Bordeaux en primeur faces a ‘make-or-break’ campaign

This year’s Bordeaux en primeur is taking place amid the worst market conditions in over a generation. Bordeaux correspondent Colin Hay looks at what needs to be done.

The current market situation, Hay says, is significantly worse than when the 2022 vintage was released – a campaign that was hardly a great success (despite critics’ enthusiasm) and which failed to establish a stable secondary market price for the vintage. Up until now, négociants have been absorbing the financial risk of en primeur, but many can no longer afford to do so – finding themselves unable to service the accumulated debt associated with the rising costs of borrowing and storage on the one hand, and the reduction in the volume of transactions since the 2019 en primeur campaign on the other. They are already holding an unprecedentedly high volume of accumulated stock, but the market has stalled – partly in anticipation of the campaign to come.

Clearly, this has almost nothing to do with the quality of the upcoming vintage. Indeed, the signs are that it is a good enough vintage to work en primeur; if it does not, the very institution of en primeur itself is threatened. However, Bordeaux is better prepared than last year and there is a much greater, collective understanding in Bordeaux of the need to ensure that history does not repeat itself. Already, a number of leading courtiers and properties are seeking to impose market discipline through the coordination of release pricing and sequencing during the campaign. This is not easily achieved, but it has succeeded before, with the 2019 and 2008 vintages, for example.

For the campaign to get off to a positive start, the first releases will have to work – and they will need to be both early and symbolically low-priced in order to do so. A reduction of, say, 35% on the 2022 vintage for the early releases would send a clear and unambiguous signal to the market that it is capable of establishing the parameters of acceptable behaviour for those releases that follow.

If the success of the Bordeaux 2023 campaign requires the price signalling of those prepared to take the responsibility for releasing early and low, then why not take the credit for being one of those to fire the starting gun? History suggests that the market tends to smile on those who have done so before – Pontet-Canet and Cheval Blanc in 2019, the first growths in 2008.

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The more timid option is to bide one’s time and see how things unfold, but the risks are greater. It is not clear that the demand exists to see a campaign the size of the 2019 vintage, and properties that release late may well risk missing the boat.

The difficult part comes in setting a release price that is both accepted by the secondary market, and to the extent that it guarantees a positive price trajectory thereafter. Put like that, is a 35% reduction enough?

There are clearly lots of internal conversations in Bordeaux today about what the appropriate discount level needs to be on the 2023 vintage (relative to 2022 release prices), and those debates will no doubt continue until the first releases (not least, as market conditions evolve). Will the early movers set the tone? A month ago I was sceptical, but I suspect it might be seen to be required, even in Bordeaux. However, even a market-transforming, step-level reduction in price does not guarantee success – and if properties feel that a 35% cut in release price does not ensure that their wines will sell through immediately, they might be tempted not to follow the first movers. Were that to happen, en primeur itself would be in jeopardy, by refusing to offer prices to the market that the market is prepared to bear.

The potential demand for Bordeaux en primeur that existed, even in the midst of the Covid crisis, does not exist today, and market conditions are significantly worse. Partly as a consequence, the secondary market is awash with quite heavily discounted back stock, often from excellent vintages, at prices close to – and in some cases lower than – those we are talking about here. And there is quite a lot of additional back stock gathering dust while it loses value in storage around the world that is not even on the market – because there is essentially no demand for it. Meanwhile, the cost of borrowing has soared and is now around three times higher than it was in 2020. The cost of storage has also risen significantly. And, with the 2021 and 2022 release prices never having really been accepted by the market in the first place, a reduction of 35% on last year’s release price is a different thing to a similar reduction for the 2019 vintage. Is 35% going to be enough to restore confidence and help lead the wider fine wine market out of the doldrums?