Bordeaux 2025 – the market conditions: when complicated is good

On the eve of the en primeur tastings, db’s Bordeaux correspondent Colin Hay sets the scene for an en primeur campaign set to take place in turbulent market conditions and likely to prove make-or-break for La Place de Bordeaux.

Let me come clean from the outset. I have put off writing this. Last year, and invariably in my annual coverage of the en primeur campaign, I start with a reflection on the current state of the market conditions before turning to the climatic challenges of the vintage itself. This year it’s the other way around. There’s a good reason for that and a not so good reason.

The not so good reason is that it never seems like a bad idea to put off until tomorrow the sharing of bad news that you’d rather not share today. The good reason is that market conditions and, above all, market sentiment have started to change and that what was true yesterday is not quite so true today and, credibly, less so still tomorrow. And, of course, on the eve of en primeur it is tomorrow that counts.

Put differently, it takes time to take stock of turbulent market conditions and those today are as turbulent as they have been for at least a decade. But, no less significantly, there are signs that they might just be improving.

From bad to complicated…

In short, it’s complicated. But complicated is good. Things weren’t complicated this time last year. They were just bad; very bad indeed.

But what is also interesting is that, given what has been going on in the world since this time last year, we might have expected the prevailing market conditions to have deteriorated further since en primeur 2024. Indeed, they have, undoubtedly. The economic fundamentals, as it were, have worsened. But that notwithstanding, fine wine market sentiment seems to have improved, albeit relatively recently – and at just the time when you might expect it to be at its very worst.

The paradox is fascinating and, arguably, cause for a certain degree of optimism in itself. For what it suggests is that it not because of some general improvement in global economic fortunes, but in the continued absence of any such improvement, that the fine wine market seems to have turned the proverbial corner. And that in turn suggests that any such upward trend is specific to the fine wine market and would be more evident still were the general economic mood music not so irredeemably bleak.

My aim then in what follows is to explain how the fine wine market in the last few months seems to have bucked the global trend and to tease out the implications for the en primeur campaign to come.

Back to the elephant in the room

This time last year, you might recall, my survey of the market conditions began with a sustained reflection on the potential implications of Donald Trump’s return to the White House.

A year down the line and we certainly know more. But we still have no clear answer to the central conundrum that I posed then. Is Trump an arch protectionist opposed to free-trade and ready to use foreign conquest to acquire what cannot be produced domestically? Or is he (just) a belligerent free-trader merely deploying protectionist threats to improve the terms of trade in the US’s favour? Or has he yet to make his mind up?

In fact, I proposed a fourth option then – and it still seems the most credible to me today. It is that Trump delights in, and seeks actively to exploit, precisely this ambiguity.

What is more certain is that whilst the tariff regime that Trump has set in place is now relatively well-established and pretty much accepted by market actors, it has undoubtedly served to suppress demand. Just as importantly, it is far from stable, above all where the goods whose terms of trade we are interested in are European in origin.

The implications for the en primeur campaign to come are complex, just as they were last year. For, on the one hand, and to state again the obvious, tariffs are not payable on en primeur purchases, at least at the point of purchase. They become payable only on delivery, two years down the line; and two years is a long time in the life of a Presidency, above all this one.

The possibility that a non-tariff regime might be restored before those taxes become due might be seen to incentivize en primeur buying, at least relative to vintages that are already physically available. But, on the other hand, uncertainty as to what the level of tariff might actually be at the point of delivery, above all when added to the exchange rate risk inherent in any futures market and the sheer volatility of international exchanges, might just as easily dissuade those otherwise enticed by the quality of the vintage into resuming their en primeur habit. Time will tell.

The geo-political context

Rather more easily read are the consequences – direct and indirect – of the ongoing conflict in the Gulf (the temporary ceasefire notwithstanding); and these are of course new since last year.

There is no ambiguity here; all is negative. Costs (including borrowing costs) are high and escalating, certainly higher and rising faster than they would otherwise be. Consequently, prices and interest rates are on the up, demand is constrained, trade volumes reduced, trade-to-GDP ratios falling and consumer spending suppressed. There is no silver lining to this particular cloud.

Yet what is interesting is that, precisely in these most difficult of economic times, the fine wine market seems to have turned a corner. We see this, above all, in recent Liv-ex data in which, for the first time in three years, the bid-to-offer ratio is greater than 1. What that means, very simply, is that for every offer, on average, there is more than one bidder. Put differently, demand exceeds supply; and when demand exceeds supply, we expect prices to rise.

That sounds good – and it is. However, we need to be careful not to overstate the significance of this. Two caveats need immediately to be considered. First, Liv-ex’s data is secondary market data and en primeur purchases are (at least in the first instance) primary market transactions. Second, Liv-ex data is London data and London and Bordeaux do not operate to quite the same rhythm. In short, we might need to draw our inferences carefully.

So, do either or both of these factors change how we might read what is going on here? Well, yes. But they probably give us greater not lesser confidence that the market has indeed turned – or is at least in the process of turning – a corner.

The market is turning a corner

Why? Let’s take each point in turn. The Liv-ex bid-to-offer ratio relates to the secondary market (indeed, to quite a distinct part of it) and we should usually we wary of inferring very much about primary market transactions from what we see there. However, for the past few years primary market transactions have been led by (indeed, arguably crowded out by) discounting on the secondary market. They are, consequently, much more closely aligned than they were.

Put bluntly, négociants in Bordeaux have lost much of their appetite for primary market purchases of new releases (including significant proportions of their historic en primeur allocations) because there is better value to be found hoovering up volumes of heavily discounted former releases (including those they sold to London and the on-trade in the first place). In other words, in adversity, the principal primary market actors have become significant secondary market players.

True, the extent to which they use Liv-ex directly as a platform is known really only unto them. But when the bid-to-offer ratio turns upwards in London it is because the accumulated log-jam of discounted backstock has now started to clear from the secondary market (one way or another). The négociants have hoovered what was there for them to hoover up (or at least the part of it that interested them). If that is accurate, it is very good news for the primeurs campaign to come for reasons we will return to, but essentially because it redirects them to the primary market.

That good news only becomes better still when we consider the second factor. The business cycles of London and Bordeaux are reasonably well-aligned. When one rises the other tends to rise; when one falls the other tends to fall. But they are not perfectly aligned, above all today, and they don’t dance to quite the same rhythm. Crucially, here, the Bordeaux primary market typically leads the London secondary market by around three to six months. What that implies is that if the Liv-ex bid-to-offer ratio has exceeded 1 for the first time in three years in the last month, demand has probably been exceeding supply for the wines most likely to interest the négociants of La Place for a number of months now. If that is true too (and it echoes what I hear privately), then it is all the more reassuring.

Yet again, however, there is need for caution. The market may well have bottomed-out and the massive blockage in the system impeding the resuscitation of the primary market may largely have cleared through. But that is hardly a guarantee of the success of the en primeur campaign to come, even in a vintage such as this and regardless of price.

To assess the prospects for this campaign – and, above all, the release price strategies that will determine its fate – requires us to look at the perceived interests, today, of the principal actors in the system: the properties, the courtiers and, above all, the négociants. Let’s take them one at a time.

The properties

It is no great secret that the properties are suffering. There is little to be gained by rehearsing once again a series of familiar arguments. But suffice it to note that, for a great number of them, their business model is profoundly broken. That is why quite so many of them are up for sale.

That model served them well for a long time. It relied on selling a significant proportion – and in many cases and in most vintages, the majority of the production – en primeur. It relied too on the assumption that quality was the key to competitiveness and that the principal means to enhance quality was through costly investments in both the vineyard and the wine-making facility which could only be recuperated retrospectively through stable but significant average annual increases in releases prices.

Since Covid that model no longer works other than for a small handful of properties – and for many of those for whom it had still been working it stopped working abruptly last year. It did so because the négociants essentially refused to accept their allocations of wines they no longer expected to sell through. They simply withdrew from the system and stopped taking on the risk the properties had relied on passing on to them.

In such a situation, the interests of the properties themselves are not too difficult to discern. For those who can afford to do so (and the qualification is important), it is to wean themselves off an over-reliance on the en primeur system over time, to hold back stock and to release only that volume of wine that they are confident will sell through so as to be able to guarantee that its price will not fall on the secondary market. That means competitive pricing, for sure, but just as much the rationing of supply. Indeed, the greater the volume of unsold backstock of previously released but unsold vintages the property is holding, the more important it is to ration supply rather than to cut price.

Sadly, however, that is not a credible strategy for a significant proportion of properties. Their financial plight and the immediacy of their financial predicament means that they simply don’t have the option to hold back stock and to ration supply. Their best, and in some cases their only, hope is to reduce their release price to such a level that they will sell through enough to stay afloat for a further year. In so doing, and in a low yielding vintage such as this, that will see many of them release below a price that covers the production cost of the vintage.

That is already bad enough in itself, you might think. But it is likely to have a further knock-on effect – to erode further the value of the unsold stock of previous vintages the property still holds (and, in turn, the value of the financial assets against which its lending is secured).

It pains me massively to write these words and I hope more than anything that consumers will get behind these wines and support in so doing the future of the properties producing them. Their interest is to cut prices further and I only hope that proves a tempting offer to Bordeaux lovers around the world.

The courtiers

Courtiers get a bad press and I can understand why. My role is not to defend them, nor even the role that they play, though the function that they will perform in this campaign is likely to prove vital to its success.

They, too, rely on transactions since they work, essentially, on a standard 2% commission; and, precisely because of that, in a context of low market volume and declining prices, they too have been suffering (though typically in silence, since they have fewer friendly shoulders to cry on!).

Their interests, too, are clear and, for once, very closely aligned with those of the properties.

They are, first, to carefully coordinate and manage the sequence and timing of the releases whilst reconciling the arguably increasingly divergent preferences of the properties on the one hand and their négociants on the other. That is no easy task and they got little or no credit for performing it in last year’s campaign much better than I think they had done so for some time. It is likely to prove yet more important this time around. Indeed, I suspect, that it will determine whether we look back on the 2025 campaign as a success, or the final nail in the en primeur coffin.

But that is for later. For now what is perhaps more surprising and certainly novel, is that the interests of the courtiers are also best served by taking the side of the properties in any battle over pricing with the négociants.

To see why it is of course necessary to consider the position of the final set of actors in the drama, the négociants themselves. We will come to them presently. But suffice it to note that the interests of the courtiers, reliant as they are on their famous 2% commission, is for the Bordeaux 2025 en primeur offer to succeed. And for that, prices need to be accepted by the secondary market. If that requires ultra-competitive release pricing then it is the courtiers’ task to ensure that the properties both know what that means and that their release pricing strategies reflect that imperative.

The négociants

Here we come to the crux of the matter. For it is the position of the négociants, certainly with respect to the en primeur market, that has changed most significantly in recent years.

Even a decade ago, the situation was very different to how it is today. Back then, the négociants, for the most part and for most of the wines that comprise an en primeur campaign, simply accepted their allocations, paid for the wine upfront and managed their stock – selling on most of what they purchased to the secondary market but holding back some to satisfy subsequent demand (typically at a higher price).

In a rising market this worked well. The négociants were duly rewarded for the risk associated with accepting their allocations since their margin was rarely in danger and, with prices rising, they typically make more money on the wines they didn’t sell through immediately.

But that was not to last. As en primeur release prices increasingly failed to entice the consumer, let alone the investor, in the way they had and as prices started falling on secondary markets, the risk to the négociants of accepting their allocations grew. They felt exploited by release price strategies that often reflected more the needs of the property (to fund retrospectively the investment in the wine-making facility that had improved the quality of the wine) than market realities.

It was almost inevitable that things were going to change and it came as a surprise to few seasoned market observes when the first négociants started refusing at least some of their allocations. Today – and, crucially, for the 2025 en primeur campaign more prospectively – the négociants will accept only allocations of wines that are essentially already sold. They take and will continue to take no risk. In short, if the price doesn’t interest them, they will not commit and, above all, they will not share the property’s risk by accepting an allocation that exceeds immediate demand.

It is not difficult to see that this changes completely their interest. It does so in two ways or, more accurately, through two parallel mechanisms. First, a much higher proportion of their turnover now comes from the sale of their physical stock of back vintages, much of it acquired on the secondary market at discounted prices. Second, and in direct consequence, they are much less dependent on en primeur for sales and annual turnover than they were.

Their interests with respect to en primeur reflect this new reality. Indeed, arguably their primary interest in en primeur is now a negative one – that en primeur release prices are not set so low as to deplete further the value of the (discounted) stock of previous releases they hold (by, for instance, setting a lower benchmark price for a great vintage). There is, of course, an irony here. For were Bordeaux en primeur release pricing (for the 2025 vintage, for instance) to undercut the current secondary market price for back vintages (notably 2020 and 2022) the négociants would have little choice other than to accept their en primeur allocations!

But that is not all. For, as this already suggests, since the négociants now share little or no en primeur pricing risk with the properties, they are likely to be rather more tolerant of – and perhaps even enthusiasts for – bullish en primeur release pricing.

The implications for the 2025 en primeur campaign

The implications of all of this might not be immediately apparent. But they are rather more easily discerned if we proceed on the basis that there are certain interests here that are shared between the key players – and build from them.

When I speak to négoces about 2025 en primeur release price strategy what I hear invariably strikes me as bullish. But given the above analysis that is not terribly surprising. For the négociants no longer bear the risk that bullish pricing once represented to them. They have, in effect, insulated themselves from downside risk.

It is precisely that fact, the new reality of la place, that the properties need to understand – and that the courtiers need to help them to understand. If they do, this can be made to work once again at least in some form or another.

What is required, a credible global release price strategy for the vintage, is in fact relatively clear. It has three components:

1. competitive pricing across the board (for me, price reductions in euros of c. 5 to 10 per cent relative to the 2024 vintage).
2. ideally, and where possible, a willingness on the part of properties to hold back stock so as not to saturate the market with supply that cannot immediately be absorbed (aided, in 2025, by the small size of the production) as a means to ensure that secondary market prices can only rise.
3. a well-coordinated campaign led from the start by the first growths and their peers signalling clearly to those who follow the release price discipline expected from them.

Put slightly differently, and in terms that speak more directly to the potential consumer, for en primeur to work again, the final buyer needs a strong incentive to buy – and to buy now – as well as an assurance that buying now will not turn out to be more expensive than buying later. The three factors that I have set out, above all the first two, are the fastest route to achieving that in my view.

There is a simple logic in all of this, I think. But it is in so sense a prediction and I do not underestimate the challenge of putting any of this is place. Bordeaux’s weakness, after all, has always been its incapacity to act collectively in its own shared interest even when it acknowledges that it has one. But I suspect that the en primeur system needs either this or something equivalent for its very survival.

This is not about making en primeur great again, but it might just be about making it work again. Most of us would settle for that.

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