En primeur 2017: ‘Have we learned nothing?’

Another missed opportunity, too many overpriced wines gone begging, an utter lack of customer interest, plummeting sales, frustrated merchants and the worst campaign since 2013 – the 2017 primeurs will be swiftly forgotten but their legacy may be longer lasting.

Speaking to UK merchants it is clear the sentiment is one of frustration and disappointment; many believed there were excellent wines from the vintage that could be sold at the right price but as too many châteaux offered mere token discounts to their (hugely expensive) 2016s, sales by both volume and value have crashed – at times dangerously close to 2013 levels.

Over at the UK’s largest en primeur player, Berry Bros & Rudd, fine wine buying director Max Lalondrelle reports that sales will be around £13-£14 million, half of what was achieved last year and while that’s not necessarily a sum to be sniffed at, volumes were much, much lower (“near 2013[levels]”) and “12 brands made up 80% of the turnover,” he noted.

Farr Vintners’ managing director, Stephen Browett, said that apart from the 2013 it’s been “the worst en primeur campaign by volume since 1992,” and while it won’t be the worst by value the final haul will still only be £2-£2.5m.

Other merchants are not always quite so open with their figures but tell a similar story. Tom Stopford-Sackville at Goedhuis said volumes would be down around 60% on last year and turnover, “shy of 70%”.

No merchant db has spoken to expects to have sold anything like the volumes they did for the 2014, 2015 and 2016 vintages and if the eventual tally from the 2017s looks healthy enough, this will largely be due to the cost of the wines in the first place and belies the extremely limited scope of the campaign and the fact that merchants have routinely sacrificed long-husbanded allocations of certain wines because they could not justify the price to their clients.

It’s worth remembering that the very first wines in this campaign – Sauternes for the most part – began appearing in early April and Château Palmer was a surprise early release on 24 April, before most of the scores had even been handed in by the big critics.

The pace of releases throughout May was sporadic; staccato bursts through a month of long weekends and with a Vinexpo Hong Kong at the end of it.

In early June however there was no stopping the rush, with near daily releases from La Place de Bordeaux like marbles falling out of a bag.

Although the pace was a little frenetic, to the châteaux’s credit there was never a day that tipped into the farcical ‘Super Tuesday’-esque tsunami of releases that was seen with the 2011s and, to an extent, the 2015s and 2016s too.

Having begun in earnest on 5 June, proceedings were wrapped up by the 21st with the release of Ausone.

So the tempo for the big names was brisk and there was no “silliness” with tranches noted Corney & Barrow’s fine wine director Will Hargrove.

Unfortunately, by the time June came around a succession of poorly judged releases and the stop-start nature of the campaign had sucked a lot of the life out of the proceedings.

In short, the 2017s are going to pass into the primeur history books as another damp squib, a frustrating come down after three campaigns that had done much to restore some faith in the system and demonstrating a complete lack of lessons learned.

 

Pythons and sticky wickets

As mentioned by db before the campaign, 2017 had all the hallmarks of a ‘conundrum vintage’.

Following in the footsteps of the 2015s and 2016s, the wines were generally much better than many had supposed following the dramatic frost reports but were clearly not as excellent as the 2016 wines and thus would need to look very compelling indeed for merchants to entice their Bordeaux buying customers – who were doing the equivalent of a Burmese python digesting a particularly large gazelle after last year’s campaign – to have a nibble at the 2017s.

The question of price is the infernal/eternal question around en primeur and Bordeaux but it is the central issue on which campaigns stand or fall. There are perhaps too many competing self-interests to make anything like a universal consensus on what pricing ‘should’ be but strictly in terms of looking at the market for wines already available (physically or otherwise) then the advice and hope was for cuts that would bring the wines back in line with the way the 2014s were priced.

In the event, prices only dropped to around the level of the 2015s (and above in some instances) and buyers quickly switched off. According to Wine Lister, the average release price of the 2017s was 6% below the current market price of the 2015s and 20% above the 2014s.

And as the 2017s emerged so it threw into starker and starker relief the relative value offered by vintages such as the 2014s which very often have the same or better scores than their 2017 counterparts.

All the market was confronted with, says Browett, were wines with, “scores like 2014, prices like 2015”.

Giles Cooper, marketing director at BI, said: “You’re always going to be batting on a sticky wicket after the ‘15s and ‘16s. We’re playing to an audience that’s already satiated with young wine and that reason [to buy] just wasn’t given. The market was looking to that second tier of vintage quality pricing and for that level the wines were just too expensive.”

For some this is merely a further indication that there are certain château owners who are still either utterly unaware of market sentiment or simply don’t care or are dancing to the tune of shareholders who, similarly, either don’t know or care.

Justerini & Brooks’s Bordeaux buyer, Tom Jenkins, said it was clear there was a “complete disconnect” between where Bordeaux wanted to pitch the wines and where consumers had decided they should be pitched.

“Most customers think this is a 14- vintage and should be below the ‘14s and the châteaux have priced them in some cases above ‘15 which is madness in my opinion,” he said.

“At times it was a car crash campaign. You saw the price and knew it would never work, which is a shame.

“Grand-Puy-Lacoste for example – lovely wine but never going to work [at that price]. There’s a stubborn refusal from the châteaux to realise what the public are willing to accept.

“You can see thought and logic in some releases and from some there’s been no thought at all, just a token discount.”

“Prices have gone up so much since 2014, a token price drop is nonsense,” said Browett who has been notably bullish on the issue.

“They know they’ve overpriced the wine but are either so aloof they don’t follow the realities of the wine market – or they don’t care.

“It’s such a wasted opportunity because the quality is quite good but it should have been sold around the ‘14 price level.

“Everyone knows what the price should have been and they just haven’t done it.”

 

Painful losses

A very few wines ‘worked’ this campaign, some completely, some to at least gradual degrees.

Beychevelle, Canon and Calon-Ségur are three names that crop up consistently in the win column.

Lynch Bages, Léoville Barton, Rauzan-Ségla, Carmes de Haut-Brion, Lafleur and Pichon Comtesse get the nod too for getting the price right, Vieux Château Certan, l’Eglise Client and Figeac have also been mentioned although the latter will have sold out more because stocks were so small rather than the price making it look super compelling.

Among the first growths it seems Mouton Rothschild, Margaux and Lafite were the biggest successes.

“Mouton has worked, yet to sell a third of our allocation. The price was 15% too expensive but it will work over time. Margaux has worked, we sold out in 24 hours and Lafite has worked and we still have demand and are still acquiring stock,” said Lalondrelle.

Stopford–Sackville said that Goedhuis had managed to sell “all of the Lafite and Margaux and 70% of the Mouton,” and it was a broadly similar story around all of the other merchants.

They also seemed in broad agreement that Haut-Brion had been the least successful of the first growths.

“Haut-Brion sadly has not worked,” said Lalondrelle, “even though we took a hit on the margin, we sold a quarter of what we usually sell.”

As to what didn’t work, merchants are often quite cagey about explicitly naming names but labels that bombed this year (in no particular order) include: Angelus, Pavie, Grand-Puy-Lacoste, Pichon Baron and Ducru-Beaucaillou but the list goes on.

“There were a lot more disasters than there were successes,” notes Liv-ex director Justin Gibbs.

As mentioned at the beginning, what is quite striking about this campaign is how narrow it was, with BBR and Farr and others only really managing to do any meaningful work with a dozen or so wines.

Even in 2013, notes Lalondrelle, buying may have been lacklustre but it was at least spread over a very broad selection of estates.

The reason of course was the price. Several merchants mentioned that wines came in at levels they felt they could not, ‘offer to our clients’, in good faith because it was not a fair or sensible investment at this stage.

As a result many will have gone to the back of the allocation queue for next year (should they wish to offer the wine). Lalondrelle admitted that this campaign had seen the, “loss of 10 years of allocation building which we will have to start from scratch,” which he described as “quite painful”.

Hargrove agreed: “There were certainly ones where we’ve built up allocations over the years and we said this year ‘we can’t have that on our books’.”

Lalondrelle continued: “We have to have integrity with our customers, they’re the one paying for the rest of the chain. We have the responsibility of being honest and we have refrained from offering the majority of the wines and when we have offered some we have made it clear where it was positioned in the market and in many instances we have sold very few cases.”

 

Fallout

Despite being a small, “limp” campaign, the effect of the 2017s on the market and as part of the on-going changes in Bordeaux and en primeur as a whole are rather more significant.

As well as high prices and poor sales, one of the key narratives this campaign has been the continued reduction in stock being released onto the market by the major châteaux.

Of course in some instances, notably on the Right Bank, frost damage led to naturally smaller yields and therefore limited quantities of stock anyway.

Yet in Pauillac for example, where there was no frost damage, certain estates still lowered volumes by 15%-20%.

Conversely, the reduced stock does not seem to have hindered sales unduly as they were often so poor to begin with that should a merchant have needed something it was easy to track down.

It has been well known for some years now that many châteaux have been purposefully holding back ever more stock.

Partly this is likely a restocking exercise on the part of the châteaux themselves but there are also questions as to whether it’s an effort to control pricing and whether many harbour ambitions to offer substantial ex-cellar stock at a later date. So not entirely withdrawing from en primeur (like Latour) yet trying to make a vintage almost pay for itself twice over which will no doubt strike many as an exemplar of trying to eat your cake and have it.

In the first instance, if holding back stock is an example of trying to maintain elevated pricing then it is cynical and will be seen through as well as the fact it undermines the entire concept of en primeur – buying wine at the best possible price and moment.

And in the second case, Gibbs points out: “The châteux have a lot of stock that, at some point, has to come to market. If you have half your crop and the other half didn’t sell, where does it go? What strategy can you build around it? Do you keep it for five years and then sell it more expensively than the first lot that also didn’t work?”

And altogether, the knowledge on the part of consumers that if they have bought a case of ‘Ch. X’ yet there is still a substantial amount of stock sitting in that estate’s cellars waiting to be released has both a depressive effect on that wine’s performance post-release and offers a yet further disincentive to buy en primeur in the first place because it’s not as though stocks of that vintage are running down any time soon nor is the buyer likely to see any quality return on investment or for that case to even hold its value.

And we haven’t even begun to consider what happens next year if the 2018 vintage is judged to be a success. Will pricing go up again? Back to what? 2016 levels? It does seem the Bordelais have priced themselves into a corner and, therefore will potentially have to come down again next campaign.

“If 2018 is a great vintage like 2016 then we’ll be fine but if it’s anything but a great vintage it is going to be very difficult to load up another round of wines into the coffers of the négoce. 2018 could represent the value for money vintage. It could be better but will have to be cheaper,” muses Lalondrelle.

All in all it doesn’t feel as though there’s been much in the way of forward thinking.

If the châteaux are increasingly blasé about the en primeur process though they might consider that at the other end of the chain so are merchants and their customers.

Although it has been threatened before, Lalondrelle explained that the cost and effort of maintaining a team during en primeur for the piddling results was going to prompt a review of how much time and energy BBR was really willing to commit to Bordeaux outside of potentially ‘great’ vintages.

He said: “Since 23 April til 19 June there have been only seven days when we have made a profit. For us the biggest problem has been the cost of running the campaign daily vs daily profit. Only seven days [in two months] were worth coming into the office for.”

If many châteaux have decided they’ve found a new level at which they intend to sell their wines and therefore the level of engagement remains low, he asks: “Do we only do 20 brands en primeur every year? And the others every few years when there is a big vintage?

“We can’t spend eight weeks paying 45 people to lose money every day.”

“If the châteaux can afford to keep the wine, and assume they can sell it later, why should they bother with primeurs at all? Recent vintages have shown them less keen to sell en primeur, and so less concerned with making the price interesting to those who wish to buy this way,” says a frustrated Charles Lea.

“Until there is next a serious downturn in demand, which many producers seem to think will never happen, they will continue not to feel a great need to sell en primeur, and we will presumably limp along in the current fashion until all the merchants also give up.”

Yet it’s also worth bearing in mind that as campaigns have become more expensive to run and profits have dipped, so en primeur has, for some merchants, become less absolute to their business.

“We don’t rely on en primeur nearly as much as we did,” notes Stopford-Sackville, while Cooper added: “If something isn’t going to work then there’s a whole lot of other wine out there. It’s no longer Bordeaux or bust.

“By the end of May we were 15% up on last year [excluding EP], having a bumper year with a low interaction primeur.”

The Bordelais seem to think they can continue to offer smaller allocations at greater prices in what seems like supply and demand 101 but what they perhaps forget, suggests Gibbs, is, “the market can also walk away and leave you releasing into a black hole.”

All of which turns attention back onto the ‘squeezed middle’ in the whole process – the négociants.

There have been dire warnings from past campaigns that the build up of stock might cause closures though those haven’t come to pass just yet it would seem.

But there’s no doubt that quite a lot of back vintages are going to be available at knock down rates in the months to come as they seek to generate a bit of capital to pay for the expensive ‘17s that nobody wanted.

How long can it go on? According to one merchant it won’t be long before more start to “grow some balls. It’s only when their [the châteaux] cash flow gets hit that they might re-evaluate their position and what en primeur means to them.”

As Jenkins says: “The négoce have lived in fear that cutting back on ‘X’ means losing it forever. This is the year big négoce have played it tougher. Best thing that can come out of this is situation where châteaux aren’t guaranteed their income.”

One victim of this stance appears to have been Pontet-Canet. Anecdotally at least many négoce seem to have ‘declined’ to take up their allocations of the Pauillac flying fifth this year.

Bad campaigns tend to have a habit of depressing the secondary market a little. Gibbs notes: “The sense is we’re about to get an early summer. I sense everyone is a bit fed up and it feels as though merchants are a little gun shy now and will look again in September. Will have a drift, hopefully not a big one.”

Then again, the high prices – as they often do – have thrown the spotlight back onto the quality and value of physical vintages such as the 2014s and 2012s and Gibbs says trade has been “reasonably vibrant” during the campaign, helped along by a strong dollar.

Browett notes that “trade in physical vintages is up 20% at the moment,” especially for ‘drinking’ vintages such as 2012 and older. It’s not that people don’t want claret, they just don’t want it at that price.

 

In the shadow of greater vintages

After three rather positive campaigns the 2017s have rather sent Bordeaux back to the doldrums again but is this Kampagnedämmerung?

No doubt the old talk about the viability of en primeur will raise its hydra head again though most merchants are still supportive of the system as a whole.

Although Jenkins, like Lalondrelle, may question the allocation of resources to it, he states very clearly that this campaign, “is not the end of en primeur. The odd campaign is going to hurt but don’t lose sight of the ones that do. Our customers like buying primeur.

“There are châteux that have cut back massively but don’t want to ‘do a Latour’. If it’s ex-cellar it just goes straight to Asia and you get no distribution at all.

“En primeur does give you that. If you want to be a global brand with global distribution and people drinking your wine you want the en primeur model.”

Hargrove agrees, stating: “Bordeaux has always had a season and there is some logic for customers to see wines from a region at a certain time of the year. If they all go their own way we’ll see a Bordeaux release nearly every day of the year. Having a concise time of year is something they would regret if they got rid of it.”

Yet if the system is to continue and be profitable all round then clearly ground is going to have to be given somewhere.

For now, the ’17 campaign is definitely to be filed with the likes of the 2001s and 2011s as wines, good wines, that were released in the shadow of a greater vintage and at the wrong price.

In the long run, Stopford-Sackville is right to say that: “The wines will sell when they’re physical because the wines are good. [But] The perception of the campaign as a failure will overshadow them.”

All well and good of course yet it all does feel like running a successful marathon and then shooting oneself in the foot afterwards time after time and expecting a different result.

“Have we learned nothing?” asks Gibbs. Well, maybe nothing but these things do tend to follow an increasingly predictable pattern.

“I have been doing it for 18 years and I know the cards. It’s always the same. I could have told you in February what was going to happen,” says Lalondrelle.

Perhaps someone needs to tell the casino the guests are getting wise to their game…

2 Responses to “En primeur 2017: ‘Have we learned nothing?’”

  1. Michael Dable says:

    So many words, but the most important one is missing – GREED. The French are historic sufferers of it. Remember the 1972 vintage?

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