The perfect finite supply & demand scenario….
In 1855, the Bordeaux Brokers Union, at the request of Bordeaux Chambers of Commerce, drew up what is known today as the Bordeaux Classification (1855). Based solely on price, the list comprised of the most expensive to the cheapest, and for comparison sake was given the titles of ¨First-Growth¨, ¨Second-Growth¨, ¨Third¨ ¨Fourth¨ and ¨Fifth¨.
Scarcity of supply is a strong backbone for any investmentAfter a series of devastating plant diseases and insect problems in the late 1800’s, the French vineyard owners were replanting vineyards and rebuilding their businesses in the early 1900’s. The shortage of wine at the time created tempting conditions for fraud. Much money could be made by bringing in wine from other areas and claiming it was from a premium region.
To combat this fraud the French Government began to create laws to protect the consumer and in 1936 created a rigid control over the Chateaux known simply as Appellation d’Origine Contrôlée or sometimes abbreviated as AOC or AC. These rules set about designating, controlling and protecting the geography and the quality of wines (as well as liquors and some food products, such as cheeses). This enforced power together with the 1855 Classification, created the perfect Finite-Supply-and-Demand scenario.
Production levels have been declining for some time. Over the last decade there have been significant falls due to the Chateaux strive for excellence – a strict selection process has enhanced this scenario.
Climate-change is also having huge significance on the volumes produced. As with many of the best wine-growing regions throughout the world, Bordeaux has not escaped Mother Nature’s wrath – earlier this summer 2013, storms swept across Europe decimating entire crops in Bordeaux.
This has led to a third successive year where production levels are below average caused by weather conditions – forcing immense strain on the supply levels from this famous wine region.