Wine prices, new realities...bubble or not?

Every day that I frequent wine message boards, I see threads talking about the new high prices of wine. Although the talk usually centers around certain regions or types of wines, there is a common thread to most of these posts: "I/we used to be able to buy X and it's now too expensive."
I think there are some reasons for what's currently happening. Here are the obvious ones that come to mind for me as cause of recent price run-ups:

- Increased world-wide wealth fueled by a 5 year global bull-market
- Increased demand of wine as wine increasingly becomes a status symbol/luxury good
- Devaluation of US Dollar
- The spread and pervasiveness of the 100pt scoring system
- Improved pricing efficiency due to internet
- Limited availability of the world's best wines

Now, if we're going strictly based on supply and demand, it should not come as a surprise that many wines from Burgundy, Cult wines from the US (i.e. Screaming Eagle), and other trophy wines in short supply would appreciate much in light of the other factors. I get the run-up of prices in this category.

What I find fascinating is that the biggest run-up in pricing is happening in Bordeaux, arguably one of the largest volume wine production areas (both at the high end and low end) I can think of. I think that in Bordeaux, there are a few forces at work that are hard to explain via the factors I laid out above.

The first issue is that nobody actually knows just how much wine is being released by a chateau. This means that nobody in the consumption chain other than the chateau understand the true supply. If chateaux, as commonly reported, do indeed hold back part of their production to artificially restrict supply and consequently drive up price, that would certainly be a potential factor in a resolving of a "bubble."

A lot of folks are talking of a Bdx pricing bubble...I am unsure whether this really is something to be concerned about or not. I believe that a bubble is generally impossible to be present unless there is a large element of surprise that has not been priced into the markets and that would cause distress should it become known. Also, any information that folks believe to be true, but really isn't can cause some major cracks in the dam. Here are some of the factors that I consider to have to be present for a bubble to be a possibility:

- unimaginably large inventory of wine held back by chateaux from release
- if the claim that much wine is now being sold to emerging markets turns out to be untrue somehow
- sudden collapse of supply chain (i.e. negociants going out of business at high speed)
- sudden consumer disinterest in Bdx

In my opinion, only the first two points seem to make good candidates for a current bubble. If chateaux have not been holding back excessive quantities of wine though, and if much of the increased sales of Bdx go to emerging markets, I find it impossible to think of a bubble.

In the next post, I will elaborate on my thoughts on the other major factor that's been driving up prices: the 100pt scoring system. It has made it easy for folks with deep pockets to blindly assemble a cellar of status symbols without having to know anything about wine...but more next time.

Please do share your thoughts with me. Looking forward to reading your replies.