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Château Latour Abandons Futures System

As the château gains more control over sales, will it hurt the rest of Bordeaux?

James Molesworth, Suzanne Mustacich
Posted: April 16, 2012

Lovers of Château Latour used to buying the famed first-growth estate's newest vintage during the en primeur season may want to hurry. The 2011 vintage will be the last en primeur offering, after the estate announced just before the weekend that it would no longer use the en primeur system to sell its most recent vintage. Beginning with the 2012 vintage, Latour will not announce a price in the following spring along with the rest of Bordeaux, as it has historically done. Instead, it will only make the wine available for sale until after it is bottled and when the estate feels it is ready to drink.

At a time when the wine world is waiting for Bordeaux's top properties to release their prices, the move came as a shock to industry members in the region. Word spread quickly after Château Latour sent a letter to its clients informing them of the change, a move necessitated by French laws which require a year's notice when one party changes the terms of a business relationship with another.

Latour general director Frédéric Engerer said that his goal was to closely manage the technical and commercial life of the wine while meeting increasing consumer demand for older vintages that have been stored at the château. It puts the château more in charge of who it sells wine to and for how much, as opposed to relying primarily on the Place de Bordeaux and négociants to do the bulk of the marketing and sales for the estate.

“This is something that I wanted to do for quite a while. Generally, we're concerned by the fact that our wines are drunk too young,” said Engerer. “We believe it is our duty, especially for a long-aging wine such as Château Latour, to be more concerned of that problem. We think this new commercial rhythm is in line with a growing demand from wine amateurs to be able to acquire wines that reach a 'drinkability phase' and that have been kept in perfect conditions in our cellars.”

Selling the wine directly also adroitly quiets concerns about provenance, another major concern for the estate.

“We need to step up on this issue,” said Engerer. “In the first 10 to 15 years the wine is traveling so much through the distribution system and secondary market. If you buy and open a '95 Latour right now and take that risk, and it doesn't show well because of how it was stored, you blame it on us in the end. It's our image at stake. So what can we do to improve the quality of the wine at delivery? We can keep them longer. The provenance problem, driven by the Asian market, really accelerated this decision for us.”

Engerer also stressed that the wines will still be made available through the Place de Bordeaux, noting that the new release pattern will typically be seven years after the vintage for the estate's second wine, Les Forts de Latour and 10 to 12 years for the grand vin, though that will always depend on the vintage. The estate's third wine, the Pauillac de Château Latour, has always been released several years after the vintage and will continue to be released on that pattern.

Château Latour is one of the top wines currently produced in Bordeaux. Wine Spectator reviewed the 2011 barrel sample with a potential score of 93 to 96 points, following the superlative 2009 (99 points, $1,600) and 2010 (96–99, released even higher-priced than the 2009 but currently selling for around $1,500 per bottle). Assuming the wine continues to appreciates in value, Latour stands to make more money by pocketing the profits that are currently split with brokers and négociants, as well as shortcutting the sale of older vintages on the secondary market.

Rumors of Latour’s defection from Bordeaux's longtime system for selling its wines have circulated for years. Under Engerer's direction, Château Latour has gradually removed négociants from its sales list and reduced allocations in recent years, selling less and less wine as futures. He has increased the inventory being sent to America and hired additional employees for public relations and brand representation.

But the reality of a first-growth's decision to abandon the en primeur system altogether has left many members of the Bordeaux industry mulling over the implications. It’s a historic move, made all the more so as it is rare for one of the five first-growth estates to break ranks in such a manner. But is it the death knell of the en primeur system?

“The en primeur selling method is deeply rooted within the Bordeaux culture,“ said Jean-Charles Cazes of Château Lynch-Bages in Pauillac. “Latour's decision to stop selling en primeur epitomizes the gradual but complete shift of power from the négociants to the property that initiated after the '70s crisis, and accelerated in the '90s and 2000s. But will that move trigger some similar initiatives from other properties? For obvious cash reasons, this approach is not within the reach of most châteaus. You have to have deep pockets and great confidence in your financial future.”

But while the en primeur system has been under attack in the past, Cazes did note that this time is different, as a major move has been made by a producer, rather than just calls for a change from the press or consumers.

However, most château owners do not have the deep pockets of Latour's owner François Pinault, one of France's richest men. They still need the distribution, marketing and financing that the négociants bring. And many Bordelais believe the system works well.

“Why would I leave the Place de Bordeaux?” asked Jean-Guillaume Prats, general manager of second-growth Château Cos-d’Estournel. “It is an extraordinary system. It costs us nothing. The négociants take low commissions while I sell my wine in 30 minutes and the wine is distributed all over the world.”

And there may be some potential pratfalls for Latour following its move. The annual spring time en primeur campaign has become an extremely successful marketing event for the region. Now, Latour will no longer be in that limelight, noted one négociant.

“He just did the others a huge favor. What used to be a five-horse race is now a four-horse race," the source said, suggesting that Haut-Brion, Lafite Rothschild, Mouton-Rothschild and Margaux would not follow Latour's lead.

Will longtime customers who faithfully buy first-growths every year as futures buy Latour long after they've bought the same vintage of other châteaus at a lower price? Some retailers say they still plan to stock Latour while expressing regret that it will no longer be part of their en primeur campaign.

“It's a fascinating development,” said Chris Adams, CEO of Sherry Lehmann. “It should be said that the Bordeaux system of distribution is incredibly efficient. While this approach might not be well-suited to each and every château, I can see the merits for Latour. They retain control of the wine's development in the bottle and are more able to assess and subsequently release the wine as they deem appropriate.”

Other members of the industry are not sure. Some feel the move may be geared toward emerging markets in Asia, which are lukewarm on primeurs but eagerly buy older vintages.

“I think it's a brave decision, and frankly has been in the cards for a while now. But ultimately I don't think it will help the value of Latour increase in the global market,” Berry Bros & Rudd’s sales director Simon Staples told Wine Spectator. “It’s about momentum. Being out of the game is dangerous.”

Several négociants and château owners complain that Latour is not being a good sport, saying that Pinault and Engerer have forgotten that the en primeur system was created to help the châteaus when they were struggling financially. There is also the role first-growths play as leaders in setting prices as well as locomotives for selling the rest of Bordeaux’s wine. Négociants often ask merchants to take allocations of less in-demand châteaus in exchange for an allocation of first-growths.

For now, Latour's team is counting on continued strong demand for top Bordeauxs for some time. “You really have to be at the top of the heap to get away with this, and they probably can,” said Barbara Hermann, wine buyer for Binny’s Beverage Depot of Illinois.

Andrew Mcinnes
France —  April 16, 2012 4:15pm ET
James, imagine you take an average annual production of Latour of 200 000 bottles, and from 2005 to 2009 calculate the difference in price for what the wines were sold en primeur, versus the price they are being sold today. You easily reach half a billion euros in cumulative revenue. I don't think this decision was a difficult one to take.
Warren Shafer
California —  April 16, 2012 8:28pm ET
James - Very interesting development and well done article. As with all major changes the consequences are not always as expected. I have purchased futures since 2000 and always look forward to the reports on the harvest and where the future markets are headed. For the high end customer and the Chateau I can see some benefits. For me as the consumer I see a negative since the option to buy futures at a discount and wait for a truly excellent product is eliminated. I will watch this to see how it plays out over time.

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