PHYSICAL OR EN PRIMEUR WINE?
Generally, there are two ways to purchase wine for investment.
EN PRIMEUR WINE
This refers to a long established practice of buying wines whilst ‘in the barrel’. The wine is released for general sale via Negociants around springtime the year following each harvest. The opening price of En Primeur Wine is usually considered the cheapest route to purchasing wine. It also guarantees the provenance of the wine – effectively you are the very first owner. The wine is sold as if ‘In Bond’ – free of VAT and Import Duty. When bottled, the wine typically arrives in the UK 2-3 years after the harvest, normally around 2 years after purchase. The wine is delivered to the UK (still ‘under-bond’) and then distributed to the buyer’s own account within a bonded warehouse and held until Tax and Duty is paid.
Quite simply these are wines that have been bottled and cased. Whilst each chateau will hold a percentage of bottled stock back for their own purpose, the majority is sent to new homes either in private cellars or bonded warehouses throughout the world for ‘laying-down’ until they reach maturity and are ready for consumption.
En Primeur wine is and will remain a hugely important part of the wine market. This method of selling wine before being bottled allows the estates to move onto the next growing season with the knowledge that their Negociants take over the role of distribution. Recent vintages, in particular 2009, 2010, 2011 and 2012 were released at eye-watering levels into the market. Despite the acclaim the 2009 and 2010 vintages have received, the lesser-graded 2011, 2012 wines were released into a turbulent economic environment and failed to generate interest from either the consumer or speculator. The outcome has to a certain extent been seen as a failure (by the Bordelais) to work with the market. This highlights why T&J always urges clients to tread with caution with En Primeur. The highest due diligence is required for this area of the market; buyers must be very selective, choose only high quality wines and always appreciate the risks involved. For any new investor, T&J recommends that you start a portfolio by investing in physical wines only. We will of course advise clients of our opinion during every En Primeur campaign in order to assist you in identifying the right quality for the right price within any given vintage. When assisting clients in the ‘Physical’ market, one of the crucial elements of buying wines is to ensure that the highest level of provenance can be proved. This is very important — and often not appreciated by speculators of the market. Often a case of wine will be transported several times between warehouses and accounts before it has reached maturity and is ready to be served at a table in a Michelin Star restaurant or in the home of a lucky collector. If one is paying hundreds, sometimes thousands of pounds for this privilege, then one expects the wine to be in impeccable condition. Knowledge that the wine has an acceptable storage history ultimately ensures the highest premium on the sale. By assisting our clients in this way, T&J believes in building a strong backbone of physical wines for a portfolio – as well as taking opportunities in the En Primeur wine market if and when they arise.