First Growths: back to 2011

Last month, the Liv-ex 1000 index reached a record high for the seventh consecutive month. The index previously reached a high in July 2011 at the peak of the China-led bull market before falling to a low in August 2014.

Other Liv-ex indices have not been making the same records. The Liv-ex 100 has been rising, but is yet to surpass its previous highs; the Liv-ex Fine Wine 50 – which tracks the daily price movements of the First Growths – remains 22.8% below its peak in 2011.

Still, several First Growths are now close to or above their 2011 Trade Prices. The chart below shows those that are within £500 of their highest prices during the bull market.

Mouton Rothschild and Haut Brion are both well represented, and a handful of Latour and Margaux vintages have climbed back to levels seen six years ago. As yet, no Lafite Rothschild vintages feature.

FG trade 2017 v 2011

Six of the wines shown above are currently commanding higher prices than during the bull market (2010-12). Mouton Rothschild 2003, for example, currently has a Trade Price of £4,500 per 12×75, marginally higher than levels reached in 2011.

mouton 03

Others are inches away from breaking through their previous highs. Mouton Rothschild 2002, for example, is just 0.6% off its peak Market Price.

As the fine wine market continues its momentum, it remains to be seen if trade prices will continue to rise.

Bull market prices are the highest price that the wine has traded at between the 1st January 2010 and 1st January 2013. The 2011 wines were released towards the end of this period, after the market peaked.


 

Spotlight on… Lafite Rothschild

chateau-lafite-rothschild-pauillac-france-10179204

Owner: Baron Eric de Rothschild

Classification: Premier Grand Cru (First Growth)

Vineyard area: 115 hectares

Colour: Red

Standard blend: Cabernet Sauvignon (80-95%), Merlot (5-20%), Cabernet Franc (0-5%), and Petit Verdot (0-5%).

Total annual production: 420,000 to 480,000 bottles

History

Records show that the first vines were planted at Lafite in the 1670s. Early customers included both British Prime Minister Robert Walpole and US President Thomas Jefferson.

In the years following the French Revolution, Lafite changed ownership numerous times until Baron James de Rothschild purchased Chateau Lafite in August 1868. Henceforth the estate became known as Chateau Lafite Rothschild.

The end of the 19th Century and the beginning of the 20th Century were turbulent decades for the Chateau. The vineyard was severely impacted by the phylloxera crisis and mildew, forcing the estate to declassify certain vintages between 1882 and 1915. Furthermore, during World War I the estate was severely impacted by supply restrictions and the financial crisis of the Great Depression led to a reduction in vineyard area.

During World War II, both Lafite Rothschild and Mouton Rothschild were confiscated and placed under public administration. A German military base was then stationed at the two Chateaux for the entire length of the occupation. By the end of 1945, the Barons de Rothschild recovered possession of Lafite and Baron Elie was responsible for re-establishing operations at the estate. A series of excellent vintages in 1945, 1947 and 1949 helped fuel efforts to re-establish Lafite Rothschild. The 1955 vintage was evidence of the wine’s rebirth. The emerging markets in the US in the 1960s, and Asia more recently have continued to help grow Lafite Rothschild into the brand it is today.

Market Performance

During the Asia-led boom for fine wine (2009-2011), Lafite became a ‘super brand’ in China and prices skyrocketed – even more than the other First Growths – as the chart below shows. Over a two-year period, the Lafite index gained over 140%.

The popularity of the brand during this period is perhaps exemplified by price movements for the 2008 vintage. In October 2010 it was announced that the bottle would carry the Chinese symbol of the figure eight, representing good fortune. The market quickly responded with trades 67% higher than in the previous month.

Lafite v FG indices - ten years

When the market started to roll over in mid-2011, prices for Lafite began to decline. In two years, the index dropped 37%.

Recovery period

At the beginning of 2016, Lafite began to show tentative signs of recovery. It is now the best-performing First Growth over one year, up 29.2%. It has outperformed the Fine Wine 50 which is up 25% over the same period.

Lafite v FG indices

Market Prices

The chart below compares Lafite Market Prices to their Wine Advocate scores. Lafite partly follows the traditional pricing pattern for fine wine, where prices rise as the wine ages and supplies diminish. However critical acclaim also appears to have some influence, with high-scoring vintages such as 2008, 2009 and 2010 commanding premiums.

Buyers willing to wait might consider the 2014 and 2015. The wines have similar scores to older vintages, but their prices are still waiting to catch up. For example, the 2014 vintage is currently trading at a discount of 30.7% to the similarly-scored 2006.

Price v Score bar

Vintage performance

The recently physical 2014 vintage has been the top performer over the past twelve months, up 40.1%. This time last year the wine was the cheapest vintage available on the market. The similarly priced 2013 vintage followed behind with a 32.5% increase. The 2009 and 2011 have been the slowest movers of the Lafite vintages, up 23.7% and 20.3% respectively.

Vintage performance


 

Talking Trade: Bordeaux steady, Lynch Bages takes charge

FW50

Activity for Bordeaux was steady at 66.8% this week, but its share of the market by value continues to be low in historical terms. This week Latour announced that it would release its 2005 grand vin later this month. As always, there is market speculation surrounding its ex-chateau release price.

In general, the First Growths have continued to see prices rise. The Fine Wine 50 closed Thursday higher at 341.39 (+0.5%), edging closer to its five-year high of 347.08.

Regional

It was another busy week for Italy and Champagne. The two Montalcino 2012s (Altesino and Argiano) featured again. Poggio San Polo Brunello Montalcino 2010 was also active. The most traded Italian vintages were the 2014, 2012 and 2010s.

Trade for Burgundy was much lower this week and dipped below its average of 7.9% for 2016. The region has seen a strong start to 2017, registering 18.4% and 14.2% of trade by value in January and February respectively. DRC Tache 2012 and DRC Echezeaux 2013 both featured in the top wines from Burgundy this week, alongside Prieure Roch Nuits Saint Georges Clos Corvees 2013.

Value

The top wines traded by value were from Bordeaux and Champagne. Angelus 2011 was top and traded at an all-time high of £2,285 per 12×75. According to Robert Parker, the wine is “supple and sexy with lots of blueberry and black raspberry fruit intermixed with liquorice, barbecue smoke and camphor.” He awarded it 94 points.

Latour 1996 was also active. It is a wine that has divided critics at The Wine Advocate. Parker awarded it 99 points calling it a “spectacular Latour.” It “continues to perplex” Neal Martin who awarded it 95 points.

Lynch Bages 2008

93-point Lynch Bages 2008 hit an all-time high of £1,013 this week. It is up 23.4% year-on-year, and 9.8% on its previous trade price of £923.

Lynch

Looking for weekend reading? This week, Liv-ex published two blogs on the forthcoming Latour 2005 releaseLatour 2005: ‘Fair Value’ among the back vintages and Latour 2005: a chequered past. Liv-ex also published the merchant prediction results from its survey Fine wine merchants bullish in 2017 – survey results.


 

 

Latour 2005: ‘Fair Value’ among the back vintages

Latour

With ex-chateau releases of Latour 2005 expected later this month, yesterday’s blog looked at the ‘chequered’ past of Latour 2005. To continue the Latour 2005 theme, today’s Liv-ex blog examines ‘fair value’ among the chateau’s recent back vintages.

The chart above plots prices for the last ten physical releases of Latour (2002 – 2011). The trend line shows that not all Parker points are equal – lower scoring vintages tend to trade at similar prices, while Parker points become increasingly valuable for higher scoring vintages.

The trend line might be helpful in determining a wine’s ‘fair value’ with vintages below the line potentially offering greater value for money than those above the line, based on the score from Robert Parker.*

The chart highlights that Latour 2005 is only 0.2% above the price suggested by the trend line and may not be considered significantly overvalued at its current Market Price of £6,660 per 12×75. In contrast, the 100-point 2009 and 2010 are both above the suggested price, by 7.3% and 16.8% respectively.

The other high-scoring 100-point 2003 appears to be the most mispriced vintage, falling 24.1% below the trend line. It is also currently offered just above the 98-point 2005 at a Market Price of £7,140. In his 2014 tasting note, Robert Parker said the 2003 is “undeniably the most sumptuous, opulent wine made [at the chateau] since the 1982 or 1961.”

The release price of Latour 2005 will undoubtedly be a major factor in determining its success or failure. The last ex-chateau release was Latour 2007, released at the same level as the Market Price. With the 2005 currently available in the secondary market close to ‘fair value’, a release at this level would likely generate interest from buyers.

 

* Liv-ex recognises there are other factors that influence the price of fine wine such as brand, vintage and age. However, the chart and trend line offer a useful starting point in the identification of wines that might be mispriced.


 

Latour 2005: a chequered past

Latour

This week Latour announced that its first ex-chateau release of 2017 will be its 2005 grand vin, 2011 second wine (Forts Latour), and 2012 third wine (Pauillac de Chateau Latour).

As can be seen in the chart above, 98-point Latour 2005 has not seen significant price growth since the Bordeaux market started to recover at the end of 2015. It is up only 2.4% since December 2015. Over the same period, 95-point Lafite Rothschild 2005 is up 36%, while 100-point Haut Brion 2005 has increased 22.8%.

Latour 2005 has something of a chequered past. It was originally seen as a potential ‘perfect’ wine. Robert Parker first awarded it 98-100 points in barrel and its price increased rapidly in the two years before physical release, rising 126.7% between April 2006 and April 2008.

When finally released in bottle, Parker awarded it a reduced 96 points and its price subsequently fell. Even during the dizzy heights of the China-led boom the wine failed to match the price level achieved during its pre-bottle phase. Although Parker did finally upgrade the wine to 98 points in his ten-year retrospective of Bordeaux 2005, this did not appear to do much to revive interest in the wine.

Liv-ex will follow this blog tomorrow with a more detailed analysis of the Latour release using its ‘fair value’ methodology.


 

 

Bordeaux 2007: value and performance of the First Growths

This month, Liv-ex has examined the progress of Bordeaux 2007 since release. Previous blog posts looked at the price performance for the 2007 wines in the Bordeaux 500, starting with the First Growths.

The 2007 First Growths have offered a return of 64.8% on average since release. While this may look impressive in isolation, the vintage has underperformed compared to a number of other vintages. Why is this? And how have other vintages performed?

In the chart below we have wound back the clock to Spring 2008, when the 2007s were released. The red bar indicates how each of the vintages below were priced at the time, relative to their quality levels. Those below the line – 1998, 1999 and 2001, for example – might have been undervalued, while those above might have been considered overvalued according to Liv-ex’s fair value methodology.

The blue bar shows the average return to date for each First Growth vintage.

FG 2007s

Five vintages were overvalued (1997, 2000, 2005, 2006 and 2007) around the time the 2007s were released. Of these, the 2005 and 2006 have provided the smallest average returns of all those shown. In fact, the 2005 has produced the only negative return (22%) over the period.

As can be seen, the 2007 vintage was potentially overvalued by 14.1% on release. Hence many back vintages offered better value at the time. Most vintages that fell below the trend line – those that were potentially undervalued – have produced a better average return than the 2007s.

One example is the 2002. It offered the most value in Spring 2008. It was priced 23.2% below the price predicted and has since provided an average return of 102.2%. However, the 1997 vintage has produced the largest average return (125.4%), perhaps suggesting that age and scarcity have also played a role in the performance of certain vintages.


Great gaps or little difference: Bordeaux 2009 and 2010

Several Bordeaux wines have received equally high scores for their 2009 and 2010 vintages – but prices can be far from even. To find out where the gaps are, Liv-ex has identified 18 Bordeaux wines that have achieved equal scores in both years from Robert Parker and calculated the price differences between the two.

For a number of the Chateaux, both vintages are very closely priced. Pontet Canet 2009 and 2010 – both 100 points – currently command identical Market Prices. The two vintages of Haut Brion and Margaux are similarly close, priced within 1% of each other.

Elsewhere, the gaps are greater. 97-point Fleur Petrus 2010 – “a truly magnificent wine for this estate”, according to Parker – is the most heavily discounted against the 2009.

Montrose 2010, which was upgraded to 100 points in 2014, is yet to fully catch up with its “astounding” older sibling: It is available at 8.9% below the 2009. Still, this gap has narrowed considerably since before the upgrade when there was a 38% price gap between the two vintages.

A number of 2009s are available at discounts to the 2010s. 100–point Latour 2009, “one of the most remarkable young wines [Parker has] ever tasted”, is one example.

Prices and scores for the 18 wines considered are shown in the table below. Opportunities, perhaps, for those that share Parker’s palate.

Bordeaux 2009 and 2010 prices


 

Ten years on: Sauternes 2007

Over the past few weeks, Liv-ex has examined the price variations – the highest and lowest Market Prices against the current and release prices – of Bordeaux wines from the 2007 vintage. The chart below displays the same data for the highly rated 2007 wines of the Sauternes 50 sub-index of the Bordeaux 500.

In contrast to the other sub-indices of the Bordeaux 500, all five of the wines in the Sauternes 50 index have dropped in value since En Primeur.

Yquem 2007 has fallen the most and is now available for £2,100, a 46.2% decrease on its release price of £3,900. The equally scored Climens 2007 (NM 98) sees the second largest variation in price. At peak, its Market Price was 37.1% above release. Since then, it has nearly halved to £650.

Suduiraut is now trading at £319, 23.1% below release.

Despite modest rises after En Primeur, Rieussec and Coutet have fallen over 23% and are now available at £295 and £225 respectively.

Sauternes07

Previous analysis on 2007 – ten years on:


 

Ten years on: Right Bank 2007

Last week Liv-ex looked at how the prices of various Left Bank wines have moved since release. Below, we examine those from the Right Bank 50 and Right Bank 100 indices.

There are significant variations in the way these wines have performed. Those lucky enough to have secured allocations of Le Pin or Petrus at En Primeur would have seen significant returns: they have risen by 162.1% and 73.8% respectively.

The other three wines from the Right Bank 50 are each available below their release prices. Ausone and Lafleur have fallen more than any other red 2007s in the Bordeaux 500 since release.

Right_Bank_50

Angelus 2007 also stands out. Its release price of £995 per 12×75 was not significantly higher than the majority of other wines shown below. However, like other Angelus vintages, the wine has made major gains and is now strides ahead of its peer group. This is despite a mediocre score of 92 (RP).

Over the last ten years, few of the wines below have dipped far below their release prices. Pavie 2007, one exception, was available at discounts of up to 64% on release at various points, but has climbed considerably since.

Right_Bank_100

Our final report, on Sauternes 2007, will be published this week.

Previous analysis on 2007 – ten years on:


Ten years on: Left Bank 2007

As part of a series on Bordeaux 2007 ten years on, Liv-ex has examined the price variations of wines from the Left Bank 200 index, which tracks the price movements of 20 major Left Bank Chateaux.

The chart below shows how the wines’ current Market Prices compare to their highs, lows and En Primeur release prices. The majority are either currently at their highest ever levels or within 8% of it. Four – Palmer, Leoville Las Cases, Cos d’Estournel and Grand Puy Lacoste – are at peak.

Duhart Milon 2007 holds a number of records. It rose the most from release to peak (389.4%), has fallen the most since (42.6%) and yet is currently second furthest (180.9%) above its release price. Part of the Lafite stable, it might look more at home with the Second Wines which have performed in a similar way.

Beychevelle – another wine with a strong brand following in China – has risen the most since release, up 239.8%.

Only Mission Haut Brion and Pape Clement are available at discounts to their release prices, having fallen 25.6% and 6.0% respectively.

Not only have the wines performed strongly in terms of price, but there are signs from critics that they are also showing (surprisingly) well ten years on. In Decanter today, Jane Anson wrote that “the Cabernet Sauvignons did well when they were able to fully ripen, and there are many classic, even luscious, drinking clarets on the Left Bank”.

Read more: