Liv-ex Fine Wine Market Blog

Top 2010s up 15% on 2009

Now that all of the 2010s have been released, we can name the winner of our annual Liv-ex En Primeur Survey Competition. In April, we challenged fine wine traders to predict the first-tranche 2010 release prices of some of Bordeaux's biggest names (shown in the table below). On average, survey respondents predicted that our basket of wines would cost €3,463 ex-Bordeaux, making the wines 4.5 per cent more expensive than their '09 equivalents. In reality, prices amounted to €3,797 - 14.6 per cent higher than in 2009. 

Several predictions came very close. One London-based merchant, however, was out by just two euros and is the winner of this year's prize - a double magnum of La Lagune 2000.

The table below summarises this year's results. (Prices are in euros per bottle, ex-negociant.)

 

For comprehensive coverage of news and release prices, visit the Liv-ex En Primeur Pages. You can also keep up with all of the latest news from Bordeaux by following Liv-ex on Twitter (@Livex) and Facebook (www.facebook.com/Livex.Fine.Wine.Exchange).

Lafite follows Mouton and Margaux... as does Mission

Lafite Rothschild followed its fellow First Growths, Margaux and Mouton, by releasing its grand vin at €600 per bottle today, with its second wine (Carruades de Lafite) also matching the price of its peers at €108. Although with the first-tranche volumes for both wines extremely thin, the actual price most merchants will pay for the majority of their stock is likely to be a great deal higher.

Both wines traded on the exchange; Lafite was steady at £12,000 per case and Carruades reached close to £3,000.

As we have seen in recent years, many merchants saw their allocations of Lafite tied to large amounts of Rieussec. As such, the Sauternes was trading at a new low of £250 per case, as merchants moved to unbundle stock. Duhart Milon, also part of the Lafite stable, was another of the wines to show its hand, releasing at €66 euros per bottle, around half the current trading price of the 2009. As such it is likely to garner high demand.

A wine that is unlikely to sell through quite as quickly is Mission Haut Brion, which used its 2010 release to firmly state that it should be considered the  sixth First Growth. Despite being ignored in the 1855 classification, the sister estate of Haut Brion released at €600 per case, the same price as Lafite, Mouton and Margaux. This equates to a London release price of around £7,000. As you can see in the chart below, this is significantly higher than the current trading price of comparable vintages. With the 2000 vintage (declared perfect by more than one critic) available at £1,000 less, there seems little reason to purchase the 2010. 

Also released was Forts de Latour, the second wine of Latour, which broke ranks with the other Firsts by releasing at €168. Is this a sign that its grand vin will also carry a premium over its fellow Firsts? 

 

For up-to-the-minute coverage of news and release prices, visit the Liv-ex En Primeur Pages. You can also keep up with all of the latest news from Bordeaux by following Liv-ex on Twitter (@Livex) and Facebook (www.facebook.com/Livex.Fine.Wine.Exchange).

Bordeaux 2010: Mouton and Vieux Chateau Certan released

With month end - and "les grandes vacances" - almost upon us, the flood of 2010 releases intensified today. The latest offerings from Bordeaux included the first and second wines of Mouton Rothschild, which took its cues from fellow First Growth Margaux and released its 2010s at €600 and €108 per bottle (ex-negociant) respectively. According to Decanter, however, only 35 per cent of Mouton's grand vin was released to merchants. The price level that the ensuing tranches will rise to remains to be seen.

Key releases are shown below, along with price changes relative to previous years. Platinum Cellar Watch subscribers can view today's 2010 trades on liv-ex.com.

Palmer: €215 p/b ex-negociant: no change on '09 (€215), +43.3 per cent on '05 (€150)
Mouton Rothschild: €600 p/b ex-negociant: +9.1 per cent on '09 (€550), +66.7 per cent on '05 (€360)
Petit Mouton: €108 p/b ex-negociant: +80.0 per cent on '09 (€60), +140.0 per cent on '05 (€45)
Vieux Chateau Certan: €180 p/b ex-negociant: +15.4 per cent on '09 (€156)
Troplong Mondot: €98.4 p/b ex-negociant: +9.3 per cent on '09 (€90) and +9.3 per cent on '05 (€90)
Conseillante: €150 p/b ex-negociant: +8.7 per cent on '09 (€138) and +92.3 per cent on '05 (€78)
Petit Lion: €36 p/b ex-negociant: +71.4 per cent on '08 (€21) and +122.2 per cent on '07 (€16.2)

For up-to-the-minute coverage of news and release prices, visit the Liv-ex En Primeur Pages. You can also keep up with all of the latest news from Bordeaux by following Liv-ex on Twitter (@Livex) and Facebook (www.facebook.com/Livex.Fine.Wine.Exchange).

2010 campaign back with a bang

With all eyes fixed on Vinexpo last week, there was little 2010 action to be had - bar the surprise release of Evangile on Friday afternoon at €180 per bottle ex-negociant (the same price as the chateau's 2009). This morning the campaign was back in full force, with Super Second Cos d'Estournel surfacing at €198 (-5.7 per cent on '09) and the first of the Premiers Crus, Chateau Margaux, coming to market at a first-tranche price of €600 (+9.1 per cent on '09). Other notable releases included Pavillon Rouge at €108 (+80.0 per cent on '09) and Clerc Milon at €48 (+33.3 per cent on '09).

Despite its weighty price rise, Pavillon Rouge was in hot demand and traded on Liv-ex at a high of £1,450 per 12x75cl case - a clear reflection of the power of the brand. Margaux also drew bidders' attention and found a market at £7,939 per case. Demand for Cos, however, was subdued. Even with its 2010 discount in hand, the wine's opening price was higher than the current trading prices of other available vintages. As we mentioned in a recent blog post, this is an important indication of a wine's probable (or improbable) success on the secondary market.

The chart below shows the ex-negociant prices of today's releases alongside the current trading prices of other recent vintages. (All prices have been converted to euros per bottle.)

 

For up-to-the-minute coverage of news and release prices, visit the Liv-ex En Primeur Pages. You can also keep up with all of the latest news from Bordeaux by following Liv-ex on Twitter (@Livex) and Facebook (www.facebook.com/Livex.Fine.Wine.Exchange).

Have Chinese buyers had their fill of Lafite?

Though it remains one of the wine world's most powerful brands, Lafite's price run appears to  have slowed to a ramble. The chart below shows the price movement of the ten most recent physical vintages of the Premier Cru over the past year. As you can see, price growth was slow in the months to October, but the ex-cellar sale in Hong Kong later that month had a profound impact on demand in late 2010. Bolstered by its spectacular results at auction, Lafite prices accelerated rapidly in November and the index increased by ten per cent. Since February, however, demand has faltered. The post-auction price spike is now behind us and the index has resumed a horizontal path, with prices having increased less than five per cent in the last five months. Will the chateau's 2010 release stimulate renewed demand?

 

For up-to-the-minute coverage of news and release prices, visit the Liv-ex En Primeur Pages. You can also keep up with all of the latest news from Bordeaux by following Liv-ex on Twitter (@Livex) and Facebook (www.facebook.com/Livex.Fine.Wine.Exchange).

FT Wine Investment supplement

Though Bordeaux remains a talking point this week, the fine wine trade's focus has shifted from the ups and downs of the 2010 campaign to the excitement of Vinexpo, which is expected to receive around 50,000 visitors this year. For those of us who won't be among them, the Financial Times provides some interesting reading, having published its annual "Buying & Investing in Wine" supplement. As usual, the aticles are for collectors and traders alike and are available on the FT website, with links below.

Hiccups in market as Chinese bring cheer

Fine wine auctions: Hong Kong confirms its place at top of the podium

Funds: New ways to tap into fast-growing asset class

Opinion: Look beyond first growths

En primeur: Future is looking tense in 2010 campaign

Château Haut-Bailly: Elegant reds that epitomise refined style of the Graves

Martin Krajewski: New owner is ‘pulled along by the momentum’

Books draw the cork on the passions of the Burgundophile

Argentina: Mendoza region suits both vines and visitors

Australia: New locations show value as knowledge grows

For more fine wine news, visit the Liv-ex News and Analysis page and the Liv-ex En Primeur pages. You can also keep up with all of the latest happenings in Bordeaux by following Liv-ex on Twitter (@Livex) and Facebook (www.facebook.com/Livex.Fine.Wine.Exchange).

Liv-ex Indices flat in May

The Liv-ex Indices remained flat in May as buyers waited for the 2010 campaign to gather steam. The fine wine industry's leading benchmark - The Liv-ex Fine Wine 100 Index -  ended the month at 358.92, down 0.01 per cent on April's close.

The Liv-ex Fine Wine 50 followed a similar path, edging down 0.03 per cent to 438.73. The index has risen 9.38 per cent in the year so far.

Though the Liv-ex Fine Wine Investables Index managed to stay out of the red in May, progress was slow and uneven. By month end, the index was up 0.93 points (0.26 per cent) to 364.83 - a change of 9.29 per cent year to date and 26.06 per cent year on year.

The Liv-ex Claret Chip finished May at 443.69. After posting the largest fall in April, the benchmark closed in postive territory, rising 0.12 per cent month on month and 7.24 per cent year to date.

 

Momentum-based investing: a different approach

In the main, fine wine investors tend to focus on identifying wines that offer value, but is this really the most effective route to success? Those who favour momentum-based investing prefer to use past performance as a guide to future returns. As discussed in the March Market Report, this approach involves buying the prior period's top-performing shares or products, and has been touted as a potentially successful strategy for investing in various markets:

Last year, a team from the London Business School looked at the price evolution of the 100 largest stocks in the British market since 1900. The study calculated the returns achieved from holding a portfolio of the 20 best performers over the past year, rebalancing the portfolio every month. They found that a portfolio managed in this way would have grown from £1 to £2.3 million by the end of 2009. A repeat of this exercise with the focus on the 20 worst performers led to a final sum of just £49. This “momentum effect”—which goes against the efficient market hypothesis that everything is fairly priced—has also been noted in the currency markets and in the pricing of various commodities. 

In last month’s report we attempted to test out whether or not this investment style would produce robust returns if applied to fine wine. For our dataset, we used the components of the Liv-ex Fine Wine Investables Index (top-scoring wines from 24 leading chateaux). Starting in June 2000, we created a portfolio of the best-performing 25 per cent from the previous 12 months (the top quartile) and rebalanced it at the end of June each year. The result? A portfolio managed in this way produced a return of 390 per cent by December 2010, outpacing the bottom quartile (at 280 per cent) as well as the Liv-ex Fine Wine 50 over the same period (+351 per cent).

Despite these rather impressive results, a look at the graph below (which shows the performance of each portfolio in index format) reveals that this is a relatively new phenomenon. Up until the market shock of 2008, it was the bottom quartile that tended to show the better subsequent returns.

 
One possible reason for this shift from value to momentum is that the main driver of demand has changed. Since 2008, Chinese buying has had a powerful effect on the fine wine market - largely due to a greater emphasis on brand, rather than vintage or score. Those wines that see an increase in pricing now tend to carry on rising for a year or more. But whilst this strategy may indeed be profitable, studies in other markets suggest that relying on momentum increases risks as well as returns.

Those who are interested in the momentum-based approach can find the past year's top 25 performers from the Liv-ex Fine Wine Investables Index below.

 

Liv-ex presentation: Investing in fine wine

Liv-ex Director James Miles gave a presentation at the Family Alternative Investment Conference in London yesterday on the ins and outs of investing in fine wine. You can view the full presentation below.

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.