 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.
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