Greg Sherwood MW: Fine wine needs a price reset but will it ever happen?

“The etiquette bible Debrett’s says we should do it. The late philosopher Roger Scruton called it “one of the great British institutions”. And we’ve all tutted at friends who have slyly ducked out of this sacred national ritual. I am not talking about queuing, obsessing about the weather or standing up for the national anthem. I’m talking about getting a round in at the pub – and it’s a British tradition that’s under threat because of soaring beer prices.”

This was the slightly obfuscated introduction to a very interesting piece in The Telegraph last week by journalist James Hall, as he unpacked the rising financial pressures being placed on younger people who can no longer afford to buy a round of drinks at the pub, let alone leave home and buy a property in the UK. In the City of London, where a pint of beer now easily costs £8 (R200) each, a night out with your mates is becoming a rather expensive affair.

In recent research, it has been laid bare that the average spend per person per pub visit has risen by an eye-watering 55% in just the last two years. As a result, regular pub-goers only visit a pub just 1.2 times a week, and 20% of those never or rarely drink alcohol, a figure predicted to rise as Britons become more health conscious. So, no surprises then that an average of 34 pubs are closing every month in the UK.

I couldn’t help but think of this article – with its litany of facts and figures about financially squeezed younger generations – while scrolling through yet another wave of social media posts urging the global wine trade to connect with drinkers aged 18 to 24. This cohort is, of course, the future of the industry. And if you happened to read my piece from a fortnight ago on “The Great Wealth Transfer and the coming fine wine market reckoning”, you’ll know that many of these young consumers – or at least their parents – may be in line for a significant financial windfall in the years ahead.

Having the financial means is one thing, but having a connection and an ingrained cultured inclination to buy a certain region’s fine wines is quite another. With the pageantry of Bordeaux En-primeur 2024 about to kick off in earnest next week, the annual debate around Bordeaux En-primeur and its sustainability in the future has raised its delirious head yet again, but this time, with the belligerence of the Bordelais Chateaux owners somewhat overshadowed by slightly more complicated global economic circumstances than previous, not to mention President Trump’s 20% tariffs that will be applied to all European wine exports to the USA (Italy and France form circa 27% of all EU wine exported to the USA).

The general discussions around how to engage with Gen Xers, Millennials and Gen Zs in a way that makes these groups re-engage with Bordeaux wines and other fine wine regions as a whole, are endless – sometimes more intelligently explained by some knowledgeable individuals like Matthew Deller MW, the Chief Executive Officer for Wirra Wirra and Ashton Hills wineries in McLaren Vale in Australia (do follow him for wine insights if you are on Linkedin).

Matt and many others argue that the challenges of selling wine nowadays being encountered by most premium wine regions as well as Bordeaux in particular, centre around the lack of correct messaging and engagement with a new generation of drinkers. A lack of connection and tailored marketing appeal etc. While I don’t necessarily disagree with any of their assertions, I can’t help feeling that all discussions somehow dodge the fundamental issue of the pricing of fine wine in today’s market.

I for one, look upon the fine wine market in much more simple terms, perhaps because I have dealt with so many consumers over the past 25 years of my career, or perhaps because I sense the financial desperation of the younger generations all the more acutely. Either way, I maintain that many of the major classical regions suffering declining popularity and sales of their wines is in large part down to unaffordability by the next generation stepping into the fine wine market.

Both I and my longtime friend Dr Jamie Goode—whom I’ve known for nearly 30 years—often find ourselves indulging in what might be slightly annoying reminiscences for others about wine buying in a bygone era. Back in the late 1980s and early 1990s, you could stroll into an Oddbins shop in the UK and pick up a bottle of Penfolds Grange, Domaine Jamet Côte-Rôtie, or even a first-growth Bordeaux for just £30, £40, or maybe £50. Even allowing for the devaluation of the British pound and the greater buying power of money back then, these were still remarkably affordable luxuries for anyone with a serious passion for wine.

These same wines all reach, in today’s fine wine market, well into the £100s if not £1000s per bottle, making their accessibility highly restricted. So, you certainly don’t need to be a rocket scientist to realise that many of these wines are now out of the reach of many budding enthusiasts. The next obvious question would be: “What has replaced these wines in the affordability scale” in relative terms? Perhaps Old Vine South African fine wines, Argentinian high-altitude Malbecs, resurgent Australian micro-wineries, or even top-end Chilean wines.

But with Bordeaux, Burgundy and the Rhône classics forming such an important integral part of the fabric of the global fine wine market, nothing has or, I believe, ever could replace the standing of these in the world of fine wine consumption. And so finally, we return to my original assertion that their simple unaffordability in our modern ‘cost of living crisis’ modern world is the root of their ultimate decline.

As I have pointed out many times before, my assertion that Bordeaux’s Chateaux have used Bordeaux En-Primeur for the last decade as a marketing / promotional exercise with pricing and sales being basically irrelevant. They simply relied on buyers, who turned their noses up to ever rising prices, instead going back into the market to buy up physical back vintage stocks, all of which once purchased, continued to reduce the markets overall Bordeaux inventory. A win-win for everyone.

However, with economic headwinds buffeting global fine wine markets AND a generational shift steering new consumers away from Bordeaux, even back vintages are no longer selling quickly enough to make room for the arrival of another year’s allocations. We all know the En-Primeur system is broken, but the deeper issue is that far too many consumers have already fallen, or are in the process of falling, out of love with wines – simply because they’ve become prohibitively expensive.

A massive price correction is required to rescue the region, rescue the smaller chateaux caught in the churn, and make the wines accessible once again to a new generation of drinkers. Othwerwise, we will simply have to wait for the first negociant to fail and the dominoes to start falling… which no one wants! Could 2024 En-primeur be the perfect opportunity for a reset, a little bit like with the 2008 EP vintage in 2009 after the Lehmans crash?

The Liv-ex Fine Wine Exchange suggests a Chateau Lafite-Rothschild 2024 released at €288 ex-negociant would offer value after a merchant margin of 15% was added on top. I would argue that even this reduction would not be sufficient to generate genuine market demand. We need a proper generational price reset for Bordeaux’s top chateaux brands as the whole market is reliant on the ‘trickle down demand’ that is created initially by the top 50 to 100 Cru Classe chateaux.

Sadly, from what I’ve heard from Bordeaux producers, no one is expecting anything more than perhaps a 15% to 30% price decrease on the 2023 prices, which in reality would still leave most wine releases appearing significantly expensive in the current economy. But let’s wait and see how this EP 2024 plays out. It’s going to be fascinating for all premium wine producers worldwide.

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• Greg Sherwood was born in Pretoria, South Africa, and as the son of a career diplomat, spent his first 21 years traveling the globe with his parents. With a Business Management and Marketing degree from Webster University, St. Louis, Missouri, USA, Sherwood began his working career as a commodity trader. In 2000, he decided to make more of a long-held interest in wine taking a position at Handford Wines in South Kensington, London, working his way up to the position of Senior Wine Buyer over 22 years. Sherwood currently consults to a number of top fine wine merchants in London while always keeping one eye firmly on the South African wine industry. He qualified as the 303rd Master of Wine in 2007.