Liv-ex Fine Wine Market Blog

Hong Kong buyers bid up a storm

The Sotheby's Lafite Ex-Cellar Auction in Hong Kong has seen furious buying so far, with numerous vintages fetching super-premium prices. On average, vintages 2000-2009 have changed hands at two-and-a-half times the price that the wines last traded at on Liv-ex. The 2009, for example, which is currently offered on the exchange at £11,200 per 12-pack, realised a massive £43,120 at auction (all auction prices quoted are for 12x75cl cases, including buyer's premium), whilst the 2003 was sold at £31,360 (compared to £11,200 on the exchange). Other stunners include the 2000 at £45,000 and the 1982 at £84,300 per case - more than double the wine's market value.

As you can see from the table below (which shows auction prices alongside recent Liv-ex trades), Hong Kong is certainly not the place to buy wine for investment purposes... 

  
All (hammer) prices are for 12x75cl cases and include buyer's premium.

The auction is still in progress at the moment, but check back on Monday for a fuller analysis.

UPDATE

Three bottles of the 1869 have just sold for 1,815,000 HKD (£147,020) each.

The litmus test for Lafite 2008

Lafite's decision to feature the Chinese symbol of luck on all bottles of the 2008 vintage has ignited a frenzy of activity on the exchange, as merchants prepare for a sharp increase in demand from the Far East. Trading kicked off at £8,800 per 12x75cl case yesterday, though intense competition saw prices touch £10,500 this afternoon. The real litmus test, however, will be the Sotheby's autumn sale in Hong Kong this weekend, which is set to auction around 2,000 bottles direct from Lafite's own cellars. 

The ex-cellar catalogue features vintages from 1869 to 2009, including numerous lots from 2008. According to the Sotheby's website, the 2008s are expected to fetch between £4,000 and £5,300 per case, compared to £4,900-£6,500 for the 2006s. In light of this week's announcement, however, it will be interesting to see how much Chinese buyers are really willing to spend on the novel 08 vintage.

The auction will also see dozens of lots from Duhart Milon, Carruades, Evangile and Rieussec go under the hammer, as well as two bottles of Lafite 1870 - each of which is expected to realise £6,500 to £13,000. Other Lafite trophies on offer include the 1949, 1959 and 1982.

In 2008, Asian buyers in Hong Kong bid well above pre-sale estimates for a rare collection of vintages from Latour's cellars. Will this weekend's auction uncork the same enthusiasm?

Lafite prices have continued their rapid ascent in recent months, with the Liv-ex Lafite Index reaching a new high of 674.31 in September - up 3.92% month-on-month. The index, which consists of vintages of both Lafite Rothschild and Carruades de Lafite (2000 to 2006), is currently up 62% year-on-year.

 

What next for Bordeaux's second wines?

The recent surge in the prices of the First Growths’ second wines begs a number of questions, most notably, what next? Will fervid demand for second labels extend beyond top-tier Bordeaux to the rest of the Cru Classe?

As we explained in the October Market Report, the main driver behind the exponential price increases that the second wines are experiencing at the moment is brand-driven Asian buying. Chinese buyers see “Little Lafite” and its peers as extensions of the Premier Crus – the next best thing as it were. Of course, in order to strengthen associations with the core brand, the second wines bear very similar labels to their respective grand vins. Logically then, the second wines of Classed Growths that fulfil this visual criterion will be first in line to benefit, should the current trend spill over to include the lower levels of the Cru Classe. This potentially powerful marketing tool has certainly not escaped the notice of the chateaux.

In order to take full advantage of the Asian market’s thirst for top brands, a number of chateaux have reinvented and relabelled their second wines in recent years, not least Clarence Haut Brion (formerly Bahans Haut Brion). In a similar move, Leoville Las Cases announced the launch of a second wine earlier this year. (The estate claims that Clos du Marquis is not the estate's second wine as it is produced from different vineyards.) Importantly, Le Petit Lion du Marquis de Las Cases looks almost identical to Leoville Las Cases.

Other second wines that resemble their betters include Alter Ego Palmer (of Chateau Palmer), Pagodes de Cos (of Cos d’Estournel), Sirene de Giscours (of Giscours), Baron de Brane (of Brane Cantenac), Chapelle Mission (of Mission Haut Brion), Pelerins de Lafon Rochet (of Lafon Rochet) and Moulin Duhart (of Duhart Milon). Interestingly, the second wine of Beychevelle (an Asian favourite) does not yet form part of this group. 

As the market becomes increasingly brand-focused, heightened demand for the second wines of the Cru Classe (particularly those that have a strong following in Asia) is certainly well within the realm of possibility.  For the moment, however, the second wines are not seeing any remarkable price movement and are, on average, trading at a fifth of the price of their parent wines, as opposed to an average of one to four for the First Growths (and one to three for Carruades).

Below are a selection of wines that have similar labels for both levels of production and a few of those that don't. With the majority of these second wines trading at less than £200 per case, they arguably have little interest as investments. But with prices for the Cru Classe rising ever higher - and the wines beneath having little recognition from the consumer - don't count out some sharp rises in pricing (and more than a few rebranding exercises ahead of the 2010 vintage).

 

 

Super Sassicaia on the move

September saw increased trade in Italian wines, bolstered by firm demand for Sassicaia. A number of recent vintages have tipped £1,000 per case this year, including the 2002 (WS 87) and the 2003 (WS 92), both of which have seen particularly strong price movement despite their unspectacular Wine Spectator scores. The latter, which is currently offered on the exchange at £1,050 per 12x75cl case, is up 30% year-on-year, whilst the 2002 is trading at £1,000 per case, up from £750 a year ago (a rise of more than 33%). On average, the last 10 vintages of the Super Tuscan are available at around £1,130 per case - a clear indication that the market has accepted £1,000 as the benchmark.

The graph below shows the year-on-year price appreciation of Sassicaia vintages 1998-2006. As you can see, more recent years (which are slightly cheaper than older vintages) appear to be generating the most interest, whilst the 1999 (WS 92) has seen little change. The 2005 (WS 94) and the 2007 (WA 95) are the only vintages that are currently available at under £1,000 per case. At £950 each, both wines may represent good value.

 

Scores from winespectator.com

October Market Report released

In summary, the October Market Report includes:

•  Trading Activity – exchange turnover up 21% year-on-year
•  Liv-ex Fine Wine 100 Index – benchmark index up 1.5%
•  Major Movers – Pavillon leads the pack
•  Critical Corner – Tanzer looks at 08 and 09 white Burgundy
•  Final Thought – the rise of the second wines

Log in and find the full report under the Analysis menu (sorry, subscribers only).

Fine wine and inheritance tax under the magnifying glass

According to FT, HM Revenue and Customs has released a statement warning that investment grade wine must be valued at its estimated market price for inheritance tax purposes (IHT) – not at cost price. The announcement appears to have come as a surprise to a number of wine brokers and executors who believed that cellar values were assessed and taxed based on purchase prices. With the Asian market pushing the prices of top Bordeaux to record highs, the difference between cost and current prices could mean that many executors are facing much larger tax bills than previously expected. Lafite 1982, for example, which cost around £3,200 in September 2000, was changing hands at £36,000 last month - a price increase of more than 1000% in ten years. Those who fail to file IHT returns correctly could be in line for severe penalties. The importance of an accurate and reliable valuation methodology, then, is becoming ever clearer - we believe that the Liv-ex Mid Price provides just that.

Over the past year, a number of leading wine funds have adopted the pricing mechanism, which is calculated by finding the mid point between the current highest bid price and lowest offer price on the Liv-ex trading platform. (If there has been a transaction on Liv-ex within the last 30 days and the transaction price sits within the bid-offer spread, then it is used as the Mid Price.) Liv-ex utilises proprietary data as well as general market information to give each wine a real market value – as opposed to a merchant list price or a general estimate.
 
Click here to view the full Liv-ex Mid Price logic.

Liv-ex also has a number of other valuation and data products available, from the quick and simple to in-depth studies. Please contact us for further details.  

Yquem: China's next big thing?

Last week on the blog we suggested that Yquem prices might well go into orbit should the chateau's parent company (LVMH) embark on a marketing campaign in China. The campaign, it seems, is already in its planning stages. Decanter recently reported that Chinese authorities have legalised the importation of sweet wines, including Sauternes (Read the full report here). This change in regulations opens the way for the sweet wines of Bordeaux (particularly the region's biggest names) to make their mark on brand-conscious Chinese buyers. Director of LVMH, Pierre Lurton, told Decanter that the company has "a good business network in place" in the country, and that it is making plans to market Yquem in China. Is the wine set to be Asia's next big thing?

Australia's First Growths

The 2010 release of Langton’s Classification of Australian Wine V sees the addition of 33 new wines to the official listing, bringing the total number of ranked wines up to 123. Importantly, the new listing, which is the most recent since 2005, features six promotions to the top-tier “Exceptional” category, which has grown from seven members in 2000 to 17 in 2010. Selections are made based on secondary market presence and value, and as such, this year's numerous additions and promotions appear to be the result of increasing demand for Australian wines on the secondary market.

Since its conception in 1991, the four-tier classification has acknowledged Australia’s finest and most sought-after wines. Only wines that have made ten vintages or more are eligible for inclusion, and the classification is revised every five years in order to keep pace with the country’s rapidly changing fine wine scene.

The current classification is composed of 58 shiraz/blends, 40 cabernet/blends, 10 pinot noirs and only 15 white wines (reflecting a strong preference for reds). As well as the newcomers to the Exceptional category, 12 wines were promoted to the second-tier Outstanding category (and four wines were added). Further down the listing, seven wines were promoted to Excellent (and eight added) and 21 were classified as Distinguished. Notable demotions include Parker Coonawarra Terra Rossa First Growth Cabernet Merlot, which fell from Outstanding to Excellent, as well as Giaconda Pinot Noir, Mount Langi Ghiran Shiraz and Veritas Rolf Binder Shiraz, all of which were demoted from Excellent to the lowest tier, Distinguished.

The table below shows the wines that have been classed as Exceptional this year (five of which are currently offered on the exchange). Of the six new entrants, five are shiraz, including Torbreck RunRig Shiraz. The wine is this year's most ambitious climber and moves up two tiers to its current position. Vintages are available at £100+ per bottle.

 
Source: langtons.com.au

Join the Liv-ex team: Warehouseman - Tilbury Docks, Essex

Liv-ex operates a business-to-business wine-trading platform. With 330 member merchants in 28 countries, sales have grown rapidly to £45 million (representing 30-40,000 cases per year). In 2009, Liv-ex was included in the Sunday Times Fast Track list of the UK's fastest growing private companies and it also owns a specialist warehousing and freight forwarding service for fine wines.

Liv-ex wish to recruit an exceptional warehouseman to work with an experienced team at their main warehouse at Tilbury Docks, Essex. This job is physically demanding, and the culture is informal, young, bright and action orientated. An aptitude for hard work, attention to detail and the ability to get tasks done quickly will be important; as will the talent to be an integral part of a team, a fast learner and someone who takes great pride in their job. IT literacy a bonus.

Prior experience preferable, in addition to a five year unbroken work/education record. An ideal role for a local, plus free parking. Will be CRB checked. Likely to be temporary initially and then permanent after three months.

All candidates should email their CV and a covering letter to Lana Jeffers at Middleton Jeffers Recruitment (lana@middletonjeffers.com).

Liv-ex Fine Wine 100 Index ends the month on a high

All of the Liv-ex indices pushed upwards in September, bolstered, in part, by energetic First Growth trade. The fine wine market's benchmark index - the Liv-ex Fine Wine 100 - ended the month at a new high of 308.21. The index is currently up 1.53% month-on-month and 28.8% year-to-date.

The Liv-ex Claret Chip Index, which measures the performance of top-scoring First Growths, was up 2.35% to 374.27 - a rise of 42.0% year-on-year and 37.9% year-to-date.

The Liv-ex Fine Wine Investables Index saw a change of 1.8% in September. The index is up 29.5% year-to-date and 35.0% year-on-year.

The Liv-ex Fine Wine 500 touched 239.74 by month end, moving up 1.8% (+4.16 points) on last month. The index is up 11.6% year-to-date and 16.9% year-on-year.

And finally, the Liv-ex Fine Wine 50 Index saw the greatest gains in September, closing at a high of 356.51. The index is up 3.15% month-on-month and 46.1% year-on-year.