Tax on Patience

Why a £3,426 case of Lafite really costs £6,500

My thanks to Mark Bevan and Patrick Headlam at Nexus Wine Collections for their help with the cost-of-carry calculations. Nexus Wine Collections is an independent inventory service that manages, stores and distributes fine wine for private collectors, working with a range of storage facilities including Octavian, London City Bond, Coterie and Hillebrand.

A £3,426 case of Lafite 2024 is not just a £3,426 purchase. By the time you sell it or drink it, the real cost is closer to £6,500.

Patience is one of those virtues people are always keen to recommend, especially when someone else is paying the price for it. Sure, sometimes it does pay off to be patient, but when it comes to Bordeaux en primeur, I would argue that patience has not rewarded anyone much over the past two decades.

The mid-March release of Latour always sets the tone for the campaign to come and a few weeks ago, Latour 2019 was released at 8% less than last year’s release of the 2016. On the face of it, that sounds encouraging but the two prices are not directly comparable.

The 2016 was released with nine years of ageing behind it. The 2019 is being released with only seven. The 2016 is already available on the market at around £500 to £585 per bottle. The newly released 2019, with less ageing and arguably a less established reputation, is coming in at £465 per bottle.

So is that attractive? Was £3,426 for a case of Lafite 2024 en primeur actually an attractive price?

You cannot answer that from the release price alone.

And that brings us back to the £6,500 number.

£6,500 includes all the costs a buyer is likely to incur from the moment they commit to the wine to the moment, perhaps ten years later, they either sell it or drink it. In finance, these are called carrying costs. In wine, these costs are often ignored.

There is storage. There is insurance. There may be delivery, commissions, duty and VAT, depending on what you eventually do with the wine. And above all, there is the cost of tying up capital for years.

That last one matters most.

En primeur is often described as a kind of wine futures market. As I argued last week, it is not. Not really. In a futures contract, you do not usually pay the full amount upfront and then wait 2 years for delivery. With en primeur, you do exactly that.

That makes en primeur less like a futures contract than a form of financing to the château. In effect, the buyer is funding the château in return for the promise of future delivery.

(For anyone who insists that en primeur is not a form of financing, try telling the merchant or château that you will pay on delivery and see how that goes...)

And whenever capital is tied up, there is a cost. Even if you have not borrowed the money in any literal sense, that money still had other possible uses. It could have stayed in cash, gone into an ISA, or been invested elsewhere. Choosing wine means giving up those alternatives.

The real question is whether the discount offered en primeur is large enough to compensate the buyer for the wait, the risk and the lost use of capital. Once you look at it that way, the picture changes.

Back to Lafite 2024.

A case bought en primeur at £3,426 does not remain a £3,426 proposition for long. Once you add receipt fees, annual storage and insurance, and the cost of money over time, the total cost of ownership compounds significantly. By Year 10, the cost is around £5,545 before any exit costs.

If the wine is then sold and the seller pays a 15% commission, the break-even sale price rises to roughly £6,524 per case.

If, instead, the wine is taken out of bond for drinking, the final all-in cost still climbs to around £6,281 once delivery, duty and VAT are included.

This is the mistake people make every en primeur season.

They compare a new release with a back vintage already trading on the market and assume the cheaper number must be the better deal. But unless both prices are adjusted onto the same basis, the comparison is meaningless, as you aren’t comparing apples with apples.

None of this gives you a perfect valuation. Wine is still a market shaped by sentiment, scarcity, brand power and broader economic conditions. Risk is part of the picture, and it cannot be reduced to a neat formula.

But cost of carry does give you something extremely useful: a hurdle rate.

It tells you how much room for upside you need before locking your money away for years. It tells you whether the en primeur discount is genuinely compensating you. And it tells you when a release that looks cheap at first glance may not be cheap at all.

Most people skip this calculation entirely. Which is fine, but if we want to support wines that can age, if we want to sustain a culture of ageing fine wine, we need to start being clear, very clear, about what that actually costs.

To those interested in the calculations, I have published them in a post for paid subscribers only.

Please consider supporting In the Mood for Wine with a paid subscription, or share this with someone who is tired of the usual industry lines such as “Lafite has been released at a 30% discount to last year”

Thanks for reading.