How to invest in wine - En primeur

Every year, there are numerous en primeur offers from wine merchants, most notably from Bordeaux. However, for many consumers, the en primeur merry-go-round can be a confusing spectacle. So here's a quick Q&A explaining what it is and how it works.

En primeur is a French wine trade term for wine which is sold as a 'future', i.e. before it is bottled – usually the year after the en primeur offer. The most important annual offer comes from Bordeaux.

  • How does the system work?

Every spring after the vintage, the great cru classé properties of Bordeaux produce young barrel samples from the previous year's harvest. These are then tasted and assessed by members of the international wine trade in Bordeaux. The châteaux then release for sale a 'tranche' or proportion of their total production at an opening price. This is sold in strict allocation to wine brokers in Bordeaux, known as négociants. The négociants then sell the en primeur offers.

  • Why does it work this way?

Mainly because it always has. Moreover, by selling to négociants, the châteaux effectively spread the risk of bad vintages, which they might otherwise be unable to sell. En primeur sales also provide the châteaux with a ready source of cash, which they would otherwise not recoup until the wine was bottled and sold.

As the system stands, the négociants are more or less obliged to buy whatever the châteaux sell. If the négociants don't buy what they are offered (in a bad year), they risk forfeiting their allocation for next year (which may be a great year). However, the system only works effectively in periods where strong world demand for the great wines of Bordeaux outstrips supply, as is currently the case.

  • Is only cru classé Bordeaux sold en primeur?

No. Winemakers whose wines are not classified growths, but whose quality and price justifies a futures allocation, also offer wines in this way. In some cases this is the only way to obtain limited-production wines on release.

  • Is it only Bordeaux that sells its wines as en primeur?

No, you will find en primeur offers from other wine regions around the world, including Burgundy, the Rhône Valley, Italy, California and Australia.

  • When do you pay?

Consumers pay the opening price as soon as the offer is made by your merchant.

  • When do you get the wine?

Usually in spring or summer two years after the offer. Then, once you have paid the additional shipping costs and duty, you can take delivery of your precious cargo. An estimate of these costs is usually given to you when you buy your wine.

  • How easy is to get what you want?

It depends on what you want to buy. Because demand is so strong for the most sought-after wines, it helps if you are a long-standing customer of a wine merchant that is offering wines en primeur. If you're not you may have to go to the back of what could be a very long queue. However, you will have less of a problem with those wines which are more available and less expensive. In order to get some great wines, customers may have to take lesser wines, too, as part of their order.

  • Isn't it better to buy older vintages which have proved themselves in the secondary market?
In the last 10 years windfall profits for investors buying en primeur have all but disappeared as chateaux have priced their wines at full market value - and pocketed the proceeds themselves.

What that means is that while en primeur may still be the cheapest way to buy particular, highly sought-after wines, those wines don't necessarily make the best investment. A case in point was the 2005 vintage which not only fared badly against other vintages, it is still trading at below its market high of June 2008.

As a result, wine investment professionals are increasingly looking at older wines for more profitable investment opportunities. Many regard the back vintages such as some 1986s, 1900s and 1996s as better value than more recent ones.

This is simply because the wines are relatively (and sometimes actually) cheaper than their sibling counterparts.

Moreover, with greater bottle age, they are going to be drunk earlier. This in turn will reduce supply and simultaneously fuel higher prices. Any such price anomalies as these present good investment opportunities.

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