Primeur Suspect

History suggests prices for 2004 Bordeaux en primeur wines will have to be keen to make it worthwhile buying

Activity in March was patchy as the market went into its usual lull before the annual Bordeaux en primeur campaign. Trade through the Exchange was down on February and flat year on year. The lack of vibrant Burgundy and Rho?ne campaigns has left the market looking for leadership – it is now hoped that Bordeaux will deliver. Stock held by the leading UK merchants dropped 1.0% for the month. With the 2004 campaign under way, Bordeaux is likely to remain in the spotlight for the next month or two. 

Indeed our own annual survey of merchants returning from the UGC tasting produced some of the most varied results in five years. It would seem that both Left and Right banks (and all communes within) produced good and bad wines. Overall, respondents to the survey awarded the vintage 90/100 and concluded that the main stars were: Latour, Lafite, Las Cases, Margaux, Ausone, Montrose, Vieux Château Certan, Léoville Barton, Pontet Canet and Moulin St Georges. Look for these to shine. With the 2004 Bordeaux campaign upon us, we have analysed the financial benefits of purchasing en primeur in the past. The results, which are reflected in our chart, have been less than spectacular in recent years. The pink bars (measured against the left axis) show the percentage difference between the UK release price and the current market price. The claret coloured line represents the return on cash (conservatively compounded at 5%) and the green line is an index of 20 top châteaux’s release prices rebased at 100 in 1982. While buying en primeur in the 1980s and early 1990s produced some strong returns, the market since 1995 has been disappointing. Indeed, of the last eight campaigns, the returns available only exceeded our cash hurdle rate in the 2000 vintage. The implication is that buyers would have been better off leaving their money in the bank. 

These disappointing returns have been accompanied by sharp increases in château release prices since 1995, indicating that most of the upside during this period has been enjoyed by the châteaux. This realisation is finally coming home to roost, as the market is already indicating, that Bordeaux 2004 will have to be very well priced if it is going to find a home. And that means dropping prices from last year. Indeed, many believe that prices will have to match 2002 levels if the campaign is going to be at all successful in anything but a handful of wines.