As I’ve discussed previously every spring the fine wine world turns its eye to Bordeaux for the en primeur campaign and the release of the previous year’s vintage as futures. Once a cornerstone of the Bordeaux business model, the past couples of years have been incredibly tumultuous and controversial and as the 2014 campaign is drawing to a close many people are beginning to wonder about the future of futures. In fact many people are beginning to wonder about the future of the Bordeaux wine industry as a whole.
The modern en primeur system took shape in the late 1970’s and early 1980’s in result to a slump in the market. Estates needed ready cash to fund their operations and began to sell their wines as futures. Over time it also became a way for critics and merchants to evaluate the quality of the new vintage. The estates would then use this feedback to set the overall pricing for the release, with the expectation that the futures prices would be a discount on the market price once the wine was released in bottle. The entire system is predicated on speculation and investment in the fine wine industry. And more importantly the system only works when everyone in the chain (chateau, wine merchant and consumer) is able to make money. Continue reading