Bordeaux’s Grand Vin wines have a finite production capacity created by a combination of human legislation and natural boundaries. France’s Appellation d’origine contrôlée (AOC), amongst many other legislations, regulates vine production and planting density. The Gironde and the Dordogne Bordeaux’s two rivers, along which the great vineyards are found, restrict any expansion.
Grand Cru vineyards were established over 150 years ago and are generally found on the best terroir. Each chateau, in turn, selects its best terroir to grow their Grand Vin. Chateaux are continually pushing the envelope of quality; therefore yields and the overall production have decreased. For example in 2009 only 43% of Ch.Lafite Rothschild’s production went into its Grand Cru; 36% of Ch. latour’s and Chateau 35% of Ch. Margaux’s. The grape juice that does not go into their grand vin is used in their reputable second wines, which are becoming highly sort after sub-brands in themselves, in some cases, equal, or greater in price then second growth wines.
These combined factors maintain a structural market shortage that cannot meet growing global demand.
Fifty years ago Bordeaux’s Grand Cru wines were rarely sold outside Western Europe. In the 70’s and 80’s the US entered the market with conviction, followed by an increasing amount of eastern markets, in particular Japan. In 2008 with production already under duress, Hong Kong abolished its importation duty on alcohol. Since then it has been the story of the awoken dragon, with Hong Kong already holding an estimated 1 in every 4 bottles of Grand Cru wine. China and the rapidly expanding economies of South Korea, Taiwan and India are unquestionably amongst the most important consumers and it is no surprise that Bordeaux has turned its gaze to the East.
Emerging markets are considered to be at the beginning of their fine wine educational curve. Emerging markets entered the market primarily as a consumer, often drinking wine much younger and therefore depleting an already scarce commodity. In reaction, professional and private investors in more mature markets are increasingly investing in fine wine, creating a truly global demand for Grand Cru from Bordeaux. Many believe we have only touched the tip of the iceberg of China’s buying with Hong Kong the natural gateway to the mainland. Russia, India and Brazil are expected impact the market further in the near future. These trends will result in few people on the planet ever be able to consume Bordeaux’s finest.