THE REBIRTH OF BURGUNDY

Bordeaux wine is seeing its fastest price rises in history as collectors in China and investors alike plough in. But France's even more seductive Burgundy region may be the next destination for fine wine collectors. OLIVER EAST

So much has changed in the world of wine in the past ten years. The market for Bordeaux has continually risen without seemingly finding a ceiling. Thanks mainly to the explosion of the size and power of the Asian market. To put things into perspective, the global wine market is actually extremely small. The 2010 Bordeaux vintage, which broke all records with its high pricing, is still only worth circa £1-2 billion (assuming that all the Chateaux released their entire productions, which we know was not the case). As a commodity, this is a tiny market, with the number of actual cases being approximately one million or so, and each of these requires distribution around the world. Most of these wines now cost well in excess of £50 per bottle, which is quite close to the release price of the 2002 First Growth prices. Eight years is a long time in the wine trade, and back then, one could buy Lafite for this price! Today, the same money buys you Brane Cantenac. The world is a different place.

In this period, Asia has proven a capacity to corner many micro-markets, sending many Bordeaux ‘brands’ escalating in price. Some of these names have increased by 500 - 1000%+ over the past ten years. Until just recently - the past six to twelve months - the prices of most Burgundies had remained stable, with a steady and constant demand from established markets all over the world, although certainly significantly less so from Asia. Burgundy, being as complex and fragmented as it is, takes a long time for even a wine professional to learn, and much longer for an entire nation or market, regardless of size or wealth. However, when one thinks of the importance of ‘branding’ of Bordeaux wines in Asia, one wonders whether it will it ever be as ‘impressive’ to be seen drinking a bottle of Rousseau, Dujac or Mugnier as it would be Lafite or Latour. Burgundy Domaines are certainly not corporations with strong branding and marketing like their Bordeaux compatriots - most of them are small businesses or farms that produce tiny quantities of divine fine wines. If the Asian market really develops a taste and desire to drink great Burgundy regularly, it easily has the power to dominate and reshape the Burgundy market completely, as it has done for the top wines of Bordeaux. Burgundy drinkers in the rest of the world should hold on to their precious bottles and stock up while they can still afford to do so. The tiny quantities of the rarest wines of today will become ghosts of the future, and who knows, they may one day be more expensive than platinum. Production of Lafite can be 20,000 cases (240,000 bottles) per year. Production of a wine such as Chambertin, Clos de Beze, Rousseau can be less than 5% of that. Lafite 2007 sells for roughly £700 per bottle. Chambertin, Clos de Beze, Rousseau from the same vintage currently sells for circa £300 per bottle. The gulf in price and production is evident, yet in quality it is not so.

An important factor to consider for the future with regard to branding is as follows; should the Asian market follow Rousseau, Dujac, Mugnier, or Roumier for example (as it has for Lafite, Carruades, Duhart, Latour, Forts de Latour etc.), then expect all wines from those Domaines to rise in value but also and crucially, expect the spread between the lower wines and top wines from a Domaine to narrow significantly. Perhaps in the future, village level Gevrey-Chambertin from Rousseau will be worth half what the Chambertin, Clos de Beze is worth because of the label and the power of the Rousseau ‘brand’ (ahead of the quality). Like the Carruades phenomenon, this is a distinct possibility. Picking those brands may require more than knowing which wine is qualitatively best – it may come down to which is the easiest to pronounce or which has the most attractive label.

DRC (Domaine de la Romanée Conti) continues to be the dominant force in the Burgundy market and has been especially active in the past twelve to eighteen months. Prices for this Domaine are now breaking all records. Just two years ago, we here at Farr Vintners sold 1999 Romanée Conti (the top wine of the Domaine) at £5000 per bottle. Just this month, we sold the same wine for £10,000 per bottle. When one considers the quality, prestige and scarcity of this wine, perhaps this is unsurprising in today’s market. The burning question is though - where can it go? £10,000 is a huge sum to spend on just one bottle. The same money could buy you a brand new Volkswagen Polo. Will it soon be worth the same as a Passat or perhaps even a Porsche Boxster? The minimum price for a bottle of DRC has risen from £200 per bottle two years ago to £300 per bottle today. Simple supply/demand economics suggests that this increase is likely to continue if Asia’s interest in Burgundy in turn continues to grow.

If there is a Carruades waiting to happen in a Burgundy shaped bottle, it is most likely to be from one of the great estates - Leroy, de Voguë, Mugnier, Roumier, Meo-Camuzet, Rouget, Ponsot, Lafon, Leflaive or Coche-Dury. The number of drinkers in Asia for these wines continues to grow, and whilst most remain relatively affordable today, past experience with larger production Bordeaux suggests that this may not be the case for much longer.

Oliver East is a director of Farr Vintners, farrvinters.com