In a graph that shows En Primeur returns since the 2000 vintage the Liv-ex report shows that in over half of the campaigns since 2005 “the returns of the broader market – investing in already physical stock – have been greater than buying wines En Primeur.”
Last week’s announcement that Pontet-Canet was releasing 2019 at 31% below the 2018 asking price was some indication of where Bordeaux En Primeur 2019 is heading. The 5thgrowth estate is traditionally the first to release, but to do it before the few key critics tasting 2019 had released their scores, was considered by many to be a bold move. Château Palmer followed suit this week with a 33% drop over the 2018 price.
All eyes will now be on what the First Growths will do and whether, like the 2008 campaign, which came on the back of the financial crisis, they will jointly release at prices at anywhere near the 60% decrease they did over the 2007 campaign, which helped recapitalise the market.
Lafleur is one of the few chateaux in the Bordeaux-500 to show considerable return on the 2018 En Primeur
According to The Value of Time, the Q2 report from Liv-ex on Bordeaux 2019, the market will need a substantial price decrease to justify an En Primeur campaign that many have questioned its very existence:
“In a market full of distractions and a changing customer landscape, another “excellent vintage” headline is unlikely to be enough for Bordeaux to grab the market’s attention. Those looking to grow their En Primeur sales might need to consider a more dramatic move this year if they want to give collectors a reason to say ‘yes’. The answer, as ever, will lie in the price.”
A series of unfortunate events
In reaching its conclusion, the report illustrates the considerable effects of: US Tariffs; the poor overall return of Bordeaux 2018; and the waning interest in Bordeaux En Primeur generally; quite apart from the economic and logistical disruption posed by COVID-19 to En Primeur in 2020.
“Donald Trump’s 25% tariffs on European wines have had a damaging effect on the US appetite for wines generally, but particularly on Bordeaux. While demand for the region’s wines had been climbing steadily since 2014, giving US buyers 22% of the market in late summer 2019, we have since seen that share halve to 11%. European and UK buying has taken up the slack, but of a market share in decline,” according to the report.
Another factor has been the changing face of the secondary market which has seen an increase from 5,700 wines traded through the secondary market in 2019 to 7,000 different wines. Bordeaux experienced a growth in new wines traded (6%) but this was set against staggering growth in other regions – Italian wines rose by 32%
“Buying interest has also been broadening as new and critically acclaimed releases from regions like Brunello, Barolo and Champagne have captured the trade’s attention,” the report says.
The halving of Bordeaux’s share in the US marketplace will not have been helped by analysis on average returns for the 2018 vintage from wines included in Liv-ex’s Bordeaux 500. Although there were some large movers like Lafleur (+82%), Le Pin (+71%), Petrus (+46%) and Calon Segur (+36%) the average return from Bordeaux 500 wines was just 1%.
“Outside Sauternes, which tends to struggle in the secondary market, Clarence Haut Brion, Fleur Petrus and Grand Puy Lacoste have all fallen circa 10% since release. Prices for the vintage generally would seem to be coming under increased pressure,” the report says.
Not least, one suspects, from the necessarily lower prices of 2019.
Releasing may depend upon ‘financial confidence’
Harvest reports and satellite technology indicate that the 2019 vintage is abundant and “very good to excellent” in quality but lower supply chain profit margins have led to a waning interest in buying En Primeur and stocks are building up in Bordeaux as a result.
“The abundant crop across the top appellations does not necessarily mean that there will be more wine coming to the market. As has been the recent trend, the weak market might prompt financially confident chateaux to withhold or cancel releases altogether rather than cut prices. Many of the top names are heavily invested – both literally and emotionally – in prices that convey a sense of status,” the report states.
The decision to release or not, with how much wine at what price may well be determined then by the size, or ‘financial confidence’, of the estate.
“Stock is building up in Bordeaux, while sales are not. The system carries debt and the sustainability of the chateaux’s strategy of withholding stock to distort supply and demand is problematic. Latour, which opted out entirely of the En Primeur system in 2012, has performed slightly better than the broader market; but not all chateaux have the same power. At a time when business is already tough, there is a risk that postponement of En Primeur might tip vulnerable players over the edge,” the report says.
100s of samples of Bordeaux 2019 arrives at Bordeaux-based critic Jane Anson
The “waning interest in buying En Primeur” was building up even before COVID-19 with Wine Spectator already having decided to scale back its En Primeur coverage and Jancis Robinson MW reporting “zero reaction” from non-professional readers of her site to En Primeur.
In a graph that shows En Primeur returns since the 2000 vintage the Liv-ex report shows that in over half of the campaigns since 2005 “the returns of the broader market – investing in already physical stock – have been greater than buying wines En Primeur.”
The report acknowledges that “in the absence of trade and critics, some chateaux may decide not to offer their wine this year, or to dramatically cut back on the size of their release” but concludes with the assertion that, failing a sizeable reduction in price, the campaign should not go ahead in its current format.
“But it is clear that now is not the time to release a highly priced and abundant “great” vintage onto the market. It either needs to be postponed or presented at a price that the market simply cannot refuse.”
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