Bordeaux En Primeur 2014 – A Good Investment Opportunity?

Posted by on Apr 6, 2015 in News Alerts, Wine at My Vineyard | No Comments

As the dust settles from the 2014 en primeur campaign in Bordeaux last week, it is time to take stock.

Based on the barrel tastings, the consensus view is that 2014 is shaping up to be an excellent year. Whilst maybe not a blockbuster that compares to 2005, 2009 or 2010, definitely a significant improvement over the last three years.

It is now down to the chateaux to set their prices in the coming few weeks.

There has been a considerable clamour, particularly from the UK wine trade, for meaningful reductions in en primeur prices. It look certain that these calls will be rejected by the chateaux who point to the weakening of the Euro against Sterling and the US Dollar over the last year that has effectively built a discount into the market.

In 2009 and 2010, the combination of exceptional reviews for the quality of the wine and extraordinary demand from new markets sent the en primeur prices spiralling.

The 2011, 2012 and 2013 vintages have all been of a lesser quality but the en primeur prices were not sufficiently rebalanced to reflect this. This, together with an unprecedented level of early sales of the 2009 and 2010 vintages, has caused considerable unease in the market and has left much wine unsold.

Does the step up in the quality in 2014 make Bordeaux en primeur a good investment opportunity?

To make this decision, it is important to understand what you would be buying, when you would receive the wine and the additional costs.

En primeur is buying a wine that is still maturing in barrel. This enables chateaux to generate cashflow by offering some of their production at what is expected to be a lower price than that for the final bottled product.

For some of the small chateaux, this is often the only opportunity to buy their wine directly.

In the world of wine investment, provenance is key. Buying en primeur, either directly from a négociant in Bordeaux or a reputable wine merchant in the UK, means that you are buying a wine from it’s genesis.

As the wine is in barrel, there is also the opportunity to choose the bottle size you desire. Many collectors prefer a magnum over a standard bottle due to the reduced proportion of the wine that is contact with the cork.

The anticipated delivery date for 2014 wine is between autumn 2016 and spring 2017.

It is also important to remember that en primeur purchases will be subject to UK Duty and VAT when these are shipped to you.

The current Duty on a case of six bottles is £12.30 and VAT is 20%. Therefore, a case of six bottles costing £500.00 en primeur would ultimately cost £614.76 on delivery at today’s rates.

Many wine merchants provide the option to store the wine ‘in bond’. By storing wine in a bonded warehouse, you defer the triggering of the UK VAT and Duty. However, there is a cost for this storage.

If the en primeur process sounds daunting, where could there be value in the Bordeaux market?

For many connoisseurs, the 2005 vintage is the best of the millennium to date, outstripping 2009 and 2010. Yet, the price point is relatively appealing.

At the eye-watering end of the market, at one négociant, a case of six bottles of Château Mouton Rothschild 2005 would cost £3,860 compared to £5,460 for 2009 and £5,220 for 2010.

At a more modest level, a case of twelve bottles of Château Lynch-Bages 2005 would cost £1,680 compared to £1,850 for 2009 and £1,820 for 2010.

It is important to bear in mind that these are the prices for the wine to be delivered to your door.

Robert Parker, the pre-eminent wine critic of his generation, is set to present a ten-year retrospective on the 2005 vintage this summer. Given that he has already indicated that he probably initially under-scored the wines, the likely impact will be to see prices rise.

In the United Kingdom, the 2015-16 ISA rates for cash deposits are derisory and, whilst shares may offer a better return, there is no guarantee.

Similarly, there is no guarantee that an investment in 2005 Bordeaux, or any other region or year, will make a financial return. However, you would be buying one of the great vintages that is in the cusp being ready to drink. Ultimately, a great wine should be savoured in the company of good friends.

If you would like advice on any aspect of the world of wine, please email me at jon.cooper@spearheadit.co.uk