Page last updated at 08:25 GMT, Monday, 17 November 2008

Wine prices go into the red

By Will Smale
Business reporter, BBC News

Red wine being poured
Even the richest seem to spending less on wine as the downturn bites

It is enough to make the super rich cough into their carefully cellared claret - prices of some of the world's most revered wines are falling sharply.

The latest indication that the global economic slowdown is hitting the spending power of even the most wealthy, certain fine wine prices have declined by a quarter since the summer.

Yet before some of us think of sniffing out a potential bargain, the cost can remain hefty. And by hefty, think the price of a brand new small car.

Picking out one wine that is indicative of the wider picture at the top of the market, UK fine wine merchant Berry Brothers and Rudd (BBR) told the BBC that the price of the 2005 vintage of Bordeaux's famous Chateau Lafite Rothschild has dropped 25% since the summer.

A case of 12 that would have cost you 10,000 ($15,720) in July - yes that really is 833 per standard-sized bottle - now retails for 7,500, a fall of 2,500.

And with Lafite's decline in value broadly mirrored by the 2005 vintages of France's other most celebrated red wines, there are rather a few people currently sitting on a loss in their cellar.

Chinese slowdown

"Whether we have now seen prices bottom out, no-one knows," says BBR's fine wines director, Simon Staples.

Footfall at Aldi has risen by 30% in the past three months, with each store on average seeing 3,000 new shoppers per month
Aldi spokeswoman

"The demand [for the very best wines] has simply fallen back from the summer as the global economic problems have grown.

"I think that most of our customers at that level can still afford to buy [the most expensive wines], and instead it is just that due to the global problems they are currently too preoccupied with looking after their business or financial investments."

In recent years one major factor behind the surging rise in the price of the world's most celebrated wines - typically reds from France's Bordeaux and Burgundy regions - has been the growth in thirsty Chinese millionaires.

Yet BBR, which has shops in Shanghai, Hong Kong and Macau, says the fall back in prices - and therefore demand - appears to be worldwide.

'Stronger value offering'

This decline in the price of the world's most expensive wines is also being mirrored back in the real world, in the supermarkets where most of us pick up some considerably cheaper bottles when we do the weekly shop.

Consumers are still drinking wine, only paying less for it

A recent survey for the UK's Wine & Spirit Trade Association found that there had been a marked fall in sales of 5 to 6 wines since the summer, together with a corresponding rise in sales of sub 5 bottles.

And as a result, supermarkets have responded by cutting prices, and increasing their range of cheaper wines.

"The market has changed rapidly over the past 12 months, and we have responded quickly and effectively to these conditions to support our customers' needs," said Tesco wine category manager Andrew Carpenter.

"Whilst our average bottle spend is still over 4, an increasing number of customers are forced to limit their spend.

"Rather than lose them from the category entirely, we have responded with a stronger value offering."

Waitrose said it had "seen a trend towards a higher proportion of sales from wines which are on promotion, as customers look for bargains".

And at Asda, there has been a growth in sales of 3 to 3.50 bottles, which it said was being driven by its three for 10 offer.

Bargain hunters

By contrast, they are two supermarkets that have seen a marked rise in how much their customers are prepared to spend on wine - value chains Aldi and Lidl.

Due to the wider impact of the economic downturn, a growing number of wealthier people are now choosing to shop at Aldi and Lidl, as more try to hunt out a bargain.

"Footfall at Aldi has risen by 30% in the past three months, with each store on average seeing 3,000 new shoppers per month," said a spokeswoman for the supermarket.

She added that over the past 12 months Aldi had seen a 21% rise in the number of shoppers from the ABC1 higher socio-economic groups.

Investment buy

Back in the rarefied world of fine wines that cost 80 a gulp, Mr Staples explains that it would be wrong to feel sorry for people who have currently lost money on the top wines of 2005.

"2005 was an excellent vintage, and history shows that prices will only rise in the long term as the wines become more scarce," he says.

"Take the 1982 Lafite Rothchild. That now retails between 20,000 to 25,000 a case.

"When it was first bottled [in 1984] you could have bought it for 300."

Despite the current downturn, there is still money to be made by investing in fine wine.

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