Apparently, The Times They Are a-Changing, what – if this was not a tautology by itself – could easily be seen in the changing role of interest. Where it used to be normal in a credit arrangement that the lender received interest from the borrower, this scheme is now sometimes inverted in the Eurozone.
The Bordeaux Primeur business consists of a forward contract as to delivery and of a credit contract concerning payment. Once there is no interest, no opportunity can be thought of as forward curves are flat.
From the point of the potential en-primeur buyer, if there is no incentive to buy now, he will keep his pockets closed and wait until the wines are deliverable.
From the point of the en-primeur merchant, if there is no potential en-primeur-buyer any more, he will stop making much fuss about allocations and quit the scene.
From the point of the producer, the Bordeaux-Chateau xy, in order to sell its wine in the future, it will rely on „normal“ market mechanisms just like in any other region: to sell the wine when it is in the bottle with discounts for professional merchants that are much higher than the implicit en-primeur-margin now.
Under ceteris paribus circumstances, prices would go up (as merchants were not willing to be squeezend to scarce primeurmargins) with the result of even lesser demand. In order to infuse demand, the producers would need to lower prices in order to meet the expectations of the clients (buyers).
So, if it may be allowed to adopt the categorical imperative to the primeur business in the sense as to highlight consequences of market participants being strictly consequent, it would be wise of the Bordeaux Chateaux to lower prices to a level where – with expediencies generating phantasy – serious demand would follow.
If there was no primeur-business any more in Bordeaux, the wines either would need to be more expensive or the Chateaux would have to exclude the merchants from the game in order to save up their margins for offering the wines themselves directly to the end-clients at lower prices.
I would assume that only very few of the very famous names could generate a competitive advantage over the merchants here by buying the necessary expertise at a cheaper price than the merchants‘ margin.
So, this is a plea from a German en-primeur-merchant who wants to make some of the Chateaux in Bordeaux (and, of course, hopefully more than „some“) conscious of the dangerous game they are being part of, currently.
If Robert Parker had not been so generous to Bordeaux with his unique ability to fuel the urge to cellar the wine-diamonds in the last two decades, prices would not be at all where they are now. We are now post-Parker, people in Bordeaux!
Its all very easy: just be a little wise.
