Pricing fine wine in New Zealand

Burgundy is far more desirable than Bordeaux now. Wikimedia

If you read wine industry news or are an avid collector of high-end wines (I’m talking about top Burgundy, Bordeaux, prestige Champagne and wines sold through La Place), you’ll have noticed several competing forces at play this decade.

The biggest and most noticeable shift, however, has been Burgundy’s meteoric rise in desirability and consequently, pricing.

The first is Bordeaux’s woes despite trying their darnedest to stir up demand. The en primeur campaigns have been generally lukewarm for the past few years. Champagne has also seen a significant drop in sales and interest this year at the recent March report, albeit largely across the NV price point. Those official statistics show stockholding increasing despite recent and frequent marketing messages of a Champagne shortage (something the region does every few years to drive hype and demand).

The biggest and most noticeable shift, however, has been Burgundy’s meteoric rise in desirability and consequently, pricing. Over the past eight years, the region’s top wines have become nearly unattainable to most drinkers as the list of NZD $1,000+ bottles continues to increase to now contains hundreds. Whereas in the past, Bordeaux’s strong price index was a result of the larger production of the region compared to the small production of top Burgundy, the situation has now reversed and Bordeaux’s ready availability has prevented it from skyrocketing.

Burgundy is far more desirable than Bordeaux now and at many auctions these wines fetch more feverish bidding and higher prices than Bordeaux First Growths. Their low production makes them scarce, and as the region continues to attract well-heeled collectors, the ‘second’ tier of producers have now moved in to take the place left behind by the ‘top’ tier producers moving into higher price-points.

As a whole, the quality producers have seen price increases across the board of 50-100% with the more sought-after wines increasing by 150-200% over the past 10 years. Specific producers have even seen increases of more than 400%! This is largely driven by the secondary market (e.g. just look at the wines of Roulot, Tremblay, Roumier, Charles Lachaux, Bizot, Comte Liger-Belair compared to their ex-winery prices).

Most estates view the behaviour of the secondary market as speculative and unsustainable with many adopting measures to limit speculative trading. In New Zealand for instance, every bottle of Domaine de la Romanée-Conti, Liger-Belair, Roumier and Rousseau I have purchased in the past few years has come with express instructions that they are for personal consumption. Some are also embedding RFID chips on the bottles to track ownership (and for authenticity purposes, presumably). NFT embedding has even been suggested as a possible solution.

However, the sentiment from the region and from commentators in the know, like Jasper Morris MW, is that this pricing is not sustainable and has to come down. There are signs of luxury pricing starting to weaken in other regions—Bordeaux is one, Napa is another—just not in Burgundy yet. According to Wine-Searcher, the Premiere Napa Valley wine auction saw a dramatic softening of prices this year, with the average bottle fetching 31% less than last year. These are generally high-priced Napa cabernet sauvignons which cost several hundred USD a bottle. It is usually seen as a barometer for the market’s appetite to spend. Purchasers of these multi-case lots tend to be clubs, retailers and restaurants rather than private collectors, and if the trade is not confident the wines will sell, they don’t bid.

Bell Hill is leading the charge for Burgundian varieties with their single-parcel wines.

This push and pull is playing out in the market for other wines too—the top examples from Spain, Italy and Germany are now settling into the NZD $1,000 a bottle mark, like their French counterparts. Australia and New Zealand have not yet entered this game, thankfully, although there are increasingly high-priced bottles being released. Value for money is scarce: a quick scan of the top 25 scoring wines on The Real Review for New Zealand (all were reviewed by Bob Campbell MW) show that there are only three wines which retail for less than NZD $100 for a 750ml bottle (there are a few sweet wines in half bottles for less than NZD $100), and the highest prices are currently for Bordeaux variety blends, which does not track with what’s happening in France (where pinot noir and chardonnay occupy the top spots).

Bell Hill is leading the charge for Burgundian varieties with their single-parcel wines, Limeworks Chardonnay and The Shelf Pinot Noir. Steve Smith MW of Pyramid Valley, CRU and Lowburn Ferry, has long believed that price leaders are needed and I wouldn’t be surprised to see him release some very high-priced wines in the near future.

At the same time, there are producers like Felton Road, Kusuda and Ata Rangi who have been cautious with their price increases but are seeing very healthy activity on the secondary market. And then there are Rippon, Prophet’s Rock, Herzog and Greystone who are not heavily traded but have a healthy ex-cellar door price for their top wines. New Zealand actually has a chequered history of some very aspirational-priced pinot noirs, some of which are no longer made (the Martinborough Vineyard Marie Zelie, Peregrine Pinnacle, Mountford The Rise, The Gradient and Crown Range Cellars) and some new entrants pricing themselves at the top, such as Cox’s Vineyard Gibbston Pinot Noir.

Good producers would be foolish not to take advantage of the pent-up interest left by those who have been priced out of the Burgundy market.

At the other end of the market, it almost seems like a different time. Falling demand and falling prices have resulted in a concerted vine pull and distillation scheme in France. At the height of the vine pull, Bordeaux was ripping out one vineyard a day (at the end of 2023). Australia is experiencing the same, in light of a wine surplus of 2 billion litres, which is unlikely to be resolved by the removal of tariffs by China alone. So, the top end is in high demand, driving up prices through scarcity, whereas bulk production wine is oversupplied, reducing prices to unsustainable levels.

Where does that leave those who live in the middle? In the short term, some bargains might be had while companies try to weather the current economic conditions, but it does not represent a trend as nothing unsustainable lasts long. The hope is that producers who are neither at the top nor the bottom can find a way to continue producing good wine, resist the pressures squeezing them from the supply chain and find a market willing to pay them a fair price for their hard work. The truth is likely that a few will fall to the wayside. If there is any justice in the world, those who make good wine will survive (but that is probably rather wishful thinking).

What is more likely to happen is the setting of new price standard for good pinot noir and chardonnay from New Zealand, Adelaide Hills, Victoria and Tasmania who are rising to fill the gap left by the exceptional price rises of Burgundy. Good producers would be foolish not to take advantage of the pent-up interest left by those who have been priced out of the Burgundy market. My fear is that we will get aspirational pricing without the accompanying improvement in quality. It remains to be seen if some exceptional wines emerge to fill this space, but if it is done well, this could be just the catalyst our industry needs to pursue greatness and propel our chardonnays and pinot noirs to the next level.

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