En Primeur Prices
The vagaries of the en primeur market, or wine futures, is an endless subject of debate, but it is important to remember that the major prices rises and falls affects only 5 to 10% of the wines of the region - basically the 1855 wines and the well known names of Saint Emilion and Pomerol. Your average Bordeaux winemaker has neither the ability nor the desire to change his price with every vintage and will sell his wine for the same amount year-on-year.
However, once you reach the upper echelons of Bordeaux, the vintage will make a big difference to the price. The chateaux will say this is a simple case of supply and demand - but the top wines of Burgundy have a far smaller production that the average Medoc chateaux (that can easily produce 300,000 bottles), and they don't indulge in the same yo-yo pricing, so there must be more to it than that.
The average price rises for the 2005 vintage was 68%, with some properties doubling, even tripling, their 2004 price. But there were plenty of buyers - 93% of Bordeaux cases put up for sale of the 2005 vintage found buyers, up from 74% for 2004.
And these buyers have made profits. A case of Petrus 2005, if you bought it from a UK merchant during the en primeur season in April 2007, would have cost you £8-10,000. A few weeks later, the same wine was being traded at £18,000. Today, even with the credit crisis, you would need to part with over £25,000 to get hold of the same case. But not every year is a 2005 (in fact, over the past 25 years, only 1982, 1990, 1996, 2000, 2003 and 2005 could really be counted as true investment years). In lesser vintages, prices may well be the same once the wine has been bottled (this is usually two years after the vintage, so bottled 2005 reds came onto the market during 2007 and 2008).
There have also been notable failure years, particularly the often-quoted 1997. At the time, merchants had enjoyed two years of successful en primeur campaigns, the 1995 and 1996, and were, frankly, reluctant to drop their prices, despite the clear evidence that the weather had not been great, and that the wines would not hold up to long-term ageing. Plenty of buyers that time around were left nursing big losses, and confidence in the system did not return until 2000.
History of En Primeur
It is easy to think that en primeur has been around for ever, as old as the 1855 classification. It is certainly true that trading between merchants before the wine was bottled (or put in cask) can be traced back for centuries, but the practise was only embraced by wine consumers in the 1970s, becoming truly popular in the 1980s.
In the 'old-style' en primeur system of simple chateau-to-merchant buying, remembers Jean Claude Berrouet (ex winemaker of Chateau Petrus), the wines were not systematically tasted in barrel as they are today, or if they were tasted, it was much later in the year after a longer period of ageing. Instead, the merchants knew the wines that they would want to sell, and simply placed their order and waited for delivery. Today, they have barely finished their malolactic fermentation before merchants and journalists descend. 'It is hardly fair to judge the wines when they are still so young,' Berrouet says. 'And frankly most people who are doing the judging today have very little idea how the wines will truly develop. It has become a moment of madness.'
Until the mid 1970s, a wine would only be marketed on to final customers by the merchants at the moment of bottling, or perhaps just before. The first really successful en primeur campaign to consumers was in 1970, when the newly affluent wine-drinking American public bought large amounts of Bordeaux. In 1972 chateau-bottling (ie putting the wine in bottle at the estate, rather than by the merchants at their offices in Chartrons) became compulsory for all classed growths, and the idea of getting your hands on these prized bottles started to really catch the public imagination.
This suited the chateaux owners enormously, as estate ageing and bottling is far more expensive than selling the whole lot in bulk, or in barrels, to a wine merchant. Effectively, en primeur means the customer is bearing the cost of ageing the wines at the property, as they pay upfront and so cover much of the costs entailed by the property.
In periods of recession, there are a number of concerns over the en primeur system, where effectively a customer has paid for a wine while it is still in barrel, two years before it is delivered to him. Not only is there the worry of price stagnation or fall, but more importantly of one of the links in the chain between the buyer and the selling going bankrupt. This was seen in 1973, with the world oil crisis. This crisis followed a few years of excessively highly priced vintages, on the back of 1970, and a sharp fall, followed by mass disposals of stocks. It meant several wine merchants went bust (or had to sell their prestigious Medoc properties, as happened with Ginestet and Chateau Margaux).
Speculation fever returned in 1982 (or rather spring of 1983, when the en primeur week took place). This is the year that is widely seen as the 'real' start of the modern en primeur system. This was not uncoincidentally the year that a young Robert Parker made his name in the US by proclaiming how fabulous the wines from Bordeaux were this year, despite the classic English merchants disagreeing. This also coincided with a strong dollar, and the Americans bought in their droves (helped also by Parker's painting-by-numbers 100 point system, allowing the mysteries of individual wines to suddenly seem far more accessible). Opening prices of the first growths were more than double what they had been two years before, with the 1980 wines, and even so were pretty smart investments (yes, had you bought a case of Petrus at the time for around £130, you would be sitting on £30,000 now).
Another dip came in 1997, when as mentioned above merchants priced too high for the quality. Leigh Claridge, UK Sales Director for Maison Sichel, remembers the 1997 vintage: 'After (a run of unexceptional vintages in the early 1990s) there was a large demand for the 1995 vintage, followed by the 1996, and then, with Bordeaux overheating and merchants wanting to keep allocations, the 1997 was bought heavily at prices which were outrageous. The rest is history. Many wines were subsequently sold off at cheaper than opening prices, and many merchants caught a cold. The wines were easy drinking, early drinking, and, to start with, overpriced.'
Comparisons have been made with the 2007 campaign, when again chateaux kept their prices high following the 2005 and 2006 campaigns, for wines that were widely agreed to be 'early drinking' (this is another change, by the way, as until the 1970s it was merchants who largely dictated the prices, whereas today the emphasis is more with the chateaux. Another downturn may change this). It seemed apparent to me, and no doubt most other non-Bordelais, that the chateaux owners were seriously over-estimating demand, or keeping vast quantities of their wine back to articificially create scarcity. They could do this because of the bumper sales of 2005, and so were cash-rich. They also were relying on new demand from Asia and Russis to fill the gaps from the UK and the US - a little optimistic for regions that are growing fast but are still fledgling for en primeur buying.
Wine Spectator reported a merchant's view in July 2008: '[The] 2005 [futures campaign] was one of the largest responses we've ever had to Bordeaux, and 2007 is one of the weakest,' said Steve Wallace, owner of Wally's Wines & Spirits in Los Angeles. 'It's like comparing Château Margaux to Beaujolais.'
They may regret their high prices and alienation of the trade even more come April 2009 and the 2008 en primeur campaign. The current 2008 vintage looks like it will have been saved by an Indian summer, but is again far from stellar quality-wise, and the economic situation is closer to the 1973 oil crisis than Bordeaux may wish to admit. As ever, it will be interesting to watch...
Further Reading There is a clear overview of the steps of the process on the Wine & Spirit Trade Association website:
Also very interesting history in The Oxford Companion to Wine (Jancis Robinson)