Chateau Latour has said it will exit the en primeur sales system which involves extensive barrel tastings by trade and press
May 15 2012
Much fine Bordeaux wine is sold en primeur in barrel but could this change?
Bordeaux’s Chateau Latour has shocked many in the wine world by announcing that, from 2012 vintage, it will exit the en primeur sales process and, it is understood, the traditional négociant network.
Chateau director Frederic Engerer revealed the decision formally in a recent letter to négociants. Latour says that its motive is a growing reluctance to sell the wine in barrel, before its true character can be revealed, and the group feels that much of its wine is drunk too young. The en primeur system involves extensive barrel tastings by trade and press, after which traders choose the labels and quantities they want. They pay for the wine up front and receive it a couple of years later when it has been bottled. This offers a great advantage for the chateaux’s cash flow. However, the bottled wine is often sold on soon after acceptance, with many customers receiving the wine in the very early stages of maturation.
However, top wines such as Latour are also sold in the fine wine collectors’ market, and listed on the Linex Index. Such wines very often sell for a great deal more than the en primeur price. Some cynics believe that Latour is motivated by the desire to corner some of this speculative profit for itself. Latour denies this and it has been suggested that another motive is that selling into newer markets such as China would be easier if the traditional system was bypassed and wines were sampled only when bottled and ready.
Latour is owned by French millionaire Francis Pinault who also owns Gucci, Samsonite and Christie's Auctions. He is, in fact, an old hand at selling luxury goods to emerging markets and may simply feel he no longer needs agents such as négociants, courtiers and wine brokers, all of whom eat heavily into producer margins, often with the knock on effect of increasing prices to the consumer. Some commentators have remarked that Latour has been preparing for the move for quite some time, by cutting the number of négociants it used and reducing quantities for en primeur sales. The chateau is also understood to have built up a large stock of older vintages. It is believed that Latour will now set up its own distributor network.
The speculation now is whether other chateaux may follow suit. There are around 350 négociants in Bordeaux, who currently distribute the region’s wines and they will face losses of some €2m as result of the Latour exit. As to the price of the wines, the market can only wait and see. At the moment, prices for 2011 are lower than 2010, with Cos d’Estournal opening at €108 per bottle, down 50% on 2010, with Chateau Lafite going down by 30% to €420 per bottle. However, some are pointing out that the drop is due more to a lesser concentration in the wines compared to 2010, rather than the state of wine trade finances.