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Wine Spectator: Trying to Create an American Model of Wine Futures

December 24, 2014

In 2005, Serge Marquié and Sally Wilkinson had a problem. After their twin sons were born, they wanted to secure some great wines from the boys’ birth year. But while they were able to get their hands on some wonderful Bordeaux, en primeur, obtaining collectible Napa wines proved difficult. All of the desirable wines were either spoken for on mailing lists (or waiting lists to get on mailing lists) or swept up at auction at substantial markups to release prices.

The two parents, who happen to be experts at solving financial problems of great complexity, thought: Why is it easier to procure a first-growth from a highly rated vintage than a great wine from Napa? Their solution was E-Cep, an American take on futures, where consumers can buy bonds guaranteeing them top Napa wines while those rarities are still aging in barrel.

The couple are wine fans but not industry insiders, and had no link to the trade prior to starting E-Cep. Marquié holds a doctorate in game theory from Harvard and was the former joint-head of Goldman Sachs’ Latin American Financing Group. Wilkinson was the U.K. economist for Deutsche Bank and an economic advisor to the British Conservative Party.

E-Cep customers don’t buy wine—they buy a bond, a financial IOU. An E-Cep bond is a guarantee for the offered wine upon release. Wineries that have partnered with E-Cep include Carter Cellars, Dana, Scarecrow, Outpost and Dancing Hares, among others.

How does it work for the wineries? As Pete Perry of Dana Cellars—which has offered three vintages worth of bonds—explains, buying early doesn’t necessarily mean a special price. “We offer what we roughly estimate our wine will sell for on release via our mailing list to those who purchase via E-Cep. The value is that consumers get access to wines that they otherwise may have to wait a very long time for.”

Every two months, E-Cep releases an offering that follows a theme, ranging anywhere from four to six wineries, with some wineries only allowing one bond, others allowing more; the average bond is worth three 750ml bottles. Site members receive an offer sheet prior to the offer going live, so there is an incentive to register.

There is no long-term requirement to participate. Consumers simply view the offers they receive and decide whether to purchase or pass. If they pass on an offer, even a string of offers, they still remain eligible for future offers. Consumers who want to buy simply select the bottling they want, and, if quantities last, are issued a bond within 24 hours. The wine is delivered 12 to 18 months later.

Some in the industry are cautiously optimistic about the service’s potential. “While E-Cep is a niche offering to a niche audience, their focus on streamlining the acquisition of allocated products is a noble goal and one that I am sure other luxury service providers will incorporate into their business models,” said Paul Mabray of VinTank, a consultant that helps wineries develop digital services.

Rob McMillan, EVP and founder of the Premium Wine Division of Silicon Valley Bank, is more skeptical. “There is little incentive for a producer who is truly allocated to skip over their long-suffering waiting list members and offer their wines through these types of arrangements,” he said. “Where this kind of a program can provide value is with the nonallocated but still rare producer of wine. Since wealthy buyers of wine prize their time, doing this spadework for their clients is the place where this company may find success.” Wine Spectator has the full story.

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