I never thought Lafite would be the 300 lb Gorilla, but....

September 21, 2010

Well, the news is gushing now about this weekend's Fine Wine Auction by Christie's in Hong Kong. For good reason.

Bloomberg writes "Laftie's 'Godzilla' Tops Wine Auctions as Hong Kong Sales Boom" http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/09/19/bloomberg1376-L8VOVH1A1I4H01-4BGCFJGKE06FO0IPSIH9BC743F.DTL

They call Lafite "Godzilla" because every bottle sold and every lot exceeded the highest estimates. Here are the sales prices, which I've estimated to include the buyer's premium on top of the hammer price from the Christie's website.

These are results for
Lafite Rothschild:
1990  $2000
1995  $1400
1996  $2500
1998  $1500
2000  $3100
2003   $1800
2006   $1500

Latour:
90  $1500
95  $1200
96   $2000
00   $2700
03  $1800

Margaux
00   $2200
03   $1800

Ausone
00   $2800
03   $2200

Lynch  Bages
1995  $725

These prices are in US Dollars.  Oh, and they are for one bottle. Each. No joke. Full cases were selling for $20,000 - $35,000. Each.

Now, look, Yr Mst Hmbl & Obdt Svt here does not want to sound like my late old man who used to say "back in my day…"  I remember well going with him into Beverly Hills Mercedes in 1972 when he decided to switch from Cadillacs, and hearing him at the top of his lungs, upon looking at a sticker, holler "TWELVE THOUSAND DOLLARS FOR A CAR! ARE THEY OUT OF THEIR ****ING MINDS???"

However, there is a reality of this pricing gentle Readers.  I bought a case of 1982 Lynch Bages on release in '84.  It cost me a whopping $20 a bottle. THAT was expensive in 1984.  The '82 Lafite was $50 on relase in '84.  Now, let's put all that into some perspective.  Also in 1984, I could buy Jordan Cabernet for $17 a bottle. I bought a bottle of 1980 Dom Perignon for $50 that same year.  My dad bought a 1984 Mercedes 380 SL for $35,000.

I don't really care to know what that case of the Lynch Bages would be worth today, because the sheer pleasure of enjoying it over 21 years was worth it.

Now today in 2010: Jordan Cab costs $50. Dom Perignon $125, a new SL is $100,000.  Stuff, clearly, is about three times more expensive now than 25 years ago.  Except, Lafite is SEVEN HUNDRED FIFTY TIMES more expensive. Clearly, these sort of prices for First Growths are clearly way exceeding the normal inflation over time.

This means, sadly,  that the new reality for the vast majority of wine lovers in the world is that they simply can't  EVER afford to buy these wines, unless they have annual incomes of over seven figures. They will never taste them unless they are good friends to billionaires.

An entire generation of new wine drinkers will frankly most likely never get the opportunity to taste the finest wines in the world.  Back when I was starting out in the wine world, it was at least possible to taste Lafite and Margaux and Petrus.  Being able to taste the "ne plus ultra" wines is part of one's wine education. You can not understand the full meaning of any wine region without tasting the very best products they make. I've had First Growths from great vintages more than a dozen times.  It helps me understand the rest of the region and assess the wines.

Sadly, I fear, my younger colleagues won't have this opportunity simply due to the economics.  Let's face it, few people can afford to pay for one bottle of wine the equivalent of a down payment on a new car. Sadly, even those Americans who already have these wines in their  cellars won't be opening them anymore.  Can you blame them? Would you flush $2,000 down the toilet, literally? Back in '89 my business partner took some '78 Lafite with us on a camping trip to the desert where we drank it out of paper cups with steaks grilled on an open fire. Amazing experience. I don't think he would have brought that wine if it cost the equivalent of $3000 a bottle. Who would?

As reported in Bloomberg "I can't afford to drink it," said importer Brian DiMarco, who's selling 50 lots of wine at Christie's this weekend, including bottles of 1995. Even Carruades de Lafite, the chateau's second wine, which he bought at $600 a case, is worth four or five times that." 

The wine press is latching on to these headlines and crowing that "wine is bouncing back" and consumers are "spending more" for wine again.   Well, this is simply not accurate reporting.  YES these highest end most soft after wines are increasing in price at an astronomical rate as Asia snaps them up.

HOWEVER

The genuine reality in the US today is that the over $30 market remains sluggish and lethargic at best. I saw a recent wine business web article headline that "Over $30 is the FASTEST growing segment of the market!" Well, on reading carefully, they were reporting that the over $30 segment had gone from 8% of sales to 10% of sales in 2010 over 2009.  So they crowed that it had a 25% INCREASE. Well, that is true in its own way, however they miss the point that NINETY PERCENT of wine consumption in the US is still under $30 a bottle.

I visited with my good friend and esteemed colleague John Roenigk, proprietor of The Austin Wine Merchant, who has long dealt with the best wines in town.  I showed him the above Bordeaux prices.  "My customers aren't interested" was his immediate response.  He reports some movement with 2007 First Growths, and some interest in the 09s after the initial hype of the vintage, but that interest was dropped like a red hot rock when the prices were quoted. "My customers buy wine and are buying wine" Roenigk said, "but these wines have become financial investment commodities.  My customers aren't buying that. They are buying wine. They just say no thank you to these prices and buy something else."  Trust me, those customers have the means to pay these prices, but they refuse to.

"Premium" California wines are going begging and on sale at rock bottom prices. John has said repeatedly that he must now be far more particular about which ones he stocks, as the market for them is far softer than it once once. When I asked him if he saw any increase in the average per bottle price in 2010 over 2009, he immediately replied "none, none at all."

Just after first publishing this piece, I saw an article online http://news.ucdavis.edu/search/news_detail.lasso?id=9621  According to Robert Smiley, dean and professor emeritus at the University of California, Davis, Graduate School of Management. "consumers can take advantage of unprecedented opportunities to purchase high-quality wines at significantly discounted prices, he said.

“There never was a better time to be a consumer of high-quality wines,” Smiley said, noting that during the past two years the prices of higher-end California wines have been reduced on average by 15-25 percent. ... The majority of survey participants reported that they believe consumers are continuing to look for bargains in wine purchases, are dining out less and purchasing lower priced wines, trends also noted in last year’s survey.

Smiley will present these and other findings from two recent surveys of wine industry professionals and executives at 9 a.m. Tuesday, Sept. 21, during the annual Wine Industry Financial Symposium at the Napa Valley Marriott Hotel.

Glad to know there is genuine data to support my analysis.

So, Gentle Readers, don't buy into the hype, just yet. The very rich few are spending record boatloads of cash, while the rest of us are shopping for bargains. Thankfully, there are a lot of good bargains out there. Good merchants, like John Roenigk, will always be finding them for their customers.

Cheers,

Rob Moshein

Austin Wine Guy