Chateau Latour uncorks shock for Bordeaux wines
Bordeaux winegrower Chateau Latour will pull out of the traditional "en primeur" or futures market, a vital part of the region's commercial strategy, in a move geared to Asian markets, industry sources said on Monday.
Some traders expressed dismay at the decision, which they fear could herald a shake-up of the sales side of the business that could cut intermediaries out of the market and undermine a popular promotional tasting season.
The renowned first growth chateau's 2011 vintage will be the last Latour to be sold as a futures commodity, in a market which follows the season of barrel tastings held each spring in the southwest of France.
Chateau Latour's director Frederic Engerer announced the chateau's exit from the en primeur system in a letter to Bordeaux "negociants" or traders on Friday.
AFP obtained a copy of the letter, in which Engerer said he wanted the commercial life of the wine to coincide better with its technical life, arguing that his wines are often drunk too young, because consumers increasingly demand wines which are ready to drink.
People in the industry commented privately on what appears to be an aggressive move towards eliminating intermediaries in the chain of distribution.
Chateau Latour is part of the stable of luxury brands owned by French billionaire Francois Pinault, who also controls Christie's auction house, Gucci, Samsonite luggage and the Vail ski resort in America.
Bordeaux wine brokers earn two percent on every transaction and negociants typically earn 12 to 15 percent. One negociant quickly calculated that brokers would suffer losses of at least two million euros.
The sale of first-growth wines also helps sell less desirable wines, with the negociants obliging buyers to take the entire range of Bordeaux wines if they want the top brand.
Private consumers also earn substantial returns by buying wine at en primeur prices, and drinking the wine years later. There is concern that these consumers would no longer be able to afford the wine when released at substantially higher prices 'ready to drink.'
Chinese consumers, however, are showing an unquenchable thirst for expensive, older vintages, ready to uncork, and this move would enhance the position of Latour in that market and capture the margin for the chateau.
Engerer declined to comment, but industry insiders reacted to Latour's bombshell.
"We will miss offering Latour in our en primeur campaigns, but remain committed to working with our negociants to keep their wines in our stock," said Chris Adams, chief executive of Manhattan retailer Sherry Lehmann.
In Bordeaux, the response was less sanguine.
"It's appalling," said one negociant, who noted that there are more than 350 negociants who ship and promote Bordeaux wine around the globe.
"It might work in some markets -- emerging markets like China, who don't buy en primeur -- but it could also destroy the work in other markets done by negociants over centuries to give Latour the best possible distribution."
One of Bordeaux's most influential brokers warned: "Engerer will lose the strength of Bordeaux."
Paying for wine while it is still ageing in the barrel in the chateau's cellar is long-held tradition in Bordeaux, but this did not take on its contemporary form until the 1970s, when chateaux were strapped for cash.
Today it is a vital source of financing for many merchants, brokers, retailers and chateaux.
With this year's sales campaign poised to begin, traders worry that Latour's defection could dampen enthusiasm.
"Merchants, journalists and negociants get excited and in turn get private clients buzzing to buy," said Simon Staples, sales director of British wine behemoth Berry Bros & Rudd, which has been trading since 1698.
"It's very similar to a major sporting event really but when Brazil, the All Blacks or Barcelona decide not to enter it does take the patina off a little," he warned.
There are also concerns that Latour's decision could trigger a wider exodus.
"If Latour is successful, and it might be, others will do the same, and that then may well be the death knell on en primeur, which in some ways would be a sad thing," said Staples.
Latour appears to have prepared for this move for some time.
In recent years it has cut the number of negociants it works with and reduced the amount of wine sold en primeur, amassing a giant stock of older vintages, according to multiple sources.
The decision to stop selling en primeur is seen by many as a step towards leaving the negociant system entirely.
"I assume they will pull out of the negociant system and set up their own distribution network, that would give them control over who buys their wine, at least in the US," said Barbara Hermann, a buyer for US retailer Binny's.
© 2012 AFP