How much will currency put a dent into the 2015 campaign?

Expectations are high for the 2015 Bordeaux vintage with even mainstream press tipping it as “maybe one of the greatest ever”! The market is more than ready to get its teeth stuck into a quality vintage but whether that will happen next month during the en primeurs campaign or at a later date is yet to be seen.

The question is, has the market got the appetite to buy in a format that in recent years has left the buyer out of pocket after the campaign?

Trade buyers who acquired the 2013 vintage en primeur, which is hitting the market now ‘in bottle’, are being offered prices that question the viability of buying wholesale future positions in Bordeaux. One of the major merchants reports that more than 60 per cent of their 2013 supply has not moved from the price paid in Spring 2014, 27 per cent trading below and 10 per cent showing an increase.

Fortunately, this is where we can be agile in the market, unencumbered by large en primeur stocks and the ability to cherry pick those that offer the most potential for growth.

The unique platform that is the ‘Place de Bordeaux’, where traditionally the chateaux work with their courtiers to extract the best possible prices from the negociants, who then take the ‘volume risk’ with the world’s markets, has led to the dynamics we have witnessed over the lack-lustre campaigns in the last five years.

Chateau Latour

The new trend appearing is the chateaux are taking a more pro-active role in the selling of their wine by retaining a quota previously sold en primeurs to supply customers at a premium at a later date. The real impact of this strategy will be realised in years to come, but you can understand their desire to hedge against downward pressure in price at the en primeur stage. Just as the market waits to see the ultimate effect on Latour and the prices of its wines in the future following their decision to exit the en primeur process after the 2011 vintage was released.

Brexit

An unusual factor this year for the UK market is the effect of Brexit. Currency has already become an influencing factor in recent weeks post the announcement of the referendum. The US and Chinese markets are expected to engage strongly in the 2015 en primeurs but Sterling buyers at this stage face challenges with the timings.

The £ continues to weaken against the Euro and wine bought in Sterling prior to the referendum is more than likely to be more expensive. Assuming Sterling recovers to recent norms wine buyers in June could potentially undercut UK merchants and in do doing further undermine the en primeurs system. The Brexit issue will certainly make Sterling buyers more cautious this campaign.

Will Bordeaux accommodate this conundrum with its pricing strategy of the first potentially great vintage since 2010? That remains to be seen. It is tough, the UK buyers represent approximately 20% of the en primeurs market but other jurisdictions also question the risks attached to the forward buying of these wines – the jury is definitely out.

Ultimately, the chateaux themselves will weigh up the odds of pandering to age old ties with London and take a view on how much stock they will retain themselves. One way or another the market will respond accordingly.

Meanwhile, we are in Bordeaux for the trade tastings first week of April and we will keep you informed!