In the May edition of our Fine Wine Market Report, as a follow up to an excellent piece by John Stimpfig(Primeur Suspects, 24th April 2009) in the Financial Times’ How to Spend It magazine, we look at how the en primeur system is in desperate need of an overhaul to make it more transparent and provide greater protection for buyers. There are three main reforms that would greatly improve the current system and protect its long-term future:
- A central registrar to record transfer of title
- Greater transparency of production figures and volumes offered for sale at the en primeur stage
- Independent verification of tasting samples
The En Primeur season is both exciting and provides a powerful marketing platform for the Bordeaux Chateaux. When working as it should, en primeur enables consumers to obtain the new vintage at an advantageous price and in hard-to-find formats. In return, the chateaux gets access to capital to finance the vintage two years prior to delivery. It also keeps Bordeaux in the headlines for 2-3 months each year and has no doubt contributed to maintaining Bordeaux’s position as the pre-eminent wine region in the world. Nevertheless, the fine wine market has changed beyond recognition in the last 10 years (outside of Bordeaux, at least) and much of the mechanics of the en primeur system is looking increasingly anachronistic. As such the need for reform is pressing.
The areas that require immediate attention include:
A central registrar to record transfer of title
The end buyer of en primeur Bordeaux has no legal title to the wines until they are physically delivered. This means that buying en primeur is unnecessarily risky for both the trade and consumer. In the current climate, asking both groups to pay upfront on a promise of delivery two years hence is unacceptable. One possible solution is that a central registrar is established in Bordeaux (or in a neutral location) so that title for each case of wine could change hands prior to delivery. This would remove the risk of loss should a supplier in the chain go out of business and make for a much deeper and more interesting market.
Greater transparency of production figures and volumes offered for sale at the en primeur stage
The current opaque system is increasingly out of date in a market of instant information and increased price transparency. Information from the Chateaux on the size of the latest harvest and breakdowns between first and second wines remains ambiguous at best. Equally, the question of how much of the total production is being offered to the market at the en primeur stage has become a moot point, with many Chateaux holding back large portions of their productions, creating an artificial market in their wines. These figures should be published and independently audited so that all customers are able to make an informed decision about the relative pricing of each Chateau’s offering.
Independent verification of tasting samples
In a world where the difference between 90 and 95 points or 95 and 100 is often worth millions of euros, it seems sensible to get tasting samples independently verified so that consumers can be confident that samples provided at en primeur tastings are representative of overall production. There have been advocates of such a system by the Bordelais themselves, most notably the proprietors of Domaine de Chevalier and Durfort Vivens.
There will be many that will argue that these changes are unnecessarily complicated and expensive and that the current system works fine. After a more successful en primeur campaign than many had expected this year, there will be little pressure for reform, but there is a strong case for Bordeaux to be proactive. If we can learn anything from the current financial crisis it is that the impossible happens and the cost of doing nothing might be very high indeed. The failure of a large player in the supply chain would do untold damage to Bordeaux’s golden goose. There is little doubt that everyone – from the proprietors to consumers – would benefit hugely by an effort to shore up the system. We welcome the fact that a debate has begun.