Bordeaux experienced a challenging year in 2021 as the region faced consecutively low crop yields, declining interest towards its En Primeur and fierce competitions from other regions.
In 2021, Bordeaux’s trade share fell under 40% for the first time to 37.7%, The figure further slipped to 32% at the time of writing, according to Liv-ex’s latest report on Bordeaux’s market performance in 2021.
Compared with a growth of 304.0% for the Liv-ex 100 and 263.9% for the Bordeaux 500 since their inception, the broadest Liv-ex 1000 index which is less reliant on Bordeaux delivered the best returns up 355.2%
The region is still the single largest component of the secondary market, but its dominance is “being eroded” and “interest in Bordeaux has begun to narrow”, according to Liv-ex.
Notably, the report pointed out the general loss of interest towards Bordeaux En Primeur, in which it suggested winemakers should bring out well-priced releases with decent volumes to attract traders and collectors.
Small crop size
Despite the fact that Bordeaux was greatly spared from the April frost that hit most winemaking regions in France, the warmer temperatures and high rainfall in May and June led to severe mildew and botrytis, contributing to severe losses in total yields.
In 2021, the region’s total yield was 3.7 million hectolitres, which was 14% lower than 2020’s crop of 4.4 million hectolitres, even slightly smaller than the 2013 vintage deemed as the hardest in 30 years.
The low yield level of the 2021 vintage is also a continuation of Bordeaux’s downward trend in crop size since 2018.
White wine crops suffered the most severe hit, where sweet wine crops were down by 57% from 2020. The sweet wine AOCs of Sauternes and Barsac were hit the hardest
Crops for dry whites dropped by 15%, in which Graves recorded the biggest drop of 53%.
Changing sentiment around En Primeur
While winemakers are facing stock jams in the supply chain and inflationary pressure, the market sentiment towards the En Primeur campaign in 2021 was “seemingly luke-warm”, according to Liv-ex. This means the 2021 vintage may not benefit from an ambitious pricing strategy from winemakers.
The benefit of buying Bordeaux En Primeur was also challenged by low or flat returns on investment in recent years.
The report shows the average price of the 2010 vintage, offered during the China-led bullish market in 2011, had declined 11% when the vintage was physically available two years later. Over a decade later, its average price still remains 2% below the En Primeur releases.
‘On’ vintages like 2009 and 2016 recorded flat returns with just 7% rise since release. If storage and other logistics costs are counted, these small returns are likely to turn negative.
When the world is facing a sustained period of inflation, trade buyers will not just consider the quality and price of the vintage, but also their own balance sheets when deciding upon their buying strategy in 2022. Therefore, the report suggested Bordeaux to bring out attractive propositions for all those involved in the supply chain, especially during an En Primeur campaign.
Growing competition in the secondary market
Given that Burgundy and Champagne of different styles have topped the price performance charts, the strongest competitors of Bordeaux on the secondary market are Tuscan and Californian wines with Bordeaux-style blends.
From March 2020 to 2021, the average market price for top Californian wines and Super Tuscans was up by 25% and 24%, more than the 12% growth of Bordeaux top wines.
The California 50 index was up 34%, compared to 11.5% for the Bordeaux 500. Meanwhile, the Super Tuscans continuously offer a lower point of entry into the fine wine market, which has likely contributed to their greater return on investment in recent years, according to Liv-ex.
While Tuscany and California have seen steady increase in the number of wines trading, Bordeaux’s expansion has paused. The number of unique Bordeaux wines traded (LWIN11s) dipped 0.8% in 2021 compared to 2020.
Efforts from producers
Recognising the difficulties, some winemakers are adopting new strategies to protect their market share. One of the most successful initiatives is to offer attractive pricing on release to stimulate demands, according to Liv-ex.
The report cited the example of the 2019 En Primeur campaign held at the start of the COVID-19 pandemic, where Bordeaux winemakers made a rare attempt to cut down the prices of their first release. 2019 turned out to become the most traded Bordeaux vintage by value and the second-most by volume in March this year.
“It is precisely this combination of bringing value back to every point of the supply chain that will guarantee that Bordeaux remains a key force in the secondary market for fine wine,” the report emphasised.
Winemakers are also pooling heavy investments in marketing, public relations and tasting events. One of the biggest shifts was their focus on sustainability, organic and biodynamic viticulture, which is seen as an effort to improve their winemaking and re-shaping their brand image.