Liv-ex Fine Wine Market Blog

Mouton and Haut Brion drive First Growth trade

Brisk trade in Mouton and Haut Brion drove the Liv-ex Claret Chip Index to a new high of 427.63 on Friday - a change of 1.05 per cent on the previous week.

Mouton 2003 posted the largest gains, rising in value from £3,900 per 12x75cl case on the 21st of January to £4,338 on the 28th. Other notable weekly climbers were the 2006 and 1998 vintages of Haut Brion, which increased in price by six per cent and seven per cent respectively. For more on Haut Brion, please see the forthcoming Market Report.

 

Spotlight on... Krug

 
History

Krug is one of the world’s most iconic champagne houses. The house was founded in 1843 by German-born Johann Josef Krug - a former partner at Jacquesson who relinquished his position in order to settle in Reims and set up his own company. The generations of Krugs that followed saw the family name evolve into a prestigious global brand.

For more than 150 years the business was family owned (a detail that had become an integral part of its image and appeal). In 1999, however, it joined the portfolio of luxury goods conglomerate LVMH, though the family continues to run the house with a degree of autonomy.

Produced under the direction of Chef de Cave Eric Lebel, Krug’s wines include a (NV) Grand Cuvée, a (NV) rosé, a vintage and two single-vineyard cuvées - Clos du Mesnil and Clos d'Ambonnay. Unusually, the house terms its Grand Cuvée “multi vintage” rather than “non vintage”, as it is composed of a relatively high percentage of mature vintage wines. Whilst some are decidedly sceptical about the use of this term, the wine’s prices  - and scores  - often keep pace with those of prestige cuvées.

The 1998 vintage

Having retasted Krug 1998 in December last year, Antonio Galloni claims that the offering “isn’t the most complex Krug Vintage”, though it is a “gorgeous wine for near-term drinking”  - 94 points.  The same vintage of Clos du Mesnil, however, received rave reviews. Galloni judged the Krug a 96-pointer, calling it “a remarkably taut, focused bottle… with great energy and minerality”.  His sentiments echo those of Neal Martin, who awarded the wine 98 points in 2008.

Market trends

After experiencing rapid price growth between 2006 and 2008, the past two years have seen champagne prices rise at a more sedate pace. This is no doubt due in part to the Asian market’s current taste for top Bordeaux - and Chinese buyers’ conspicuous indifference to vintage champagne. As a result, the Liv-ex 25 Champagne Index has risen by just 7% over the past year, whilst top vintages of Krug are up around 5%.

 

Though the brand as a whole has made rather slow progress, older vintages of Krug have fared relatively well since December 09, with the 1989 and the 1988 rising in value by 23% and 17% respectively.

The table below shows the market prices of the last six vintages of Krug, alongside their scores from Antonio Galloni. The 1989 stands out as particularly good value for money at £2,300 per case, whilst those with a hankering for something special may want to consider the ‘95 (£1,250 p/b) and ’96 (£1,125 p/b) vintages of Krug’s Clos d'Ambonnay - both of which are currently available on the exchange.

 
*Burghound

Scores from erobertparker.com.

Hong Kong auctions kick off 2011

The 2011 auction calendar kicked off in earnest this past weekend, with Hong Kong playing host to three headline sales in just two days. The Sotheby’s Lloyd Webber (LW) auction on Saturday sold 100% of its 746 lots, attracting HK$41.8 million (£3.4 million), whilst the Sotheyby's and Bordeaux Winebank (SBW) sale on Sunday amassed HK$68.8 million (£5.6 million). Meanwhile, Acker Merrall sales on the 21st and 22nd saw bidders splurge HK$84.6 million (£6.8 million) on more than 1,200 lots of premium Bordeaux and Burgundy.

These Hong Kong auctions’ success is yet another patent indication of the Bordeaux market’s current buoyancy in Asia. If we compare auction prices (including buyer’s premium) with Liv-ex trade prices (represented by the Liv-ex Mid Price, our mark-to-market value), we see that buyers in Hong Kong were willing to fork out an average 15% premium for the First Growths.

Twenty-five wines were sold across all three auctions in the 12x75cl unit size, giving us an interesting chance to compare the results. Although the best prices were generally achieved at the Sotheby's and Bordeaux Winebank sale, there was a great deal of volatility in the prices achieved, with all three auctions seeing their share of winners and losers.

Overall, buyers payed 9% above the Liv-ex Mid Price at Acker, 8% above at Sotheby's LW and 22% above at Sotheby's and Bordeaux Winebank.

Of course, the results below include the buyer's premium; 22% at Acker and 21% at Sotheby's. If we remove this and look solely at the hammer prices, we find that the sellers actually achieved around 10% less than the Liv-ex Mid Price at the Acker and LW sales and achieved little more than a par score at the SBW sale.

*Most recent available: for First Growths 1996-2007, 25/01/2011,  for all others 31/12/2010.

Liv-ex Cellar Watch - for collectors and enthusiasts

Here on the blog we try to keep readers up to date with all of the latest developments in the fine trade. But for those who are interested in gaining a more in-depth perspective of the fine wine marketplace, our Liv-ex Cellar Watch packages offer unrivalled access to price information and analysis. We have briefly outlined the benefits of subscribing below.

Liv-ex Cellar Watch - our non-professional subscription service - gives collectors access to the world’s largest standardised database of fine wine prices. The Liv-ex database currently holds over 6.7 million lines of data, including trade-to-trade transactions, auction hammer prices and merchant list prices. Our data is sourced from 350 merchants in 28 countries (and 21 different auction houses) who together account for more than 80% of global fine wine turnover. This is the same market information that is used by fine wine merchants globally to make buying and selling decisions.

Unlike standard price comparison or cellar management websites, we provide historical prices and charts that track the performance of almost 100,000 individual wines over time (as far back as the early '80s for some products). The chart below gives a glimpse of the sort of information that is provided.  

Cellar Watch packages also allow collectors to accurately track the value of their cellars in real time, relative to cost and other assets. Prices can be displayed in any major currency, with all conversions made using the historical spot rate. 

 
 
 

To keep subscribers abreast of the latest news and analysis, Cellar Watchers receive a detailed Monthly Market Report. You can view the first page of the January Market Report here.

The following packages are available:

Cellar Watch Silver:   £49.95 per annum
Track up to 25 wines in your cellar and search for current and historic merchant or auction prices.

Cellar Watch Gold: £99.99 per annum
All the benefits of Silver with the added ability to track 500 wines in three different cellars.

Cellar Watch Platinum: £299.99 per annum
The ultimate fine wine data package, Platinum provides collectors with professional-level access to information on the Liv-ex trading platform. View “live” bids, offers and transaction prices. You can also track 1,000 different wines across five different cellars.

Those who are not yet ready to make the jump to a paying package can subscribe to our free Price Watch service. Sign up to search our database and view summary price information.

Foreign Office to reduce cellar: a boon for fine wine?

The Evening Standard reported this week that the Foreign Office is planning to reduce its formidable wine collection – which is said to be worth around £2 million. The cellar's prized wines are served to dignitaries and heads of state and reportedly include a bottle of Margaux and Latour 1961, worth £900 and £3,000 respectively. According to the Standard, “Controversy caused by the cellar at a time of public spending cuts" is behind the government sell off.

But doesn’t all of this sound vaguely familiar?

Think back, if you will, to May 1999. The Treasury announced its plans to auction off half of the UK’s gold reserves in order to diversify its portfolio and invest in foreign currencies. After initially causing the price of gold to fall to a 20-year low, the next decade saw prices leap to new highs - thus exposing the state’s rather expensive blunder. According to the Telegraph, the sell off, which took place between July 1999 and March 2002, procured £2.2 billion at an average price of $276.60 an ounce. Given that gold has now reached $1,377 per ounce, the reserves would have been worth five times as much today.

If the government’s previous sell offs are anything to go by, the current fine wine bull market may have somewhat further to run...

 

The gold standard

Fine wine prices put in a dramatic increase in 2010 – with the benchmark Liv-ex Fine Wine 100 up more than 40% in just twelve months. Understandably, these rapidly rising prices have stoked fears that the top-end of the market is approaching bubble territory. If we convert the sterling-based Liv-ex 100 into other global currencies, however, a somewhat different picture emerges.

An international perspective

When based in euros, the index only moved past the level set in July 2007 in October 2010. In dollars the index remains five points (or 1.2%) off its high, reached in June 2008. If we look at Yen – the results are even more dramatic. The index remains 29.7% off its all time high. In Japan, we are still a long way from a bubble.

 

 
 
 

So what is the situation in the current diver of global demand, China? When based in the dollar-linked Renminbi, the index sits 10% below its June 2008 high.  For the Chinese buyer, fine wine prices are still someway below their historical highs. It is only Lafite Rothschild and a handful of other brands (such as Duhart Milon and the First Growths’ second wines) that have far surpassed their pre-2009 pricing.

Sterling  troubles

Of course, the majority of the data used to calculate the Liv-ex Fine Wine Index is in pounds and euros (as you would expect, with London and Bordeaux remaining the leading trading hubs for trade buyers). This suggests these results should be treated as indicative rather than definitive. But it does show that the rapid increases we have seen in London pricing is partly due to currency movements – or more precisely the depreciation of the sterling since 2007. With the Bank of England continuing to press forward with its quantitative easing plan, this is a situation unlikely to change in the medium term.

This can be clearly seen if we base the index in gold, the classic store of government wealth. With gold prices having almost kept pace with wine prices in recent years (even when measured in sterling), the  trend since the tumultuous economic events in the latter half of 2008 has been broadly flat. In essence, fine wine has started to behave as a store of value. Perhaps Sauternes is not the only fine wine that should be described as liquid gold.

 

IMF gives the nod to fine wine

A recent report published by IMF economists Serhan Cevik and Tahsin Saadi Sedik investigates the influence of advanced and emerging market economies on commodity prices by analysing two very different commodities and assessing the impacts of global supply and demand. Significantly, the IMF chose fine wine as one of the two commodities for their analysis (the other being oil), thus adding weight to fine wine's credibility as an investable alternative asset class. The researchers used the Liv-ex Fine Wine Investables Index to track historical changes in fine wine prices.

According to their working paper (A Barrel of Oil or a Bottle of Wine: How Do Global Growth Dynamics Affect Commodity Prices?), demand plays a critical role in determining the prices of both commodities, "while production constraints have the expected, but limited effect”. The paper also finds that it is emerging economies – such as China – that have the most marked effect on pricing. One of the closest correlations found is that between fine wine prices and industrial production in emerging economies (which is five times higher than that found for the same measure in advanced economies).

During their research, the economists also discovered a striking similarity between the behaviour of oil and fine wine prices, "with a correlation of over 90 per cent during the sample period”. This secondary finding has prompted many critics to question fine wine's value as a portfolio diversification tool. (Read FT’s take on the IMF's paper here.)

On the other hand, the study's conclusion that fine wine prices are closely correlated with industrial production in emerging economies indicates that fine wine as an asset class is a geared play into emerging market growth. This can hardly be overstated - particularly considering the phenomenal growth that these markets have seen in recent years. Forbes Magazine's latest rich list reveals that emerging markets such as China now boast a growing number of billionaires - all of whom are no doubt interested in drinking wine rather than oil.

January Market Report released

Today sees the release of the January Liv-ex Monthly Market Report. This month's report includes:

•  Trading Activity – exchange turnover doubles in 2010
•  Liv-ex Fine Wine 100 Index – benchmark index up 41% for the full year
•  Major Movers - Bordeaux brands in high demand
•  Chart of the month - Bordeaux First Growths: 08 leads the way
•  Critical Corner – Antonio Galloni on Champagne's sparkle
•  Final Thought – the gold standard

Cellar Watch subscribers can log in and find the full report under the Analysis menu. Those who have not yet subscribed can view the first page of the report here. 

Liv-ex Claret Chip Index edges upwards

The Liv-ex Claret Chip Index continued its slow but steady ascent last week, led by Mouton. The index rose 0.37% on the previous week to a new high of 415.25. And though Lafite as a whole remained relatively flat, the 2005 vintage saw notable movement, rising in value from £11,000 per 12x75cl case on the 31st of December to £11,660 (+6%) on Friday.

To show how each of the First Growths performed in 2010, we have split the index into its constituent brands and rebased each brand's index at 100 on the 31st of December 2009.

 

2010: The Bordeaux story

Having realised around 89% of Liv-ex trade in 2009, Bordeaux further dominated trading in 2010, accounting for a definitive 95% of total exchange turnover. The driving force behind Bordeaux's success is undoubtedly Chinese demand and the Far East's current predilection for Left Bank Classed Growths - particularly Lafite. As a side effect, however, 2010 saw Burgundy's share of trade sink to an all-time low of 1.3%, whilst trade in Champagne fell to 1.4% - down from 5.9% in 2005. 

The table below shows each region's percentage of trade in 2010.

  
  
As you can see, Bordeaux's share of trade has increased dramatically since 2005, and whilst Burgundy's share of trade remains relatively low, the last few months have shown some signs that demand is on the rise. With the 2009 Burgundy tasting in London in full swing this month, will we see a spike in demand for the region's top wines?