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Liquid Insights: En Primeur

Liquid Insights: En Primeur
May 18, 2022
Bradley Calleja

The Background of En Primeur

This week, Vint will release the first ever fractional En Primeur offering which immediately begs the simple question, what is En Primeur?

En Primeur or 'wine futures' provides investors with an opportunity to invest in wines while they are still maturing. The maturation process for fine wines usually occurs in oak barrels and can take upwards of 18 months. While the majority of transactions on the secondary wine market occur after the wine has been bottled, En Primeur gives a buyer ownership of the wine while it sits in the cask.

In the 1970s, the concept of En Primeur experienced a significant boost as both buyers and producers saw benefits in the system. As demand for fine wines increased and the global market grew through the latter-half of the 20th century, collectors and investors alike sought ways to secure key vintages from their favorite producers before the wines are sold on the general market.

The En Primeur system benefits the producer, as they receive an influx of cash during a new vintages' maturation period -which is usually a time where revenue runs dry for a château. In any market that involves farming or growing seasons, guaranteed cash flow is often difficult to obtain. The expenses are year-round, as an estate must seed, prune, protect, harvest, and mature their product while only receiving payment when that product finally hits the market. There is also the added risk of weather-related factors such as drought or frost that can impact the wine's valuation at market and also the total production. With En Primeur, the estate receives funds from the consumer before the wine is bottled, which removes a degree of pressure from the producer.

For the buyer, En Primeur provides multiple tiers of benefits. First, the wine awarded via En Primeur are often priced significantly less, between 10%-25%, and in Vint's case, they secured 600 bottles of the 2021 vintage at a 20% discount versus the market value. The En Primeur system also provides buyers with guarantees - both in the number of bottles they will receive and in the provenance. The buyer has the privilege of knowing that the wine was stored properly and can be traced directly back to the estate, with no middlemen or third-party transactions involved. There are potential risks involved as well, since prices can drop below the En Primeur value, but those are risks that any investors takes on when they pursue an investment in wine or other asset.

Vint's En Primeur Collection

The Vint offering of En Primeur come from ocean-breezed vineyards of Santa Barbara. Coming off of a historic 2020, where Santa Barbara was named the global "Region of the Year" by Wine Enthusiast, Vint secure 600 bottles at a 20% discount from one of the top estates in the coastal valley. Owned by Master of Wine Amy Christine and her husband Peter Hunken, The Joy Fantastic producers a variety of red and white wines that are starting to receive global recognition. Arguably their most recognized production is their Joy Fantastic Syrah, which highlights a grape that is believed to have originated in the Rhone region of France but has since found success growing in Australia, Spain, South Africa, and the United States. While still an emerging market for syrah, Santa Barbara has received an increased attention by top wine critics as the wine world continues to search for new investment opportunities. The 2020 vintage of The Joy Fantastic Syrah received a score of 97 from Wine Enthusiast which placed the vintage among wines from the Rhone Valley and Barossa Valley regions which price above $200 per bottle. Vint's collection prices the 600 bottles at a $24,000 market cap compared to the anticipated fair market value when the wine is bottled and released which would price at $30,000 before additional costs such as tax, shipping, and storage.

Later this week, Altan Insights will provide a Bull Case Bear Case on the collection, looking at the pros and cons of En Primeur, historic performance of wine futures, and The Joy Fantastic estate.

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Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk. Past performance is not a guarantee of future results.

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