Two years ago, Chateau Latour announced they were no longer going to sell their wine en primeur, instead releasing them “when the wines are ready to drink.” Owned by billionaire Francois Pinault, the first growth decided to not pre-sell the vintage two years before delivery. The en primeur system of pre-selling a vintage has been widely criticized for a variety of reasons ranging from crass commercialism to selling an embryonic wine, one that hasn’t completed secondary fermentation and is literally years away from having a completed final blend.
In strictly economic terms, en primeur is selling the bearskin before catching the bear. Yes, that really is economics, with a bit of hunting: apparently, hunters would sell pre-sell bearskins when they thought the price of bearskins would decline in the future, thus locking in the higher price. Since this is a declining marketing, this is why down markets came to be called bear markets, at least accruing to a recent piece on Marketplace. In the case of wine, pre-selling a wine may be because sellers are bracing for a decline in the future. But it also helps cash flow, again, since they sell the wine two years before delivering the wine (in any format you want!). Either way, Latour clearly thinks prices are going up and they aren’t in need of short-term capital.
So, yesterday, they sold a slice of 2004 from their cellars. The price is about $600, which is about the market price today. But it is a far cry from the 110 euros the wine was sold for en primeur in 2005. In other words, Latour is getting 328% more today than they did in 2005 for the same wine (the S&P 500 was up 62% for the period). Not a bad return for the past ten years . And it certainly covers their storage costs.