Mark Rashap, WFFT's Director of Wine Education, explains the ins and outs of Bordeaux Futures.
Insights on Bordeaux: How It’s Bought and Sold
Most wine lovers know Bordeaux, the famous Chateau, and have some bottles in their cellars; however, the majority might not know all the behind-the-scenes activity that make this region one of the most dynamic and complex markets in the wine world. In 2012, I had the great fortune to visit Bordeaux, to see the inner workings, and be a part of the En Primeur, a process in which Chateau start the campaign to sell wine as Futures before bottling. The history for this unique system is fascinating and can potentially make you a savvier collector.
The concept is simple: the Chateau makes the wine and the Negociants sell it around the world. To assure a stable market in which poorer vintages are still sold (albeit at lower prices) as well as avoiding cherry picking great vintages, the Chateau created an allocation system where a certain percentage of the production go to any number of the 300+ Negociants operating in Bordeaux. The number of Negociants any single Chateau does business with will vary from only a handful to over a hundred as is the case with the high-profile estates. For example, if you are purchasing a wine like Pontet Canet off the shelf in Texas, it might be coming from any of dozens of Negociants with slightly different pricing because of their various in-house supply and demand situations and priorities.
This practice has its roots in the 1600s as the Dutch merchants controlled trade and shipping routes in much of the world. Bordeaux was a prominent port city, and as the Church was letting go of land it was mostly the wealthy merchant class that purchased vineyards and set up very large and elaborate Chateau. This was a very different situation from Burgundy where it was mostly the bourgeoisie and the farmers that acquired land from the Church.
The Dutch were also responsible for creating a drainage system in the Medoc (North of the city of Bordeaux) and turning previously unplantable marsh land into some of the most sought-after vineyard and soils of Bordeaux. Because these operations were so large, the Chateau would sell wine in barrel to the Negociant in the Spring to raise the money needed to successfully harvest grapes and make wine that year. Wine wasn’t bottled at the Chateau until the 1920s, and the practice became mandatory in the 60s and 70s.
In today’s world, this process has become a spectacle with a lot of money on the line. The first week of April after the harvest the previous Fall, prominent journalists, importers, and retailers from around the world descend on Bordeaux to taste “out-of-barrel” (actually, barrel samples are taken and bottled so the wines can be tasted in event centers and grand halls). There is much murmuring as to the quality of the vintage and any possible pricing that each market around the world might bear. Meanwhile, journalists write about the projected quality of the final wine. Many skeptics doubt this is even possible and believe it to be a marketing campaign. However, much can be determined from tasting at this stage, yet it takes experience in doing it year after year. If you’re new to this process, Decanter’s Jane Anson and Parker’s Neal Martin are some of the most insightful journalists to follow, although I recommend finding journalists that resonate with you.
In May and June, the Chateau start to release pricing for the Negociant, which trickles down to the retailer (if they choose to participate in this racket). The retailer then creates a Futures price list for their customers. This is a delicate dance for the Chateau: if they price too low compared to the ratings, they leave money on table, and if they price too high, they may not have the desired demand. There are orders that are fired back and forth for months, and consumers typically pay the retailer when they place their order. This is the time to lock into what is thought of as the lowest price as well as guaranteeing an allocation of a highly sought-after wine. In some cases, you can request a larger format since the wine hasn’t yet been bottled. Finally, the wine is delivered two years later, once it is in bottle. To use 2016 as an example, the wine was tasted in April 2017, there offers are out now, and the wine will be delivered in September 2019. Occasionally, there will be a second offer, if the Chateau releases more wine or after the wine is bottled and tasted again, which is called “2nd Traunche.” This often results in higher prices.
What does this all mean for us in Texas? There are many retailers that offer the possibility of buying Bordeaux Futures, and 2016 is an excellent vintage and prices are sure to rise. In fact, 2014, 2015, and 2016 are all interesting vintages. I have listed some links below to some of the offers. Keep in mind that prices vary because the supply chain may be originating at different prices from various Negociants. Spec’s, Total Wine and More, and online retailer Michel Thibault are some Texas outlets that are putting out interesting offers. I spoke with John Roenigk owner of Austin Wine Merchant, who operates a little differently. He takes reservations and commitments but not payment, because of the potential for the wine to be delivered heat-damaged, with other defects, or not at all if someone goes out of business. There is also a very strong argument for greater appreciation through other investments over the two years than the savings you receive for paying up front.
So, should collectors get into this game if they’re not already? I really don’t think you’re missing out if not. However, it can be a fun way to follow wines that you know you like from year to year, and you’ll usually get the best price. There is also a factor of anticipation, which can be exciting. If you’re gunning for the top of the top, it will most likely be the only way to purchase producers such as Petrus and many of the First Growths. Finally, it’s one of the only ways to reliably acquire magnums from your favorite Chateau, and every cellar should have a lot of magnums!