En primeur 2016 verdict: Out with a pop

It was an intriguing and often frustrating campaign on the whole but one might argue there were a number of positives to be taken away.

After a cautiously optimistic start where some big names such as Cos d’Estournel and Montrose chose not to raise their prices on last year (although Montrose then released a pitiful amount of stock), true to form prices then began to rise as the campaign went on.

This matter was compounded by the weak exchange rate between the pound and the euro which meant that the higher the price increase out of Bordeaux, the more expensive the 2016 wine looked in relation to the 2015 vintage that had been released last year.

It’s worth pointing out that while prices did rise as the campaign went on (being 16% up on average versus the 2015s by the end), very few big name wines this year increased their prices by more than 20%, still fewer by more than 25%.

This is in contrast to the 2015 campaign where, as Liv-ex points out, “increases of 40-50% by the middle of June were normal”. Vieux Château Certan’s release of 28% was quite high for this campaign but last year it would have been distinctly average.

The problem was that as prices had been pumped up so much with the 2015s even smaller increases this time around were enough to push many wines into ever-higher price brackets.

The campaign was long and never seemed to truly catch fire. Rises in energy generated by the release of Montrose and Lafite quickly subsided as it became clear there was very little stock, while the increased prices meant buyers hung back rather than jumping in with both feet.

In this sense it was a bit of a “wait and see campaign,” as Corney & Barrow’s Paul Marus told db some weeks ago, customers often weighing up releases against one another rather than making snap decisions.

This campaign, with the quality of its wines, should have gone off like the Guns of Navarone or Superfly TNT; the final effect was more like that of a pop gun.

Stocks

Stock levels or the lack of them was a major feature of the campaign that was a major topic of conversation and debate. It has been estimated that the amount of wine released this year was around 20% below what was offered last year, which caused a few angry moments for all concerned.

As Liv-ex director Justin Gibbs told the drinks business: “This shortfall was of no relevance for the wines that were too expensive, however it was irritating for those looking for well-priced wines.”

And there were well-priced wines that sold strongly – Mouton Rothschild being a case in point – but what was frustrating was that allocations were sometimes so small (Montrose), that stocks were burned through before demand was fully satisfied. It’s been mentioned here before but it’s worth mentioning again; the trade is losing out on tens, hundreds of thousands even millions of pounds/euros/dollars because of missed opportunities involving poor

London is squarely back at the beating heart of en primeur sales.

pricing and dubious decisions on stock levels.

Merchants have generally reported they were able to get enough wine to “satisfy demand” of course – perhaps from wines freed up from the still disinterested Asian market? COFCO recently told our sister magazine dbHK it had cut its en primeur purchases by some 50% this year.

The news from other merchants in Hong Kong from this campaign has also been rather subdued. Memories of the 2009 and 2010 bonanzas which then turned to dust in their portfolios are still raw in the east.

“We love the wines, but we’ve learned our lesson from the 2010 vintage. We are cautious. We are not buying some wines en primeur because they don’t make financial sense,” commented Eric Desgouttes, general manager of Kerry Wines, a leading wine merchant in Hong Kong and one of the city’s biggest en primeur buyers.

Liv-ex reports that sales in Hong Kong increased between 15%-20% in value (largely due to the price increases) but volumes remained flat.

If anything, this campaign should put to bed, once and for all, the notion that there is any immediate future for en primeur in Asia. It is not the promised land where wine will sell at any price.

The US has still not rebounded fully either, like HK volumes remained flat on last year while price increases inflated value sales. It is the UK that is buying Bordeaux en primeur and has always been the most faithful market for these wines through thick and thin.

And that’s where there is something of a bright spot for en primeur. The wines are clearly excellent and merchants have really got behind labels they felt could work.

As they predicted, levels of consumer engagement were high. People wanted these wines, which was why allocations were sold through and customers were even going for wines that many judged too expensive – such as Palmer or Pavie, although as Liv-ex said, there are many wines that did not sell well at all which must now sit in the system like so many others.

“We were a little surprised by how well prices were received. Prices were high, but collectors still thought the wines were worth buying,” commented Justerini & Brooks’ Bordeaux buyer, Tom Jenkins.

After several rather fallow years since the 2010s were released Bordeaux has come good. Jenkins said it has been the “biggest campaign since the 2010s” and about 40% up in value on the 2015s.

The 2016s have not, therefore, entirely rekindled or recaptured that fever that marked the 2009 campaign but it would be wrong to say it was a disaster and just as important to point out that en primeur isn’t dead – yet.

As Berry Bros & Rudd’s Bordeaux buying director, Max Lalondrelle, states: “En primeur is fundamental to the survival of Bordeaux and therefore will always be part of its DNA. The Bordelais will always find a way to make it work. Let’s not forget that it is the highest concentration of volume fine wines in the world. With increased demand from around the world and low availability from other wines regions Bordeaux will always remain the number one source for volumes of fine wines for most collectors and merchants. It isn’t always easy to deal with Bordeaux but in many ways, this is why we like it and why we spend so much time talking about it!”

What needs to change?

There’s now a well-established argument that en primeur is out-dated and needs to be radically overhauled.

As Lalondrelle’s comment above makes clear, and it is broadly the consensus of many other major merchants, when en primeur works it really works.

“We still believe in en primeur and we believe that when you work closely with the châteaux and négociants there is a lot of very smart business to be done,” says BI’s Giles Cooper.

“There’s no doubt that plenty of client excitement still exists, especially in a good vintage. Are some clients tired of it? Do some not see the point? Certainly. But there are plenty of other offers to show them to keep them happy; in fact we would have almost hit our sales target for June without any primeur sales at all, such is the scale of trade in physical stock.”

There are a number of things that could certainly do with a change however that could give the whole operation a shot in the arm:

End tranches:

Again, in a good campaign where things are really motoring and customers are clamouring for the wines, tranches can work. There’s something about tranches though which is inherently dishonest and almost a little distasteful, charging latecomers to the party more because they missed the initial rush.

Not that it mattered much this year as the two most high-profile châteaux that tried it didn’t do a very good job. Montrose had a much talked-about release early on in the campaign and tried to bottle lightning twice as it wound down but nobody was interested by that point and the worst practitioner was Lafite which did a woeful job.

The initial price would undoubtedly have worked but so little was released (50% less than last year) that négociants held onto it to await the second tranche and then average out the price. The news that Lafite was out raised much interest which then fizzled out as the offers were withheld in Bordeaux for a month. When the second tranche came out there were buyers sure but the campaign had lost all momentum by that stage and there was more apathy than anything else.

“I would like to see the back of tranches,” says Corney & Barrow’s Will Hargrove. “It is inefficient and makes little or no sense to the end customer and they after all are (or should be) the focus.”

Lafite faffed around with tranches and it didn’t work, Mouton released everything it was going to at once (still a smaller amount that last year admittedly) and it was one of the most sought-after and successful wines of the campaign.

End pricing opacity:

A point already raised in the main text above in conjunction with stock levels, Liv-ex has spoken a lot in recent months on the need for better pricing models and an end to opacity which will stop the trade and consumers haemorrhaging money. In the conclusion to its own 2016 report it noted: “En primeur continues to be hindered by an opaque system of price discovery that leads to a broad spectrum of mispricing. Price information in the secondary market can be harnessed to produce logical, fair prices that could help to restore confidence in en primeur.”

A more focused campaign:

Riffing on a recent political slogan in the UK, this campaign has been characterised by some as, “for the few, not the many.”

There’s no doubt that the scope of en primeur is shrinking. The bigger châteaux are holding back more stock and margins are increasingly squeezed. For merchants to invest so much time and effort into two months a year and to get what can be fairly paltry returns is clearly a nonsense. Already many are being much more ruthless in their selection of wines to maximise their returns.

Perhaps ‘en primeur’ in its traditional format should zero in on those top wines of the Left and Right Banks only and become the stated time for to get their hands on a case or two of first growths and grand cru classé ‘A’.

It’s tough on the smaller châteaux but perhaps they can still be sold as futures at a later date. They may even benefit from not having to compete with the big labels if they released later in the year. Ditto Sauternes.

Simon Larkin MW, managing director of Atlas Fine Wines, said: “Year in and year out purchases of specific wines, almost irrespective of quality and price, just don’t happen much today. I think that en primeur is becoming focused on fewer and fewer wines. Then the négociant has the problem of trying to sell wines that merchants aren’t interested in. We have had our fair share of requests for ‘assistance’ with certain tricky stocks or offers of desirable stock tagged to stock that is more difficult to sell.

“For us en primeur has always been small. We aren’t building our business on the volatile nature of Bordeaux en primeur. Sideshow? Smaller in scale? Yes, I can’t see how it becomes reinvigorated with the leading châteaux not needing to sell at this point in time nor needing to release at levels that offer value against past vintages to the end consumer.”