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Late March/early April is a busy time
in the Bordeaux
wine region. This period each year marks the beginning of
the "en Primeur" tastings, when hordes of wine
journalists, importers and wine merchants from all over the
world descend on the
Bordeaux
vineyards to get their first taste of the most recent vintage.
What happens in these few weeks is of prime importance to the
entire region, as it will determine the prices that will be
set for the wines of the best chateaus, setting the tone for
the wine commerce of the region for the vintage and setting
the stage for wine speculation for many years to come.
In English, we refer to
this practice as buying "futures". Buying
Bordeaux
futures is very much like buying futures for any other
market-traded commodity, like grain or pork bellies. The
idea is that you buy wine from the current vintage just a few
months after it has been harvested and vinified (while it’s
still aging in barrels), gambling that it will increase in
value later on. After the futures tastings, when the
most prominent wine journalists publish their opinions of the
wines tasted, the top tier chateaux (the First Growths, Petrus,
etc.) set their prices, based on their opinion of the vintage
and how much they think the wine will be worth on the market.
They lead the charge, and the other chateaux follow suit
afterward. Certain of the journalists (particularly Robert
Parker) can make or break a vintage with their comments, and
have an enormous (some would say inordinate) effect on
pricing. After the chateaus set their prices, wine
brokers and wine merchants purchase directly from the chateaus
(nearly all the great
Bordeaux
chateaus sell their wine exclusively to wine merchants, not
direct to the public). The
merchants in turn mark up the price and sell to importers and
retailers, who then sell to interested individuals.
After the tastings in March, the
futures are offered to the public in June or July. So in
June/July 2005, wine lovers can purchase futures for the 2004
vintage. But the 2004 vintage will spend at least 18 months
aging in oak before it's ready to be bottled. For the
greatest chateaux, the 2004 vintage will be bottled in June
2006, and then delivered that autumn to the wine merchants.
The 2004 vintage would then be available on the export market
in spring of 2007. So
there is a two to two and a half year gap between the harvest
and the delivery of the vintage when buying futures.
Futures have been a mainstay of the Bordeaux
wine market for some time. It was mostly limited to
transactions between the chateaus and the wine merchants who
sold their wines until the famous 1982 vintage brought futures
buying to the attention of the general public. That
vintage was so highly touted that individual collectors sought
a way to reserve a stock of the vintage in advance, knowing
full well that those bottles would disappear (and gain in
value) once they were placed on the market for the general
public. Therein lays the major attraction of buying
futures: being able to reserve bottles of a great vintage in
advance, and (ostensibly) at a substantially lower price than
the bottles will fetch once on the market. The savings
helps make up for the time buyers have to wait to receive
their bottles. The attraction for the chateaus is cash
flow. During the time between the harvest and the time
the wines are offered for sale, all the investment in that
vintage is literally sleeping in their cellars and not making
money for the chateau. The advance sale of the vintage
provides a treasury for the chateau, giving them vital cash
flow to continue their operations. It's a win-win
situation for everyone, including the wine merchants,
distributors and wholesalers, who get to mark up the prices at
every step of the transaction (by the time the futures offer reaches them, individuals
will pay a mark-up of 200 to 250% over the price originally
offered by the chateaus to the wine merchants).
There is a good deal of controversy
over the futures system at this time. The tastings used
to take place a few months later than they now do, and many
critics argue that the wines are way too young and undeveloped
in March to be able to make an accurate prediction about their
outcome. I personally can attest to the fact that the
wines can change considerably within just a few months time;
in 2003, I tasted the 2001's in April and then again in
September, and the wines had considerably matured. The samples
for the tastings are drawn by the cellar master from various
barrels, to simulate what a final blend might be like. It is
widely recognized that the chateaus use only their best lots
for these samples, in a blend that may be fairly different
than the final blend. Some chateaus have been accused of
creating a special "Parker sample" to please the
palate of the king of wine critics (i.e., particularly
full-bodied and oaky) so he'll give them a high rating.
Finally, in some vintages (for example, the excellent 1985
vintage), the futures price ended up being the same as the
price offered once the wine had been released publicly.
So should you venture into the wild
world of Bordeaux
futures? If you
are aware of the pitfalls, buying futures can help ensure that
you get the wines you want, particularly in the best years
when the demand is extremely high.
Robert Parker has said “the lesson consumers can
learn from history is that buying futures of the finest wines
always makes economic sense in the great years.”
Does that mean that you are guaranteed to make money by
buying
Bordeaux
futures? No, not
at all. As with
any type of investment, there is some risk involved.
Individuals who bought the great 1982 vintage certainly
made a good investment, as those wines are now sold at many
times their original value.
In other vintages, like 1997 or 1985, the wines ended up selling at the
same price when they were released as they had been offered in
futures. Remember
also that in the several years you’ll wait to receive your
precious bottles, you could have been earning interest on the
money you spent for them, particularly if you had used that
money on another shorter-term investment.
You’re also gambling that you’ll be able to resell
your bottles down the line and make a profit.
For all of these reasons, many financial experts
caution against buying futures as an investment strategy.
But for the wine enthusiast who plans to cellar and
eventually drink these great wines, buying in futures can be a
good way to secure great wines and possibly save some money in
the process.
How
to Buy Bordeaux
Futures
If you decide that buying
Bordeaux
futures is for you, it’s important to work with a wine
merchant or retailer who is reputable and experienced.
If you’re forking over a considerable amount of money
for wines that you’ll receive several years from now, you
want to make sure your merchant is likely to still be in
business, and that he’ll actually deliver your shipment in
the end (unfortunately, there have been a number of cases of
fraud and mismanagement of funds in the futures business).
The Internet provides a terrific means of comparing
prices between merchant futures offerings, and you will find a
difference in price between the different merchants.
But beware of “bargains”: if the price seems
unbelievably low, much lower than all the other merchants,
it’s probably too good to be true.
It’s best to stick with established merchants who
have a long track record and offer good, but realistic prices.
Once you make your purchase, you should be given an
itemized receipt with an approximate delivery date that will
be confirmed later.
Here are some popular wine merchants
that work with the U.S. market and internationally (listing here does not constitute
an endorsement or recommendation on our part):
-
Zachy’s (www.zachys.com):
probably the best-known merchant in the States for
Bordeaux
futures, well-established and (from what we’ve heard)
reliable.
-
K&L Wine Merchants (www.klwines.com):
hailed by the Wine Spectator as “one of the nation’s (U.S.)
top 10 wine retailers.”
-
1855 (www.1855.com):
this Paris-based company can deliver in a number of countries
and has been working in the futures market for over 10 years.
Other French wine regions have
followed
Bordeaux’s
lead and are now also offering futures for their wines.
These include Burgundy,
the Rhône Valley, Languedoc and Alsace.
The phenomenon is also slowly spreading to Spain,
Italy
and
California.
© 2007 Lauriann Greene. All rights reserved.
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