Keep Your Eye on ‘Off’ Vintages

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.

Cult & Boutique’s Daniel Paterson on the Golden West Podcast

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.

Cult & Boutique (Wine Management) Limited

An Ever Expanding Market

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.

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The Price Always Goes Up | John Kapon of Acker Wines

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

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Everyone Wants To Enjoy Wine | Stephanie Barnett | 67 Pall Mall

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

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Hermitage & Hendrix | Jeff Leve of Wine Cellar Insider

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.

Cult and Boutique Wine Management

The Benefits of Tangible Assets

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

cult and boutique wine managementcult and boutique wine management

A Close Look at Burgundy

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”.

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Arrive App | Hans Manku

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.

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The Show Must Go On | Hannah Tovey | London Wine Fair

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