Throughout 2021 the wine market shone, setting new records for trade and pushing the market’s leading indices to reach new heights with month after month of consecutive growth.  And 2022 began right where 2021 left off, given a helping hand from a solid 2020 Burgundy vintage.

The market did begin to show signs of a slow down as we edged through February with only small gains from both the Liv-ex 100 & Liv-ex 1000. But this started to pick up again from March onward and although the Liv-ex 100’s Q1 was slower than in 2021 the Liv-ex 1000 showed robust gains fueled by both Burgundy and Champagne.

The Russian invasion of Ukraine on 24th February added to widespread concerns of rising inflation, as the rising cost of oil, gas and metals started to impact negatively on already strained global supply chains.  So far, wine seems immune but we are remaining sensibly cautious.  However, this is the perfect environment for wine to shine as an alternative asset, as it has certain advantages over more mainstream financial options.

Vintage wine is a diminishing asset, you cannot produce more of any particular vintage than was originally made.  Plus, as an asset, it is necessary to invest time holding on to stock in order to see growth.  Both of these factors help to keep the wine market’s volatility extremely low.

As the chart below demonstrates, the Liv-ex 50 has remained very stable during Q1 while other markets and commodities displayed erratic price movements in response to current events.

 

The growing interest in, and value of, US wines such as Screaming Eagle has helped to push the Rest of the World 60 index forward.

 

Champagne & Burgundy lead the way in Q1

Burgundy and Champagne’s performance was very strong last year, and this continued into 2022.  So far this year Burgundy and Champagne have been the leading performers, growing by 14.6% and 9.6% respectively.  Although the Champagne 50 index has the best annual growth figure at the time of writing, the Burgundy 150 index has been the best performer over the past three months.


Its also worth noting that the growing interest in, and value of, US wines such as Screaming Eagle has helped to push the Rest of the World 60 index forward.

 

The best performing wine of the first quarter was Domaine Leflaive, Batard-Montrachet Grand Cru 2012 which grew in value by 76.3% since the start of the year.

 

Burgundy’s Leflaive 2012 is the best performing wine in Q1

The following table of Q1’s top price performers clearly demonstrates Burgundy’s dominance with nine of the ten positions being taken by the region.  The best performing wine of the first quarter was Domaine Leflaive, Batard-Montrachet Grand Cru 2012 which grew in value by 76.3% since the start of the year.  This was followed by Domaine Bonneau du Martay, Corton-Charlemange Grand Cru 2014 which grew by 55.2% over the same period.

Regional Overview of Q1

As mentioned above, Burgundy and Champagne have really stolen the show so far this year and this was reflected in their overall share of trade.  Burgundy’s share was 25% and Champagne’s 11.5%, Bordeaux still took the lion’s share of trade at 32.8% but this is lingering around an all-time low for the region and is an ongoing sign that the wine market has matured and diversified beyond Bordeaux’s hay days of 90% trade share.

Champagne climbed the rankings significantly in 2021, making it the third most-traded region. Tuscany was nudged down the rankings in this process but the region sits on firm footings as proven by strong trade in Super Tuscan wine Sassicaia in Q1.

Q1 2022’s Most Desireable Labels

Although Burgundy completely dominated the top ten price performers, you’ll be glad to hear that the top wines traded by value were more varied.  Champagne’s Louis Roederer Cristal took three of the top spots for wines traded by value, alongside Dom Perignon, Screaming Eagle from the US and Pomerol’s Petrus.

 

Prices from the region’s best wines continue to soar, boosted by great ratings from the world’s most influential wine critics.

 

California 50 Outperforms the Broader Market

Looking back at the past year, one region has presented itself as a very secure option for growth.  The California 50 index has grown by 34% over the last 12 months to reach its highest ever level.  We have been recommending premium Californian wines since as early as 2010 and clients with the foresight to have taken up our early offers have either sold their positions or are now in a very comfortable position.

Prices from the region’s best wines continue to soar, boosted by great ratings from the world’s most influential wine critics.  The UK market for top Californian wines has also developed and now sees an increased demand for premium labels such as Screaming Eagle, Dominus and Harlan Estate.

For example, Screaming Eagle’s flagship Cabernet Sauvignon is the best performing wine in the California 50 index and has risen by 42% over the last year, easily outperforming the index’s other contributors.  This growth has largely been the result of the stellar 2009 and 2010 vintages which have delivered 61% & 75% respectively over last year.

A well-priced futures campaign can serve as a huge boost to the market heading into Summer

 

Where from here?

Even though global stock markets have experienced a rough ride of late they have managed to recover the majority of their losses, regardless of the volatility seen in commodity markets and gloomy global economic forecasts.

While the snowballing effects of COVID, Brexit and the European war are yet to knock the markets completely off course there remains a sense of financial insecurity that actually bodes well for the fine wine market.  Wine is increasingly being used as a financial safe haven, similar to the traditional use of gold in times of uncertainty.

Bordeaux’s En Primeur campaign is well underway and is a time when the market traditionally slows down as it awaits the first inkling of what quality the next vintage will be. A well-priced futures campaign can serve as a huge boost to the market heading into Summer but if the chateaux are too greedy price-wise then market progress could be dampened.

Overall the market is in a similar place to the close of 2019 where external events – global trade disputes and Brexit – lead many to defensive strategies to protect their capital and reduce the volatility of their overall investment portfolio.  The wine market’s track record of low volatility and steady returns is now common knowledge and the confidence it builds could help to shape the rest of the year for wine investors.

 

2021 was the strongest trading period that the wine market has ever seen.  The market’s benchmark index gained 2.6% in December alone to close out the year 23% up.  This set the wine market’s performance above that of many of the world’s stock markets, such as the Dow Jones Industrial and Nasdaq which grew by 18.7% and 21.4% respectively. Even when equity markets were rocked in November after the news of the new ‘Omicron’ variant, the Liv-ex 100 rose 2.7%.

Liv-ex 100 vs Alternative Indices for 2021

Regional price rises in 2021

All of the wine market’s main regions showed growth in 2021.  Their indices achieved positive growth over one year and two year periods.  The weakest performer was unsurprisingly Bordeaux whose sub-index was up 9.2% by early December, while the Champagne 50 was the best, rising 33.7% by the same point and has continued to grow rapidly.


 

The Liv-ex 1000 index, which incorporates all of the above, is the wine market’s broadest index and has become a yardstick for measuring the ongoing regional diversification that has helped to drive the market in recent years.  The index has grown by 18.2% over the past year and 22.7% over the last two.

 

If you had bought ten cases of this wine in January 2021 for £56,500 you could trade it now for £120,750, generating a return of £64,250 in a year.

 

Champagne Continues to Astound

The big winner of 2021 was definitely Champagne.  In fact, many of you may have already taken advantage of the region’s growth and disposed of some of your bubbly recently at a good profit.  Champagne’s best wines have collectively risen by 40% over the past year and the best performing wine across the entire wine market last year was from champagne.

 

 

The wine in question is Salon 2002 and over the past year, its value has risen from £5,650 to reach a market price of over £12,075 today, a growth of 113%.  To put that into perspective, if you had bought ten cases of this wine in January 2021 for £56,500 you could trade it now for £120,750, generating a return of £64,250 in a year.

 

Our Outlook for the Year Ahead

Following a record-breaking 2021, the market has continued to move at a rapid rate and our sights have shifted to the year ahead.  Moving through 2022 we will be focusing on Champagne, Burgundy and California.  Burgundy has continued to show growth and we expect this to be compounded throughout this year.  Rarity is Burgundy’s biggest driving and the region’s most sought after wines are produced in such minuscule quantities that they can’t even come close to satisfying the market’s demand.

There is a huge amount of excitement in the trade around the 2020 releases and due to Burgundy’s rapid sell-through rate, we would suggest agreeing on a budget with your Portfolio Manager which can then be allocated to stock as soon as it becomes available to avoid disappointment.

For further information on any of the above please feel free to speak with your Portfolio Manager directly, or contact the team by telephone or email.

2021 has proven to be a great year for the fine wine market, and the third quarter has been no exception.

September was a rough month for equities as the end of the third quarter neared.  The S&P 500 suffered its worst month since the start of the pandemic to close 4.8% down.  This was largely caused by a combination of rising interest rates stoked by inflation fears, along with concerns over China’s troubled property market.  Although mainstream markets felt the jitters, fine wine prices stood firm and continued to grow.

The fine wine market’s benchmark indices have recovered exceptionally well from the shock of Covid-19 in the first half of 2020 and have now either reached or are near record levels.  In September the Liv-ex 100 posted its eighth consecutive month of growth, gaining 3.8% to come within a hair’s breadth of its 2011 peak.

 

The Burgundy 150 index is up 16.8% year-to-date, 18% over the last year and 83% over the last five.

 

Wines of Bordeaux saw trade by value reduce in the last quarter, in contrast, Burgundy saw trade by value increase over the last two quarters. Champagne was the second-best performing region behind Burgundy and has generated some impressive short to medium-term returns for the early adopters among our clients.

The Liv-ex 1000, the market’s broadest index which tracks the price performance of wines from the world’s leading wine-producing regions, gained 4% in the last quarter and is up 10.9% year-to-date. Following wines from California, Australia, Italy, Champagne and Rhone amongst others, this clearly demonstrates the ongoing shift in buying patterns over the last decade away from Bordeaux in favour of other regions.  This expansion of the market has helped to raise the index which now sits at an all-time high.

Burgundy remains the strongest performing region that contributes to the Liv-ex 1000, with no signs of waning.  Some may be put off by the region’s relative high buy-in prices but the performance you can tap into is undeniable.  The Burgundy 150 index is up 16.8% year-to-date, 18% over the last year and 83% over the last five.  But this is an average calculated from the performance of 150 Burgundian wines and our carefully selected individual Burgundies have smashed these figures to deliver staggering returns.

 

Reduced production quantities from many of the top wine-producing regions, coupled with the growing supply chain crisis is adding pressure to demand

 

Although the Liv-ex 1000 reached another record in September, it was the reliable benchmark Liv-ex 100 which emerged as the best performing index both year-to-date and over the last year.  We remain bullish about the market’s prospects in the coming months.  Reduced production quantities from many of the top wine-producing regions, coupled with the growing supply chain crisis is adding pressure to demand within an environment where it outstrips supply when everything is operating ‘normally’.

Leading hotels, restaurants and members clubs, as well as private collectors, are already beginning to scramble to secure stocks before the situation worsens.  This has been particularly evident in the Champagne market and with Christmas and New Year fast approaching, get in touch with us now to discuss your options and ensure that you remain ahead of the curve.

Market statistics have shown that lesser vintages of Bordeaux’s First Growths can often equal, or sometimes even better the returns generated by trophy vintages. The broadening of the market that has occurred in recent years has diluted Bordeaux’s dominance and highlighted the region’s off vintage wines as an interesting sector that could offer great potential.

The trends between vintage quality and financial growth can be quite surprising.  Of course, the top quality ‘trophy’ vintages have always commanded the highest prices. However, it’s also apparent that impressive levels of financial growth can also be found in so-called ‘off’ vintages, as these wines are often overlooked due to the excitement surrounding the higher scored vintages, therefore, seeing periods of concentrated growth.  As an example, the 94 points scored Chateau Lafite Rothschild 2002 has grown by 795% since release, from an initial start price of £680 per twelve bottle case to over £6,000.

This back up a strategy that we have often promoted to temper your portfolio with several cases of lesser or off-vintage First Growth to lower the volatility of your portfolio and add further liquidity to your holding. After all, lesser vintages are consumed more frequently than trophy vintages and therefore change hands more frequently. Of course, the fact that they are consumed more readily also has a direct effect on their financial value as the fine wine market is a supply and demand environment after all.

As many of you will be aware, the aftermath of the 2008 financial crisis followed by a cooling-off of Chinese buyers a few years later made for a correction, Asia is still very much in the market however not at any cost and the largest losses, in financial terms, during this period were shown by the highest graded vintages, including 2000, 1996 and 1990.

 

Some in the trade will be more flexible on score or vintage grade, gaining a substantial saving without sacrificing greatly on quality.

 

Although there was little difference in percentile terms, lesser vintages did not have as far to fall financially compared to top vintages, demonstrating that the volatility of each vintage can vary depending on quality, output and wider general perception of the region or vintage.  For example, in terms of financial instability, some in the trade will be more flexible on score or vintage grade, gaining a substantial saving without sacrificing greatly on quality.

Another more recent example of this strategy in action can be found from Chateau Haut Brion.  The 2013 vintage Haut Brion received an underwhelming 92 point score from Neal Martin for The Wine Advocate and has grown in value by 30.7% over the last five years.  The 2013 had a release price of £2,400 per case,  £1,850 less than the 100 point scored 2015 vintage which was released at £4,250.  In addition to the much lower initial outlay, the price volatility of the 2013 vintage is also lower than the outstanding 2015.

So remember, another way to add diversity to your wine portfolio could be to take a position with some lesser vintages. As long as they are backed up by a good representation of highly scored classics you could well add a new dimension to your portfolio.

Our very own Daniel Paterson was invited on to the Golden West Podcast to discuss the wine world and his experience in the wine investment market. 

Daniel speaks with Ryan about the influence of Robert Parker Jr., Old World wines versus New World wines, what to look for when thinking about value all over the world, a 1992 bottle that sold for $500,00 in the year 2000 and what you should consider when building a wine investment portfolio.

Click HERE to listen to the podcast now.

One of the biggest developments in the fine wine market over the last decade is the shift of focus from Bordeaux to now including an ever-growing list of wine-producing regions from around the world.

There was a point, not too long ago, when around 90% of all trades executed within the wine investment market were for wines produced in Bordeaux.  Today that figure lingers somewhere around 38%, proof that the market has undergone some big changes over the years.  The regions that have expanded their market share to take up the remaining percentage is long but could be summarised, in size order, as follows – Burgundy, Italy, Champagne, USA, Rhone and interest in these regions has grown exponentially.


Italy had been something of a sleeping giant but the progress of Italian wine in the market has been explosive, something that we predicted several years ago.  Clients that put faith in our early Italian recommendations have seen impressive levels of growth, many have even traded their initial holdings to take up positions with younger vintages or alternative brands.  Italy is a region that continues to grow and with a wide selection of wines available at varying price points, the opportunity to tap into this sector of the market remains for almost any budget.

There are other external factors that have helped to boost Italian wine’s performance. Italian wines were excluded from the recent USTR tariffs, and unlike Bordeaux and Burgundy, there is no complicated En Primeur system to navigate or unnecessary classification issues to be argued over.  All of these combined in 2020 to propel Italian wines upward and moving into 2021 the trajectory has continued.  In the first quarter of this year wine trade by value was up 125% on 2020 and the number of buyers seeking Italian fine wines had grown by 45%.

 

Performance has been very reliable in recent years and acquiring a parcel of Italian wine or vintage Champagne now could give you good reason to raise a glass and celebrate in years to come.

 

The most-traded Italian sub-region is still Barolo, followed in order of popularity by Tuscany, Brunello di Montalcino, Bolgheri and Barbaresco. However, this is also followed by a further 40 sub-regions that are currently traded on the secondary market, nearly double the number in 2020.

However, The Champagne 50 Index has grown by 12.7% in the past year, outperforming Italy and many traditional mainstream investments products.  Even though Champagne has had an excellent run of late there remains huge scope for growth. Champagne offers some of the most affordable wines on the market, especially when compared to the premium wines of Burgundy or Bordeaux.


The performance of specific Champagne brands and vintages often far exceeds that of the index.  A great example is the 2002 vintage of Salon ‘Le Mesnil-sur-Oger’ which was available five years ago for £2,790 per case.  Today cases are trading for around £6,900 which represents a 147% growth over five years and a £4,110 return.  This figure generates a Compound Annual Growth Rate of 19.85%.


Performance has been very reliable in recent years and acquiring a parcel of Italian wine or vintage Champagne now could give you good reason to raise a glass and celebrate in years to come.

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