So finally, is there still a place for the En Primeur system in the current market? Top quality wine is scarce, due to lower yields and strict selection methods. Global demand for fine wine is increasing. As a result, the en primeur system will potentially become more important.
From the 1950s to 1970s few châteaux were profitable, and the market was controlled by négociants. In the 1970s cash flow at châteaux improved as en primeur took off, freeing up producers’ capital. The financial risk for châteaux is lower and investment has increased. The system virtually guarantees strong sales, with 400 négociants promoting the same product. Selling wine en primeur presents the product at the optimum point for consumer attention, as there is always more interest when a vintage is first tasted.
The main advantage for middlemen, from courtier through to négociant and importer, is financial. All parties profit in a good vintage, such as 2005. On the downside, in a lesser vintage, such as 2007, middlemen are forced to take allocations for which there is no demand.
Historically, the intermediaries have dominated the en primeur system. However power has shifted to the top producers. In 2005, the First Growths delayed the release of their prices, feigning shortages and driving up prices. The merchants were powerless. They were forced to wait, and paid more than double the 2004 price. The more the chateaux come to dominate the system, the harder it will be for middlemen, as operating margins are affected by higher prices.
En primeur is unique and is good for distribution. Merchants shoulder the costs of marketing and distributing each en primeur campaign. No château can afford to develop and maintain the same number and geographical distribution of clients as a large négociant. Joanne, one of the largest négociants on La Place, has customers in 132 countries. Similarly no château can hope to retain the client base and customer loyalty of a successful importer.
For the consumer, the major advantage of en primeur is financial. Buyers are rewarded for early payment. Wines can cost on average 10%-30% less at en primeur. Many customers buy en primeur to make a return. Fine wine investments have enjoyed good yields in recent decades. The best returns are achieved in great vintages (2-3 per decade) and the finest wines outperform the rest.
As wines reach maturity and are drunk, supply decreases just as demand hopefully increases. For example between 2001 and 2006 1982 Lafite increased in value by 123%. Few investments offer a similar return. Profits from wine are free of Capital Gains Tax because wine is classified as a “˜wasting chattel’. The 2005 vintage proved that the en primeur system can work for consumers as prices have since risen dramatically.
Buying at en primeur also ensures provenance. This is important for investors looking to sell the wine, but also for enthusiasts who want to drink it. En primeur enables consumers to secure stocks of the most sought-after wines. Some wines are simply unavailable if the consumer does not buy them at this early stage. And finally, consumers who buy en primeur can request their wines in less common formats, such as magnums or halves, that command a premium on the secondary market as they rarely become available after en primeur.
So it seems that there is certainly still a role for this system in the current market. However, we wait with bated breath for the first prices to be released…