Bordeaux Futures Wrap-Up: The Good, the Bad and the Ugly

Bordeaux's futures campaign for the 2014 vintage started with enthusiasm for the wines, a more promising group than the 2013s, and hope that sensible pricing and a weak euro would rejuvenate sales. Now that the campaign has ended, however, retailers and merchants report mixed results. They also have serious doubts about whether future campaigns will work without changes.

Here’s a look at the ups and downs:

The Good

The campaign to sell the 2014 vintage was never going to be a frenzy. “Everyone knows it's a good but not great vintage, and it's also the fourth [non-blockbuster vintage] in a row,” said Barbara Hermann, fine wine buyer at Binnys Beverage Depot, a major Midwestern chain.

But “good” was good enough for the owners of several top Bordeaux châteaus, who understood the market and priced their wines to sell. Consumers came back to futures after a long, dry spell. “The good news is that we actually had a pre-arrival campaign this year,” said Ralph Sands, senior Bordeaux specialist at K&L Wines in California. “Although it was a quiet one with absolutely no urgency, overall it has a positive feel to it because it seems to have brought interest back to Bordeaux. After three long years, I was busy on the phone.”

Strong performers for this year’s campaign, according to Lilian Barton-Sartorius, who is both a négociant and owner of classified growths Château Léoville Barton and Langoa, included Châteaus Lafite Rothschild, Haut-Brion, L’Église Clinet, Pichon Longueville Lalande and second-label stars like Carruades de Lafite.

Château Lynch Bages was particularly successful, releasing at the right time at the right price. “We sold 20,000 bottles,” said Max Lalondrelle, the director of fine wine buying for Berry Bros. & Rudd in London. Other hits were Calon-Ségur, Carmes Haut Brion, Léoville Barton and Talbot. “We sold 7,560 bottles of Talbot in a day,” he said.

The Bad

Unfortunately, despite the spate of successes, experts on all sides agree that the campaign veered off course, missing a wider opportunity to reach more consumers. While most estates raised prices slightly, American retail prices were lower than other recent vintages because of the weak euro. But several estates raised prices more than the exchange rate could overcome. It’s unclear if the châteaus feared undercutting the previous three vintages, which have sold poorly, or if they overestimated demand for the 2014s.

Several retailers pointed an accusatory finger at Château Pontet-Canet, which raised its price from last year and then boldly offered a second, costlier allocation, “despite the fact that [the first tranche] was too high and it wasn’t sold,” complained one merchant.

Berry Bros. & Rudd used to sell 20,000 bottles of Pontet-Canet, said Lalondrelle. This year they sold 4,000. Results for Angélus were weak too. “We only sold 396 bottles of Angélus,” said Lalondrelle. “Last year, we sold 72 bottles. In the past, we sold 300 to 400 cases of Angélus.”

The Ugly

More concerning to players on all sides, however, are several trends that threaten futures campaigns in the years to come.

The first problem is volume. Most châteaus have drastically reduced the volume of wine they sell as futures. “This is the châteaus giving into the temptation to create scarcity, but it’s false scarcity,” said Jean-Pierre Rousseau, managing director of the négociant Diva. Rather than drop prices from past vintages, château owners hope they can create demand at higher prices by releasing less wine.

But U.S. retailers say supply was not an issue, despite lower volumes. “There is a lot of wine out in the market and in the pipeline from just about every château,” said Hermann.

Small allocations serve another purpose—châteaus can release the wines in two years or more, when demand may have grown. “The châteaus are keeping 30 to 50 percent. It shows that the châteaus are richer, it’s easier for them to gamble and they want to speculate themselves,” said Rousseau. “But they’re not respecting the en primeur system.” If négociants and retailers can’t make money in a weak year, they may not be in the futures business when there’s another blockbuster.

The second problem lies with négociants. Stuck with too much wine priced too high, many have resorted to discounting—selling a wine for less than the recommended wholesale resale price, which is set by the château. When discounts occur, the château keeps its profit margins, but the négociants trim their own.

Why is that a problem? Prices are widely transparent on the Internet. Châteaus get angry when their wine is discounted, because they believe it hurts their brand image. Négociants who play by the rules lose business. And retailers argue that the discounts are an unhelpful quick fix that undercuts prices. “We work with a 3 percent net profit. It’s not much,” said Lalondrelle. “We are all in this together.”

Just before the campaign started, Lalondrelle sent a letter to the 38 négociants he orders Bordeaux classified growths from and let it be known that the British merchant, a client of Bordeaux for the past three centuries, was in no mood to accept discounts. “If the prices are correct there is no need for anyone to discount the wines,” he wrote in the letter, which he shared with Wine Spectator. Rather than discounting, Lalondrelle suggested, “If the wine isn’t well-priced, don’t offer it.”

But when sales slowed after the first few weeks of the campaign, négociants agreed to the discounts demanded by some of their customers.

Bordeaux has now had four commercially difficult vintages, which has some traders suggesting new business models that include standard discounts en primeur reserved for importer-retailers who demonstrate a firm commitment to Bordeaux throughout the year.

Others believe the châteaus need to find a way to ratchet the prices down. Without the trust that the wine will gain in value, there is little reason to buy Bordeaux en primeur. “You have to have a bonus at some point. You have to be rewarded,” said Rousseau.

Some point out that Bordeaux has faced such dilemmas before. Today’s large stock of unsold wine and discounting recalls the gloomy early 1990s. What saved en primeur was the 1995 vintage—it was a classic, and Bordeaux rebounded. Some are already hoping that maybe 2015 will deliver the same salvation. “The 2015 could put us in a stronger position,” said Rousseau. Then he cautioned, “if the prices are OK.”