France

Buying Red Wine “En Primeur”

If you are interested in red wine and have ever contemplated investing in it
Posted 28th September 2012        
     

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If you are interested in red wine and have ever contemplated investing in it you may have come across the term “en primeur“. Buying red wine en primeur is big business and for many people with a serious interest in red wine it is the best way of securing bottles from the most sought after producers during the best vintages.

So what does buying wine en primeur mean? En primeur means “futures” so buying en primeur means investing in a future supply of red wine whilst it is still in the barrel. Some investors buy their wine this way to make money by paying what is often a lower price than when the wine becomes available on the general market. Others use this method of purchase to ensure they secure some wine from some of the most in demand producers.

Many wine producing regions and countries sell red wine en primeur but the most important regions for this purchase method are Bordeaux, the Rhone Valley, Burgundy and Port. The top producers in each region, including the cru classe producers in Bordeaux, get together every spring to offer tastings of the previous harvest’s wines to wine industry professionals such as critics and merchants. Obviously these wines are still in the barrel and are barrelled in their individual grape varieties so any tastings cannot offer an accurate picture of the final individual red wine or red wine blend but they usually offer enough of an idea of the quality of the wines for the critics to score them and for the merchants and negociants (brokers) to decide on a price.

The producers and negociants then come to a deal. Producers will usually allocate a percentage of their anticipated red wine production to a negociant for an agreed price. For small producers or highly regarded producers whose wines are in great demand, this could be all or almost all of their wine production meaning that these wines will never reach general release.

The negociants then sell on these future wines to merchants who make them available to their customers. En primeur red wines from Bordeaux are usually for sale later that same year, around a year following the harvest whilst those from Burgundy and the Rhone Valley are usually available earlier the following year about eighteen months after the harvest.

Many merchants have regular customers who will buy several cases of red wine from them en primeur. In years when the vintage has been highly rated or individual wines have been given high scores by critics demand for some wines may be heavily oversubscribed. In this case most merchants allocate first to their regular customers with casual investors at the back of the queue.

En primeur red wine is sold by the case and the price does not include duty or VAT and often does not include delivery. When the wine is ready and bottled in a couple of years’ time customers are notified and are given the option of taking delivery of the wine and paying the duty and VAT or having the wine delivered to a bonded warehouse where it can be stored duty and VAT free until you are ready to take delivery of it and pay the taxes.

So what are the pros of buying red wine in this way? Firstly, you can make a huge saving by buying fine wine at a reduced price before it goes on general release at a higher price. Secondly, if you are particularly fond of a certain producer’s red wine and find it difficult to source on the general market it can be a way of ensuring you get a supply of that wine. Also, as you are buying the wine before it is bottled you can stipulate how you would like the wine bottled i.e. you can have it in magnums or half bottles if you prefer.

However, there are many pitfalls to buying en primeur. It can be a gamble to buy it as a financial investment as sometimes the retail price falls if the wine doesn’t live up to expectations or if there is too much on the market. Secondly, some customers get caught up in dodgy deals or with financially unsound merchants – so ensure you buy through a reputable and well established merchant. Finally, don’t forget that en primeur red wines will generally need cellaring in proper conditions which can prove costly if you do not have your own cellar and have to rent cellar space.

Don’t be scared off by the potential pitfalls. You don’t have to be a serious investor to dip your toes into buying red wine en primeur. Most merchants would be happy to sell you just one case so you can find out if buying wine this way is for you.

Image by Berndt Fernow.

     

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