Hugo Rose MW
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Is the en primeur market just for show?

With the original structure and purpose of en primeur changing rapidly, what exactly does the process serve today?

Montrose-barrelsBefore the era of château bottling, en primeur was the only game in town. Producers had no alternative but to sell each vintage in barrel to Bordeaux merchants ‘on Le Place’ who took on the responsibility of ageing and sometimes bottling the wines.

Those merchants often sold on the wine, still in barrel, to their customers in France and elsewhere in Europe. My former employer, Lay & Wheeler, was bottling claret from moderately well known châteaux into the 1970s.

Despite château bottling becoming the norm Bordeaux négoçiants were still obliged to place orders for wines pre-bottling, trusting in the châteaux to care for them correctly during the élevage process.

In order to maintain the selling cycle, merchants devised the en primeur system as we know it today, encouraging their customers to taste barrel samples and to place orders for the finished wine for subsequent delivery.

Buying on trust – that the finished wine would turn out as expected – and paying up-front a year or more ahead of delivery predicated a reasonable reward for risk. A discount for financing the élevage stage was logical but is was the risk element that was more important.

A critic’s assessment based on one or two prepared samples is a long way from a definitive judgement over ultimate quality. Both the producers and the Place were content for this risk to be passed down the chain. In this sense the en primeur buyer, as risk holder, was making an investment decision, whether the intention was to be consume the wine or eventually to sell it on into the secondary market.

With all but the very top names now released the 2015 en primeur market appears to offer very little reward either for financing the stock or for taking the risk. Recent high-profile releases have been at levels 30- 40% and sometimes more above the 2014s (in Euro terms) and approaching the current values of their respective 2009s, 2010s and 2005s in Sterling.

The risk/return profile is hardly persuasive, especially as there is growing evidence of châteaux artificially limiting the market by withholding more stock than usual. Historically a property would aim to retain 10-20% of its production to meet future commercial needs, for tastings, unforeseen supply issues, and to make available small quantities to specific clients specialising in mature wines.

Retention rates today are not usually made public but are often substantially higher, ranging from 100% (Château Latour) to an estimated 50% for many of the leading names. With no intention of selling a large part of the crop during the en primeur process, price setting has become driven by vanity as much as commercial reality.

Many châteaux are in this way investing in their own wines, to release them ‘ex-château’ as they see fit some years later. No crime is committed by so doing, but if the object is, as some observers have suggested, to harvest the investor margin, then by definition the value of buying en primeur is diminished.

Latour has made its position clear and has withdrawn from the en primeur process. This is at least unambiguous. It is paying the price from absenting itself from the publicity circus that is en primeur as it is no longer necessary to taste Latour from barrel – you can’t buy it for a decade so early notes are largely redundant.

But its peers want to have it both ways, to reap the PR benefit by sticking a toe in the en primeur water and to manage the price of their wine upwards by drip-feeding the market.

You can understand why hard-nosed wine funds don’t buy en primeur: the price is known but not the value.

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