I could believe 10 Euros/bottle for Lafite’s
VARIABLE cost of production: just the corks, bottles, labels, barrels, pickers,
tractor fuel. But it’s quite improbably low if it’s supposed to be
Lafite’s ENTIRE annual production cost including acquisition,
maintenance, repair and depreciation of facilities and equipment, periodic
replacement of vines, managerial supervision of production, taxes, reasonable
return to the real estate and to the equity, etc. That would suggest that
Lafite’s entire annual budget, before marketing and distribution, is in
the range of 2.5 million Euros. I think Mr. Staples has his decimal point in
the wrong place. I’m definitely not here to defend first growth
Cheers,
Russ
From: wine-bounces@thebarn.com
[mailto:wine-bounces@thebarn.com] On Behalf
Of Theodore Trampe
Sent: Wednesday, April 01, 2009
1:49 AM
To:
Subject: Re: [wine] New market
wine trouble
Did everyone read the quote from Simon Staples, in the
14th paragraph below, where he estimated Chateau Lafite Rothschild's cost of
production at $13 a bottle? The words got a bit garbled in the email, but
the exact quote from the NY Times article was, "He estimated it cost the
chateau 10 Euro, or $13 to make a bottle of the wine." Talk about
marketing - there sure are a lot of suckers out there!
> March 31, 2009
> Wine Market Struggles to Adjust in New Era
> By DAVID JOLLY
> What is a wine worth?
>
> As elite critics and merchants from around the globe descend on the city
of
>
> The ultimate connoisseurs have gathered every spring since the early 1970s
for the tastings, known as the .campagne primeur,. or futures campaign. But
never have they done it in the middle of so deep a recession, after so frothy a
market. For that reason, this week.s tastings are likely to be an unusually
sober affair.
>
> Just as the go-go years of Wall Street.s inflated salaries and Main
Street.s cheap cash created a bubble in real estate, stocks and other assets,
they produced a wine bubble too.
>
> The en primeur, or wine futures, system works to the advantage of the
wine-producing châaux, providing them with cash for part of their product while
it is still in the barrel; investors and consumers get the chance to buy wine
at prices that have the potential to rise substantially.
>
> Prices for futures had long varied widely according to the quality of the
vintage. But that seemed to change after an exceptional 2005 sent prices
spiraling upward. The vintages of 2006 and 2007 were merely average, but prices
did not fall, kept aloft by a surplus of nouveau riche big spenders.
>
> Now many of the speculators who drove prices to extraordinary levels have
disappeared, or turned from buyers to sellers as they try to raise cash to
cover their overleveraged bets. And the bankers and traders who thought nothing
of blowing hundreds of dollars on a bottle are now worrying about losing their
bonuses, if not their jobs.
>
> As a result, some overseas buyers have decided to skip the tastings this
year, complaining that top châaux will not accept that in a market this weak,
prices must fall. Some of the smaller merchants whose livelihoods depend on
selling the wine, including some of the
>
> Stephen J. Browett, director of Farr Vintners, an up-market British wine
merchant, said he would not even be sending a team to Bordeaux this week
because he did not expect to be able to sell the new wine at a profit, unless
the wineries are prepared to accept substantial price cuts.
>
> .I wouldn.t call it a boycott, precisely,. he said, .but unless they give
us an indication that they.re going to put the price down, there.s not much
point in us sending our team down for a week..
>
> Simon Staples, director of fine wine sales at Berry Bros. & Rudd in
Hampshire, England, said the gap between the pricing expectations held by wine
merchants and the châaux over what is expected to be a decent, though not
great, vintage was the widest he had seen in two decades.
>
> The top châaux are hoping to cut prices by 15 percent from the 2007 en
primeur to show good faith, he added, .but cutting the price by 50 percent to
60 percent is the only way it.s going to work..
>
> The problem has been particularly acute for British wine merchants because
the pound has fallen precipitously against the euro, and British buyers can
account for up to a third of the market. Mr. Staples said the pound had fallen
about 15 percent against the euro in the last 12 months, so .even a 15 percent
price cut will only get us back to last year.s level,. he said.
>
> Prices for the best wines from around the world rose in tandem with the
financial bubble, with both institutional fund managers and home-based Internet
traders getting into the act. The London International Vintners Exchange.s
Liv-ex 100 index, which tracks trading in 100 fine wines, mostly red
>
> Mr. Staples pointed to the example of Châau-Lafite Rothschild, a
first-growth Bordeaux, which soared from £675, or $955, for a 12-bottle case in
the 2002 futures to £4,000 a case for 2005 . which he called .the best vintage
I.ve ever tasted.. But despite merely average years subsequently, the price
only fell back to £3,500 in 2006 and £2,800 in 2007. He estimated it cost the
châau .10, or $13, to make a bottle of the wine.
>
> Both Christie.s and Sotheby.s, the auction houses, say sales continue to
be strong at their auctions, which typically feature excellent bottles in their
primes.
>
> And people have not cut back on their overall wine consumption, according
to Lulie Halstead, chief executive of the research and consulting firm Wine
Intelligence. .But what we are seeing is that people are trading down a bit in
price,. she said, spending less at restaurants while occasionally splurging
more for the wine they serve at home.
>
> Data from Wine Australia, an industry marketing group, supports that
analysis. Australian wine exports declined 5 percent in volume terms in the 12
months through the end of February, but the value of those exports fell 16
percent, suggesting cheaper wines are making up more of the mix.
>
> Predictions based on the weather during last year.s growing season suggest
that the 2008
>
> There is concern, however, for the many smaller
>
> In an e-mailed message last week, he sounded similarly bearish. .In terms
of wine prices, even the luxury end are soft, but have not fallen as much as
real estate, art, and stock,. Mr. Parker said. .However, buying of top wines
has slowed considerably, and what unfolds over the next six months will push
prices lower, I suspect..
>
> David Sokolin, a fine wine dealer in
>
> But Jean-Guillaume Prats, director of Châau Cos d.Estournel, a Bordeaux
second growth, acknowledged that prices have come down over the past six
months. .That.s true of every fine wine around the world,. he said, .and it.s
also true for many luxury items..
>
> Mr. Prats hinted that the producers would seek common ground with
merchants. .Speculation isn.t in anyone.s mind at the moment, in any area,. he
added. .It.s good that the market is going back to fundamentals..
>
> Francis Cruse, director of the Union des Maisons de Bordeaux, the
néciants. union, blamed the madness spurred by the excellent 2005 vintage.
>
> .Prices need to return to the level where people who like to drink good
wines can afford them,. he said.
>
> But Angéque de Lencquesaing, one of the founders of iDealwine, an online
auction site in
>
>
>
>
> --
> ------------------------------
> * Dr. James Ellingson, jellings@me.umn.edu *
> *
> *
>
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