Is Burgundy up or down? The 2020 Hospices de Beaune auction, held on 13 December, suggests the Burgundy category is ablaze – barrel prices hit an average of €21,677 ($26,304), with the auction raising a total of $17.3m for charity, the second-highest sum in its history.
“A thrilling result tonight,” Jasper Morris MW told Meininger’s shortly after the auction ended. “I think it pays tribute to the resilience of the world of wine in the face of the pandemic,” given how complicated it was to hold the event. “Clearly there remains huge demand for the wines of Burgundy.”
Yet the results seem to contradict recent figures released by Liv-ex, which show the average price of a case of Burgundy across all vintages tumbling in 2020 – to £2,052 ($2,728), from its 2018 high of £2,833, a fall of 27%.
Huge demand but plummeting case prices on the secondary market – what’s going on?
Apples and oranges
The wines sold at the Hospices de Beaune sale, and the prices paid for them by the region’s negociants, reflect the quality of a single vintage, and the way it has been handled by the Hospices winemaking team. It’s also a charity auction, in aid of the local hospital. The relationship between the sums paid for small quantities of wine from one estate, and the prices producers across the region may accept for this and previous vintages can be quite elastic; the results of the Hospices de Beaune are not a perfect proxy for Burgundy in general.
What the Liv-ex figures show is a correction in some parts of the Burgundy market.
“I think we can confirm that prices for the very highest-level Burgundies (Domaine Romanée Conti, Jayer, Leroy) peaked in 2018 and have softened since then,” says New York-based Jamie Ritchie, head of wine at Sotheby’s. “However, the broader Burgundy market has shown a subsequent uptick since the initial downturn. I think the decline is reflected by a softening of pries at the very highest levels.” In other words, the top wines hit a ceiling and have, at present, nowhere further to go. The next tier down, however, “continues to show growth and strong demand.”
Liv-ex figures show how dramatically the Burgundy category has expanded. In 2002, there were a mere 17 LWIN7s, or unique wines, showing up on the Liv-ex radar. By 2020, the number of unique wines had increased 84-fold: Bouchard Père et Fils, Trapet Pere et Fils, and Jacques Prieur have all become hot properties.
“If you look at our category sales, Burgundy increased its market share by value from 42% to 50% in 2019, with a slight decline to 46% through mid-year 2020,” Ritchie continued. “Burgundy sales are holding strong and in great demand, particularly compared to Bordeaux.”
Interest from the UK also remains strong, despite Brexit uncertainty and a fall in the value of sterling.
More wine to sell
In 2018, 12.4% of buying activity came from Europe. This year, it was just 8.4% – yet Europe accounted for 63.5% of selling activity, up from 51.7% in 2018; collectors have decided to cash in. And, of course, it’s likely that shuttered restaurants have been selling off their stocks.
Asia was also down, accounting for just under a quarter of buying activity in 2020, as opposed to more than a third of all buying in 2015. Carl Robinson, CEO of Japanese importer Jeroboam, says the Japanese love affair with Burgundy continues. Nevertheless, as “prices have got silly”, buyers – particularly in the on-trade, which accounts for most of the Burgundy consumed in Japan – have become resistant to buying the top estates. “We have more than 3,000 French restaurants in Tokyo and where they used to pour a Premier Cru by the glass, now it’s a village,” Robinson says that buyers have gone to where they can find value, particularly Chablis.
The changes in what’s trading are reflected in Liv-ex’s Power 100 list: Coquard Loison Fleureut, Prieuré-Roch and Drouhin-Laroze have all gained. That DRC has fallen from second place on the list to 21st place doesn’t mean it’s less desirable – it’s simply less affordable.
“I think the prices escalated very rapidly and a lot of great Burgundy has already been bought, so it is just a flattening out and slight softening after prices increased so much,” says Ritchie. “There is also a broadening of the market to the next tier of growers.”
But the hunt for value can’t go on indefinitely. Will it make sense to pay a fortune for village wines, when Pinot Noir lovers can now find superb Pinot Noirs from Oregon, New Zealand and Germany, for a fraction of the price? Already the Italian and Champagne indices are up, suggesting a flight to value, while Carl Robinson reports he’s seeing Japanese wine buyers “moving sideways”, into the Jura, the Loire, and Beaujolais.
Burgundy’s long and romantic history, combined with its tiny estates that demand a high level of knowledge to unlock plus ravishing wines produced in tiny quantities, means it will always exert a pull on wine lovers – as the frenetic bidding at the most recent Hospices de Beaune auction demonstrated.
But, it seems, buyers have signalled that, for the moment at least, there is a limit they are willing to pay.