The terms Wine Futures, Pre-Arrivals and En Primeur generally mean the same thing. En Primeur is French for “In Youth”. A wine future refers to buying wine after it is made and before it is bottled. Sometime after six months or so after harvest while the wines are still in tank or barrel the chateaux releases for sale a portion of wine called a tranche. The chateaux then sets an opening price for 12 bottles of its wine. That tranche is tasted and the tasting notes are made available to select wholesale merchants and wine critics. Wine merchants use that information on the wine assessment to sell their future purchase to wine buyers and collectors.
Why do people buy wine futures or pre-arrivals? The most important reason is that buyers get first opportunity to purchase potentially limited wines. The second reason is related to the first reason. By having a first opportunity to buy limited wines, buyers are counting on the purchased vintage will be so good that the price to buy the wine on the open market will be higher than the established futures price.
It is more common to see Pre-Arrivals offered by wineries and/or suppliers who to select buyers they give an opportunity to purchase wines before those wines hit the market place. Many of these wines don’t make it to retailers but to collectors and savvy buyers. Wines that are offered as Pre-Arrivals are typically premium wines which are highly desired and in most cases in limited supply. One wine comes to mind is Kosta Browne. According to Zachy’s, there are nearly 800 American wines that are available as Pre-Arrivals.
We will use the most common wine futures of Bourdeaux wines to show how the process works. The châteaux and highly regarded estate wineries make an estimate as to what the opening market price will be for a vintage for what they think a case of wine (12 bottles) will sell for in the future. Then courtiers or brokers get involved and they charge a small percentage for the right to sell wine futures to négociants or shippers/improvers. There are different types of négociants. Some are simply just middlemen and others work with the grapes from harvest to bottling who use their own label. Negociants are more or less obligated to buy their annual allocation because if they don’t then they may not be able to the following year. The chateaux effectively spreads the risk that a particular vintage is bad on to the negociants. The chateaux sell futures to assist their cash flow in operating the vineyard. It is rare that the public ever deals with the chateau directly.
There are other wine futures than the Bordeaux wine market. Futures can be used for wines from other regions like Burgundy, California, the Rhone Valley, Italy and Port. Futures can also be found in whiskey and bourbons.
If you buy wine futures, make sure that the futures are confirmed by the supplier. Depending on the futures, merchant pre-payment (100%) in full is required and in some cases 50% up front and the balance on the release of the wine. Buyer beware that if someone is offering futures that are significantly lower than others; be extremely cautious of that merchant because shady businessmen are looking to take your money and not give you anything in return.
Like the stock market, buying wine futures can be a windfall, no gain or worse, a bust. Futures buyers in 1983 purchased Château Cheval-Blanc 1982 futures at $350 to $450 a case. That particular wine then sold at auction in 1999 at $9,500 a case. That was a 2700% rate of return! That doesn’t always happen as evidenced by investors buying 1997 Chateau Haut-Brion in 1998 for $150 per case. After five years, the wine could be purchased for that amount in retail stores. According to price-comparison website Wine Owners, Château Lafite Rothschild 2010 was first released at £11,900 per cases of 12 bottles. In 1994, that wine sold for only £5,700. That is a 52% loss!
For the everyday person or even a wine enthusiast, buying futures should be money that you are okay to lose. There are other things to consider like storage fees, risk of corked wine, insurance, broker commissions and capital gain considerations. I think buying pre-arrivals is a great way to learn about wine and is worthwhile for people who want to appreciate wines. A good bottle of wine is not just for the momentary consumption but an appreciation of the beauty of the wine itself. Wine is to be enjoyed and shared. Having a wine that is limited or increased in value is part of the wine experience.
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