Look, It Costs What It Costs, Alright?!


Anyone who follows the wine press will have seen plenty of articles in the last few weeks about how much the 2015 Bordeaux releases cost. The 2015 vintage of Bordeaux is trading in a futures market at the minute, where you buy the wines 2 years before they’re released. So everyone’s waiting to see how much the Chateaux are releasing their wines at. And you hear plenty of comments like “oooh it’s the most expensive for 5 years” like that’s a terrible thing. So what?

Thing is, wine to a certain point doesn’t have an intrinsic value. You can’t break down the components and say this costs this, and this costs that, so this bottle of wine costs dot dot dot. It can only be the price one person is happy to sell at and one is happy to buy at. Usually that boils down to a simple supply and demand issue.

Look at house prices. What’s the point, when you’re trying to buy a flat in London, in saying “ah well this place only cost £200,000 in 2010, so I won’t buy for now”? Doesn’t matter what it cost 20 years ago, 10 years ago, or last week. If people want to buy it and there’s only so much to go around, there’s only one way the price is going.

In the past, Primeur trading used to offer a discount so buying wines across the board was a good idea. It doesn’t anymore. The only thing it offers anymore is access to the most sought after wines. So does it matter how much they cost compared to 5 years ago? Not really! All that really matters is who wants it and how much is available.

Maybe we could just talk about that?


10 thoughts on “Look, It Costs What It Costs, Alright?!”

  1. Your comparison between houses and en primeur wine simply doesn’t work – because you’re buying wine to drink in the future, whereas you buy a house to live in NOW.

    Imagine if you were buying a house which you couldn’t live in for another five, ten, even twenty years. Of course you would be concerned how the price of a house now compared with one of five years ago, because you’re buying something on the basis of its future, not its current pleasure.

    “Doesn’t matter what it cost 20 years ago, 10 years ago, or last week. If people want to buy it and there’s only so much to go around, there’s only one way the price is going.” This is clearly untrue when it comes to wine, where many prices have actually fallen since their offer price. By waiting, you may be able to get a wine cheaper than when it is first available. (That’s rarely true for houses.)

    Finally, you are obviously going to compare the price of a house/wine you can’t enjoy for another ten years with the price of a house/wine you can enjoy today. The price of currently undrinkable 2015 Bordeaux may well affect the price of drinkable 2005. The price of 2010 Bordeaux now on the market may (or may not…) be an indication of what may happen to 2015 En Primeur by the time it becomes available.

    There’s a whole web of price/value/time considerations around en primeur wine which simply don’t apply to houses, I’m afraid!


    1. I’m afraid we’re going to have to agree to disagree. Having traded in the financial markets for over ten years I’ve seen people twist themselves in knots over all kinds of assets that are nearly impossible to “value” looking at all kinds of charts of previous prices, trying to extrapolate this, that, or the other for future valuations. I’ve no problem with them doing it, I’m just not convinced there’s a point to it. I still contest that most of what’s written is absolutely irrelevant, hence the post. I still believe it’s a simple question of supply and demand, and more column inches should be donated to that rather than anything else. That’s how most trading in alternative asset classes work.

      And ok, with houses, I was just looking for an example that most people can relate to. Something where prices are much more about a supply and demand issue rather than any intrinsic value. Although I’d be wary to tell too many people in negative equity that house prices rarely drop, they might not be too chuffed!

      But, I guess this is the beauty of it all, the fact we think of it differently makes it all the more interesting no matter what angle you come from. Thanks for the reply!

  2. Well, the answers to your last two questions are:

    Q: Who wants it?
    A. Not enough people.

    Q. How much is available?
    A. A hell of a lot.

    Outside of a few very low-production Right Bank wines, all of these releases will be available in bottle for the same price (or if the last 5 or 6 vintages are anything to go by, less) once they are physically released to the market.

    There is no shortage of Pontet Canet or Leoville Barton. Every vintage of Leoville Barton dating back to the ’70s will be available in the UK at this very moment .The last 6 vintages, which includes 2 vintages better than 2015, are all available right now and are all available for less than you would have paid en primeur.

    There is no longer any earthly reason to tie up your money for two years. The wine will be widely available in the future and probably for less than you paid for it.

    Unless of course, you want it bottled in nebuchadnezzars. In which case go for it.

    1. So now we’re onto the main question, is there any point in still doing an En Primeur market? I think we probably all agree it’s a bit weird and doesn’t make sense anymore. The only upside of “having access” is only useful, as you rightly stated, for a tiny handful of releases.

      …and there’s no space in my flat for Nebuchadnezzars unfortunately….not even sure I could pour one!

      1. Well now we’re back to price again.

        The situation used to be that in exchange for tying up your money for 2 years, you would receive a price that was, if not guaranteed, then almost certain to be cheaper than you could buy the wine for once it was released. That made sense. The chateaux made money, the negociants made money, the merchants made money and the clients got the wine they wanted at the cheapest price possible.

        Unfortunately, over the years, the chateaux have got jealous of the margins being made by other people in the supply chain and decided they would rather like some of that cash for themselves. Thus prices have generally increased year on year for the en primeur releases (I remember everyone complaining about the 2005 release prices) with the effect that the chateaux made more money, the negociants less, the merchants even less and the gap between the price paid by the end consumer and the price of the wine once released grew narrower and narrower.

        This all came to a head with the opening of the HK and Chinese markets.and the vast increase in release prices for the 2009 vintage. People bought in because it was a superb vintage and now the Far East was in the market hoovering up supply. So the chateaux increased the prices still further in 2010 and people still paid for the same reasons.

        Unfortunately, the market for both back vintages and new releases was mostly being driven by speculation rather than demand from an end consumer and this was made clear in 2011 when the market for top Bordeaux tanked and the prices fell rapidly – not least for the 2009 and 2010 vintages. The Chinese began to feel that the Bordelais had pulled a fast one on them in 2010 and huge cancellations of en primeur orders were made, leaving the negociants stuck holding the stock.

        Since then, there has been no reason to purchase en primeur. The chateaux refuse to countenance reasonable price decreases, wittering about their ‘brand’, the consumer sees no reason to buy and the negoce are stuck in the middle having to absorb vast quantities of Bordeaux that they then either sit on or try to sell at a tiny profit or a loss.

        When it works it is a fantastic system, allowing the chateaux access to funds two years earlier and freeing them from the need to organise their own wstorage, sales, marketing and logistics.

        Regrettably in its current form, it hasn’t worked since 2008

  3. Fun piece & responses. Pablito’s observations are quite astute, and I agree with you as well- it’s unlikely to change. As I see it currently, there are three types of buyers remaining for the en primeur market: 1) Investors, 2) High End Merchants, and 3) Collectors. The passionate oenophiles and casual wine drinkers can no longer afford to say “I’d like a case of that” to have arrive in two years when the costs are beyond the reach of the average wine drinker, plus on average, those Bordeaux OWCs will be put down for 3-8 years before opening anyway. Cheers!

  4. Started a bit of a shit storm, Mike.
    I used to get futures. I don’t now. It’s sad that I used to scrimp and save over the years to get a case or two of Bordeaux. Now that I can more easily afford it, I’m not inclined to get screwed. They have priced themselves out of my cellar. I may not be the market they are targeting although I imagine that my monopoly (the largest single purchaser of wine and spirits in the world) here buys as much of their stuff as anyone does. Things may turn as Operation Occupy cripples the capitalist elite. Oh wait, that failed. Well, when Bernie Sanders takes the helm……….Bordeaux will be $8 a bottle. I’m sure I heard that it’s part of his platform.

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