America’s Retailers Still Believe In Bordeaux

Off-premise sales have changed as France’s most prominent wine region slowly digs out from the pricing bubble hole.

Many retailers cite Château Pape-Clément (pictured) as a Bordeaux label that's found success because of its reasonable pricing.
Many retailers cite Château Pape-Clément (pictured) as a Bordeaux label that's found success because of its reasonable pricing.

The global wine trade descended upon Bordeaux in early spring to taste barrel samples of the 2015 vintage, and for yet another year, many key U.S. players were absent. It’s a reflection of how far Bordeaux has fallen in the United States, where the category’s image has been hammered by years of soaring prices, lackluster vintages and a generational shift in consumer interest. During the 1980s and ’90s, Bordeaux represented the crème de la crème at U.S. retail shops and restaurants. Today, retailers often find better value in Cabernets from California, Australia, Chile and elsewhere. French fine dining establishments with starched white tablecloths and bone china have little appeal to millennials, who dine out on sushi, tapas and other casual cuisines.

Bordeaux shipments to the U.S. market by value peaked in 2003, but the real troubles began when global pricing overheated on the 2009 and 2010 vintages, fueled by frenzied buying in China. For the U.S. market, the timing couldn’t have been worse, as the bubble coincided with a recession and its hangover—just as the millennial generation was coming of age. “Millennials got interested in wine at precisely the time when Bordeaux became unaffordable, and so they gravitated toward new and exciting wines they could actually buy,” notes Rick Anderson, owner of France 44 Wines & Spirits in Minneapolis.

Despite those challenges, Bordeaux has been recovering far better than might be expected. While the classified growths remain out of reach for most consumers, alternatives from the Bordeaux Supérieur and Côtes de Bordeaux appellations, as well as the petits châteaux, are providing growth opportunities. Statistics aren’t available for the petits châteaux, but shipments of Bordeaux Supérieur are up 78 percent from 2010 to 2015, when value reached 15.5 million euros ($17.4 million). Côtes de Bordeaux shipments rose by 81 percent to 5.8 million euros ($6.5 million) in the same period. And total Bordeaux shipments to the United States reached 182 euros ($225 million) last year—up 108 percent from 2010, according to Impact Databank.

While value is still far below the 2003 peak of 279 million euros ($313 million), Bordeaux clearly has shown dramatic improvement. Even the en primeur market, which was clobbered by the pricing bubble of the 2009 and 2010 vintages, is starting to show signs of life. Chris Adams, CEO of retailer Sherry-Lehmann in New York City, says customers are expressing greater interest in the 2015 vintage than in any en primeur campaign since 2010, when prices skyrocketed to as high as $1,000 a bottle. “The first growths in the 2015 vintage will sell without a problem,” he predicts, adding that rival wine regions still rarely garner the same prestige as Bordeaux.

At Wally’s Wine & Spirits in Los Angeles, Bordeaux buyer Geoff Pattison also forecasts that 2015 will be his best vintage since 2010, noting that the dollar is now stronger against the euro. Even at the upscale Wally’s, customers are moving from the top classified growths to choices like the 2012 Château Pape Clément ($99 a 750-ml. bottle) and the 2012 Château Smith-Haut-Lafitte ($85 a 750-ml. bottle). Futures on the 2014 Smith-Haut-Lafitte, which won’t arrive for another year, were being offered for $66. “Wine Spectator gave it an estimated rating of between 93 and 96 points  in last year’s barrel tastings,” Pattison notes. “That will be hard to beat in terms of value.” In its futures pricing for the 2015 vintage, Smith-Haut-Lafitte did spike by 32 percent to about $83 at retail, but that’s still quite reasonable compared with much of Bordeaux’s top end.

Despite the pricing inflation among many top growths, certain châteaux continue to thrive, such as Smith-Haut-Lafitte (above).
Despite the pricing inflation among many top growths, certain châteaux continue to thrive, such as Smith-Haut-Lafitte (above). (Photo by Sara Matthews)

The Millennial Gap

New York City retailer Morrell & Co. focuses on top-end Bordeaux labels, led by the Left Bank classified growths, and offers only a limited selection of Bordeaux under $30. Nonetheless, the store is experiencing a rebound. “Bordeaux has popped back for us over the past couple of years, and it’s now a consistent, steady business,” says Morrell president and CEO Jeremy Noye, adding that he sees only a modicum of interest from millennials and recognizes the challenges. “Younger consumers are starting to reconsider Bordeaux, but the idea of buying a case of wine and laying it down for years isn’t prevalent among this demographic. They want wines for the present moment, and when they do buy for the long term, it’s in smaller increments.”

At BevMo, which operates 158 stores in California, Arizona and Washington, sales of Bordeaux are performing well. “We’ve seen a strong rebound,” says BevMo senior vice president of wine Bob Paulinski. “Growth is robust across the board, but the most significant progress is in the $20-to-$40 range.” However, he also observes little enthusiasm from millennials. “Some interesting packaging concepts are targeting younger consumers, and that’s a certainly step in the right direction,” Paulinski says. “But our Bordeaux audience is still mainly more experienced, savvy customers.”

At Kahn’s Fine Wines & Spirits in Indianapolis, owner Jim Arnold is dealing with the new realities of selling Bordeaux. In the 1990s, the category represented 20 percent of his wine sales, while today that share is about 5 percent. But the decline hasn’t been across the board. “While my business in classified Bordeaux is a shadow of what it once was, I’m doing very well with the petits châteaux,” he says. “I’m pushing millennials and Generation Xers in that direction.” Kahn’s stocks a wide variety of Bordeaux at moderate price points, including the 2012 Château La Confession from Saint-Émilion ($37 a 750-ml. bottle), the 2012 Domaine de Chevalier from Pessac-Léognan ($48) and the 2012 Château Monbousquet from Saint-Émilion ($48).

Twenty years ago, Club Liquor in Menasha, Wisconsin, had a cellar filled with classified Bordeaux at reasonable prices. Today that collection is a distant memory, but owner Doris Szymanski hasn’t backed off Bordeaux entirely. Her offerings include the 2008 Château Duhart-Milon ($153 a 750-ml. bottle) and the 2010 Baron Philippe de Rothschild Château d’Armailhac ($66). “When Bordeaux’s prices skyrocketed, I pulled back,” Szymanski says. “But pricing has eased in recent years, and I’ve been jumping back into the more affordable châteaux.”

Everyday Bordeaux wines have been driving substantial growth at the 33-unit Binny’s Beverage Depot in the Chicago market. “I’m buying thousands of cases of Bordeaux that retail from $9.99 to $10.99 a 750-ml. bottle,” says Binny’s fine wine buyer Barbara Hermann. “It’s a sleeper business, but we see high demand for everyday-drinking Bordeaux. We also have a lot of excellent Bordeaux at $30 to $50. Even California sometimes has a hard time comparing to those prices.” Hermann says the best-selling Bordeaux at Binny’s is Château Pape Clément ($79 a 750-ml. bottle). “Owner Bernard Magrez has made a fantastic wine and sells it at a reasonable price,” she says.

At the 12-unit Haskell’s chain in Minneapolis, chairman and CEO John Farrell Jr. has a long history with Bordeaux. When he owned just a single store in the 1970s, roughly 85 percent of wine sales were French, and Bordeaux comprised over 65 percent of that total. Now, Bordeaux has sunk to 12 percent of Haskell’s wine sales, and Farrell no longer offers a futures program. He’s been steering customers toward more affordable labels at $30 to $60 a 750-ml. bottle. “The petits châteaux are trending up for us,” Farrell says, adding that the top Bordeaux estates’ second wines also are doing well. For example, Haskell’s customers have been moving from Château Lagrange (around $60 for the 2011 vintage) to the second label Les Fiefs de Lagrange ($40 for the 2011 vintage). “In addition to being more reasonably priced, the second wines are lighter and drinkable now, making them perfect for millennials,” Farrell says. “Nobody under 40 today is going to wait 12 years for a bottle of great Bordeaux to mature.”

Washington, D.C., retailer Schneider’s of Capitol Hill doesn’t advertise Bordeaux futures anymore, though the store does procure orders for loyal customers upon request, says president Josh Genderson. Among its more successful Bordeaux labels, Schneider’s sold more than 100 cases of the 2006 Clos Les Lunelles ($40 a 750-ml. bottle) last year. With a rich blend that’s 80-percent Merlot, the wine is ready to drink now. “A good Bordeaux selling at a fair price will still move,” Genderson says.

Bordeaux was once the bread and butter of fine wine retailers like  Johnson Ho of Pantheon Wine Shoppe (pictured). The category remains important, but focus has shifted from en primeur sales to vintages that are ready to drink.
Bordeaux was once the bread and butter of fine wine retailers like Johnson Ho of Pantheon Wine Shoppe (pictured). The category remains important, but focus has shifted from en primeur sales to vintages that are ready to drink. (Photo by Anthony Tahlier)

Pricing Worries

Bordeaux’s 2015 vintage is the most highly touted since the twin jewels of 2009 and 2010. At Total Wine & More, vice president of wine buying Melissa Devore is heartened by the vintage’s quality, but remains cautious on how the wines’ value will evolve. “We were excited by the wines at the barrel tastings in Bordeaux in March and April,” she says. “But the price-to-quality ratio will determine their success. The quality is there—the question is whether the wines will price themselves out of the market. Overall, I have high hopes that Bordeaux will use this vintage as an opportunity to correct pricing and offer some real values for the consumer.”

Bordeaux’s en primeur market is still dealing with the fallout from the 2009 and 2010 vintages and the excess inventory problems that rippled through subsequent years. Johnson Ho, owner of Pantheon Wine Shoppe in the Chicago suburb of Northbrook, Illinois, invested $80,000 in Bordeaux futures in 2012, only to see demand collapse. “I sold less than 10 percent of that vintage,” says Ho, adding that he quit the futures market in 2013.

Today, many Bordeaux wines on store shelves are selling at far below their original release prices. For that reason, Paulinski of BevMo is content to tap the market’s current inventory and won’t be buying futures. “Over the last 12 months, we’ve found a pretty good supply of ’09s and ’10s,” he says. “Those vintages were great, and we now have ample quantities.”

Labels like Domaine de Chevalier (pictured) represent value in Bordeaux, a category that's important to younger consumers.
Labels like Domaine de Chevalier (pictured) represent value in Bordeaux, a category that's important to younger consumers.

Still, retailers participating in this year’s en primeur campaign are reasonably sanguine about prospects for success. “I worried that pricing might hamper our ability to sell these wines, but I’ve been pleasantly surprised,” says Noye of Morrell. “I’m not one to get hung up on comparisons with en primeur pricing from previous years. And while the ’15 is being touted as more of a Right Bank vintage, our customers are gravitating toward the Left Bank wines. We had plenty of offerings from Pomerol and Saint-Émilion, but one of the strongest sellers has been Pape Clément from Pessac-Léognan.”

Pricing plays a significant role in Bordeaux sales at the three-unit K&L Wine Merchants in California. “The reasonably priced wines are selling,” says vice president and sales director Clyde Beffa. “Château Malescot Saint-Exupéry rose by about 12 percent in this year’s futures campaign. We’re selling it for a very good price—$49.99 a 750-ml. bottle—and it had great scores.” Like other retailers, Beffa is also enthusiastic about Pape Clément, whose 2015 futures campaign opened with a 19-percent rise. “Pape Clément came out early in the campaign, and we’ve sold a lot of it,” he says.

Not everyone is persuaded that this year’s futures pricing is reasonable. “It started out as 10 percent to 15 percent over 2014 prices, but then we began seeing increases of over 25 percent,” says Hermann of Binny’s. “I wish prices were lower.” Pattison of Wally’s agrees. “I’d prefer the increases to be closer to 10 percent to 15 percent,” he says. “Then we’d see even more interest from consumers.”

But even if this year’s en primeur campaign doesn’t inspire wild enthusiasm, it certainly has a chance to ease Bordeaux back into pricing normalcy. Château Pontet-Canet announced its futures price in mid-May, releasing its first tranche at $85 ex-négoce (the price wine merchants pay to négoçiants). That number represented only a modest increase over 2014’s first tranche and put the wine’s retail price at around $100 a 750-ml. bottle, according to Wine Spectator—a dramatic drop from today’s $275 retail price on the 2010 Château Pontet-Canet. Elsewhere, Clos du Marquis released its price at 36 euros ($40), equaling about $50 at retail—far lower than the current $70 for the 2010 vintage. Many prominent Left Bank classified estates announced their pricing on June 1st, and most increases were in the range of 20 percent to 30 percent.

But the ante was raised significantly on June 13th, when Château Margaux announced a release price of 384 euros ($433), up 60 percent over 2014, according to Wine Spectator. That should translate into an initial U.S. retail offering of nearly $550 a 750-ml. bottle, up 70 percent over 2014. Château Pichon Lalande followed with a release price of 96 euros ($108) on the same day, a 48-percent increase. And on June 15th, Château Haut-Brion released at 385 euros ($434), up 60 percent from 2014. Thus it appears that for at least some top growths, retailer worries remain well-founded.

John Farrell of Minneapolis-based Haskell’s has watched Bordeaux fluctuate. These days, he recommends petits châteaux to customers.
John Farrell of Minneapolis-based Haskell’s has watched Bordeaux fluctuate. These days, he recommends petits châteaux to customers.

Market Realities

As the trade looks beyond the 2015 vintage and toward the long-term future, some worry that the U.S. wine market’s growth and consolidation are squeezing Bordeaux’s ability to keep pace. Selling classified growths through the négoçiant system results in a more splintered distribution approach that no longer fits with the monolithic nature of the three-tier system, they argue. “Bordeaux doesn’t have national importers building brands in the United States,” says Hermann of Binny’s. “That’s partly why it’s faded from the attention of many customers. There’s no real network out there promoting these wines.”

Anderson of France 44 argues that Bordeaux’s exporters must reacquaint themselves with the fundamentals of selling wine in the U.S. market. “Too many members of the Bordeaux trade think it just takes some phone calls and a visit to meet with a few retailers, but they don’t understand how the supply channels work,” he says. “They don’t really know how to deal with the largest wine market in the world—one that’s admittedly very complicated.”

K&L’s Beffa sees the market in similar terms. “There are 10 or 15 big Bordeaux players like us who sell a lot of Bordeaux, but we buy directly from Europe,” Beffa notes. “There aren’t a lot of restaurants that feature Bordeaux, outside of high-end venues where it’s very expensive. And master sommeliers often don’t want to recommend Bordeaux because they’re seeking out new and different wines.” But Hermann of Binny’s notes that Bordeaux has been trying to redouble its efforts with the trade. “More château owners are making greater efforts to visit the United States to get their message out,” she says. “And some négoçiants have set up wholesale operations in New York to sell existing stocks and get back into the restaurants.”

Meanwhile, competitors from California and from other wine-producing countries—as well as various regions in France—continue to grow their distribution and hone their marketing savvy. Morrell’s Noye observes that the U.S. wine landscape is far different than it was in Bordeaux’s glory days of the ’80s and ’90s, particularly as it relates to younger consumers. “The supply of top-quality wine at affordable price points is at an all-time high in the United States,” he says. “That’s been a factor in putting Bordeaux somewhat out of favor with younger drinkers.”

While Bordeaux has endured some rough years, its star power is unlikely to remain diminished forever. Whatever the future holds, retailers will continue educating consumers about the region’s diversity—a strategy that’s already paying dividends. “Bordeaux has so many different estates to choose from, covering a full range of price points,” says BevMo’s Paulinski. “Certainly the classified growths represent an iconic pinnacle, but there’s a lot of excellent Bordeaux in the $20-to-$40 range.”

Additional reporting by Carol Ward