines can still be linked to the strengths of their brands in Asia. With the current climate for buyers in China – where a weakened Yuan makes fine wine more expensive – not favouring high-priced First Growths, the more accessibly priced seconds look particularly interesting.