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Here’s why Bordeaux should be cautious with en primeur pricing

With this year’s en primeur campaign fast approaching, we reveal why Bordeaux should be cautious when it comes to the pricing of the 2020 releases.

After several reports from the drinks business on what to expect from this year’s Bordeaux en primeur campaign, head of investment at Bordeaux Index, Matthew O’Connell, has stressed that it’s particularly important that the famous fine wine region gets it right when it comes to pricing the wines from last year’s vintage.

In a conversation with db earlier this week, he made it clear that the prices set for the 2020 wines in barrel – along with the volumes released – will not only directly affect the success of this year’s campaign, but also the health of the secondary market for Bordeaux more generally.

Furthermore, he explained that it would only take a small increase in price on the 2019 release to create a marked drop in demand for this year’s wines, despite the fact that the previous en primeur campaign was priced relatively low as it took place in the middle of the pandemic.

In his view, by keeping prices for the 2020 vintage close to the 2019 releases, the Bordelaise could expect to see a good campaign, as well as a continued rise in trading for the region as a whole.

He told db, “The pricing of last year’s campaign led to increased interest: we could have sold some of the wines a number of times over, but it won’t take particularly significant price rises [for this year’s releases] for that interest to dissipate quickly, and our concern is that producers will be looking for significantly higher prices, and the risk is that the reception to that is binary.”

Summing up his hopes for the 2020 releases, he added, “We are looking for sustained momentum driven by last year’s campaign.”

Indeed, he said later on in the discussion that should the 2020 vintage be priced at a similar level to last year’s release, then “there’s a chance for en primeur to regain its following strongly,” – having admitted to db that “the consumer’s relationship with en primeur has been complicated over recent years – every year has been pretty finely balanced.”

Continuing he said, “It was very clear last year that a material discount when buying wine en primeur in barrel led to strong demand, and a more modest discount didn’t. I think it will be the same this year, if the pricing is marginal, then demand will be marginal too.”

There are other factors to consider when it comes to en primeur’s success, according to O’Connell, which relate to the timing of the campaign, and the quantity released.

Speaking of the 2019s, he said, “The wines were released over 2-3 weeks, it was quite condensed, and it grabbed and retained people’s attention, but if it’s a more dispersed campaign, then it may not hold people’s interest in the same way.”

As for volumes, recording a longer term trend of châteaux releasing lower quantities of wine at en primeur, which was particularly marked for last year’s campaign, he also schooled against producers deciding to hold back large amounts of stock.

“Volumes were down very significantly with 2019, and if the en primeur campaign this year has lower volumes than even 2019, then it starts to feel very small,” he said.

“Production is down with the 2020 by about 30% on average, so hopefully that won’t feed through into lower en primeur volumes on last year, when châteaux retained more stock to sell later,” he continued.

In short, he said that he would like to see a campaign that included all the “positive elements of last year” and one that is “slightly bigger in size to build on the moment of last year,” commenting, “That is the recipe for a strong campaign.”

He also said that he believes that a general upsurge in the level of demand for back vintages of Bordeaux on the secondary market is connected with the healthy en primeur campaign last year.

“I don’t think Bordeaux would be seeing very strong trading volumes this year without a high-demand en primeur campaign last year,” he said.

“When the châteaux release wines at reasonable discounts, and there is a strong demand for the campaign, it spills over into the aftermarket, and the chateaux still have plenty of stock to sell at a later date, so it’s a beneficial virtuous circle.

Concluding, he offered this warming, “It would be a shame to disrupt that pattern.”

Read more

Bordeaux en primeur 2020: what to expect

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