En primeur & wine futures for beginners: Fine wine investment guide

If you're new to Bordeaux en primeur, here's Decanter's guide to understanding the basics of wine futures and fine wine investment

What is En Primeur?
En primeur is a French wine trade term for wine which is sold as a ‘future’, ie before it is bottled.

How does the system work?
Every spring the great cru classé properties of Bordeaux produce barrel samples from the previous year’s harvest. These are then tasted and assessed by members of the international wine trade in Bordeaux at tastings that are known as the Bordeaux En Primeur or Bordeaux barrel tastings. 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 wine on to merchants around the world. Wine merchants sell the wine to their customers, whether private or trade.

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. Penfolds announced in 2005 that it would sell Bin 60A Coonawarra Cabernet Sauvignon-Barossa Valley Shiraz, and Block 42 Kalimna Cabernet Sauvignon, en primeur Contact a reputable wine merchant [see below].

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.

Should I contact more than one merchant?
Yes. You should always shop around for the wines that you are interested in. So get as many merchants’ offers as you can and compare prices – they do vary.
Also, find out as much information as you can about particular wines and regions. Don’t just read the merchants’ reviews of the vintage, read several vintage reports written by respected journalists from specialist magazines and newspapers.

How do I find a merchant?
Only deal with recommended, reputable specialist merchants who have a good en primeur track record. In the past, merchants have gone bust and customers have lost significant amounts of wine, which they had bought, but which the merchant had not paid for. Therefore, be wary of prices that are surprisingly low, merchants whom no one has ever heard of, and anyone who only operates through a PO Box. If you have any doubts or suspicions, go elsewhere and buy from someone you can confidently trust. See this section for a list of reputable merchants.

You should therefore ask your merchant the following questions:

1. Are all cases of customers’ reserves, whether duty paid or in bond, identified with customers’ names or code numbers?
2. Can reserves be inspected by the customer?
3. Are individual stock certificates supplied annually?
4. Are customers’ reserves insured on customers’ behalf, at least to the value of the original purchase price?
5. Are wines only removed from reserves on receipt of written instructions from customers?
6. Is the value and/or existence of stock qualified by the auditors in the merchants’ auditors accounts?

Only if the merchant can answer ‘yes’ to all these questions should you consider buying from them. Good, reputable merchants will offer all these guarantees.

Are there any hidden costs?
Read the small print and work out what the final purchase cost will be as there are significant add-on costs. For instance, if you are buying straight from the producer (‘ex-cellar’), you will have to pay VAT (in the UK), duty, transport and insurance. An in-bond price means you won’t have to pay VAT, but the other charges must be paid for before you can take delivery. You should also take into account the annual storage costs if you plan to keep your wine in professional or merchants’ cellars. Similarly, you may want to keep the wines in bond while they mature. This can be a good option if you want to re-export them. However, make sure that the wines are properly identified (see below).

How can I sell the wine if I want to?
If you plan to sell the wine on for profit, there are other costs to consider. If you sell to an auction house, you will have to pay a seller’s premium. Remember also that consumers buy at retail and sell at wholesale prices. The difference when selling to an auctioneer or broker can amount to as much as 25%.

How can I guarantee the quality of the wine I buy?
Bear in mind that all wines you buy en primeur are still in barrel. You are therefore taking a punt on the ability of various wine professionals to assess the quality of these unfinished wines. Things can turn out differently once they are in the bottle, and many a merchant and critic has made a mistake in predicting the quality of a particular wine.

How long is it before I see the wine I have bought?
The wine normally stays in the Chateaux for two years after the harvest. The 2003 Bordeaux vintage was released in September 2005.

What do I do when the wine is released by the chateau?
Once your wine has arrived, visit the merchant to make sure it is exactly as you ordered. You should also check that the wine is correctly labelled with your name or code and is stored separately from the merchant’s stock. Some merchants will store your wine for you at an annual cost – or they can recommend a professional storage organisation.

Written by John Stimpfig