Wednesday, July 12, 2006

Is it worth the money?

It has been such a busy week for me that this article installment is extremely late. Anyhow, while I was sorting out the 2005 en Primeur offer, I realized that the prices are much higher than the previous vintages. The much sought after grand crus are fast becoming a cult wine even before they are being released.

I am intrigued by the market forces that determine the price of wine. However, I am even more curious to ask if all this fuss is truly worth the money. Factors determining the price of a wine are both economical and sentimental. From the economics point of view, the cost of a wine is highly dependent on its production cost, especially true when the vintage is a difficult year that limits the quantity of good grapes. Packaging and transportation costs may constitute a smaller percentage as communications technology improves. Import tax and consumption tax levied by different countries will add to the final cost of the wine by the time it reaches the retailer. However, the most critical factor in this chain of events is probably the reputation the winery has built up and this will determine the price of the wine which is not a simple function of cost. A winery’s reputation is built throughout its lifetime, probably over generations of winemaking. The first growths of Bordeaux, for example, have such deep rooted image in the consumers’ mind that the wine is not just a product of consumption. It represents the drinker’s attitude, social status and his/her quest for the best in the industry.

The vintage 2005 brings high expectation given the positive comments by renowned wine writers during their initial barrel tasting. The Feb 2006 issue of “Decanter” revealed the following comments from the various industry insiders. The following is a reproduction and I think it is time to cool down on paying exponentially high dollars to wine.

“The chief objection to breaking ranks is the effect it may have on prices. Sam Gleave of Bordeaux Index said, 'I see no benefit to the consumer. It simply gives a blank cheque to the owners.'

Many however argue that Bordeaux can hardly be unaware it is sitting on a winner.

'It is arguably a legendary vintage,' Laurent Ehrmann of negociants Barrieres Freres said. He stopped short of agreeing a 300% increase was possible but said the first growths might well release a first tranche at 100% above the 2004 price, with possibly a similar increase on subsequent tranches.

'But there will inevitably be a cooling off period,' he cautioned.

'Prices will be high,' Gleave said. 'Some will be sensible and value the wine according to status, but others will go for a big raise. Somewhere like Montrose could go up 300% and get away with it. And if Ducru Beaucaillou went up that much on 2004 it would not be unusual.'

On, Robinson says she 'fears the worst', with the top tier 'drawing away from the pack' and being priced only for the 'super rich.' Further down the hierarchy she also fears the 'soft underbelly of the left bank classed growths' may go for 'robust prices.'

As for the chateaux themselves, few will comment before their wines are released. One proprietor, Anthony Barton of Chateau Leoville-Barton, who prices 'for consumers' rather than investors, put out a general plea for calm.

'The market will go crazy, there's no doubt of that, and prices will zoom up because in the US in particular they will pay any price. I just hope people will be sensible.'”

So, if I were asked if it is all worthwhile to pay a few thousand dollars for a bottle of wine, I am likely to say yes only if this wine has been out of circulation in the market and has a vintage that is considered best in the last 15 years. Otherwise, I would rather pay less and enjoy a fine wine from other vintages or regions.


By Cher Lim
Wine Treasures Pte Ltd



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