Bordeaux continues to be remarkably resilient, and its sales in the U.S. market are hitting new peaks despite a number of obstacles that remain in its path. The renewed interest in Bordeaux wines is centered on both U.S. coasts, as many retailers in the middle of the country long ago stopped attending the region’s spring en primeur tastings as part of its futures campaign. But major players on each coast, like Sherry-Lehmann, Zachys Wine & Liquor, K&L Wine Merchants, and Wally’s Wine & Spirits, continue to invest heavily in first-growth futures, as well as those of other classified wines.
“The quality from Bordeaux has been incredibly high—the wines have never been better,” notes Ralph Sands, Bordeaux specialist at K&L Wine Merchants, the three-store chain based in Redwood City, California. “There are very few underperformers in quality terms right now. The winemakers have been at the top of their game for most of the past decade.”
Consumers seem to be taking note. In 2017, U.S. imports of Bordeaux rose by 6% to 2.22 million 9-liter cases, according to Impact Databank, and that performance followed a 6% gain in 2016. Back in 2009, in the wake of the recession, imports were 42% lower, at just 1.29 million cases. The rebound is even more impressive in value terms—shipments to the U.S. in 2017 jumped 18% to €231.5 million ($263.9 million), whereas in 2010, Bordeaux shipments were worth a mere €99 million ($132 million), some 57% lower.
Two great vintages in 2015 and 2016 get some of the credit for this renaissance. But just as important is the rising recognition of quality in the lesser-priced petits châteaux that have displaced classified growths on many retail shelves. Bordeaux importer Michael Corso, founder and managing partner of Michael Corso Selections in Oak Park, Illinois, is having success with Château Tour de Gilet, a Bordeaux Supérieur retailing at $15 a 750-ml. in most stores. Corso strikes his own deals directly with the producer, which gives him better margins. “It’s remarkable that you can get good wines like Château Tour de Gilet at that price level,” Corso says. “It allows them to compete with domestic wines.”
At the higher end of the price spectrum, however, retailers are less than bullish on futures. Devastating spring frosts in April 2017 led to a 40% overall decline in production, though the damage wasn’t across the board. Some vineyards on the Right Bank lost 80%-90% of their grapes, while the Left Bank sustained little, if any, loss. Overall, the harvest was among the smallest in the past three decades.
Futures prices were lowered 10%-20% for the 2017 campaign, but retailers say the drop hasn’t been substantial enough to arouse interest. “The 2017 futures campaign is not a strong one,” says Jeff Zacharia, president of the two-store Zachys Wine & Liquor based in Scarsdale, New York. “At this point it looks like 2017 sales will be down 50% from 2016 levels, and 2016 was already down 10%-15% from 2015 totals. The prices on 2017 weren’t low enough to get people interested in the vintage.”
Still, there are some real values in Bordeaux futures these days. At Zachys, the 2016 Château Cap de Faugères is on offer as a future arrival at $17 a 750-ml. The 2017 Château Calon Ségur is priced at $90. The 2016 Château de Fonbel from Saint-Émilion, owned by the same family that owns Château Ausone, is priced at a mere $22. “There’s great value in Bordeaux between $15-$40,” Zacharia says. “We love those wines. It’s an exciting part of the business for us.”
Zacharia is also fighting larger trends in trying to sell high-end Bordeaux. Two decades ago, he recalls, Bordeaux accounted for more than half of Zachy’s wine sales. Today that share is less than 25%. Rising sales of wines from Burgundy and the Rhône are responsible for some of that decline, but society as a whole is changing. “The millennial generation isn’t looking at Bordeaux much right now—it’s not in fashion,” Zacharia says. “They view Bordeaux as something their parents drank. But they’re missing something, and Bordeaux will come back around again.”
Opting For Alternatives
At K&L, Sands says that young consumers are prone to compare a $100 bottle of Bordeaux against other categories. “They’d rather buy 15 different craft beers or a single bottle of Scotch that will be good for 15 drinks,” he says. While K&L’s Bordeaux business once represented nearly one-third of all wine sales, today that share has fallen to just 15%. “The passion for great wine and collecting has gone by the wayside with the younger generation,” Sands says. “They’re looking to buy something and drink it within 24 hours. Fewer people are waiting to hold Bordeaux.”
There is another problem for merchants: profits in the top-growth Bordeaux wines are narrowing. The 2017 Château Lafite Rothschild futures from K&L are selling for $600 but cost the company $510. That leaves its margin at little more than 15%, while the rest of the store’s wine offerings have a margin closer to 30%. “People assume that our margins on a $600 first growth are really good, but in fact the margins have gotten skinnier every year,” Sands says.
That reality is the primary reason that many retailers in the middle of the country—where Bordeaux is apt to be sold through the three-tier distribution system—have exited the business. Many store owners report that their margins on classified wines have slipped under ten points, and in some instances, to five points or less. “The internet pretty much destroyed my Bordeaux sales,” says Johnson Ho, owner of Pantheon Wine Shoppe in Northbrook, Illinois, whose last big investment in futures came in 2010. “There were notorious sellers stocking one bottle of a particular Bordeaux label and advertising it at $20 below their cost. It was suicide. Some of my customers went to online sellers and ended up getting bamboozled. At these prices and margins, who can afford to buy up futures and then wait two or three years for arrival?”
Ho is skeptical of fellow retailers’ switch to petits châteaux in order to stay in the Bordeaux game. “The aspiring wine drinker who’s moving up to Bordeaux wants to buy the biggest names,” he says. “Bordeaux, particularly the first growths, is a vanity business, with people boasting about how many 100-point wines they own. If they’re going to spend under $50, they might as well be buying reds from Spain and Italy where you get more bang for the buck.”
Jack Farrell, the chairman and CEO of the 12-store Haskell’s chain in Minneapolis, echoes many of Ho’s frustrations. In the late 1960s, 70% of Farrell’s wine sales came from Bordeaux. Today, it’s less than 14%. “Of course, 50 years ago there were perhaps 65 wineries in Napa, 35 in Sonoma, and none in Oregon,” Farrell notes. “Bordeaux has a lot more competition now from all over.”
And yet Bordeaux is still selling. “Bordeaux is more than just futures,” says Chris Adams, CEO of Sherry-Lehmann Inc. in New York, who admits that his allocations of classified wines are severely reduced from what they once were. “Our business selling out-of-stock Bordeaux is terrific. That’s the real story.” And while the 2017 futures may not be selling well now, Adams predicts the classified 2017s are likely to find decent interest from customers when they arrive in 2019.
Adams says his average Bordeaux sale runs above $50 a bottle. But his best seller is the Domaines de Barons Rothschild Réserve Spéciale Bordeaux Rouge ($22 a 750-ml.), a 50-50 Cabernet Sauvignon and Merlot blend currently offered in the 2012 vintage. Even the 2015 Mouton Cadet, with fresh packaging and a reinvigorated marketing program, is selling well at $13. “Bordeaux quality at price points like these has continued to go up and up,” Adams says. “The margins are all right for us. The velocity of sales is what really helps us.”
While some have steered clear of 2017, Geoff Pattison suggests that Bordeaux lovers in the U.S. have been spoiled by a long string of extraordinary vintages. As the Bordeaux specialist and senior director of merchandising at the two-store Wally’s Wine & Spirits in California, Pattison has traveled to Bordeaux every year since 2005 and considers the 2015 and 2016 vintages among the best in recent years. The 2017 wines, he says, are also of a high quality, with some of the best reaching the same level as the previous two years.
Many of the first growths for the 2017 vintage at Wally’s are priced at $500 or less. “That’s beyond the range of most consumers, but for people who collect these wines, that’s a pretty attractive number,” Pattison says, noting that the 2017 Château Mouton Rothschild ($485 a 750-ml.) was especially spectacular. He sees good value in Bordeaux priced under $100—the 2017 Château Les Carmes Haut-Brion at $77, for example, and the 2017 Château Pape Clément at $87. His bargain find is the 2015 Château Gigault Viva Cuvée at $20. “Bordeaux customers have become very price-conscious lately,” Pattison says. “They’ll hesitate to spend $150 on a fine Bordeaux but won’t bat an eye at spending $200 for a Napa Cabernet, or the same for a Super Tuscan.”
Barbara Hermann, wine director at the 40-store Binny’s Beverage Depot chain in Illinois, has tasted many “hollow and short” wines from the 2017 Bordeaux vintage. But she thinks the decline in quality is almost beside the point. “We had three excellent vintages in a row from 2014 to 2016, and by 2017 futures fatigue was setting in no matter what,” she says. She compares 2017 to 2013—a mixed vintage that Binny’s ultimately had to move at low prices.
Hermann has also noticed that astute Bordeaux buyers are rediscovering the value in second labels. The 2016 Château Brane-Cantenac from Margaux, for instance, is priced at $66 a bottle as a future at Binny’s. But the 2015 second label Baron de Brane—which scored 90 points in Wine Spectator—is already on the shelves at $27. “That price looks very good when you consider the entry level for a California Cabernet is increasingly at $40 or $50,” Hermann says. “Many people don’t see the moderate side of Bordeaux. Retailers have to do a better job in promoting these wines.”
Mark Maruszak, sommelier at Benny’s Chop House in Chicago, has assembled a list of 1,700 labels, which is topped by such rarities as the 1990 Château Lafite Rothschild in magnum for $7,083. He’s a bit cynical about such trophies; they often languish on his list of years. As such, he’d like to see some changes from the region. “Bordeaux labels aren’t designed for 25- and 30-year-old drinkers to understand,” Maruszak says. “And I wish Bordeaux would emphasize second labels and half-bottles as a means of attracting the interest of young people. I would like to have more Bordeaux priced under $100 here at our restaurant.”
Bordeaux may be listening. The 2016 Château Palmer is still available at Binny’s as a future for $300, but the house’s second wine, called Alter Ego de Palmer ($60 a 750-ml. for the 2014 vintage), is a perennial sell-out. Château Palmer CEO Thomas Duroux admits that marketing the label to the U.S. is a challenge. Major retailers like Binny’s, K&L, and Zachys all get direct access to the wine from either the château or négoçiants. Boutique specialty retailers who once carried Palmer are increasingly forced to hunt for the label from wholesalers state by state—if they can find it at all. “It’s hard for smaller retailers in America to get access to our wine at the same price,” Duroux says. “That’s something we have to figure out. We’re happy to be in the expert hands of the people at K&L and Zachys, but we want to reach out and broaden our distribution at the same time. We want to get in the hands of people who don’t yet know us so well.”