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Words About Wine
A feature of Robin Garr's Wine Lovers' Page

Wine prices and inflation:

A statistical analysis of
Bordeaux and California Cabernet

By Charles Collins

© Copyright 1997 by Charles Collins. All rights reserved.

I initially computed this analysis of Bordeaux and California Cabernet prices because of Robert Parker's assertion (in his 4/96 issue I believe) that Bordeaux prices have increased less than those of California cabernet. In looking at the data he supplied, it was clear to me that he generally chose to compare prices for California cabernet over a longer period of time, typically mid 70's release prices to mid 90's versus '82-'95 for Bordeaux. He never attempted to correct for the number of years over which the price increases occurred or for inflation, which was considerably higher from 1975-1982 than in 1983-1995.

The wines examined here are those chosen by RP in his 4/96 WA issue to compare California and Bordeaux price increases and arelisted further on. I have used the CPI given below to calculate the price in 1996 given only inflation adjustments and compared that to the actual price as stated in the Wine Advocate. On several California wines the stated current price by RP was substantially above what several local retailers were selling the wine for, so I used the local prices rather than RP's price.

There are a number of variables that differ between the two lists so I have made a few assumptions. First, the Bordeaux prices are first tranche ex- chateau prices. They are in essence set by the chateau in the year following the vintage. The California prices quoted by Parker are the retail prices upon release. One would expect the retail prices on release to be more volatile than the first tranche futures prices, so the comparison actually favors the Bordelais there (Consider, for example, the difference between first tranche and release prices of Bordeaux in 1993 and 1995 - the 93 prices didn't move much after the first offering while the 95 prices have hit the stratosphere. Those variations are included in the California prices but not the Bordeaux prices).

Another important variable for the California wines is the release date. California producers release their wines over about a 4 year period after the vintage while the Bordeaux first tranche prices are always the year after the harvest. Since the average inflation in the mid 70's when many of the California wines were first released was 5-6%, the effect of being off a couple of years in the release date is about 10-12% in the price - a good fraction of the calculated difference including inflation! To address this issue I have calculated the inflation adjusted prices for the California wines for two cases:

1) my best estimate of the release date based on current practices by the winery and

2) a release date 1 year after the vintage.

The second case is obviously too conservative but gives a lower bound for the true inflation adjusted price increases. The first case may be too liberal since the release date after the vintage is likely to be longer now than it was in the mid-late 70's.

Here are the wineries considered:

California - Beringer, Caymus (SS), Dominus, Dunn (Napa), Dunn (Howell), Heitz Martha's, Hess, La Jota, Laurel Glen, Matanzas, Mondavi (Res), Newton, Opus, JVP Insignia, Ravenswood, Ridge (MB), Spotteswoode, Stag's Leap (Cask 23)

Bordeaux - Latour, Lafite, Mouton, Margaux, Haut Brion, Ausone, Cheval Blanc, Leoville Las Cases, Ducru, Beychevelle, Brainaire, Leoville Barton, Pichon Lalande, Grand Puy Lacoste, Figeac, Canon, La Conseillante, L'Evangile, Lynch Bages

The data:

Bordeaux First Growths

avg inflation adjusted '82 price: 264.5 Francs avg '95 futures price: 235.7 Francs avg % st. dev. in '82 prices: 4.4% avg % st. dev. in '95 prices 7.4% avg inflation adjusted increase, '82-'95 -10.9%

Bordeaux (non first growths)

avg inflation adjusted '82 price: 102.1 Francs avg '95 futures price: 117.5 Francs avg % st. dev. in '82 prices: 33.2% avg % st. dev. in '95 prices 31.5% avg inflation adjusted increase, '82-'95 15.1%

All Bordeaux

avg inflation adjusted '82 price: 156.5 Francs avg '95 futures price: 157.2 Francs avg % st. dev. in '82 prices: 52.2% avg % st. dev. in '95 prices 41.9% avg inflation adjusted increase, '82-'95 0.5%

BEST GUESS RELEASE DATE: avg inflation adjusted initial release price: 36.8 Dollars avg current release price: 45.8 Dollars avg % st. dev. in inflation adjusted prices: 47.7% avg % st. dev. in current release prices 50.0% avg inflation adjusted increase 25.5%

1 YEAR AFTER VINTAGE RELEASE DATE: avg inflation adjusted intital release price: 42.9 Dollars avg current release price: 45.8 Dollars avg % st. dev. in inflation adjusted prices: 53.2% avg % st. dev. in current release prices 50.0% avg inflation adjusted increase 6.8%

My interpretation of the data is as follows:

1) The Bordeaux first growths have been very conservative on price increases relative to all others, but that's probably because they had an unwarranted price premium to start out (a factor of 2.6). If one looks at the overall standard deviation in prices between '82 and '95 there is a significant decrease percentage wise. This reflects the fact that the price/quality ratio as perceived by the market was too high in 1982 for the first growths, so their price vis a vis the other classified growths has dropped to a multiplier of 2.0.

2) If we assume the truth for the California wines is somewhere between my best guess and the conservative estimate, but closer to the best guess we find an inflation adjusted price increase of about 20%. This is very comparable to the 15% for non first growth Bordeaux except it covers a longer average period of time.

3) The standard deviation of the prices for the non first growth Bordeaux, First growth Bordeaux, and California cabernet have remained nearly unchanged over the 15-20 years examined. This indicates that the relative homogeneity of the group remains unchanged. Note my statement about the standard deviation of the price for all Bordeaux in 1) above.

Here is the CPI data I used. It was obtained off the net from the U.S. department of Labor. The cumulative factor is the number by which a price in the listed year must be multiplied to get an inflation adjusted 1996 price, for example, a 1960 price must be multiplied by 5.229 to find the equivalent 1996 price.


I hope this is interesting to someone.

Charles Collins is a wine lover who's been collecting wine since the early '80s. He works as a geophysicist at Shell Oil Co. in New Orleans.

A Word About 'Words About Wine'

If your love of wine inspires you to want to write an article or essay about the subject, or if you've had a wine-related article published in print that you'd like to share with wine lovers on the Web, I'll be happy to consider placing it on the Web in this new feature of my Wine Lovers' Page.

Although I can't offer to pay for submissions at this time, I'd like to see this feature become a showcase for serious wine journalism and essays in a format longer, more thoughtful, and less transient than message board discussions.

I'll be happy to consider both previously published work (as long as you retain copyright rights) and unpublished work, and while I reserve the right to reject submissions on the basis of content or style, I'll make every effort to be generous in those judgements and err on the side of inclusiveness, in order -- I hope -- to build a good collection of quality Words About Wine. If you'd like to propose an article now or show me one that you've already written, please feel free to send me E-Mail.


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