Bordeaux En Primeur - From Frenzy to Fiasco?

March, 2009

Every Spring a great deal of posturing goes on amongst the global wine trade before the curtain rises on a drama that starts in Bordeaux and often finishes years later, sometimes ending in tears. The main protagonists are the great Châteaux of Bordeaux, the négociants or brokers, the wine trade of the UK, US, Europe and more recently the East, as well as wine journalists. Thrown into the mix are the lesser Chateaux and producers, the investors and even some consumers. 

Like the annual epic voyage made by salmon up river to their spawning grounds in British Columbia, which is considered a great natural event, so the en primeur tastings of the previous vintage of Bordeaux wines and the release of prices every April is a great wine event, just as gruelling and sometimes as disappointing as the swim upstream is for the salmon. And like the salmon the wine trade return every year; to Bordeaux. 

En primeur for us mere mortals is a system of French origin whereby the wines of the previous vintage are tasted and offered for sale to the wine trade through négociants and brokers. The idea behind it is that the producer offers a portion of their annual production for sale early and some two years before release at a discounted price. The producers receive a boost to their cash flow and the wine trade can buy wines at more competitive prices, passing on the benefit to their customers or making a better margin when the wines are eventually released. Pay now. Receive the wine once it is bottled two years or so later.  

That is the theory but in periods of economic booms and high demand, such as in the 1970’s and 1980’s and more recently, prices have rocketed and ridiculous prices have been paid even for vintages of lesser quality. 

This year there are serious rumblings amongst the trade and speculation that the en primeur campaign is likely to fizzle like a damp squib or even be a non starter. 

As I am not an expert on this vinous opera I thought I’d ask our Spectator Wine Club wine partners what their thoughts and predictions are for the imminent 2008 en primeur campaign and what it means for us consumers. I will then ask them to comment in a few weeks once the dust has settled a bit.

Nicola Arcedeckne-Butler MW

Private Cellar 

There would appear to be little doubt that the region has made better wines than in 2007, with rot possibly more in check and certainly a better end-season, with the long Indian summer from which we all benefitted here in the UK. Some growers are claiming that they have made a better wine than in 06, which could lead to interesting attempts at pricing (see below). It remains to be seen how well it has been handled in the different regions, particularly in Graves/Pessac-Leognan, where, with their earlier harvest, the early September rot would have to have been well under control to allow for their earlier maturity dates. Certainly from all reports the dry whites haven’t had a roaring success, unlike in 2007, and for the Sauternes I have no opinion at the moment. 

As to the market for the primeurs? Like most of the British trade, we have become increasingly jaded by the undentable optimism displayed by both the big Châteaux and the négociants over the past years, really from 1997 onwards. Their inability to learn lessons and match global economic circumstances with viticultural reality is spectacular, resulting in certain Châteaux last year claiming they had reduced their prices over 2006. Strictly, this was true, but a reduction of say 0.4 euros between 06 and 07 when there had been an increase of eg 15 euros between 04 and 05, and static between 05 and 06, amounts to little more than lip service to the word ‘reduction’.

Customers aren’t stupid, nor so blinkered or determined to have X wine at any price that they can’t see through this fiction of a price reduction, with the exception of the very top first growths and a limited number of other wines where there is (almost) always a price advantage to buying en primeur. And this is before any negative impact from exchange rates! The very real depreciation of the pound against the euro has been well documented, however the fact remains that a wine which cost for example 15 euros a bottle in the 2005 campaign, and the same in 06 and 07 will have seen a year-on-year increase of around 20% in sterling price to the customer. Given that the 2005 vintage is fabulous, and the 06 and 07 less good each time, clearly that doesn’t offer the customer value for money, nor a reason to buy. 

I think that whilst I am out in Bordeaux next week I will see lots of handwringing by Château proprietors declaiming the global market and its particular influence on Bordeaux – during the 07 harvest the Export Director of one of the biggest négociant firms baldly stated that they didn’t really care about the Anglo Saxon market’s (US, UK) lack of primeur activity as they knew that the Eastern market would buy the wines only once they were in bottle, with a price marked up to match. Now that these self-same 2007s are due to be bottled (some already are bottled), I would very much like to see if that optimism is being borne out (believe me, I will be trying to find the man to see if it has!) as the grapevine has it that the Eastern markets are very quiet indeed.

If, as we expect, these new markets aren’t buying in bottle in a particularly big way, it will leave many négociant houses with huge stocks of expensive wines, which will in turn jeopardise their profitability – the 07s will only come onto their balance sheets once they are physically available, and if they aren’t selling them or moving them on they will find themselves badly overstocked with all the attendant liquidity problems. 

The primeur campaign? Who knows? The Châteaux will be trying to get the best price possible, and it is clear that they have a real gamble to make – to release or not to release? If they release, what if they don’t sell? If they don’t release, it has a huge impact on their cash flow. As to pricing – Berry Bros & Rudd, Farr Vintners famously stating that prices must be halved to find a market – I think that there need to be serious adjustments in pricing, with a look back to before the 2005 campaign which set new highs across the board (as did 2003 and 2000 before it), however for the UK certainly, and other currency markets, a 50% reduction in the euro cost will not equate to a huge reduction in sterling cost.

Plus I can see very few Châteaux being prepared to be so brave – the smaller Châteaux haven’t marked up in the same way as the bigger names, and generally have been less arrogant so therefore don’t have the flexibility to offer this sort of discount, and the bigger Châteaux still living in their cotton wool land of luxury goods and brands, where they think they are immune – they are aware that there is a war out there but don’t think it is a problem for them (yet). 

More on my return!! 

Adam Brett-Smith

Corney & Barrow 

The culture of en primeur purchasing in the UK is very strong. On the whole for good reasons because it allows the customer to buy at the best price, to have a good chance of securing rare and in demand wines, and in the size that is required. He might also benefit from spotting a latent ‘star’ whose true value has not been recognized in the market. These are the compelling en primeur ideals – I stress ideals. 

Bordeaux’s problem is that it is frequently incapable of pricing according to intrinsic quality AND market strength. It often uses either one or the other and on the rare occasion it uses both, it usually does so in the wrong way. So it was with 1984 – a bad vintage with a strong US market and therefore grotesquely overpriced. Result? UK Merchants forced to buy to ‘maintain their allocations’ couldn’t even sell them at cost and they hung around like a bad smell (literally in some cases!) for more than a decade. 

Likewise with 1997. A perfectly decent, moderate year priced hugely more expensively than the very good 1995 and 1996. So, hot market, average quality. Result? See above…. 

And….likewise in 2007. Decent year, overpriced. See above again… 

In fact the problem with the about to be offered 2008 is not 2008 itself (likely to be pretty, even very good) but 2007. 2007’s pricing allows significantly less room for manoeuvre on price reductions for a much better vintage (2008) because of the greed shown by most producers with their 2007’s. Factor in the pathetic devaluation of Sterling (and the overvalued Euro), a very sticky market and you can appreciate the difficulty. 

But difficult to weep for the Châteaux owners. They have made A LOT of money whilst the Bordeaux négociants and the poor old UK Wine Merchants have had their margins squeezed and squeezed again. The balance has shifted but the consumer has not benefited. 

That’s the extent of the problem and of course the opportunity. My advice to the Bordelais? Halve your prices in 2008 for starters. You can afford to and you really, really need to make some friends. We all need them in these times don’t we? 

There are some noble champions of reasonable pricing which is why their wines will sell in ANY market. Headed by Christian Moueix in Pomerol and St Emilion whose prices – for a supreme quality – have risen by just 35% average in 7 years and Anthony Barton (Ch Leoville/Langoa Barton). Ditto the lesser Classed Growths who offer fantastic value – Kirwan, Lafon Rochet, St Pierre, Calon Segur, Les Carmes Haut Brion to name a few. It ain’t all bad! 

Jason Yapp

Yapp Brothers 

Happily at Yapp Brothers we are well off out of it as we sell no en primeur Bordeaux at all and never have done. 

I’ve always felt wistful when the UK trade has been revelling in the feeding frenzy of great Bordeaux vintages (2005, 2003 & 2000 being fine examples) but the difficult years (in difficult times) are a different matter altogether and I really am glad not to be part of it at present. I do think the Bordelais are narrow-minded on pricing (and often greedy and deluded). They had a bit of a ‘get of jail free’ moment with last year’s campaign and the abolition of import duties in Hong Kong coupled with strong Asian markets. I can’t see any get out for them this year and I think the 2008s will be a drag on the market for years to come (as were the 1997’s).

Personally I wouldn’t be tempted to buy right now at any price. As far as I can see the only way is down but I must reiterate that I am no expert and have no commercial involvement with buying or selling Bordeaux en primeur. 

On a jollier note the Rhône has been enjoying a great vintage run and business here is thankfully brisk. 

Robert Boutflower

Tanners Wine Merchants

 So, what exactly is the point of spending the money this year, with the awful exchange rate, when:
1.      The price of even the stratospheric 2005s has fallen on the secondary markets
2.      Coffers look pretty bare
3.      It's still a 'questionable' vintage anyway...

Well...
We can be pretty sure that:
1.      Wine prices will go up eventually, as the wines get drunk and the Bordelais look to get richer... This is winflation, so buy now.
2.      Gordon Brown would like you to spend money
3.      Certain pockets of land, mostly that (immediately) surrounding the chateau making the statement, were (miraculously) blessed with the most extraordinary weather in 2008, allowing them to make wine of quality very close to that of 2005. Faced with this implacable belief coming straight from the horse's mouth, many polite British buyers will not recognise that the proprietor of said chateau is not in fact wearing any clothes.

Henry Rymill

Spectator Wine Club 

It looks to me as a rank amateur that if you are a wine drinker, avid collector or investor you are better off buying older vintages of Bordeaux that are being offered at reduced prices due to the current economic circumstances and their effect on merchants and private investors needing cash badly. It is a time to sniff out bargains as there will be plenty. 

Jason Yapp also referred me to an article by Jancis Robinson in the Financial Times which paints a somewhat gloomy of the world of wine. More than ever we all need a decent reasonably priced bottle of wine, good comforting food and entertaining company.