Unpacking how wine futures work and how one important wine store reconnoiters a spectacular vintage and traverses the pathways of the marketplace.

Wine Stores: Sherry-Lehmann

The 2005 vintage from Bordeaux is already considered to be as good as and perhaps better than the great vintages of the mid and late twentieth century—among them, 1947, 1961, 1982. This breathtaking judgment is based on the “en primeur” barrel tastings held in Bordeaux earlier this year for wine professionals.

This kind of quality and the subsequent buzz make a difference, a huge, sticker price difference, in the marketplace. By the time the April tastings were complete, American wine merchants were under pressure to decide what and how much they were buying, and how much to pay, and within a couple of months after that collectors and consumers who buy Bordeaux futures had to start making their decisions.

I checked in with Michael Aaron last week to get some perspective on this heady process. Mr. Aaron is the chairman of Sherry-Lehmann, which has been on Madison Avenue for 71 years and is very likely the most important source of French wines in this country. He lives in a historic house in East Hampton Village with his wife Christine. What happens at those tastings? Professionals like Mr. Aaron look for certain indicators in the sample such as the quality of the tannins, the overall freshness and ripeness, the power and completeness, and they use their well trained noses and palates to recognize importance, character and longevity. Enough of these very knowledgeable people decided that 2005 was not just a classic in the making, but perhaps a perfect vintage, and after that the competition to acquire their desired labels and quantities became fevered.

It is tempting and easy to imagine the wine trade as a civilized and gentle process—like drinking wine—but it is, at bottom, a marketplace. Critical decisions must be made, with many millions of dollars at stake. Chris Adams, an executive at Sherry-Lehmann who accompanied Mr. Aaron to the tasting, told me about the intensity of dealing with producers and negociants, the French wholesalers. Emails arriving in the middle of the night required immediate answers—or the deal was lost. Mr. Aaron bought heavily, and as it turns out, wisely.

In late June Sherry-Lehmann offered Bordeaux futures to their customers—giving them the opportunity to buy (and pay for now) Bordeaux wines that will be delivered no sooner than late spring of 2008. It would be an understatement to say that Sherry-Lehmann’s clientele was geared up and waiting. On the first day the futures were offered, sales records at the store were shattered. They booked 15 per cent more business than any previous day in their history. And the following day they broke that record by an additional 20 per cent.

You don’t have to have an outlandish budget to buy Bordeaux futures in general—but you definitely do if your goal is getting the trophy wines. Prices for cases (futures are sold by the case) for the most famous estates have doubled and tripled in comparison to the past few years. Sherry-Lehmann sold 2005 Chateau Petrus futures for $19,200 per case. That works out to $1,600 per bottle. Note the past tense: they’ve sold out. At the economy end, they sell futures of less stellar labels for as little as $120 per case. That’s quite a broad spectrum, and for the middle range of the market which most of us occupy, they have many offerings between the two extremes.

Mr. Aaron may have broken another record, this time in real estate, with the sale this month of the Sherry-Lehmann building on Madison Avenue between 61 st and 62 nd streets. The four-story brownstone was acquired by Vornado Realty Trust. Sherry-Lehmann retains a five year lease, during which time Mr. Aaron will decide on a new location for the store.