Investment Tips - Bordeaux - 3. June 2020

Bordeaux Is Back! Strong Short-Term Potential In The 2019 En Primeur

Record-low prices and a particularly strong vintage mean that we see exceptionally solid short-term potential in 2019 En Primeur. An opportunity we haven't seen in years

"Bordeaux Is Not Worth Investing In"

Perhaps the quote is not verbatim stated by RareWine Invest's Director, Anders Børsen, but the faithful reader of our investment tips will not doubt that we have always had some skepticism about the Bordeaux wines as investment cases – and we still have. From this, it can be difficult to understand why we will be focusing heavily on the Bordeaux 2019 En Primeur as an investment in the coming weeks - and therefore you should read along here, because there is a very specific explanation for why the 2019 vintage can be the best Bordeaux investment for more than a decade. But before that, we must state our general attitude towards Bordeaux before we can get to the heart of the matter – and how you can take advantage of the lucrative 2019 En Primeur.

The Great Taboo In Bordeaux

It has long been the case that both castles and négociants have become aware of the inconvenience of the last ten years of price increases, failing sales and internal accumulation of millions and millions of bottles of Bordeaux wine. It has temporarily been difficult to see a good solution to this problem where no one loses reputation and where a price collapse can be avoided.

The unmistakable consequence of rolling the prices backwards has therefore prevented Bordeaux as a whole from looking in the mirror and saying the famous words of H.C. Andersen's fairytale, The Emperor's New Clothes: "He has no clothes on".

Whatever was to save Bordeaux from a major collapse in prices, which was jointly responsible, no one has probably made serious thoughts about and in the absence of alternatives, the hole has only been dug deeper and deeper in recent years.

Maybe the Corona crisis will be the rescue, which gives the Chateaus a legitimate reason to adjust prices, without pointing the knife towards themselves and without anyone losing face.

This should not be the first time that turmoil and chaos have allowed radical changes that would, under normal circumstances, be impossible allowing scandals to have been reduced to historical footnotes. Maybe a crisis like this is precisely the scapegoat that Bordeaux has been longing for?

What Is En Primeur Sale

The tradition stipulates that the grapes are harvested in the autumn, after which the wine is fermented and put on casks before the En Primeur tasting in April. Here, the unfinished wines are presented to the public in connection with the great landscaped En Primeur tasting and the chateaus then put their wines up for sale during May-June, a little well over half a year after the harvest. The wines are typically bottled after 18-24 months on the casks and the buyer can expect the wines delivered 2½ - 3 years after the harvest time. This means that the sale of the 2019 En Primeur has just started, and that wines purchased in this connection will be delivered during the second half of 2022.

Uncertainty Gives Big Discounts Despite High Quality

The fact that the En Primeur tastings has been canceled this year due to Corona means that those who usually buy En Primeur wine based on their own tasting notes, will be hesitant because of the uncertainty that refers them to depend only on the greatest wine critics' tasting notes. The uncertainty, which is not an indication that the quality of the wines is low, is therefore compensated by a reduced price, and thus the loyal buyers are again motivated. In many ways, it is like buying a suit without being able to try it on first. The suit itself is great, but because of the risk that it doesn’t fit you will only pay half.

With the prospect of being able to buy the 2019 vintage, which is of great quality and belongs in the good company of the 2018, 2016, 2015, 2010, 2009 and 2005 vintages, with up to 40% discount compared to the En Primeur price of the 2018 vintage, we see a great short-term investment potential in the 2019 Bordeaux En Primeur, which seems extremely cheap.

Along with the uncertainty also comes the possibility of an even bigger upside. This consists in the fact that the greatest wine critics have only in a few cases tasted and criticized the wines prior to the En Primeur release. For the investor this means that you buy into a case that consists of a very strong vintage at an incredibly low price, but at the same time has the opportunity for an extra gain if one of the top critics sprinkles star dust and rewards the wines with the ever important top scores.

Why Invest In 2019 En Primeur? Once-In-A-Decade Opportunity

With investor glasses one can hope that the 2019 En Primeur will be a repeat of the 2008 En Primeur, which took off in the summer of 2009 - in the midst of the financial crisis. The turmoil in the financial markets and the fear of a failing En Primeur sale then triggered a coordinated effort between the chateaus, which resulted in the 2008 vintage being released at prices that were 30-50% below the release price of 2007 vintage - a vintage that was slightly weaker than the 2008 vintage.

Those who invested in the 2008 vintage in the 2008 En Primeur, at that time did a very good trade because they bought with an exceptionally high discount, and when the prices subsequently adjusted, they were rewarded with a return of 32% in just 12 months while the prices after two years had risen almost 50%. Since then, ie. since summer 2011, Bordeaux prices have been stable and returns have been around 0% in about 9 years. 

If the 2019 En Primeur becomes a complete or partial repeat of the 2008 En Primeur, the Bordeaux prices will rebound within a year or two, in whole or in part, which will send 2019 prices up on par with the other vintages - potentially triggered by a successful 2020 En Primeur campaign with prices closer to the En Primeur prices from 2018 vintage rather than the 2019 vintage.

Invest in 2019 Bordeaux En Primeur En Primeur tasting

Top Vintage At Lucrative Price Offers Minimal Risk

Alternatively, and with slightly more pessimistic glasses on, we end up witnessing a larger and more permanent fall in Bordeaux prices, which will trigger price declines in the other vintages, while the 2019 vintage will either rise marginally in price or, in the worst case, stagnate in price.

Either way, the value of the 2019 Bordeaux En Primeur is difficult to oversee, which is comparable in quality to the better vintages while En Primeur prices are expected to land on par with the four mediocre vintages, 2011-14.

Thus, 2019 Bordeaux delivers solid potential, and the expectation is that we can get solid short-term returns at best. At worst we will witness a major fall in prices in Bordeaux, but in this case the 2019 En Primeur remains the cheapest top vintage there is a market that one again offers long-term investment potential in Bordeaux.

Possible Solid Short-Term Return In 2019 Bordeaux

With a discount of up to 40% compared to the corresponding 2018 vintage and with a price corresponding to the ordinary 2013 vintage, the potential of investing in the 2019 Bordeaux lies in the possibility of a solid short-term return. If 2019 ends up as a single cheap vintage, which is replaced by a significantly more expensive 2020 vintage, it could result in price increases of the 2019 vintage of up to 35% over the next 12 to 24 months.

For example, to only illustrate the relationship between price increases and net return, a 25% price increase in 18 months, in a typical portfolio (0.7% annual cost + 7% sales commission), will in practice result in a net return of 15.2% after all costs, which is equivalent to an average annual net return of 9.9% over the period, which is significantly above market return.

Given that there is a potential where nothing is guaranteed, it is worth noting that a price increase of just 9% in the above calculation example will send the investment in a small plus, so the risk may reasonably seem limited, in the light of the major discount that the 2019 En Primeur offers.

James Suckling at 2019 En Primeur James Suckiling focused while tasting and giving criticism - high scores can definitely move the prices

This Is How Investing In En Primeur Works In Practice

Nobody knows when the wines will be priced and put up for sale, and often it is about being quick and responsive when it happens, and many times it is sold out after a very short time. For example, the entire vintage 2019 from Pontet-Canet (about 240,000 bottles) was sold out in just 3 hours when these went on sale May 28. Part of the explanation should probably be found that the price of the 2019 vintage was 30% lower than the price of the corresponding to the vintage 2018.

With the risk of the wines being sold out in a few hours, we will be sending out emails up to several times a day during this time. We will only offer Bordeaux En Primeur for investment, which we have already assessed, is attractively priced and has investment potential based on the criteria described in this article. This can in short be reduced to a question of price in relation to similar vintages from the same manufacturer.

In order not to waste time, these emails will rarely contain a case description, in which our starting point is that the wines we offer for investment are considered to be attractively priced. If you want to be sure of being offered specific wines when they are released, we recommend contacting your investment advisor already - if you are not already on our mailing list, you can sign up for our special En Primeur campaign list here.

You can unsubscribe from our Bordeaux En Primeur campaign at any time, after which you will continue to receive our weekly newsletters as you know them.

No General Changes In Attitude Towards Bordeaux

Despite the fact that consumer-driven demand has stagnated and fallen at worst, the Bordeaux chateaus have, over the past decade, year after year, set prices which has contributed to declining sales and the accumulation of wine at both castles, négociants and wine merchants around the world.

The castle's insistence on raising prices no matter what, combined with their great wealth, has allowed this to go far beyond what is healthy for a market. As a result, we at RareWine Invest have been very reserved about investing in Bordeaux, which we fear could face a price collapse when the owners of the millions of expensive purchased Bordeaux wines ran out of either capital or patience.

Therefore, when we released our recommended standard portfolio recommendations in 2016, it was with just 20% Bordeaux. A more or less opt-out of Bordeaux as an investment in favor of Burgundy and Champagne was controversial back then and we were very much alone with this attitude. However, in light of how precisely the Champagne and especially the Burgundy prices have developed, compared to the Bordeaux prices over the past four years, we are glad that we made the call that time. The adjustment of our recommendation from 20% to 10% Bordeaux back in 2018 is therefore also a decision we both stand by and are happy to have made.

Our general attitude towards Bordeaux is currently unchanged, and we do not yet see a long-term investment potential in Bordeaux, which, with the exception of the 2019 En Primeur, is too expensive. That being said, right now we see a unique potential in the 2019 En Primeur sale from Bordeaux that gives the wine investor an opportunity for a solid short-term gain.

Use the contact form below if you want to learn more about En Primeur investment.

En Primeur Sale

Here we will update our En Primer recommandations.

If you want to be among the first to receive the En Primeur offers when they are released, please sign up to our special En Primeur campaign list here.

Pontet-CanetPauillac€ 68Sold out / waiting list
PalmerMargaux€ 180Few available
MalescotSt. Exupery€ 33Sold out / waiting list
Cheval BlancSt. Emilion€ 400Sold out / waiting list
Leoville PoyferreSaint Julien€ 55Available
Mouton RothschildPauillac€ 350Sold out / waiting list
Le Petit Mouton de Mouton RothschildPauillac€ 170Few available
BeychevelleSaint Julien€ 60Sold out / waiting list
TalbotSaint Julien€ 37Few available
*All prices are in EUR ex. customs duty, tax and VAT for delivery to a bonded warehouse. Prices including customs duty, tax and VAT can be sent on request. The wines are only sold in whole cases unless otherwise specified and the price is per bottle. Minimum order size € 2,500. Assumes a total minimum investment of € 10,000. Prices may have changed since release of this article.

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