Greg Martellotto, owner of Big Hammer Wines, loves wines from Bordeaux. Attending Bordeaux’s Vinexpo 2019 recently, he went to source classified-growth Bordeaux wines for his lucky customers.
His BHW newest video features an interview with Bordeaux négociant Jeffrey Davies, with four decades of experience in sourcing, selecting and exporting these high demand wines.
With all this talk of Bordeaux, the recent Bordeaux en Primeur 2019 season comes to mind.
What Is “en Primeur”?
Type “en primeur” into Google translate (French to English) and what do you find? “en primeur!” What “en primeur” literally means “something that is new and available.” When applied to wine it means “wines that are newly produced and made available.” (Oxford dictionary)
En primeur is both a process and an event. As a process, it represents the annual release of the newest vintage of wines from the Bordeaux region of France. As an event, it refers to the week, this year April 1-4, when Bordeaux wine producers present their newest vintage, in this case 2018, to the global wine trade.
The sponsor of en Primeur week is The Union des Grands Crus of Bordeaux (UCGB.) A total of 116 Chateaux from 14 appellations (AOCs) presented their wines to the press, critics and buyers. These different parties came to evaluate wines, assess the pricing, place order and write about the wines.
The en Primeur event kicks off the en primeur season when wine producers, or chateaux, offer selected quantities, or sometimes all their wines, for sale for the first time. These wines are tasted in barrel and won’t be bottled for at least another 18-24 months. Customers might not take possession of wines paid for during en Primeur week for up to 3 years.
Outside of France, buying wines en primeur is referred to as buying “futures” or “pre-arrival” wine, but the terms are used interchangeably. Buying futures means to buy wine that is still in barrel. Beyond Bordeaux, some other regions that use this type of system are:
- the Rhone Valley, France
- Burgundy, France
- Port in Portugal
- Napa Valley (for select high-end wines) and
The en primeur system has been in place in Bordeaux since just after the 1855 classification.
Bordeaux wines were sold by negociants, not producers, who bought the wines in barrel and later bottled them. These negociants paid for the wine upfront providing cash flow for producers. Given the volatility of Bordeaux’s vintages, this was beneficial for the producers. Consumers benefited by enjoying lower pricing.
Though vintage volatility in Bordeaux continues, wine prices have been rising over the past couple of decades. Now a high-priced luxury product, most consumers can’t afford the high-end wines of Bordeaux. Many of these top luxury wines are owned by corporations and very wealthy families. Many of the small, family wineries are now producing wines that are traded globally.
The power to set pricing has shifted to the producers who want to maintain higher prices. Bordeaux producers use limited quantities and high demand from places like China and from wealthy buyers to keep prices high.
En primeur may be turning into a big PR campaign for each new vintage while continuing to set high price expectations in the market.
Why Sell, and Why Buy, Wines en Primeur?
Bordeaux wine prices are set based on prior year’s pricing, current vintage scores during en Primeur week and level of demand. Chateaux release wines in so-called ‘tranches’ or lots that can change in price over time depending on demand during the campaign.
Customers place orders and pay “In Bond” prices. The price is exclusive of duties and taxes but inclusive of shipping and handling. Wines are held in a bonded warehouse until they are ready to be shipped when duties and taxes are paid. Some wines are bought and sold while still in warehouse, avoiding duties and taxes temporarily.
|Benefits for wine producers||Risks|
Selling young wines while still in barrel transfers risk, and potential gains, to others down the supply chain. It brings in much needed cash flow for wine producers.
Typically, wine will increase in price over time so releasing some of the wines earlier provides guaranteed sales at a guaranteed price. But selling wine early also leaves significant profits unrealized for the producers if prices continue to rise over time and remaining inventory is low.
En primeur selling spreads the risk of bad vintages.Négociantsmust purchase consistently every year, in both strong and weak vintages. If they refuse a bad vintage, they may be frozen out of future good vintages.
|Benefits for collectors and investors||Risks|
Generally, buyers pay much less, often the lowest price when purchasing futures. They can access wines so limited in quantity that en primeur is the only way to buy them. The payoff can be significant if the wine matures well and prices increase.
But if prices drop, investors can lose money. For example, Bordeaux's 2010 vintage sold for extremely high futures prices but most 2010 Bordeaux wines were priced below their en primeur prices after release.
Leaving storage to the négociants ensures buyers that their wines are properly stored. They also benefit from plenty of future growth potential when buying such young wine. Buyers can quickly sell wine upon delivery (or later) for those wines that increase in value.
But the final wine may not be the same as what the buyer tasted in the barrel en primeur. While producers offer a blend during en primeur, the final blend may be very different, effectively delivering a different wine from that purchased.
Another risk is that you can’t get the wines that you want due to limited allocations unless you have long standing relationships with the négociant or the chateau.
For investors, fraud risk is a factor because there are no legal investing requirements, so buyer beware.
Finally, en primeur wine pricing will be impacted by the fallout around Brexit, changes in currency (USD or Chinese Renminbi vs Euro,) and change in duties (French wine into the U.S.)
Buy en Primeur from Big Hammer Wines
The reviews of the 2018 vintage so far are very good but it depends on the region within Bordeaux. You need the expertise of a reputable dealer to help determine the best options.
Reputable dealers are critical because you will wait at least two years to get your wine. If your retailer goes out of business, you are out of luck.
En primeur wines are available for only a certain length of time. Once the window closes, no further orders are taken. Depending on the vintage, en primeur wines can sell out very quickly due to the limited availability.
Follow the information at Live-Ex (the London International Vintners Exchange,) a trading, information and settlement platform used by producers and wine investors.
Operating since 2009, Big Hammer Wines direct imports the best of Bordeaux. As Bordeaux experts, we can guide you through the en primeur process.
Greg Martellotto knows the wine business intimately, having worked in all levels of the business from winery to restaurant. He tastes over 5,000 wines every year to ensure access to the best wines from around the globe.
Trust Big Hammer Wines for all your Bordeaux wine needs. We will help you find the right wine for every occasion. Contact Big Hammer Wines today.