Every year, Around May, the fine wine market gets very hectic. People from all over the world clamour to buy Bordeaux wines from the recently completed vintage – The interesting this is that these wines do not yet exist in the bottle. In fact the wines are still sitting quietly in barrels all over Bordeaux, slowly integrating the numerous flavours floating around in solution and oak, and probably only just starting Malo-lactic fermentation. The wines will not be available in bottles for at least another 18 months after the En Primeur date.
So why the commotion?
Well around May of every year, the Chateaux of Bordeaux, one by one, make their wines available to buy as ‘future options’. This is the meaning of ‘En Primeur’. As the Chateaux declare their wines available to buy as futures, they allocate certain volumes to various Courtiers/Negociants and Traders around the world. These allocations are like gold dust. These allocations are then traded onto end consumers and indeed parallel traded to other traders who may not have received allocations or are investing themselves.
Allocations are released in several tranches, each subsequent tranche becoming a little more expensive that the previous tranche. For the Châteaux whose wines are highly sought after, in the space of a day the En Primeur prices can rise 20% or more.
As a customer, to get your name onto an allocation list for any highly sought wine is extremely difficult. You will have to show good history of buying with the trader in question, both in time and money.
An example is 2005 Petrus, which came out En Primeur in June 2006. Initial allocations to the privileged few sold at approximately £8-10K per case of 12. By the end of the week a case of 12 was trading at £18K. Today a case of 12 Trades at £22K….where will it end? Who knows, currently a case of 1982 Petrus trades at £30K – A vintage which is probably not as well regarded as 2005.
How do the wines Command such High Prices?
The answer is Supply and demand.
Some of the wines produced by the Bordeaux Chateaux are amongst the best wines in the world. The terroir is second to none, and over centuries the Farmers have come to understand exactly how to cultivate their land for ideal wine grapes. Strong wines, combined with strong brands and minute volumes lead to huge surges in demand as the Global Cognoscenti demand the finest for themselves, both for purposes of Investment and to drink.
Are the wines worth it?
This is a very personal question. There are many people around the world who will spend thousands of pounds for a great bottle of wine. As long as these people value wine in such a way, it’s worth it. Not all the Chateaux in Bordeaux command great prices, and each year the world waits for reviews from re-known critics – to see which Chateaux at this stage of development appear to have done a good job, and which not so good. A big hit from the 2005 vintage was the Pontet Canet which reviewed highly and generated a lot of interest. The Pontet Canet came out 50% higher than previous vintages, and is continuing to rise. Currently it is priced at approx £540 per case. The 2000 Vintage, another great vintage is selling today in the £370’s per case….a good buy perhaps??
Should I Invest?
Tread very carefully here. Indeed there is good money to be made Investing in Bordeaux En Primeur, and many portfolio analysts praise wine Investment as an Avenue in any Investment Portfolio, although perhaps not the main focus. One of the advantages of wine is that it is not liable to Capital Gains tax as it is a perishable. It can be bought and sold for Investment Under Bond, and free from any Tax from profit made.
However buying En Primeur is a hedge – You will most likely not have tasted the wine yourself, and will be relying on other people’s reviews. The wine is still not finished, and may not finish as well as expected – The risk is yours. Experience helps. Mathematical brains have also started to apply their focus to this matter – as yet no Golden rules have emerged. But to leave you on a parting note, a case of 1982 Latour would have cost you around £500 in 1987. Today you are looking at around £12,000. A 24 Fold Increase. Not many Investment trackers would give you a return like that.
For all the talk of Investment – wine is there to be tasted, savoured and remembered. By all means invest….but the best Investors are those who love wine
For more information please do not hesitate to contact me. I have many years experience both in winemaking and working for one of the main Fine Wine Traders in the UK