At En Primeur Week in Bordeaux, merchants and collectors buy wine futures and pre-arrivals of wines before they reach the mass market. Photo Credit: Wikimedia CC user BerndtF
Earlier this year, thousands of customers sued California wine retailer Premier Cru for allegedly running a Ponzi scheme. According to these collectors, Premier Cru sold them more than $60 million in French wine futures, but failed to deliver the bottles as promised. Lawyer Thomas Boothe says he lost $161,000 in investments on French wine futures, including rare vintages of DRC and Petrus. In hindsight, Boothe tells The New York Times that he should have suspected Premier Cru of fraud from the start. When he found bottles of $1,000 Bordeaux selling for $600, he says, “At that point the alarm bells should have sounded.”
It may be easy to identify wine futures fraud after it happens, but it’s much harder to spot before you buy. When you buy wine futures or pre-arrivals, it’s not enough to find the retailer who’s willing to sell you vintages at the lowest price; you also need to learn the warning signs of a bad investment. The good news is that investing with the right retailer could be a huge benefit for your collection, especially if you’re just getting started.
Reasons for Caution When You Buy Wine Futures
Wine futures differ from pre-arrivals in that retailers sell futures before the wine has even been bottled. Pre-arrivals, on the other hand, are sales of already-bottled wine that hasn’t been officially released on the market yet. Generally, collectors take on a greater risk when they buy wine futures because not even the winery itself can guarantee that the wine will arrive safely. Countless things can go wrong between the time you order your futures and the time the bottles arrive on your doorstep. Barrels can break, wine can spoil, or the vintage might not be as delicious as expected. In addition, it can take as long as four years for you to receive your wine after you pay for it, and there’s no guarantee that the wine will be worth whatever you paid for it if you decide to resell later.
Buy Wine Futures from a Trustworthy Source
You can’t control the quality and market risks when you buy wine futures, but you can decide where you buy them. To buy wine futures, you need to contact a negociant directly, or deal with an importer who has negociant contacts. This is the safest method to ensure that the wine futures you buy are authentic, however, finding an importer who works directly with collectors is rare. Most importers choose to sell bulk futures to retailers instead, which raises the cost of the futures and makes it harder to authenticate the wine. You can expect to pay as much as 200 to 250 percent more for futures sold by a merchant compared to an importer or negociant. To find a trustworthy merchant, search for sellers online, or call your local wine shops to ask if they sell futures, or know someone who does.
Before buying from a wine store that claims to sell futures, research the merchant’s customer reviews. If you don’t see a long history of satisfied customers, consider shopping with another merchant. Never buy wine futures from the first merchant you find. Shop around for the best price, and consider negotiating those prices with your merchant candidates. However, as we have seen with the Premier Cru fraud accusations, price isn’t everything. If a retailer is selling futures at a deep discount compared to his peers, it might not be worth the risk. With great negotiating skills, you might shave $100 off the price of a fine Bordeaux, but don’t expect to get authentic vintages at half price.
Where to Find the Safest Pre-Arrivals
You’ll avoid barrel mishaps and years of waiting when you choose pre-arrivals over wine futures, but even this type of sale isn’t foolproof. Just like futures, buying pre-arrivals from the wrong retailer can increase your risk of fraud, but it can also make you wait longer for your bottles to arrive. If your retailer isn’t familiar with shipping laws in your country or state, you could wait months longer than your peers for your bottles to arrive, and sometimes, those bottles arrive in poor condition after sitting in a shipping warehouse for too many weeks.
The good news is that you can handle your pre-arrival purchases much in the same way that you handle your normal, ready-to-drink wine purchases. First, research wine stores or wholesale retailers, preferably close to your home, who handle pre-arrival sales. Before you get to their pricing or negotiate specific bottles, verify that the bottles you’re buying are indeed pre-arrivals, and not futures. Sometimes, wine retailers will use the term “pre-arrival” when they really mean “future,” so it is important to ask whether the wine has already been bottled. Next, ask about the condition of the wine; has it been stored properly, and if so, where? How do they plan on shipping it to you? If your retailer struggles with answers to these questions, or seems generally unfamiliar with the process, you might want to choose a new retailer.
Shop around for the best price, and turn down prices that are too good to be true. Stay in contact with your retailer throughout the buying and shipping process to hold them accountable for getting your wine shipped to you on time. One of the best ways to protect yourself when you buy wine futures or pre-arrivals is to get your sale in writing, and detail exactly what you expect from your retailer, including whether you’ll get a refund on your purchase if the wine doesn’t show up as planned.
Whether you are starting your high-end wine collection or adding to an established portfolio, Vinfolio is your partner in buying, selling, and professional storage. Contact us today to get access to the world’s best wine.
