The 2013 Bordeaux EN PRIMEUR Campaign: A Diminishing Commodity

CANCEL THE 2013 BORDEAUX EN PRIMEUR CAMPAIGN?

HARPERS.co.uk recently asked the wine trade if we thought there should  be an en primeur campaign for 2013 Bordeaux? 

Yes and no, depending on why they are considering not having it. If the reason is because they are hesitant to proceed without Robert Parker's scores, then that is not a sufficient reason. Proceed without him. He should not be allowed to hold the market to ransom. Further, nor should his penchant for re-scoring vintages ten years later be encouraged or supported. This gives him, and his interested parties, another bite at the apple. Quite dodgy. He is not only moving the goal posts, he is ADDING new ones. 

Should the system continue, in general? No. The en primeur system has seen its day. Climate will destroy the market it created. Since harvest reports are the key instruments upon which all projections concerning a particular wine's longevity are based, they are also then, the key instrument used to guide any investment in that projected longevity: the backbone of  fine wine investment; that ironic game that has warped the industry, and the wines, so unrecognisably. The traditional investment model is inane. Even Thomas Jefferson thought as much, for his own reasons, when he wrote that buying wine directly from the château was the only way to buy it, stating that “it is from them alone that genuine wine is to be got and not from any wine merchant whatever.” And climate change will be the final nail in its coffin. Future investment has to be focused on the future of the new energy technologies that will fuel our future wine regions, not on buying wine futures via the en primeur system. 

The en primeur system was meant to give the wine trade, or chateau, a two-year period during which the wines await retail release at higher prices (hopefully – this is what did not happened in 1970/71).  A sort of game of Cabernet-curtain twitching between neighbouring chateaux, and "keeping up with the Latourses". If one feels inclined to don some rose-coloured glasses, then yes, the en primeur system could be looked upon as originally having been for the good of the wine and of the producer – a benevolent sort of investment. It is not at all certain that two years after harvest the wine will sell rapidly at the best price. The system counteracts this risk and provides a bit of insurance. But if the original intent was altruistic, it was quickly replaced by opportunism.

The system is a dinosaur and seems to be unwilling to acknowledge the changes unfolding before it. In the real world, the world in the vineyards, everyone talks about climate change. They have to - we are standing there looking at the shriveled rows of vines. But in the virtual world, the world of London investment firms and in most wine industry trade journals, there is never a whisper. They are desperate to keep a lid on what may explode their game. Since 1988, when reliable data first became available, the fine wine investment market has generated an annualised return of 12.1%. Why mess with that? Fine wine consistently out-performs shares, bonds and other asset classes, delivering annual double-digit growth. Fine wine investment is less volatile than other assets such as equities, gold and oil whilst the correlation between financial and fine wine markets is relatively low, providing greater resilience to recessionary conditions. Fine wine investment is a tangible asset (if the buyer ever bothers to visit it in its storage facility); it is a finite and reducing supply as vintages are consumed versus increasing demand; it provides the ability to off-set currency influences; and is tax efficient with its potential exemption from Capital Gains Tax. And, you can brag about it over dinner!

A recent wine reporter I read, wrote, in his analysis of the poor 2013 Bordeaux “investment environment”: “As it struggles to find direction, reports of the Bordeaux 2013 harvest do not provide much cheer. But does it spell further trouble for Bordeaux? Maybe not. (Yes, of course it does, I say.) The market lives and dies on both demand and supply. Traditional collectors have not bought en primeur since 2009 (And, have you asked yourself why that is?). If they are still drinking, then their stocks are down. The small and mediocre 2013 vintage will be of little help. This might just be the bad news event that piques the market’s interest – and subsequently leads to restocking.” This analysis is so far off the mark, and irrelevant, that it beggars belief.

So what has climate change got to do with this? The system got further mired in the ambiguous “point” systems of American wine critics. Suddenly, their opinions were having a greater influence on the prices than the guidance of the négotiants. All fingers pointed at Robert Parker, whose American palate had been trained with warm-climate wines and who prefers the big, oaky, ultra-ripe wines. If he liked a wine, and gave it prizes and high scores, it sold. If he did not, it didn’t. The Bordelaise started emulating this New World wine-style, adopting the methods to achieve ultra-ripe grapes with the high extraction, high alcoholic, sweet style that got the attention of the New World critics. What they did not realise is that Mother Nature was creeping behind them and planning to do this for them anyway. Higher temperatures cause more sugar, more sugar means higher alcohol, and more alcohol, more imbalance, and imbalance means a compromised longevity. And longevity is what all the en primeur bets are based upon.

These Bordeaux that are now unbalanced by alcohol; first by man’s desire to please the critics, and now by climate change, have had their aging potential compromised and thus, their value as a commodity lessened.Jean Claude Berrouet, formerly at Petrus and now winemaking director for various estates in Pomerol, said that in his 40-year career he has seen alcohol rise between 2 and 2.5 degrees in Bordeaux. 

This commodity is losing its uniqueness and its reliability: the two basic tenants of investment. If these wines do not cellar as long as they used to, will this mean that investors will get a smaller return, but a faster one? Should the system remain in place but merely in abbreviated form? And will the investor/consumer accept the new Bordeaux profile? How sweet does it have to get before people say “no more”?  If Médoc grows Carignan or Carmenere (again), how will that change the Bordeaux brand, and how will that go down? The classic Bordeaux model is already non-existent ...so, in what is there to invest? Adaptation and Mitigation, I say. Invest in the future of WINE - in the land, the people and the improvement of the technologies that we have today to make them more affordable, and, to invest in the technologies that are going to be needed in the future. And, face the fact that adaptation techniques and mitigation techniques are hurtling towards each other- and will eventually eradicate each other: irrigation is the number one Adaptation technique, but it lessens wine quality and salinates the soils. More importantly, there won' t be enough water to irrigate. And conversly, irrigation is the Mitigation campaign’s number one enemy. It's Margarita time.