First Growth Latour – a sign of things to come?

Chateau Latour releases a top vintage second wine at a 20% premium. The Bordeaux First Growths’ second wines have grabbed attention and market share over the last 12 months. Chateau Lafite’s Carruades-Lafite has been one of the highest volume traded wines on Liv-ex in 2018. With this back-drop we look at the release this month of the highly scored Forts Latour 2009.

Latour sent shockwaves through the fine wine industry when it quit the Bordeaux En Primeurs system in 2012; 2011 being the last Latour vintage to be released onto the market via La Place Bordeaux’s annual campaign. The Chateau team had announced at the time that they had decided to only release their wines to the market when they were physically ready to be drunk. This meant that, on average, a Latour Grand Vin would not now be available until about 12 years after harvest and second wine, Forts Latour approximately seven.

This strategy was a radical departure and in hindsight it could be seen that Latour had been preparing for this new sales strategy for some time with a growing reduction in the amount of wine made available En Primeur in the campaigns leading up to the release of the 2011 vintage in 2012.

What are the benefits for Latour? Obviously, they now have more control over where their wine is sold, to whom and at what price, with a corresponding effect on the secondary market, which it is still very early to understand due to the ageing capacity of these wines. Key goals will have been to retain margin and to build stronger relationships with the end-consumer and their more immediate agents in the supply chain. The Chateau management may well be aiming for a model more similar to that established by the top Californian estates who have a direct customer list.

One of the key selling points for buyers today is the ‘direct from cellar’ provenance on offer, as opposed to acquiring wine with multiple previous owners if bought at first stage release En Primeur. However, as long as a wine is stored In Bond throughout any sales history with minimal movement the premium that has to be absorbed for this luxury must be weighed up.

Commercially, Latour’s decision to leave was a risky strategy as the Bordeaux En Primeurs system is a very significant marketing machine. The region’s annual flag waving provides a shop window for the top wines of Bordeaux to buyers from all over the world. The process keeps the chateaux in the ‘mind’s eye’ of the international merchants. La Place Bordeaux is responsible for marketing, sales and supply chain logistics to a global market to which Latour now has to assume responsibility.

The impact has been that Latour must now hold about 10 vintages of stock at the Chateau; an enormous investment in terms of storage and insurance and a corresponding requirement to increase marketing support and sales effort. Saying that brand ‘Latour’ has a profile and take-up the envy  of the industry, not surprising as it is owned by Francois-Henri Pinault, whose interests also include top luxury brands Gucci, St Laurent, Stella McCartney and Balanciaga.

A negative impact may have been some disengagement by merchants from Latour since 2012. Less involvement and financial commitment from the earlier stages of a vintage may have resulted in a reduced willingness to sell Latour rather than Lafite, Mouton, etc over time. The market has been ‘deprived of’ early tasting data and information about the wine’s evolution to drinking stage.

In terms of the First Growth Chateaux’s second wines and their quality and price performance generally, this is based on the wine making skill and intellectual property of these great estates and their teams, but applied to a different quality grape, or blend. They are, in certain vintages, scored nearly as highly as their Grand Vin ‘big brothers’ but available at a considerably discounted price. As they start to be consumed and become rarer, their prices too tend to move in the market, so they do offer the opportunity for growth.

Second wine, Carruades Lafite is a great example, and of course there are more vintages of this wine available on the market so we can take a view from its performance. Liv-ex reported in May this year that the Carruades Lafite index had increased 22% in 12 months to the end of that month, significantly outperforming the Bordeaux norm, of nearer 6% growth, and being one of the most actively traded wines on the market.

We have previously looked at the logic of including First Growth second wines in portfolio planning and a well-priced Forts Latour could certainly tick all the right boxes. This 2009 vintage (Wine Advocate 95 points) was one of the last few En Primeur releases in 2010 and from the most highly average scored vintage of the 21st Century so far. Robert Parker previously described it as “possibly the best second wine ever made” at Latour.

This latest release price reflects the blue-chip provenance direct from the Chateau at a 119.1% uplift from its En Primeur price, however the higher scored 2010 Latour (Robert Parker 97 points) is currently available on the market at a 16% discount which may present a deflection on demand for a while.

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