French Prices Up but Demand Heads South

If you think prices for French wines are excessive, you’re not alone. Even fine-wine collectors, people who don’t raise an eyebrow at a $100 price tag, agree.

According to an informal poll of major wine merchants in the Los Angeles area--considered to be the most important wine market in the United States--the weakness of the dollar against the franc, the number of excellent recent vintages and a lot of full wine cellars have combined to force down demand for expensive wines drastically.

“The market for expensive wines? There is no market, as far as I can see,” says Steve Wallace, owner of Wally’s on Westwood Boulevard, one of the Westside’s top wine merchants. “The people who usually buy these wines, the collectors--their cellars are full. There is only a small group of people I call ‘the players,’ and they have seen so many good vintages in the last decade they’re getting tired of the hype.”

He says savvy buyers find older wines at auctions at attractive prices. “You can find Second Growth Bordeaux for under $300 a case,” he says.

Larry Seiple at the Wine House in West Los Angeles says the big buyers are dying off. At a recent wine auction, he says, “I saw a number of the ‘big players’ in Los Angeles. They are not players anymore, not involved in the market except as casual sippers. Their cellars are full, and they are selling their wines at auction.” Newer buyers, he says, are more tentative in their purchases.

Futures for the highly praised 1989 Bordeaux are selling slower than in other past vintages, when the wines also were rated as being excellent, merchants say. (In a futures purchase, buyers agree to make a down payment for wine they will take possession of in a year or 18 months, when it is released. Usually, such wines are not tasted by the buyer before they are bought.)

“Without even tasting a wine, people will say: ‘I have to have that label,’ ” says Tom Burke, a Los Angeles attorney and major wine collector. “Isn’t that silly?

“People buy wines they think are going to appreciate in value instead of laying them down to drink. They say, ‘In 10 years this will be worth $200 a bottle more than I paid for it.’ Sure, and I remember too well the people who bought the ‘69s only to find out that the wines were terrible.”

Burke says futures prices are too high; often the same wine will be available at a lower price when it hits the shelves. His advice is: “Take money and put it in a CD (certificate of deposit) and if you want the wine in a decade, you can still find it. It’s amazing how many wines you can find on the secondary market. You can find high-quality Bordeaux from the 1970 vintage at a lower price than today’s new releases.”

“Futures these days are a poor purchase,” says Bob Golbahar of Bel Air Wine Merchant. “About 50% (of the sale of futures) is hype and 25% is price: People see the price of what some older vintages are selling for and they get excited.

“But I’d say that 30% or 40% of the people who are buying wine today started with the 1982 Bordeaux, which have gone up in price, and they think prices are going to continue to rise. And I think the first vintage that it won’t happen with is 1989.”

He says that if the franc, now trading at less than five to the dollar, should reach seven to the dollar, the price of French wine not yet shipped here would drop in price. But even if that doesn’t occur, he says, “I think you’ll see prices coming back”; some dealers in Bordeaux “are holding the ‘89s and they will start dumping them if they don’t sell them.”

Despite the acclaim 1989 Bordeaux red wines have received, some merchants believe the vintage may not be all it’s supposed to be.

“I’m definitely concerned about the (1989) vintage,” says Keith Perez of Northridge Hills Wine and Spirits. “I think some customers are going to taste the wines and wonder if they are worth this kind of money. The fact that people (from Bordeaux) have alluded to technical problems (with the wines) is a red flag. When they say the acidities are a little out of balance, well, that reminds me a little of 1982, and a lot of my customers are asking me to buy those wines back from them.”

In fact, merchants say, so many wine collectors’ cellars are full they are trying to turn them into cash.

“People always want the new thing,” says Golbahar. “They forget what they have in their cellars. Then, after they buy the new stuff, they start selling their old wines. We’re being offered a lot of ’85 Bordeaux. That’s why I see little market for ’88 Bordeaux, and we didn’t buy any futures of ‘89s; we don’t see any interest in them. And all the stores that did buy them are just sitting with them.”

Burke, who owns a home in France, says the typical wine buyer doesn’t drink all that is bought: “You like to buy wine, and you’re obsessed with buying it, so years later there’s some solace if it’s (worth) $100 a bottle more than you paid for it. But the auction houses are selling off cellars from people who are deceased, who amassed huge collections and who died with the corks still in. What a tragedy.”

Sharp says he has been offered “a lot of wine from private collectors, a lot more than before.” Other merchants are buying private cellars too.

Ed Masciana, wine buyer for Bristol Farms, sees no real slowdown in the sale of expensive wines, though he admits he’s working harder to maintain them.

“When business is down like this, a lot of wine shops don’t promote. But our dollar volume is up in the last month, and that’s because we’ve been more conscientious going after our loyal customers. We’ve done more advertising, sent out more flyers. And we’ve been selling a lot of Italian wines.”

Masciana says Bristol Farms doesn’t offer futures on wine. “There so much of that available. If you tie up your money a year before you get the wine, you’re entering into a competitive market where everybody is beating the daylights out of each other. Besides, we’re buying private cellars and selling 1982s and 1985s at less than the pre-offer prices. I have 1982 Mouton for $125 a bottle. I bought it from a collector. I remember buying that wine at $140 a bottle, wholesale, just a year ago.”

Seiple at Wine House and Dale Sharp at Red Carpet in Glendale have sold a lot of Bordeaux futures for 1989, but both said they had to beat drums to do so.

“We sold a lot of wine in May, June and July, when the futures first came out,” Sharp says. “It was based on all the hype--you know, ‘vintage of the century.’ ”

Sales of expensive Burgundy wines, including those of Domaine de la Romanee-Conti (DRC) are off as well, merchants say. There was so little response to the initial offering of 1988 DRC wines that the West Coast representative for DRC, Wilson-Daniels Ltd., held a summit meeting with top wine shops in Los Angeles to find out why. On a futures purchase, the DRC wines had a suggested retail price of nearly $4,000 for a mixed case of the various vineyard wines. (The suggested retail price for a mixed case of the 1986 and 1987 wines was $2,200 last year.)

Wallace says he wrote letters to two dozen of the top Burgundy buyers, offering them some of the finest red Burgundies in the world, including the DRC wines, at cost plus 10%, and had no response. Golbahar says he mailed fliers to 2,000 wine buyers offering high-end Burgundies at prices barely above cost and had about 10 responses. “I think they’ve priced them for the Japanese market,” Golbahar says.

Jack Daniels of Wilson-Daniels says sales of the DRC wines have been “good, not great. It’s been slower than in past years, but that’s a combination of things. We came out earlier with them this year, during the holidays, and then the wines are higher priced because it was an outstanding vintage, probably the best they ever made. Now, combine that with the weak dollar and our economy. . . .

“But overall, the entire wine business has softened quite a bit. Even our most popular items are slowing down.”

Sharp says some red wines--such as those of George Mugneret, Leroy, Jayer and Meo-Camuzet--are so limited, he had more orders than he had wine to sell. He adds, “White Burgundies are dead too, with the exception of three or four producers, like Ramonet, Leflaive and Sauzet. There is big price resistance because buyers remember when they were $20 to $40 a bottle, and now they are $60 to $200 a bottle.”

Moreover, merchants say the market for futures on high-end California wine appears flat too. “California futures is a bogus market,” says Seiple. “People are not as interested in it as they were a few years ago. It was all based on limited supply, but it hasn’t worked out that way.”

Perez at Northridge Hills adds: “I think people are being a lot more selective. A couple of years ago, a good wine selling for $125 would have sold. Now there’s resistance. People are trading down and saying, ‘Let’s look for the value.’ ”

He says this is a new phenomenon for Los Angeles. “(Wine buyers in) San Francisco and New York have a long history of buying fine Burgundy, and with them price was a major factor.” In Los Angeles, he says, it hasn’t been a major factor until now.