1996 Price Spike

During the class discussion of the "Chateau Pontet-Canet" case, a question was raised about the spike in prices across the Five Classes of Bordeaux wine in 1996. Although there were likely many factors at play, some quick research suggests that the spike may have been caused both by high quality vintages and by supply/demand imbalances driven by an increase in demand from Asia. As can be seen in articles such as the first link below, the 1996 vintage was considered especially high in quality. The article notes that high priced wines can often stagnate in price, thereby limiting opportunities to purchase these wines as an investment. However, the article notes that many of the high priced Bordeaux wines from 1996 have continued to appreciate significantly - in many cases, the wines have increased in value over 6x, and some have even appreciated 15x. This suggests that at least part of the spike in price was due to the intrinsic quality of the 1996 vintage.

However, the precipitous drop in prices in 1997 suggests that there may have been some other market forces affecting the 1996 vintage in addition to the intrinsic quality. The second link below hints that the ramp in prices may have been caused by an influx of Asian buyers. Like the more recent bubble from a large increase in Chinese buyers, the spike in the 1990s may have been at least partially driven by an influx of Japanese buyers. The publication notes that the Japanese wine boom began in the 1990s. However, the authors note that Japanese wine consumption fell sharply in 1997, which may have at least partially caused the sharp decrease in Bordeaux prices from 1996 to 1997.

https://www.thedrinksbusiness.com/2015/07/in-focus-1996-bordeaux/
https://www.eu-japan.eu/sites/default/files/publications/docs/japanwinemarketreport-2014.pdf