Pre-Paying for Wine – or En Primeur: Is it Always Such a Good Idea
Paying up front for wine that you won’t receive for two years is known as buying wine en-primeur. You’re basically buying futures on wine that has not yet been bottled. The idea from a buyer’s standpoint is that you can get a better deal this way, avoiding later price increases. It can be a confusing process, though, and it may not always be a good idea. And yet, there are investors who are willing to take this risk, and believe it or not they end up with excellent returns on their investment. Here are some tips about buying wine en-primeur.
How buying en primeur works
Every spring, wine makers (primarily in Bordeaux, but some other locations as well), produce barrel samples from the harvest the year before. The young samples go to an international trade association, where they are carefully tasted and rated. The chateaux then release a portion of their production for a set opening price.
This initial offering goes through designated wine merchants (negociants), who then sell it en primeur to other people. As a buyer, you pay for the wine up front, though you don’t pay the charges for duty, VAT, or shipping until the wine is delivered to you. Usually, the wine is bottled one year after being sold en-primeur, and it will be shipped to the buyer the year after that. When the wine is delivered to you, you pay the shipping, duty, and delivery costs at that time. You may also need to pay storage charges.
Advantages of buying en-primeur
One reason to buy en-primeur is because you think the prices will go up, so you get a better deal by buying up front. This is often not the case, though, and there are some risks involved, too. A bigger advantage to buying en-primeur is that this is the only way to be sure you get certain highly-demanded scarce wines. When a great vintage is released, even the major wine merchants have trouble getting much supply.
Though en primeur is primarily about cru classe Bordeaux wines, you can also find high quality fine wines from Burgundy, Italy, California, and other regions available en primeur.
Is buying en-primeur wine risky?
To some extent, it can be risky to buy fine wine en-primeur; but that’s not always the case and the key to spotting a good type is to know the market. You may also incur the risk of something happening during the two years between the time you pay and the time you receive the wine. There could be a problem along the line somewhere – for instance, the wine might be exposed to too much air during bottling.
It can still be hard to get what you want. Unless you’re a major customer of one of the merchants offering en primeur sales, you may find that customers with better standing get first chance at the best wines, leaving you with less selection. Windfall profits for buyers of en-primeur wines no longer occur like they used to, as the chateaux have changed their pricing structures to capture more of that profit themselves. If you’re looking for investment opportunities, buying en primeur can offer paybacks as great as buying proven older vintages.
A statistical analysis of en-primeur wine
Buying wine en-primeur was once a fine investment. Between 2009 and 2010 the numbers were not that good because the demand was killed due to inappropriate prices. It looks like en-primeur wine doesn’t bring the investor enough benefits. 2013 vintages have been reported to be of poor quality. From vintage wines bottles in 2006 onwards the opposite correlation between returns and release prices is stark. The cheapest year of all was 2008 (when the crisis struck) and the most expensive thus far was 2010, which lead to losses worth 17%.
Paying for wine in advance is risky, however there are investors who can afford to venture their money, and win big time. Is it a good investment? Yes, it is. People who assume that en-primeur are not a good idea just doesn’t know the market, so it’s easier for them to focus on the downsides. For a wine aficionado, buying future wines is not at all a gamble, it’s just smart business.
Share this:
Category: Wine
