The Future is Now

 Toward the end of March or the beginning of April, the world’s leading wine experts and merchants gather in Bordeaux for the first tasting of the new vintage, put into barrel the preceding fall. This series of tastings is the traditional beginning of the futures campaign, and usually ends with a triumphant round of glittering parties at the First Growths (the estates of Latour, Lafite, Mouton, Margaux and Haut-Brion).

Last week, Chateau Latour stunned the industry with the announcement that 2011 would be their last vintage offered on the futures market. Observers are trying to determine the potential fallout from this development.

In the Bordeaux futures market, contracts are sold (ultimately to consumers) to purchase wine for future release. Most of the wine harvested in 2011 won’t be bottled until 2013, and some won’t be available until 2014. In exchange for committing early and paying in full, the buyer receives a discount. The chateau receives the assurance that all the wine in their cellars is paid for.

Futures are released in stages, with each successive slice becoming more expensive. The wine contracts filter down through layers of middlemen—Bordeaux négociants (brokers), importers and retailers—until they finally reach the consumer. Depending on critical opinion and the demands of the market, some vintages have skyrocketed in price, while others were actually worth less by the time they were released. In recent years, given the heated demand for Bordeaux’s top wines in Asia, the system has led to speculation and price inflation.

Some chateaux don’t participate in the futures system, and prefer to sell their wine on the open market. This is not what Latour is going to do. Apparently, they plan to cellar the wine until it is mature and ready to drink, then sell it at substantially higher prices. They’ll take a financial hit for 5-8 years, but will ultimately reap all the profit now absorbed by middlemen.

“We are seeing wine consumers and lovers living differently,” said Frederic Ungerer, director of Latour. “It’s rarer and rarer that people buy wine and age it in the same place for 20 or 30 years.”

This is undoubtedly true. What’s also true is that a bottle of Chateau Latour from a top vintage already costs around $1000, and the tab will easily double after years of aging at the chateau. The world’s wealthiest buyers will have an assurance of provenance and correct storage. For the rest of us, the wine will slip further and further out of reach.