Fine wine trade buyers and critics from all over the world were in Bordeaux last week to taste the 2018 crop and the market is now waiting for the quality scores first and then the release prices which will start to hit the market in May. So should you invest in the 2018 en primeurs?
A complicated vintage climatically, with the first half of the year experiencing prolonged periods of rain. The region experienced an average 12 months rain falling between January and July. Hailstorms created vineyard stress and water reserves in soil were extremely high, but this subsequently paid dividends, protecting vines during hot conditions from July through to harvest. Cool nights and hot days late season helped to achieve a rare freshness and aromatic complexity and Bordeaux has great expectations for this vintage.
Winemakers across the region believe that 2018 is “a highly desirable vintage in-barrel” and the Union des Grand Crus, in a recent press release, stated that it is an “outstanding vintage for the region”. It is still too early to confirm whether this is a prime or mid-quality vintage as we are still waiting for the top critics’ views, but an early indicator has been provided by Jean-Marc Quarin, who scored a number of wines the perfect 100 points, as can be seen in the table:
|2018 WINE||Jean Marc Quarin score|
|Margaux||99 – 100|
|Leoville Las Cases||98|
|Pichon Longueville Baron||98|
Source: Liv-ex.com, April 2019.
Key observations from Quarin includes Cheval Blanc 2018, of which he stated that “he had never tasted Cheval Blanc at this level at En Primeur” and that Latour and Lafleur also deserved their perfect points.
From a critical perspective 2018 will be interesting as we are another year on from Parker’s retirement from appraising Bordeaux. Neal Martin is only just heading the pack in terms of influence when it comes to a view on Bordeaux, and he will not be tasting the 2018 en primeur until later this year due to illness. There will not be one voice guiding the market this year for sure, and the value of an overall average critical score is becoming increasingly apparent. There will probably never be another Parker – as we keep saying those Parker 100 pointers will become evermore collectable, and valuable, over time.
Why invest in en primeur?
Does buying wines en primeur provide investor benefits? You can see our guide to the benefits and risks of investing in wine en primeur on our website. The original rationale for purchasing wine futures (as this process can be described) was:
(1) to guarantee an allocation of highly sought after fine wine which may be difficult to get hold of, and
(2) to benefit from a lower release price (which historically was the lowest ever price of a wine) with some discount for upfront payment before physical receipt of wine.
However, such was the demand for the top wines of Bordeaux ten years ago, the chateaux, negociants and early supply agents increased the release prices over the 2009 to 2014 vintages to such an extent that the prices were unsustainable. This was combined with a general slump in the market for Bordeaux during the period, and the 2011 – 2014 vintage campaigns struggled. Whilst Bordeaux pricing became slightly more realistic in time for the excellent 2015 and ’16 vintages there has been increasing market scepticism about the benefits of buying fine wine en primeur.
Price is looked at much more keenly and some chateaux have responded by reducing the volume of wine they make available for sale en primeur. Latour famously withdrew from the Bordeaux en primeurs completely in 2012, and their wines are now released by the Chateau when they are ready to drink and at a premium. The trade in Latour on Liv-ex has drifted since the withdrawal, but price has held and other chateaux, whilst not completely exiting the en primeurs process, have certainly reduced supply made available.
Supply, demand and Brexit
The vintage is expected to yield more supply than 2017, which suffered significant frost damage. The chateaux are known to have held back supply of the prime 2015 and ’16 vintages which may naturally correlate to reduced levels of 2018 being made available, however it is a more bountiful vintage overall. The supply strategy will be interesting.
But one of the key influencing factors unique to the 2018 vintage will be the ‘Brexit effect’. The UK merchant take-up accounts for the majority demand for Bordeaux en primeurs and the back-drop of the increasing political and economic confusion over Brexit could have a marked impact on the campaign. Should Sterling suffer significantly in the next couple of months, UK demand would be affected, the Asian market does not tend to buy en primeur and it is unlikely that the spare capacity would be absorbed by North American and European buyers.
Merchants and collectors hold a fair quota of young Bordeaux with significant demand in the last couple of years for the superlative 2015 and 2016 vintages. 2018 will have to be critically strong and most importantly priced right to stimulate high demand at this time in the UK. Hopefully, the Bordeaux negociants will consider this in their pricing strategy but with Brexit see-sawing on an hourly basis we expect that release prices and volumes will be judged carefully and timing may well be linked to any Brexit deadlines that arise in the coming days.
How to invest in en primeurs?
Buying fine wine en primeur can be likened to buying a ‘future’. In essence you are acquiring an allocation equivalent to a case of 6 x 75cl, 12 x 75cl or other standard format. The wine stays in barrel at the Chateau and then once bottled, normally 2 to 3 years after harvest (for example, the 2016s are being delivered now), it is shipped to your ‘In Bond’ account, in the UK. You can sell your en primeur allocation before it is bottled should you wish to and the en primeur prices are available, for example 2017 en primeur allocations are still available to buy now.
We will be watching the scores as the critics publish over the coming days and then, most importantly, the prices over the next couple of months as trade commences in 2018s. We will keep you informed about those wines we identify as offering growth potential for fine wine investors.
For more information call us now on 0203 384 2262.