Wine Spectator's Guide to Buying Futures

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Editor's Note: The following was originally posted on Wine Spectator's Web site on March 28. It is being republished here with their permission.

Buying futures is a lot like buying commodities, with cash laid down now for later delivery of something that doesn't yet exist as a finished product.

Unlike pork bellies, however, wine futures buyers must wait a relatively long time for their purchase, typically up to two years if the futures are bought soon after they are first offered.

The motivation for getting in on futures action is twofold.

First, buyers get an early opportunity to lay claim to a potentially rare wine. Second, those same highly desirable wines can often be obtained at a bargain price -- assuming the vintage is exciting enough to cause a price hike later. Buyers can then pass the waiting period watching their futures increase in value.

That's if they're lucky, of course. Buying futures can be a double-edged sword. It's possible to make a killing, as anyone who bought Chateau Cheval-Blanc 1982 futures in 1983 can attest ($350 to $450 for a case bought as a future, $9,500 at auction in 1999, a 21-fold return on the investment).

But buyers can get hurt, too. Those who bought 1997 futures in 1998, for a vintage considered by many to be overpriced, would have been just as well off waiting for the wine to arrive in stores.

Chateau Haut-Brion 1997, which fetched about $150 per bottle for a future, could be purchased at retail in 2003 for almost exactly the same price.

Futures -- called en primeur in France -- reach the world through a series of phases. It all begins with the chateaus, mainly the first-growth producers and a handful of other highly regarded estates, who effectively set the market price for a given year.

After courtiers, or brokers, take a small percentage, the right to sell the futures is passed on to the negociants, or shippers. With very few exceptions, no one deals directly with the chateaus; they deal with the negociants.

Once past this phase, as far as the U.S. market is concerned, the importers take over. Some importers offer futures for sale directly to individual consumers. Others sell their futures allocations to wholesalers, retailers and restaurants.

Merchants are the final part of the process. Most consumers purchase futures through them. This arrangement doesn't mean that merchants never see the inside of a chateau; on the contrary, the reputable ones travel to Bordeaux for every campaign. Their goal is to obtain firsthand knowledge of the new wines.

Even though wines from the preceding year's harvest are typically barrel-tasted in late March, the top growths may not release their prices for the trade until May. There is no fixed schedule; some smaller estates that offer futures come out with their trade prices before the first-growths. A consumer can expect to pay a 200% to 250% markup once the title to the wine has made its journey from chateau to merchant.

If you plan to buy futures, you should work only with reputable merchants who have a history of delivering the wines their customers order.

Shop around for the best prices, but don't be tempted by a price that's too low. If an offer sounds too good to be true, it probably is.

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