The 34th London Wine Fair key debate for investors in en primeur

Peter Shakeshaft - Vin-X blogTim Atkin, MW hosted the key debate for the wine investment market on the opening day at London Wine Fair this week, which considered the future of Bordeaux’s ailing en primeur system. The industry panel included current Head of the Union des Grands Crus de Bordeaux, Olivier Bernard, Christian Seeley, MD of AXA Millesimes who also own Château Pichon Baron, and Will Lyons columnist for the Wall Street Journal.

Atkin opened with a reminder that the en primeur system, whereby buyers acquire allocations of wine whilst it is still in barrel, sometimes likened to a ‘wine future’, is not an old system. Originally launched fifty years ago the intention was that the grower secured an advance sale on wine to aid cashflow and the buyer was rewarded with wine at the lowest possible price. The pricing strategy of en primeur campaigns since the 2010 vintage launch have brought the system into question as the Bordelais have demanded en primeur prices in excess of back vintages physically available and more reliably scored.

London Wine FairChristian Seeley was asked to give his thoughts on 2013. He advised that it was important to remember that wine varies from property to property with differences in chateaux strategies and terroirs, therefore it is essential not to generalize Bordeaux or a vintage. His view was that the 2013 campaign did have some positives in terms of tasting experiences, and as considerably less wine was produced – a positive on the rarity angle. Prices were lowered as well in an attempt to engage the market. Atkin concurred likening the 2013 vintage to 1992 except the quality of wine is better this year.

Picking up on Seeley’s view on generalization, Olivier Bernard stated that the negative 2013 pre-campaign media commentary, particularly in the UK, was not fairly representative and in fact set the tone for the campaign itself. ‘There are 10,000 chateaux in Bordeaux, a maximum of forty considered as desirable brands and only five First Growths.’

Sophie Schyler Thierry of Chateau Kirwan commented that “the First Growths are not the Bordeaux market, they create and carry the reputation of Bordeaux but they are not typical. In ten years time when there is no 2009 in the market it will be wonderful to drink and those that own it will be incredibly lucky. Be patient with wine. The en primeur system needs to be looked at in the long term but Bordeaux is like all markets – it goes down as well as up but the future is bright for Bordeaux especially for the First Growths.”

Will Lyons had thought that 2013 would have been an opportunity for Bordeaux to correct the pricing strategy adopted since 2008 and feels the investor is not being well-served by recent en primeur campaigns.

Bordeaux 2013Farr Vintners’ Tom Hudson stated that regular en primeur buyers have deserted the market because it doesn’t make sense. ‘A lot of goodwill has been lost with the buying public and en primeur prices need to be brought back in line with reality’ rather than hinge on the superlative quality and corresponding prices of the 2009 and 2010 vintages. His view currently is ‘the idea of buying en primeur is null and void’.

UGC’s Bernard reminded all that 2013 was one of the most difficult vintages in the last 25 years, but Bordeaux has never been so good in terms of producing quality wines.

Max Lalondrelle of Berry Brothers & Rudd stated that generalisation, or the ‘wildebeest effect’ is a key problem for Bordeaux as there are good 2013 wines to be found. He also commented on a shift in focus away from Bordeaux as consumers seek value particularly as quality wine production has improved markedly in other regions of the world.

Seeley noted that the quality of wine produced in Bordeaux has also improved significantly and the globalization of wine in terms of supply and demand continues to evolve with Bordeaux making the greatest wines in the world.

Atkin rounded the panel debate up with a consensus opinion that the en primeur system will not be abandoned by the Bordelais, with the expectation that it will evolve as it needs to become more aligned to the market in the future.

For our view on the 2013 en primeur campaign speak to a Vin-X portfolio manager on 0203 384 2262.