If you follow any form of wine investing news, you will likely have heard, read, or listened to people reference the issues facing Bordeaux.

So what is going wrong? And I’m even going to try and add a bit of nuance…

Muted Performance.

Over the last 5 years, the Liv-ex Bordeaux 500 index has underperformed the major indices for Burgundy, Champagne, Italy, California, and even Port!

Why?

The Bordeaux market has En Primeur at its foundation.

“Whistle-stop description of En Primeur for the uninitiated – It’s a way to buy wine early, while it’s still aging. Buyers get access to limited wines at pre-release prices, with the potential for their value to grow by the time they’re bottled and delivered. Effectively — wine futures.”

En Primeur prices used to be the cheapest price that you would ever be able to buy a case of premium Bordeaux. They are sold via allocation, the more you’re willing to spend (especially on the less in-demand wines), the more of the premium wines you are allowed to buy.

The problem is that En Primeur prices have outpaced the market.

Effectively, the producers are releasing the new wines at prices that are too high and do not reflect

Some wines that were sold En Primeur in 2023 and haven’t even been released for drinking yet, and are already trading below their official release prices. Investors and drinkers alike don’t think these wines are worth En Primeur prices. So they don’t buy them.

This creates an issue for La Place.

“Whistle-stop description of La Place for the uninitiated – La Place de Bordeaux is a historic wine distribution system where châteaux work with a network of négociants / brokers to sell and distribute their wines globally.”

Bordeaux négociants make their money by distributing Bordelaise wines to the global market. When the global markets reject those wines the négociants and merchants are left sitting on a load of stock that they had to buy to keep their allocations.

This causes liquidity issues, as can be expected when you spend money on items that people used to buy from you, but have stopped doing. To save the balance sheet, Bordeaux stock-holders will need to sell their stock at a lower price, dampening the prices of the entire list, not just the most recent release.

I have gone on for a while here, so it looks like we may need a part 2…