AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

BENJAMIN LEWIN

What Price Bordeaux?
Vendange Press, Dover 2009, 292 pp
ISBN 978-1-934259-20-7
Hardcover, $34.95

Reviewer: Lawrence R. Coia

Benjamin Lewin is a scientist who is the founding editor of Cell, a leading biology journal, as well as the author of several books on science. He also is a Master of Wine, a title granted to less than 300 worldwide by the Institute of Masters of Wine in London. His skills in both areas enabled him to provide an in-depth investigation and analysis of the topic of the pricing of Bordeaux wines.

My interest in this book stems from my background as a scientist and a grape grower in the Outer Coastal Plain AVA in the Mid-Atlantic region of the United States.

As we learn from Lewin, much of the wine produced in Bordeaux is relatively mediocre and inexpensive, yet Bordeaux wine at its best is rarely equaled and is one of the most coveted luxury beverage items. How can wine from Bordeaux range in price from under $5 a bottle to over $1000? While What Price Bordeaux? by Benjamin Lewin is not an economics text, it does illuminate how the Bordeaux wine market functions and how such price differences occur. It is particularly focused on the high end of the market where the current price is still related to a classification system that was constructed in 1855. To give us unprecedented insight into the pricing of Bordeaux wines, Lewin relentlessly pursued the facts from records and archives and spoke with countless chateau proprietors, negociants and others inside the wine trade. He has assembled and presented this information quantitatively in this excellent book which includes 117 figures comprised of pie charts, bar and line graphs, rankings, maps and other illustrations.

From a grape growing viewpoint, Bordeaux is a “cloudy climate” region like our MidAtlantic as opposed to the “sunny climate” regions of California or Australia for example. While cloudy climate regions generally produce less powerful and less fruity wines than the sunny climes, the wines often are of greater elegance and finesse. Terroir has been the basis by which the French approach and appreciate wine. Elements of the ecosystem known as terroir include the climate, soil, grape varieties grown and the technology that man uses to grow and produce the wines of a given area. While there is no ideal terroir for all grapes, one can define goals for growing grapes and making wine to produce wine of the highest quality. That is one of the functions of an appellation system.

Lewin makes several important points about wine pricing in Bordeaux as it has evolved over time in relation to the fundamental concepts of terroir and the appellation and classification systems that help define the market.

First, some of the elements of terroir in Bordeaux have changed dramatically over the past several centuries. One of the most important man-made changes has been the draining of the marais (marsh areas) of the Medoc by the Dutch beginning in the 17th century. Good drainage is one of the most important aspects of soil in the production of high quality wine, especially in a cloudy climate region like Bordeaux. Gravel mounds, consisting of topsoil on sand on top of a gravel bed with underlying layers of clay and sand, and “deep” soils where there is no restrictive layer to limit root growth, are some of the good grape growing soil characteristics one can find in the better growing regions of Bordeaux as well as our Outer Coastal Plain AVA.

The importance of the weather during the growing season gives rise to the use of the vintage year on the label. Weather and soil drainage contribute much more to wine quality than other aspects of the soil nutrition of the vine. Yet, as Lewin points out, due to the unpredictability of the weather, crisis is the rule rather than the exception in the Bordeaux region. In 1956 winter cold temperatures killed many of the vines necessitating replanting of vines that should have a life expectancy of over 50 years. Bad weather increases vineyard costs and may decrease the quality and the price of the wine in a poor vintage. Recouping the loss in a poor year requires especially high prices during good years. While it is unclear that the frequency of “great” growing seasons will change, the climate in Bordeaux is warming and there is less rainfall at harvest, both of which can contribute to better grape ripening and lower likelihood of rot.

The grape varieties grown in Bordeaux have changed from a preponderance of white grapes to over 90% red. The red grapes grown include Cabernet Sauvignon, Cabernet Franc, Merlot, Petit Verdot, Carmènere and Malbec. While Carmènere and Malbec are rarely grown and Cabernet Franc plantings have declined, the proportion of Merlot grown has seen a steady rise. The reasons for this are manifold and include the earlier drinkability of Merlot-dominated red wines due to lower amounts of tannins and more supple tannins than Cabernet Sauvignon and the increase in sugar content at harvest which yields higher alcohol wines. Most Bordeaux reds are a blend of two or more of these varieties. This has the advantage of adding sophistication, complexity and roundness which a wine made from a single variety may lack. The disadvantage is that the consumer may not be familiar with the blend of a chateau. It was as recently as 2005 that the INAO allowed the mention of the grape varieties on the label, something that Americans are quite familiar with and look for in choosing a wine.

According to Lewin, grape growing and winemaking techniques have benefited greatly by scientific advances over more than a century. Diseases such as powdery mildew, phylloxera and downy mildew invaded French wine growing regions in the 19th century and eventually were brought under control in the century’s latter half. Pasteur’s elucidation of the role of yeast in the process of fermentation put winemaking on a scientific basis. Lewin points out some of the 20th century contributions which the great French enologist Emil Peynaud made to our understanding of the production of high quality wine including the importance of malolactic fermentation and the need for barrel replacement. Another aspect of wine culture which is mentioned but perhaps is underemphasized, is the importance of wine in the lives’ of so many of the Bordelais since grape growing was established in Bordeaux in Roman times. Bordeaux is the largest grape growing area in France. There are currently 10,000 producers and 13,000 grape growers with 310,000 acres under cultivation in Bordeaux along with some of the best institutions for the study of viticulture and enology. Its history and vast size make the wine growing culture associated with this region second to none in the world in wine knowledge and experience.

Lewin excels in his description of the wine market system in Bordeaux. There are 3 billion Euros in sales of Bordeaux wine annually, making Bordeaux second in sales in France only to Champagne. 70% of those sales take place in the system of wine professionals known as the Place de Bordeaux. This system is comprised of three groups whose roles and relative importance have changed over time. The two main groups are the proprietors of the chateaux and the negociants. The negociants are wine brokers who may serve as the distributors in France and importers to foreign countries. The third group is the courtiers who serve as intermediaries. The system is set up to smooth out price fluctuations in the market such as those that occur between poor and good vintages. Yet the system does not prevent the wine lake of nearly 20% of the wine which cannot be sold and often winds up at the distillery, or the huge gap in prices of the lower versus upper end wines. Comparatively little is done in the promotion or advertizing of wine and relationships between proprietors and negociants are rarely cordial and often adversarial.

Lewin devotes a large amount of material to a critical examination of the 1855 classification in which a five-group hierarchy was established for the best wines of the Medoc based on price. He points out the major differences in the wines and winegrowing at the time of the classification compared to now and brings into focus the issues related to current pricing. Based on the average prices in the Medoc over the past decade, only one-third of classed growths would be in the same group today as in 1855. It is clear from his arguments that there are so many factors that have changed that this classification is outdated. While this is not a new concept, it has never been as well supported.

What role do the critics play in the pricing of Bordeaux wines? The topic is examined here, at least for the high end wines, by a quantitative look at critic’s scores. The low correlation (only 40% to 60%) between critic’s ratings and the release price that Lewin finds is disconcerting. In this consumer driven industry, information about wine is often through the wine critic’s interpretation or the reputation of the chateaux rather than by the consumer actually tasting the wine. Lewin shows that a more important factor in the release price of the wine is the price of the previous vintage. Since this question has been well examined by economists and others, some references to their work would have greatly improved the presentation of this topic.

Lewin assails the current system of selling future wine production known as en primeur. In this system wine is sold in the spring of the year following the harvest. The wine will not be bottled and released for nearly 2 years or more after being sold, so the quality and ultimate demand for the wine is unknown. The price of the wine that is sold is based on barrel tasting, market hype and the reputation of the chateau. While Lewin gives excellent arguments and facts regarding the folly of what he terms as the “en primeur game “ it is surprising that he omits recent important economic analyses of the process. Such analyses support his position in that they show the lack of correlation of the en primeur price and the market price and further demonstrate that the market price is better correlated to the growing season of the vintage.

This book is an excellent addition to a wine library as it provides the consumer with an important foundation of information regarding the history, function and constraints of the wine market in Bordeaux. It is particularly informative regarding the pricing of high end wines and describes (albeit without economic rigor) market efficiencies in producing and selling these benchmark wines. It examines the changes in Bordeaux grape and wine production that have occurred which should inform the consumer that the use of the 1855 classification in determining wine price is fraught with problems. The book has a section entitled Wine as an Ultimate Luxury Item, which was relatively well written but also was a lost opportunity to present important economic publications addressing this subject. It would have been better to have included this topic in a chapter on wine investment that addressed such issues as investing in wine for portfolio diversification and the real return from collecting wine.

It is surprising that the author omits much of the wine-relevant economic literature. Furthermore, despite his presentation of a good deal of information on supply and demand issues and changes brought about by competition from sunny climate regions, he fails to mention the production of wines of similar style and elegance from cloudy climate regions which likely will be a future source of competition that could alter the supply demand relation.

Lawrence R. Coia
Outer Coastal Plain Vineyard Association

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