Margaux in decades

We examine the evolution of values for Margaux wines and the prospects for their future against the backdrop of the eagerly awaited prices for the 2010 vintage

The Margaux appellation is an interesting group to examine as there is a wide variety within the region – both qualitatively and in terms of price - including the most extensive range of wines from the 1855 Classification. It is an appellation which epitomises the success of the 2010 vintage producing some sublime wines whose tannins are exceptional – silky smooth, sensual even, with an intensity which is remarkable. The irony is that the headline grabbers (the Premiers Crus etc.) bring notoriety to a vintage but it is the less well-known châteaux which provide terrific wines for drinking and laying down. However, do their past and present values provide reasons for buying at en primeur?

Current prices for 2009 vintage (drawn from merchants in bond prices) generally show that for the main traded wines (e.g. Margaux, Pavillon Rouge and Palmer) the 2000 and 2009 vintages are fairly comparable in terms of value. This is what one might expect given that these are similarly perceived vintages in terms of quality although the 2000 is now somewhat on its way to being drinkable and it's a vintage which has stood the test of time. Other wines tend to show an erratic picture which is much more likely to approximate to general perceptions of the specific wine rather than the vintage as a whole, whilst also reflecting the holding costs.

If one considers current prices of wines for this Appellation for the decade under review, certain patterns appear, but so do anomalies. The first thing to say is how few wines from Margaux ever see the auction market. The wines which do are: Château Margaux and its second wine Pavillon Rouge, Château Palmer and its second wine, Alter Ego. All the rest may appear from time to time but really only in respect of the top vintages (2000 and 2005 – notice the absence of 2003 here) and in tiny quantities. Rauzan-Ségla and Lascombes are probably the only other two Châteaux which otherwise generate some (small) auction interest. This would confirm the wines' lack of status as investment vehicles which, of course, may not be the same thing as their attractiveness for wine enthusiasts. Not surprisingly therefore, there is a dividing line in the separation of prices for the 'top vintages' from the 'top Châteaux', and the rest.

If one looks at these top wines and their average prices as expressed as a percentage of 2009 they present an interesting picture for the vintages over the last decade:

2000 2001 20022003 2004 2005 200620072008 2009
94.5% 49.2% 46.8% 51.6% 67.1% 90.3% 44.4% 45.2% 68.5% 100%

Expressing these as some kind of star rating for the vintages one might arrive at the following:

2000 20012002 20032004 2005 20062007 20082009
***** ** ** *** *** ***** ** ** *** *****

The rest of the wines from our Margaux sample show no real consensus for the vintages in this respect. For example, the price for Rauzan-Ségla 2000 is 203% of its 2009 price. Brane-Cantenac and du Tertre show similarly high values (186% and 173% respectively). However, nearly all of the 2000 prices for other châteaux are higher than the 2009 price with the exception of Lascombes (only 82%). In fact, many other châteaux in Margaux show higher or nearly equivalent prices for their wines in the other years leading up to 2009. Only Lascombes really seems to reflect the pattern above. I think this demonstrates that the market sets prices according to the perception of the vintage for those wines which have some trading visibility but doesn't appear to impact on wines which one is more likely to find in wine merchants' cellars. For example, Brane-Cantenac 2001 is trading at 238% of its 2009 price and at 138% for the 2007 vintage .

However, after taking into account the costs of buying en primeur does it make sense to buy 2010 when the offers come through, or wait? Obviously, cheaper wines start from a lower absolute cost so by adding in the costs of the initial purchase, interest on the capital or opportunity costs, and storage, it may hardly make sense – storage and duty being immune to the relative prices make up a far larger proportion of the base cost. If one looks at what might appear to be an attractive increase in value of 144% over 10 years from a base of £25 (say, a Rauzan-Ségla 2000) one can see the result: cost £25, storage £1/annum per bottle, interest on the outlay at, say 5%, duty and VAT, the calculated cost of a bottle of 2000 ready for drinking would be £66: you can buy it today for less than £60 (IB). If one excludes VAT and duty and also takes out any professional storage costs then the calculations would improve significantly. However, this is the general picture for most of the non-investment wines. The year 2000 is a special case, much like 2005 and in all probability 2010. Since 2005 most non-investment wines would show at best a break-even or perhaps loss on paper, including those who bought 2009. On the other hand not everyone bases their buying decisions on these kinds of considerations, fortunately too for the Bordelais.

Wines from Margaux represent more than one-third of the entire 1855 Classification. Apart from the eponymous Château Margaux itself (Premier Cru) there are some five Deuxièmes Crus, eleven Troisièmes Crus, three Quatrièmes Crus and two Cinquièmes Crus not to mention various crus Bourgeois (for example: La Tour de Mons, Paveil de Luze, Grand Tayac, Deyrem Valentin, Le Coteau, d'Arsac, La Galiane and La Tour de Bessan), a miscellany including Château Monbrison and others previously once within the cru Bourgeois classification for example, Château Siran.

An alternative examination of release prices for some wines from Margaux as compared to their current trading prices also shows that it's not always a one-way street in terms of gains. Most notably the pricing policies of Palmer (2006 and 2007), Rauzan-Ségla (2006 and 2007), Dauzac (2005 and 2006), and Giscours (2007) showed that market rates never kept up with their release prices and these are all now trading at a loss. It seems that despite the hype of 2009 certain wines have proved themselves unworthy of their promise, in particular, Rauzan-Ségla, d'Issan and Brane-Cantenac whilst few have shown any real growth with the exception of Pavillon Rouge (185%) and Margaux itself (122%). Historical pricing might be something to consider when the new releases emerge. Having said this one would struggle to find wines apart from those mentioned which hadn't shown some significant appreciation over the years. One could highlight Giscours (2001: 208%; 2003: 182%; 2004: 138%; although 2005: 29%).

The weather is the best indicator for the demand and pricing of a vintage. 2010 will be no exception and all the indicators are that this will be a vintage which will probably sell for similar if not higher prices than 2009. Certainly, the wines from Margaux are superior this year. The most striking feature of the weather in this vintage was the significant absence of rainfall in July and August and during the latter part of September. The adage is that all dry summers produce highly prized vintages – but I would qualify this to exclude those summers which are unusually hot (2003). In July, for example, rainfall in Margaux was down 36mm over the ten year period 1996-2005; down 49mm in August and down 15mm in September for the same period. By the time any real rain appeared in October all of the harvests had been completed. This meant that 2010 was closer to 2005 than the much-vaunted 2009. The only blot on the landscape were problems caused by coulure for the Merlot in June following cooler, wetter weather than normal. Indeed, the 2010 vintage has been the driest of the decade whilst average temperatures were fairly close to normal. The cool nights in September, coupled with extensive sunshine sealed the fate of the vintage and proved beneficial to the accumulation of anthocyanins in the red wine grapes (higher than both 2005 and 2009) something which I particularly noticed during the en primeur tastings for the Margaux appellation. In a nutshell, the cool sunny weather preserved the fruit, aromas and acidity. But, as always, it is the estate which decides when to harvest and this can have had a significant effect on the style of the wine. I remarked at the time of the apparent lack of spiciness of the Cabernet Sauvignon which is linked to cooler night-time temperatures for later maturing Cabernet Sauvignon (associated with perceptible amounts of isobutylmethoxypyrazine), but this generally broke down during September and ended up being lower than the olfactory perception threshold at harvest.

The impact the weather has on the general quality of the wine is well known. In good years, of course, there will be higher volumes of the first wine produced, producing higher profits for the châteaux. In less good years, however, a château will produce less of the first wine – a natural corollary of the quality of the harvest, the market, prices, reputation and so forth. The question then to consider is this: do the Château reduce the quantity of the first wine produced in order for the châteaux to make the best wine possible or, is it reduced only to a limit set by the financial disposition or budgets of the château? A significant reason why perhaps less good vintages should, not may, command less good prices.

There are plenty of reasons to buy wines en primeurs, but saving money may not be one of them. However, it seems likely that given the quality of the underlying vintage then a new yardstick will be established and as yet the Far East has had to really impact on Bordeaux futures in the way they have for the auction market.

It might seem that where Bordeaux châteaux owners have sought to correct the speculative gains earned by others that values have appreciated less. However, this is not always the case but it is more than likely that you could acquire many wines cheaper in the future than it might cost you to buy them en primeur after considering all the associated costs along the way. Without professional storage this will reduce the cost quite significantly and it may seem to some that pride in their cellar far outweighs the cost disadvantages which would be negligible if it were empty.

2010 in Margaux is a wonderful year and there will be some outstanding wines at reasonable prices. If it's status you're after then there are also some of the crus classés which don't match the prices of the class in general, for example Durfort-Vivens and Malescot St. Exupéry, which should offer some good opportunities.

by Fabian Cobb
This article first appeared in the Drinks Business (June, 2011)

Note: Current prices for wines are based on an average auction value for the 6 months to 30/4/2011, 75cl bottles only and where required filled in with merchants' prices (IB).

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