Liv-ex Fine Wine Market Blog

Angelus: Putting the Right foot forward

In the September Cellar Watch Market Report (released this week) we noted that this month's major movers board comprises almost exclusively Right Bank wines, including two vintages of Angelus. With this in mind, we have conducted a more thorough analysis of Angelus' recent progress based on the price data of vintages 2000-2008.

Over the past few years, post-millennial vintages of Angelus have consistently recorded healthy price growth. Since September 2010, however, the wines' ascent has accelerated. The 2007 and 2008 have both seen a surge in demand and have risen 67 per cent and 56 per cent respectively. Other "lesser" vintages such as the 2002, 2003 and 2006 have also charged ahead and are up 30 to 40 per cent year on year.

The chart below shows the current prices of vintages 2000 to 2010. Many of these wines have seen heavy buying this year, having benefited from broadening market demand. The 2004, however, is still available in strong volumes. At £1,500 per case, the wine appears to be on the move.

 

*The major movers board shows those wines that have posted the most notable monthly increases.

Lafite underperforms at HK auction

A collection of Lafite spanning 1981 to 2005 sold for HK$4.2 million (£336,000) at a Christie's auction in Hong Kong on Saturday. Despite setting a new world record - the most expensive wine lot ever sold at auction - the collection failed to match its pre-sale high estimate of HK$4.5 million. 

Overall, the two-day sale was a success, raising £4.7 million against a pre-sale estimate of £3.7 million. More than 570 lots went under the hammer, including those featuring the top names from Bordeaux, Burgundy and Champagne. Bidders' enthusiasm for Lafite, however, was somewhat tepid. This is particularly interesting in light of the First Growth's recent descent. (Read more here.)

Lafite's relatively lacklustre performance can be seen from the table below, which compares the Liv-ex Mid Price to Lafite hammer prices. Please note that the Liv-ex Mid Price is a trade-to-trade price and does not include merchant margins. It represents the price merchants could expect to achieve when selling wine on the secondary market. (End-consumers could expect to pay 10 to 25 per cent more.) Because we are approaching the auction results from a seller's perspective, and the buyer's premium does not go to the vendor, we have used hammer prices for our analysis.

As you can see from the table below, all of the vintages sold at a discount to the Liv-ex Mid Price.

 
Prices for 12x75cl cases. Hammer prices based on a buyer's premium of 20 per cent (though this can be higher).

Hail forces early start for Lafite as Cos takes a battering

Guest blog: Gavin Quinney reports from Bordeaux on an unscheduled start to the harvest for one of the world’s most famous estates, and the severe misfortune that fell on an illustrious neighbour.

"It’s an early vintage, and not an easy one," said Charles Chevallier, the director of Lafite Rothschild, as he checked the Cabernet Sauvignon from their parcel in St-Estephe in his new harvest reception area. He certainly never thought that he’d be bringing in this late-ripening variety exactly one week before the Médoc Marathon, when over 8,000 runners in fancy dress pass through the vineyards on the second Saturday of September. (In 2010, they started picking their Cabernet on 4th October.)

Hail is, in my experience, the wine grower’s worst nightmare. In the space of a few minutes, a healthy crop can be all but wiped out. At 6pm last Thursday, 1st September, with the red harvest just days away, there were several hailstorms across the Bordeaux region. Just up the road from me at Grézillac, near Branne, a few miles south of St-Emilion, hail tore through leaves and blasted grapes in several vineyards. There was then a deluge in Vignonet, closer still to St-Emilion, as the storm continued further east. Mercifully, this was mostly just heavy rain.

On Saturday, I headed over to the Médoc and, from what I’ve seen, a sizeable chunk of St.Estephe – some 900 hectares, apparently – was by far the worst hit. As well as hail, there was an "inondation", with over 70mm of hail and rain falling, compared to barely more than 10mm of rain at the same time in Margaux.

The hailstorm cut a swathe between the vineyards of St-Estephe  –  "a corridor", witnesses said –  with the vines on the gravel mounds leading from Lafon Rochet to Cos Labory and Cos d’Estournel – and beyond to Le Crock, Haut Marbuzet and Montrose  –  taking the brunt of it. Leaves were shredded and grapes battered. 

My swift stroll around the parcels seemed to support this, with the vines on the slopes down to the Gironde estuary having less damage than those on the south and west-facing slopes and plateau. The vines to the north of the chai, or winery, were badly hit. St-Estephe’s other Super Second, Montrose, suffered much less than Cos, but several parcels were hit to a greater or lesser extent before the hail petered out at Meyney. Montrose started picking after the storm, with their large team of imported Spanish workers hard at it on Saturday.

Both the leading St-Estephe estates have seen massive investment of late, with Cos building a new winery and cellars which opened in 2008. Montrose will unveil a new barrel cellar later this year.

Also hit was Lilian Ladouys, where they were busy harvesting by machine over the weekend and de Pez, while Calon Segur and the vines around Phelan Segur, both further north near the village of St-Estephe itself, suffered only superficial damage. Calon Segur was probably spared by the gods because it had been hailed on last year.

In case you were wondering, Lafite has a 4.5 hectare (11 acre) plot in St-Estephe, opposite Lafon Rochet, and they have had a special "derogation" to transform this into Pauillac for many years. The Cabernet Sauvignon from here almost always goes into the Grand Vin – but not this year. At an estimated 50hl/ha, that’s 30,000 bottles that won’t make the cut, the best that Charles Chevallier is hoping for is for the grapes to produce wine of "second-wine" quality.

The fruit was in good condition as it was picked by Lafite’s initial squad of 70 pickers and porters, all sporting yellow safety vests as some of the rows are next to the main road. With the leaves peppered by the hail, and some of the grapes split by the impact, there was no option but to bring it in.

 
Pickers at Lafite bring in a parcel of Cabernet Sauvignon.

Meanwhile, just across the stream that divides St-Estephe and Pauillac, called La Jalle du Breuil, at least five enormous machines were out on Saturday at Lafite and Duhart Milon next door, spraying an organic "champignon" product on the grapes to combat against the onset of botrytis. Some bunches had suffered a minor impact, and any split grapes could have led to problems with rot.

UPDATE: Read Jeff Leve's interview with Jean Guillaume Prats here.

Lafite: The force behind last month's losses

The Liv-ex Fine Wine 100 Index lost four per cent in August - its third-most dramatic monthly fall since its inception in 2001. Though the majority of index constituents performed poorly - most notably the First Growths - the real millstone was Lafite Rothschild. 

Recent vintages of Lafite were under acute pressure last month, so much so that all but the 2004 saw significant price slides. The 1998 and 2008 vintages declined by around ten per cent each, whilst the 2003 and 2005 both dropped by eight per cent.

Because the Liv-ex Fine Wine 100 Index is production and scarcity weighted, and the First Growths are produced in sizeable quantities, recent vintages of Lafite have a profound effect on its monthly movements. The chart below compares the performance of the Liv-ex Fine Wine 100 Index to that of Lafite since December 2010.

    

Liv-ex Claret Chip losses in context

The Liv-ex Claret Chip Index descended -0.99 per cent last week to 421.27. Having to-ed and fro-ed since late February, the index has increased less than two per cent in the year to date. How does this sit with historical changes over this period? 
As you can see from the chart above, which shows the index's movement between January and August each year, price growth has varied considerably over the years. The Liv-ex Claret Chip Index (which measures the performance of top-rated First Growths only) recorded its worst performance in the eight months to August 2004. Prices moved rapidly in 2006 and 2007, though subsequent years saw the index record more moderate increases before upping the pace again in 2010.  

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Super Second prices soar

For every action there is an equal and opposite reaction. Newton may not have had the fine wine market in mind when he penned the third law, but it seems particularly apt in light of the First Growths and the Super Seconds divergent fortunes. Over the past few months, First Growth prices (and those for their second wines) have been relatively static. But where demand for the First Growths has faltered, and buyers have been disinclined to invest in the top-tier (and most expensive) Left-Bank wines, the so-called Super Seconds have picked up the pace.

As you can see in the chart below, prices for the Super Seconds have risen by an average of 23 per cent in the year to date, compared to eight per cent for the First Growths (as measured by the Liv-ex Fine Wine 50 Index) and six per cent for their second wines.

 
The last ten vintages of Pichon Baron have led the charge, rising in value by an average of just under 40 per cent since the start of the year. Ducru Beaucaillou and Pontet Canet (considered a Super Second or Flying Fifth) have gained 37 per cent each, whilst Montrose and Cos d'Estournel are up 30 per cent and 25 per cent respectively. Despite their ascent, a number of vintages continue to offer strong value. A selection of these are displayed below. Liv-ex trading members can view live markets here.

 
All prices are for 12x75cl cases stored in bond.

Claret Chip signals further price drops

The Liv-ex Claret Chip Index descended for the third consecutive week on Friday, closing at 425.45 - down 0.95 per cent on the previous week. The index is constructed of top-rated Bordeaux First Growths only.

Though the Lafite camp saw continued volatility, it was Margaux that posted the largest price falls. Margaux 2003 dropped six per cent, a loss that was exceeded only by Latour 2006, which declined from £5,525 per case on the 12th of August to £5,050 at the close of trading on Friday.

The 2008 vintage in general performed poorly, with Mouton falling five per cent. There were, however, one or two bright spots, most notably Haut Brion 2006 and Lafite 1996, which gained five per cent and six per cent respectively.  

 

The upside of down

With concerns over the global economy weakening investor confidence, the First Growths lost their lustre last week and accounted for just a quarter of total trade on Liv-ex. Reticence and softer demand have, of course, had a knock-on effect on pricing. But whilst the Liv-ex Fine Wine 50 Index (which measures the price performance of the First Growths only) continued its descent today, trade outside the Premiers Crus remains strong.

Over the past few days, merchants have overlooked the First Growths and have opted instead for their second wines, Sauternes and chateaux lower down the ranks of the Crus Classes. Carruades, Forts de Latour and Cos d'Estournel topped buyers' wish lists last week, whilst trade in Yquem moved up a gear (or two) and accounted for five per cent of weekly turnover, placing it ahead of Margaux, Latour and Haut Brion. 

For cautious buyers on the lookout for value, the table below shows a number of wines that don't require deep pockets. Liv-ex trading members can view live markets here.

   
All prices are for cases stored in bond.

Lafite in reverse: A closer look

Yesterday on the blog we showed how Lafite's price decline is weighing on the Liv-ex Indices. As one of our readers rightly commented, however, price performance has not been uniform across vintages. Some vintages of the First Growth have recorded price falls of more than 15 per cent since the start of the year, whilst others have posted more moderate losses, or have seen little change. The charts below show the price movement of the last ten physical vintages of Lafite.

  

 

*Data based on the Liv-ex Mid Price for 12x75cl cases stored in bond.

As you can see from the first chart, Lafite 2008 has seen the sharpest falls this year, having dropped in value by 26 per cent. And though a few wines have recorded positive year-to-date returns, prices for all ten vintages have faltered since the end of June.

Bordeaux 2011: Early, but not great?

 

With the dust now settling on the 2010 campaign, thoughts are gradually turning to the 2011 vintage. According to The Drinks Business, an exceptionally warm, dry spring has accelerated the growing season in Europe, forcing many wine-producing regions (including the Loire, Champagne and the Douro) to prepare for an early harvest. Bordeaux and Burgundy are reportedly considering an end-of-August start, whilst Champange is gearing up for the 20th - the region's earliest harvest in 189 years. (Read the full article here.)

To find out what has ben happening in Bordeaux we spoke to local grower and winemaker Gavin Quinney: "It  is definitely very advanced, the grapes have already finished veraison, so we are probably about ten days ahead of the norm... The growing season started off very hot and very dry; up until mid-July we had drought conditions."  

And though vignerons prayers for rain were answered, the last three weeks have seen rather too much of it, according to Quinney. "We've now started praying that we've seen the last of it. I have seen quite a bit of rot already and it is still very humid... We can already say that we aren't going to have another 'vintage of the century' like 2009 and 2010 - drought followed by heavy rain aren't the best conditions for making wine."

"Having said that, we still have some way to go. The red wine harvest won't start for at least another month. If the weather is kind, it could still be a very good vintage and yields are quite high. But it's a very risky time at the moment in Bordeaux and it could still go the other way."