Will Diageo's Defection Damage Bordeaux?

The story of Bordeaux's fortunes only seems to get worse over time. The most expensive and prestigious wine has taken hit after hit in the global crisis. Now there are rumblings of a move that could put the future of Bordeaux at serious risk. Global drinks giant Diageo has a division, Diageo Chateau & Estates that dominates much of the sale of wine in Bordeaux. According to a story in the Napa Valley Register says that Chateau & Estates has been selling off a lot of its Bordeaux inventory. The total value of the wine that it holds could be in the $200 million range and the repercussions of the sales could include a deep drop in the prices of Bordeaux. Lower prices could spark consumer interest in the short term but draw down the prestige of Bordeaux over time. The AFP also reports that the news is bad for other wine dealers who have stockpiled vintages of Bordeaux as an investment. As the prices fall, these retailers are struggling with potentially taking a loss on their wines.

At this point Bordeaux has pinned its hope on Asia where there has been a surge of interest in French wine, especially the prestigious first growth Bordeaux. As my colleague Tom Johansmeyer recently reported, wine is selling well at auctions in Hong Kong. The reportedly excellent 2009 vintage can also help boost the reputation of Bordeaux as long as there are still people interested in buying.