2012 was the year that Chateau Latour announced its departure from the Bordeaux en primeur system, or EP for short. This meant that the first growth would henceforth cease to sell its grand vin and second wine, Forts de Latour, as futures and only release them when they are ready to drink.
Although Latour built up to this moment over a long period of time by gradually increasing the stock that it held back from EP, the announcement still sent a shockwave across the world of fine wine. While some in the trade applauded it for shaking up the theatre of EP, others criticised it as a regressive move against the region’s efforts towards transparency and openness.
With the financial backing of Francois Pinault’s group, Artemis, Latour renovated its winemaking and cellaring facilities prior to its exit from EP, making it ready to house and keep the 10,000+ cases of wines it produces every year.
It is hard to know the exact reasons why Latour left EP. The chateau stated that changes in consumer behaviours toward buying wines that have already been bottled and minimising the risks of counterfeit by selling ex-chateau stock.
Other suspected motivations included increasing profit margin and better branding and distribution control to become the truly exclusive luxury wine label not available at EP.
Supply and demand
Soon enough, other major producers across Bordeaux started cutting back their EP releases.
“We haven’t lost faith in the EP system,” Mouton’s president Philippe Sereys de Rothschild explained his decision in 2016. “We will be releasing less of it en primeur as we have to rebuild our inventory.”
Apart from maintaining enough inventory, Stephanie de Bouard of Chateau Angelus, which has historically sold 95% of its production en primeur, saw reducing EP releases as a way to forge a stronger understanding of the end consumers. “I don’t want our negociants to feel they are being watched over… but we need to have more information and transparency about our final clients.”
While some chateaux including Palmer, Cos d'Estournel and Chateau Ducru Beaucaillou have followed suit and permanently reduced their EP releases, others are factoring how much wines they sell en primeur into their new campaign strategy.
For the 2019 Bordeaux EP campaign, many chateaux adopted this strategy. For instance, Lafite set its EP release price 16% lower than the previous vintage but held back 50% of what it normally released. The rest of Lafite grand vins will be sold at a later day when the wine could fetch higher prices.
“The negociants are also holding back more and more stock to ensure they are financially safe during times of uncertainty,” Cult Wines’ seasoned buyer Hermione Egerton-Smith noted. “The recent economic difficulties such as the pandemic and Brexit and the fluctuations in forex rates associated with them have been contributing factors for holding back stock for both producers and merchants.”
The changing nature of EP
With advances in viticulture and winemaking technologies, Bordeaux hasn’t had a disastrous vintage in the new millennium. We may sometimes forget that the EP system was created to help chateaux survive in lower-quality vintages and pay their workers while they had no wines to sell.
However, after the tremendously successful 2005, 2009 and 2010 EP campaigns and fast-climbing prices in the 2010s, the biggest names in Bordeaux have plenty of cash. EP has become more of a tradition to them as opposed to a means to bridge gaps in their cash flow.
In another blog, we explained how the 2019 EP was a monumental campaign that inspired market confidence and excitement during the darkest hours of the COVID19 pandemic.
For top chateaux, strategically participating in the 2019 campaign whilst holding back stock not only generated excitement but also sent signals to lower-rank producers of their commitment to the EP system.
After all, there are over 6,000 estates in Bordeaux. Some 300 chateaux sell their wines en primeur each year. EP sales represent over 90% of the annual turnover for many smaller producers. Without the top players keeping the game going, it would be hard to gauge the interest level for the EP campaign that year.
“Somewhere deep down,” suggested Aarash Ghatineh, Cult Wines’ executive director, “there is a tacit understanding among the bigger chateaux that they need to keep the EP system intact, and to look after the little guys.”
Implications for investors
One of the immediate ramifications of top chateaux reducing their EP release is more competition for stock. Also, for the upcoming 2020 campaign, it might be harder to tell whether the producers are holding back stock due to lower yields.
Scarcity and availability of the most sought after wines is a key factor in pricing and performance of EP releases in the long term.
Cult Wines have always strived to secure good allocations for our clients and historically been one of the large buyers of EP wines. Long-term relationships with producers and negociants, nurtured over the years, are an integral part of our strategy and put us in a good position to access releases.