Between a rock and a hard place, Bordeaux & 2014 En Primeur

En Primeur is upon us; as soon as the days begin to lengthen and warm, the wine trade starts looking forward to (or complaining about) En Primeur.  Depending on who you ask its either a ‘bacchanallian feast for the senses’, and a tantalising glimpse of the most recent harvest, OR an onerous week of listening to winemakers tell you once again that it’s the best vintage ever (since last time) and gazing into the tea leaves of barrel samples being tasted far too early.

Violins are unnecessary for Vin-X; we stalwarts refuse to complain at the size of the task ahead, but we do (of course) want to think about it seriously.  And this is a serious vintage. Truly it is the most important for many years; not just since the last most important En Primeur, or the one before that. It is certainly a decent vintage, perhaps not exceptional; nobody is expecting 2005 or 2009, but we are expecting a vintage on par with the best of the rest, 2006, 2008 perhaps.  But, this does not explain the importance of the vintage. It is certainly an important vintage for the UK wine trade, after lacklustre campaigns for the 2011 -2013 vintages much of the UK trade is looking forward to getting their teeth into another decent En Primeur campaign.  This also, does not explain the importance of the vintage.

For the Chateaux, 2014 is a chance for them once again to crow about the quality of their wines, something they have become expert at, having proclaimed “vintage of the century” at least four times since 2000, and with some even managing to boast of their 2013’s as “a true example of what modern winemaking can achieve” in what was, truth be told, a pretty abject growing season.  However, neither does this explain the importance of the vintage.

For us, the importance of 2014 is to be found with the negociants (traditional Bordeaux middle men who sit between the chateaux and the market) and the En Primeur system itself; for both are in some trouble.The negociants first: under obligation to keep their orders up even in bad years to be sure of securing the wines they want in good years, and after bumper 2009 and 2010 campaigns where it seems they barely had to get out of bed to sell their wines, recent years have not been kind.  A falling market, a stubborn unwillingness to sell at competitive prices, a moribund European economy and large stocks of those tricky vintages from 2011, 2012 and 2013 are the major causes. Hard data is difficult to come by, but Vin-X’s understanding is that a number of negociants are sitting on 900+ stock days; a huge excess compared to the largest UK suppliers who hold perhaps 90 stock days.  Perhaps more worryingly, there is now open talk in Bordeaux that banks have run out of patience and will extend no further credit to a number of negociants.  This in combination with the volume of stock held could spell disaster for Bordeaux’s middlemen.

The consequences of this could be dire for the negociants, but need not be all that bad for buyers or for the market.  We can anticipate that some negociants will be in desperate need of funds, and quickly, so in the run up to En Primeur there may be some good deals to be had if you come bearing cash.  During the 2014 En Primeur, we may see some negociants quietly offering  better deals for immediate cash purchases if you have feet on the ground as Vin-X (with the opening of our Bordeaux offices) do, and a pressure from within the Bordeaux system to price wines sensibly.  All in all, the requirement to repair balance sheets currently drenched in red ink could force these backward looking, but sadly significant, market players into the 20th Century (not an error).  Hopes are not high; Bordeaux has proven its ability in the last few years, particularly in the 2013 En Primeur season, to be myopic to a staggering degree, but pressure breeds diamonds, and the Bordelais are notoriously resistant to change.  There is hope.  While some may fall, certainly negociants in general will survive the 2014 En Primeurs.

As for the En Primeur system itself that is an altogether tougher nut.  Just under a decade ago we saw En Primeur working exceptionally well for the 2008 vintage, both for the consumer and for the chateaux.  A decent vintage, released at great value ensured that, even as the world stared over a financial precipice, the vintage sold quickly and efficiently.  The implied contract behind En Primeur “you get a good price for risking buying wines that are not mature, we get money 12-24 months before delivery” held for all players.  But … but: Bordeaux got greedy, they saw the rising prices of 2008 and the quality they had on their hands in 2009 and 2010, and they broke the contract; instead of releasing at a lower than the market price for comparable back vintages, they released at or above these prices (i.e. Lafite 2009 released over the market price of the 2005 or 1996 vintages at the time).  For the almost universally acknowledged vintage of the century, the market braced themselves and bought. Prices for a while continued to rise, and sighs of relief were heard all around.  When the second vintage of the century came along in 2010, with similarly high prices buyers gritted their teeth, held their noses and bought again.However that was the peak of the market, and when negociants tried the same trick with 2011, 2012 and 2013 the implied contract had been broken, and support that could previously be counted on even in bad years was non-existent. We have had three years of commentators telling us that En Primeur is no longer working for the consumer, that there is better value to be had in back vintages. We have had three years of merchants by and large ignoring En Primeur, advising clients that they do not represent good value and buying instead on the secondary market at much reduced prices. We have had three years of Bordeaux telling us that they value the En Primeur system, that they will listen to the market and price accordingly, then releasing regardless to a chorus of silence. 2014 is perhaps the last chance for En Primeur; if this fails, we believe that more chateaux will follow Latour’s model and release in bottle or perhaps, wake up and smell the 21st Century and other direct routes to market.

So what conclusions can we take?  What predictions do we make? What needs to happen for En Primeur to survive? Vin-X believes that it is odds on that at least one major negociant will not survive the coming year.  We would bet against their wine holdings flooding onto the market, as this is in no-one’s interests. In this event, the wagons will likely circle, and the wines will be taken on the books of other negociants or sent back to their respective chateaux. In order to survive, En Primeur needs to find the old social contract it worked by, and a big roll of sellotape: 2014’s wines need to be more affordable than the 2008’s, 2007’s, 2006’s, 2004’s, and perhaps most crucially the 2012’s.  A release price at or around that of the 2013 vintage should probably suffice. A release lower than the 2013’s would almost ensure a swift campaign and repaired relationships. he pressure is on; if the Chateaux listen to the market and the negociants’ pleas, it should be a successful campaign, one in which Vin-X intends to play its part.  For investors a well priced 2014 could be a canny and savvy investment, just as En Primeur 2008’s proved to be.

Obviously Vin-X will have members of staff on the ground during the En Primeur week and with our new Bordeaux office a presence throughout the campaign.  If you’d like to hear our thoughts on the wines we’re tasting and their release prices follow us on Twitter and Facebook, read our blogs at www.vin-x.com and await more by email!