There is excitement in the fine wine business after Chateau Latour announced it was pulling out of the long-established ‘En Primeur’ (or ‘futures’) system of selling wine.
The top Bordeaux chateaux (as wineries are known here) have historically sold their wine less than a year after it is harvested, long before it is bottled and while it is still in barrel. They benefit by getting their cash early and the advantage for the customer is that they can ensure they get their chosen wine at an agreed price.
The chateaux can only make wine from their own vineyards so their production is limited and yet demand already way exceeds supply and keeps growing. Top wines retail at well over $1,000 a bottle.
At the beginning of April the worlds wine buyers and press descend on Bordeaux to taste the newly made wines. The wine isn’t finished yet, these are samples. But the feedback, and especially the scores of influential writers like Robert Parker, influence prices the chateaux will charge.
The chateaux do not sell their wine directly but only to an agent who will add a margin and sell it to middle men known as negotiants. They in turn add their margin and sell it to the worlds wine buyers. For a buyer to get a good allocation a long-term relationship is needed with a negotiant and often they will also have to buy other, less desired wines, that the negotiant wants to off-load. If the vintage is poor and a buyer decides that they won’t take their usual allocation then they may be unable to buy any in future.
Remember these are wines that are in huge demand and adding two layers of middlemen between the seller and the buyer adds to the cost and provides – for the buyers – little value. But it is the way that it has always been done.
So Chateau Latour’s announcement that it is withdrawing from the en primeur system has sent shockwaves through the industry. It will financially impact the middlemen and break long term personal relationships with them. Latour say they will keep their wine until it is ready for drinking before offering it for sale, which means that it could be years before their 2012 vintage becomes available.
Selling and buying en primeur is a gamble. The chateau may find that the price later shoots up as opinions of the vintage are revised and buyers sometimes find that if they’d waited they could have bought the wine cheaper.
Chateau Latour expects that by selling the wine when mature and ready for drinking, and by cutting out middle men, they will be able to charge a much higher price that will more than cover the cost of storing their wine. They also have their eyes, like much of the wine world, on the increasing importance of the Chinese and Asian markets, neither of which like buying wine futures.
Other Bordeaux chateaux are reportedly expanding their storage cellars and it may be the archaic en primeur system is on its way out. With computerisation and the internet a futures system underpinned by personal relationships, historic allocations and deals are no longer necessary for selling wines that everyone wants.
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