What is Wine Futures?
This article explains what wine futures are, how they work, and how to make a smart investment with them.
In fine wine investment, en primeur is always a heated discussion. To put it in simple terms, en primeur is a system of selling wines before being bottled. It is a system used mainly in the prestigious wine regions in France, such as Bordeaux, Burgundy, and Rhone Valley. Bordeaux in particular is where en primeur plays an important role in fine wine sales every year. Instead of investing in the future of a company by buying the stock shares, you will be investing in the future market performance of the wines. Here is what you should know about investing in en primeur.
History
Selling future merchandise, specifically, wine, can be traced back thousands of years. However, the current system of en primeur came into being after World War II in Bordeaux, when many chateaux were poorly managed and underfunded. Wine merchants (in French “negociants”), who were far more powerful and dynamic than even the most prestigious First Growths at the time, agreed to pre-purchase wines from the top wine estates. In this way, the struggling chateaux found relief in cash flow and allowed merchants to set their own prices. Today, en primeur sales are restricted to the most prestigious chateaux, many of which are Grand Cru Classe.
How does en primeur work
The sale of en primeur begins in Spring. Traditionally, the “en primeur week” takes place in March or April, during which time thousands of wine industry professionals, including wine merchants, wine critics, and journalists, gather in the chateaux, to taste the wines from the previous harvest. Wine critics rate the wines of barrel tasting, which later becomes one of the most influential factors of the market performance of the wines. After the tasting, the wine estates release a portion of the production of the given vintage to wine merchants, then the merchants present the offer, along with the critics’ score and tasting notes, to buyers. Professional or private buyers may place en primeur orders. En primeur is normally sold by the case of 6 or 12 bottles, and the price does not include any tax and duties. Finally, the wines will be shipped to the bond warehouses of buyers’ destination countries, 18 months to 3 years after the wines are bottled.
Why invest in en primeur?
There are several reasons that en primeur can be an interesting investment option:
To have a considerable return on investment in the long run
To secure the rare bottles before they become in high demand
To buy wines at the best possible price for future consumption
How to Invest in wine futures
To make a smart investment in en primeur, two essential factors must be considered.
Choosing the wines that are approved by multiple wine critics and wine professionals. This will ensure a stable return on investment and avoid the risk of investing as much as possible.
Buying from reliable, well-established wine merchants. As the sales cycle of en primeur can take years, proper management of the whole process, the transportation and storage after the wines arrive at bond warehouses are crucial.
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