Buying Wine on Futures

The time between when a grape is harvested and ends up on a store shelf can last from weeks (for lighter wines) up to years, sometimes four years or more.  During this time, the winery has to harvest, transport, separate, crush, soak, ferment, barrel, rack, bottle, box, and store the wine (just a few of the processing steps involved).  To produce a higher quality wine, the steps are often more labor intensive (or rely on expensive high-tech automation), pushing up the winery’s operating costs.  To recover some of those costs ahead of schedule, some wineries will offer a fraction of their wine under production for sale shortly after it has been stored in barrel and the quality can be assessed.  To motivate buyers to engage these wines early on, a discount is usually offered.  Alternatively, it may be the only means by which the wines can be obtained in certain formats (such as magnums or half-bottles).  By selling wines ahead of their release using futures, wineries can get some operating revenue and customers can get better access to the wine.

If, like me, you buy wine to drink, then you may be wondering whether to participate in a wine futures campaign.  (If you are buying wine as an investment, then there are superior sources of information than this post.)  Whether you participate in a futures campaign differs for domestic and import wines.  Most domestic wineries offer their wine futures at a substantial discount, so the opportunity to save money on a case or two of nice wine is sufficient motivation.  (If there is no discount, then the wine is probably in such high demand that this is your only means to secure a bottle, but you should confirm this.)  When visiting a winery, especially a smaller operation, ask if they have any futures wines available.  It is rare when they do, but well worth asking.  If a futures offering is available, make an effort to taste from the barrel before buying so you can get an impression of the wine’s potential.  (Expect wines from barrel to have much higher tannin levels and less refined fruits.)  If you cannot taste the wine before purchasing, then try to read the harvest reports online for details about the anticipated quality of the year’s wines in general.

Buying international wines on futures involves more risk and research.  Above all, buy your futures from a trusted wine retailer that is well established in the futures market (like JJBuckley and Zachy’s).  Often times, the larger retailers will send their own sales team to places like Bordeaux to assess the vintage early on and can weigh in on their personal favorites.  Wine journals like the Wine Advocate, Wine Spectator, et al, attend the same tasting functions and rate many of the wines.  You can use the retailers’ assessments and the professional reviews as a guide until you discover a few wineries that you come to know. 

Bordeaux wines are highly speculative around the world, which can affect their prices and availability in better vintages.  If a vintage is previewed with unanimous praise (as were the 2009 and 2010 vintages), buying the wines on futures can mean the difference between getting a bottle and missing out, or simply being priced out of the market.  As an example, one wine that I wanted to acquire was the 2009 Chateau Pontet Canet Pauillac, which had been rated in the range of 97 to 100 points in early 2010 from the barrel.  I was able to secure a few half-bottles at about $60 each, which was below my are-you-insane??? limit.  Upon release, the wine scored 100 points from the same reviewer and the price shot up to $150+, which is well beyond my limit.  So, buying this wine on futures made it possible to acquire the wine in the first place.  This same experience happened with five of the wines I ordered from the 2009 futures campaign.  Price changes like this help you to understand why there is so much speculation in the futures market.  It is worth noting that in less impressive vintages, the value of ordering futures diminishes, especially during years of currency-exchange turmoil.  You may end up saving $5 to $20 a bottle, but not much more, and with an increased level of risk.  In an ordinary vintage, you might consider futures as an affordable way to acquire a few bottles of first-growth Bordeaux for your collection, but buy the other wines at release.