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The future of the primeurs system

Chateau Latour’s decision to quit the en primeur system has naturally stimulated quite a lot of debate, and the subject merits reflection. There has been talk of the consequences of this decision, suggesting that it might be the beginning of the end of selling Bordeaux en primeurs, and some debate as whether this would be a good or bad thing.

Château Pichon Baron

I do not think myself that it is the beginning of the end of the current system. Latour is Latour, and is in a position to do more or less as its owners wish. The same is true probably of the other Premier Crus, but it is by no means certain that they will wish to follow suit. Time will give us the answer to that, and in the meantime it is just pure speculation to talk about it. However, since the question has been raised about the advantages or otherwise of the current system, I think it is perfectly valid to discuss this aspect of the question.

Like any system that works, it has its advantages and disadvantages. I think the positive aspects outweigh any negative ones, both from the point of view of the chateau and of the consumer. So here’s how it works, from my viewpoint at Château Pichon-Longueville Baron.

The system depends on the existence in Bordeaux of the numerous negociants who make up the Place de Bordeaux. There are over four hundred of them, but a property like Château Pichon-Longueville Baron will typically work with between forty and eighty of them. Any more and it begins to be difficult to know them all well. The reason for working with so many is that they have different strengths and specificities, many having strong distribution in different parts of the world, some being particularly strong in one particular part of the market etc…

By selecting a number of negociants with different strengths, the chateau can make sure of a good global distribution of its wines, reaching every part of the market that it wishes to reach. The existence of these negociants, managed by knowledgable wine professionals who travel the world promoting the wines they sell and ensuring a global distribution for the wines of Bordeaux, is a major asset for Bordeaux producers.

But I also believe that it is good for consumers. There being so many first rate negociants in existence, competition between them is intense, and their margins relatively small. This ensures that the wines achieve their global distribution at a relatively low cost.

When a property like Château Pichon-Longueville Baron declares the price of its Grand Vin during a Primeurs campaign, it will communicate the price to its negociant partners via the courtiers. This might happen for example at 11.30 in the morning. If all is well, within an hour or so all the negociants will confirm that they are taking their allocations.

They in turn will offer the wine to their partners around the world, and if the price is right they will in turn confirm that they will take their allocations. In a good year this can happen the same afternoon, meaning that by the end of the day the chateau has sold its crop (or as much of it as it decides to put on the market) and within a few hours achieved a global distribution for its wines. The advantage of this to the chateau is clear.

From the point of view of the customer, the wine lover who wants to buy some Château Pichon-Longueville Baron, I believe that the system is a very efficient way of getting the wine to them, wherever they may be.

If the chateau tried to achieve this distribution on their own without working with the negoce it would be more expensive and less efficient, as it would not be possible to ensure the remarkable capillary distribution that the various negociants are able to achieve.

Supposing that we accept that this unique system is a good way to get the wines to the consumer, that still leaves the question of when is the best time to sell the wines. At the moment, En Primeur sales happen in the spring or early summer of the year following the harvest. So the 2011s have just begun to be offered to the market. The wine is of course still in barrel, and will be bottled next year and despatched to the customers.

It is perfectly valid to question whether this is the best time to offer the wine for sale. A good argument can be made that the campaign should take place a year or so later, after the wines are in bottle. However, I think it highly unlikely that the system is going to change in that way.

The temptation for a Grand Cru property is more likely to be to keep its wines for longer, in the hope of selling them for a higher price by choosing the moment at which the Chateau puts them on the market. Seen from the point of view of the chateau owner, it can sometimes be a little frustrating to see the price of the wine rise by a significant percentage after the sale en primeur.

Obviously, if you are a wine producer and you see the price of your wine double on the market within a few years of releasing it, the tempting thought is likely to cross your mind that if only you had held the wine back for a while, you could have sold it for that higher price yourself! There is nothing particularly wicked in thinking this way. Imagine you were the owner of the chateau yourself: you might well have similar thoughts.

However this is to ignore the enormous value for a Bordeaux chateau of the remarkable world-wine chain of distribution that exists, and which thrives on the possibility that wine bought en primeur may gain significantly in value. This can of course be advantageous for the distributor if they keep back some stocks themselves, but above all it is highly motivating for the final customer, the person who buys the wine to drink themselves.

Of course, for all this to work, the prices en primeur have to be right. But it is up to the market, made up as it ultimately is of individual buyers, to make the judgement of whether a chateau has offered its wine en primeurs at the right price.

If the price is too high, then the wine will not sell well, and the market price is likely to come down. Any chateau that makes this mistake will be punished by the market in future years by a weaker demand for its wine and by a strong demand for a downward adjustment of future prices. That is part of the mechanism of en primeurs.

But it is usually possible for a consumer by buying wisely to buy the wines en primeurs at significantly lower prices than the wine will trade for in the near future. All recent vintages of Château Pichon-Longueville Baron are trading today at significant premiums to their en primeur prices, some of them twice as high, some of them more than this.

It has been a good idea to buy Château Pichon-Longueville Baron en primeurs over the past decade. I think it will be over the next decade as well and we will do our best to make sure that it is so. Would it be wiser for us to keep the wine back and sell it later, keeping this extra profit for ourselves?

I do not think so, although it is only human to have such thoughts. An important part of the dynamic of the demand for Grand Cru Bordeaux is precisely the possibility for distributors to make a fair margin when selling our wines around the world, and for the final customer, who is the most important person of all, to feel that he or she has bought the wine at a good price en primeurs, far cheaper than it would be were they to try to buy the wine at a later date.

The traditional advice given by wine merchants to their customers was to buy twice as much as they wanted of their chosen wine, wait till the price had risen, then sell half and drink the rest for free, or at a significantly reduced price, subsidised by the profit on the wine sold. It is still perfectly good advice, provided you have the means to do it and you choose your chateau well.

But even if you never intend to sell a bottle, (and my favourite customers are those who would never resell a single bottle of Château Pichon-Longueville Baron­ I certainly wouldn¹t: what would you buy with the money that you are going to enjoy more?) it is always a source of satisfaction to open a bottle that cost you much less than its value today.

That is part of the fun of the en primeur system, and an element that I do not think we should forget: it is a game which is fun to play, and which attracts the interest and enthusiasm of wine drinkers all over the world. This excitement is an important motor of the Bordeaux wine business, and I think we would be unwise to lose it.

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