In this episode of The Cult & Boutique Show, Daniel is joined by the CEO of Acker Wines, John Kapon.  Acker Wines has grown to become the most successful fine wine auction house on the scene. Last year saw Acker set another plethora of new world records to become the highest-grossing wine auction house of 2020.

John explains how Acker overcame the challenges posed by the pandemic and walks us through his view of today’s fine wine auction market.

We also hear about market developments he has seen first hand and his thoughts on where the wine market is heading in the coming years.

To learn more about Acker Wines you can visit their website by clicking HERE

Stephanie Barnett of 67 Pall Mall, a private members club for wine lovers, dropped by to chat with Daniel about the club’s inclusive approach to membership and its aim to create a rich mix of members from different generations and walks of life.

Stephanie explains how the club creates tailored events for today’s younger generation of wine lovers, as well as discussing how they quickly shifted to a virtual offering during the pandemic and news of what’s on the horizon for 67 Pall Mall.

Check out 67 Pall Mall’s Website , Instagram & LinkedIn

Daniel is joined on the show by Jeff Leve, Founder and Editor of the hugely popular Wine Cellar Insider.

Jeff explains his love for the wines of Bordeaux, Rhone Valley & California, and breaks down his theories and feelings surrounding wine’s well established 100 point scoring system. Jeff also shares details of his personal ‘bucket list’ wines, as well as offering a peek into his interests outside of the wine world.

You can visit the Wine Cellar Insider site HERE, or connect with Jeff on Twitter through @JeffLeve.

The current economic climate has led most to focus attention on personal finances and the performance of investment portfolios.  The majority of both high net worth and retail investors’ investment pots consist of a mixture of equities, bonds and SIPPs but with recent performance being either unsatisfactory or underwhelming many have decided to look for growth outside of the norm and increase their exposure to tangible assets.

Tangible assets have an intrinsic monetary value and exist in the physical form.  Fine wine is one such asset and provides a great example of why many are turning to tangibles in the current financial climate.  Contemporary investors see their wine portfolio as a form of value diversification to be used as a hedge against underperformance in their traditional investments, as well as wider economic uncertainty.

 

Top investment advisers recommend that investors diversify part of their portfolio with resilient alternative assets such as fine wine.

The Telegraph, December 2020

 

Often described as an Alternative Investment, wine has performed very well in recent years due to its low positive correlation to equities and bonds.  A carefully selected portfolio of fine wine could actually help to reduce your exposure to overall market risk and offer some protection against volatility.

Wine can also offer some protection against inflation.  To give a historical example, the value of the dollar declined by 95% over 100 years since the creation of the Federal Reserve.  Over the same period, the inflation-adjusted value of gold (another tangible asset) increased by more than 2,500%.  However, as an additional boost wine differs from most commodities as each individual vintage can be collectable in its own right and has a finite, reducing supply.  Wine is after all a consumable and this can help to increase demand and values as remaining stocks begin to dwindle.

 

Amidst 2020’s turbulence, the fine wine market showed its strength – steadfast returns and low volatility.

Liv-ex, January 2021

 

Although not essential, if you also happen to be a wine lover you will benefit from the enjoyment of building a portfolio of world-beating wines, and also provide yourself with the opportunity to consume wines that might otherwise be out of reach to you.  One tried and tested strategy is to purchase multiple cases of investment-grade wine and wait for the value to increase, effectively allowing you to consume one case either for free or at a greatly reduced price.

Of course, due to the current climate, we appreciate that fresh investment capital may not be readily available, but if you already have a portfolio of wine we could help to identify selling opportunities within your portfolio and reassign the capital to wines that offer the potential for an improved growth profile.

We would be happy to take a look at your portfolio and highlight any immediate opportunities that could elevate your growth rate without the need for fresh capital.  If you would like to explore your options or discuss them in further detail, please get in touch.

 

By Spencer Leat

Burgundy has dominated the fine wine market for many years and its success is largely a result of the minuscule production quantities of the region’s elite wines.  The supply and demand nature of the wine market has helped to elevate the region’s premium wines to legendary status among connoisseurs and collectors alike.

The two leading producers, Domaine de la Romanee-Conti (DRC) and Leroy, have seen prices driven skyward as buyers compete to add to their collections.  DRC, for example, was responsible for over $19M of the 2020 auction total (Acker, worlds No 1 wine auction house), despite accounting for only 28% of bottles sold.  Leroy claimed the top spot in the latest revision of the Liv-ex Power 100, a list of the market’s most tradable brands (Liv-ex is the UK benchmark for the fine wine trade), and is a clear indicator of Leroy’s standing with both the on and off-trade and collector, consumer markets.

 

Judged by average trade price premium Burgundy labels lead the secondary market by a huge margin but the long-term price performance is also unbeatable elsewhere in the wine market

 

Demand has remained strong in recent years with countless world records being broken both at auction and within the secondary market.  Judged by average trade price premium Burgundy labels lead the secondary market by a huge margin but the long-term price performance is also unbeatable elsewhere in the wine market by other regions.  Although Burgundy on a whole represents the highest entry point for the market, a carefully selected representation can comfortably outperform its closest peers.  The chart below tracks the price performance of the wine market’s leading regions and reinforces the view that Burgundy operates in a different sphere to its closest competitors.

 

 

Most markets work in cycles and it’s important to bear this in mind when looking at today’s opportunity with Burgundy.  The region is currently taking a well-deserved pause from the aggressive growth seen previously and this represents an ideal entry point to the market, the extremely limited production quantities should ensure the future growth of Burgundy.

Over the past decade, Burgundy’s market share by value has risen from 1% in 2010 to 18% by the close of 2020 with the Burgundy 150 index generating 140% of growth over the same period.  This compares very favourably to the 20% growth seen from the Bordeaux 500 index.

 

 

The luxury status and minuscule production levels of Burgundy has helped to attract the attention of new investors which has helped it to outperform equities including the FTSE100 and Hang Seng indices throughout 2020.  Offering an alluring combination of stability and growth that is hard to find elsewhere.

In 2020 the market for premium Burgundy continued to grow.  The volume of Burgundy traded showed a year-on-year increase of 31%, trading activity grew by 34% year-on-year and the number of active buyers increased by 11%.  All indicators of a healthy and sustainable secondary market.

Appetite for Burgundy remains strong despite current circumstances as recently explained by world-renowned wine critic Neal Martin who stated “Despite economies stagnating, people have money and those with disposable income have fewer outlets to spend it on, restaurants for one. Like 2020’s Bordeaux primeur [2019] campaign, wine-lovers exhibit an undiminished desire to purchase wine, partly because of quality and to retain allocations, partly to feel a sense of continuity until our lives return to normal”.

Last year we had an interesting chat with local businessman and Founder of London based taxi app Arrive.

Aiming to offer the user more transparency and choice, Hans explains the principles behind Arrive and discusses his inspirations, passions and thoughts on entrepreneurship.

Director of the London Wine Fair Hannah Tovey joined us in December 2020 to speak about the challenges they have faced over the last year and gives a sneak peek at what’s in store for the fair’s 40th anniversary show.

Update: Since recording this episode London Wine Fair have announced that due to the ongoing lockdown restrictions, this year’s show will be fully digital. This is such a shame as we know how hard Hannah and the team have worked to try and provide a fully functional event, but this is the right decision given the circumstances. We hope the show goes well for all involved.

For more information, you can visit the London Wine Fair website HERE

The wine market entered 2020 full of gusto and positivity but as the bizarre events of the year began to unfurl, the market’s direction for the coming year initially looked uncertain. One thing we knew for sure is that wine had a history of performing well in times of financial stress, and this year soon became a new proving ground for this belief.

The Hong Kong disruption, US wine import tariffs, Brexit and then the Covid-19 pandemic presented unique challenges, and the global wine trade reacted by improvising and overcoming a deluge of obstacles to keep the market on track. The biggest wine trade fairs were cancelled and the Bordeaux En Primeur campaign became a mail-order type affair to keep the wheels moving. Bordeaux producers worked wonders to ensure that critics and buyers were supplied with premium condition barrel samples to allow for pre-release tastings. This, combined with some very attractive pricing resulted in the campaign being heralded as a success.

But behind all of this, prices held firm. The financial performance of many leading wines remained remarkably stable at first and then continued to rise. This is particularly true of Champagne, Italy, California and Rhone, who all saw either growth in value and market share. This was good news for our clients as these regions have been an area of particular focus for us over the last couple of years something highlighted in our first podcast episode in January 2020.

Market Performance

All of the major Liv-ex indices showed positive growth in 2020 with the Liv-ex Fine Wine 50 growing by 3.26% and the benchmark Liv-ex 100 gaining 4.65%. November saw the latter reach its highest level in two years, with trade by value reaching a ten year high.

As traditional investments and equities either struggled or became extremely volatile, wine stood firm and offered stability amid the growing financial storms. The wine market had once again shown unmatched stability, as demonstrated in the chart below. By the end of November, only the Liv-ex 100 and the S&P 500 were in positive territory. The FTSE and the Hang Seng were both negative and the DAX ran flat.

A weakening of Sterling against other currencies helped to highlight UK based wine holdings as an attractive purchase but there were also other forces at play. Wine is simply more appealing to people as an alternative asset and as central banks pumped liquidity into the global economy, investors and collectors were drawn to low-volatile, hard-assets such as fine wine.

There’s plenty of evidence to show why. 2020’s biggest price performer was Bordeaux’s Chateau L’Eglise-Clinet 2010 which grew by 37% to the end of November. This was closely followed by Sassicaia 2013 and Bollinger 2008 which saw 30.7% and 27.4% respectively. You could argue that similar performance could have been found elsewhere but probably not with the added protection that low volatility and stability can provide.

A Broadening Market

The wine market’s regional diversification is something that we have been at the forefront of for over a decade and this year we saw this broadening really take hold, with great results.

The US fine wine market is huge and American buyers have helped to drive the performance of regions outside of Bordeaux and Burgundy by side-stepping Trump’s 25% wine import tariffs.

This resulted in Champagne outperforming all other fine wine regions for the first year ever. The Champagne 50 index grew by 8.27%, bolstered by critically acclaimed releases from the 2008 and 2012 vintages. Italy, another US tariff-dodging region, gained 6.72% with collectors increasingly turning to premium Piedmont, such as Giacosa Conterno, Vietti and Gaja, names by now very familiar to our clients.

The Rhone 100 was the third best-performing regions, gaining 3.64% and although the Rhone was still subject to US tariffs geographically, many of the region’s wines were deemed exempt by having an alcohol content above 14% abv. Rhone wines have a strong following in the US, thanks to critics such as Jeb Dunnuck and Robert Parker which resulted in US-based buyers accounting for over half of region’s trade share by value.

US wines, predominantly from California, had a great year increasing their trade share from 2.3% last year to 7% at the time of writing. The Napa Valley, in particular, has provided some of the best performing wines with Harlan Estate 2016 creeping into the top ten wines traded by value this year. The USA is still very much a growing region outside of the US but we have experience and contacts, having worked with the region’s top wines for many years. The future for these wines is very exciting and we’re well-positioned to guide you through the best products as the market for them develops.

Where from here?

If you were looking for some positive news to end the year, look no further than the wine market. With a ‘no-deal’ scenario with the EU seeming the most likely outcome for 1st January, any further weakening of Sterling could have huge benefits for your wine portfolio moving into 2021. Next year seems very uncertain at this stage with so much hanging in the balance but the wine market has a very positive outlook and we remain committed to seeking out the best wines to maximise market conditions and deliver growth over the coming years.

Véronique Sanders, President of the world-renowned Chateau Haut-Bailly joined us on the show to share their approach to winemaking, her family’s history at the chateau and surviving the challenging 2019 En Primeur campaign.

Véronique has a huge amount of experience and has overseen the production of some truly exceptional wines at Chateau Haut-Bailly.  If you found this episode interesting, you can learn more about Chateau Haut-Bailly through their website by clicking HERE.

Wine educator and sommelier Cristie Norman joins us from LA to speak about her online wine courses, setting up the United Sommeliers Foundation and her passion for wine.

We also discuss some of the personal challenges she has faced, diversity in the wine world and how representation can be a driver for change.

Connect with Cristie:

https://www.unitedsommeliersfoundatio…

https://theonlinewinecourse.com/

https://www.instagram.com/cristienorm…