The 5 Things You Need to Know About Burgundy 2011.

The Burgundy En Primeur fortnight has come and gone. For those of you who missed the 25+ tastings held around London, we have distilled our thoughts, notes and discussions into the 5 things you need to know about the 2011 Burgundy Vintage.

Burgundy 2011

2011 Reds on show at the Philip Mould Gallery in Mayfair, courtesy of Goedhuis & Co

1) It is not “Vintage of the Century”.

Unlike the previous two vintages, 2011 is not a stellar/legendary/epic/amazing vintage. Simply put, the growing season was backwards and it’s surprising that the wines are as they are. Burgundy shared the same fate as the rest of France in 2011, where the growing season was upside-down; summer in spring and spring in summer. April to the end of June had abnormal temperatures, up to 30 degrees on some days, with flowering taking place over 3 weeks ahead of normal expectations, and with a distinct lack of rain. July till early August was beset with summer storms, with hail hitting parts of Chablis and Rully, although the rain provided the parched vines with must needed water, but meant that spraying was obligatory. Given the topsy-turvy nature of the growing season it’s surprising that the wines turned out the way they did.

2) It was, again, a small harvest.

The downside to the abnormal growing season was undoubtedly the smaller crop that was produced. Despite another record breaking early harvest at the end of August, yields were down, especially at those Domaines where the prudent decision to restrict yields to ensure quality was taken. Over all the volumes are similar to 2010, which will unfortunately mean higher prices despite the vintage being more comparable to a combination of 2007 and 2010 in quality, than say the stellar 2009 or muscular 2010.

3) The wines are better than you think.

Unlike Bordeaux 2011, which struggled with green, sandy tannins, and a lack of ripe fruit character in some parts, Burgundy 2011 is decidedly rewarding. Nearly all of the wines we tried were ripe and well balanced, with few showing any angular tannins, aggressive acidity, high alcohol or lack of backbone. What struck us most was quite how drinkable the wines are now, and how pleasurable they are. We’ve heard the vintage described as both “accessible and delicious” and from our own notes “approachable and very pleasant.”

4) The whites are more consistent but the better reds are more rewarding.

Probably the best comment we heard on the 2011 whites was that they were “relaxed”. Easily comparable to 2007, the general quality is good to excellent, and with alcohol and acidity levels lower than 2010, the whites are honest, reliable and will drink well young. The reds are harder to characterise with one broad definition, and as is always the trouble with Burgundy, there is large variation in quality amongst growers. That said, the general impression is that the reds are often charming, almost always balanced, and will save those who own them from opening their 2009′s and 2010′s too soon. For our part, the red s are ripe, fruit forward, often fresh and with low tannins.

5) Buy this vintage if you like drinking Burgundy.

Certainly something that we noted during the tastings was how rewarding this vintage is. The wines aren’t tough, or angular, and thankfully display their typicity without being overly cerebral. If ever you wanted to taste the difference between say, a good Meursault and a Rully 1er Cru, this is the vintage to do it with.

For our money (and of those we tried) the producers this year we were most impressed with for whites:

  • Domaine Jean-Marc Boillot – Ripe, but beautifully crafted gracious Puligny’s that you can enjoy young but will age.
  • Domaine Roulot – Elegant Meursualt’s, a great example of the terroirs of the village
  • Domaine Etienne Sauzet – Rich and borderline savoury Puligny’s, classic and well balanced.

And for reds:

  • Domaine Fourrier – Ripe, approachable village wines and Gevrey’s 1er Crus. His three new négociant wines are definitely ones to watch.
  • Domaine Meo Camuzet – Fine Cotes de Nuits, that are light but generous.
  • Domaine Sylvain Cathiard – Delicate, fruit driven Nuits and Vosne’s. This is Sebastien Cathiard’s first solo vintage at the helm of the Domaine and the quality is spot on.

 

Are You Long 2013, But Short Fine Wine?

One of the better things about being involved in the fine wine trade as a growing industry (more fine wine being produced and bought than ever before), is speculating what factors currently affect the market and which events are likely to in the future. Amusingly, even before the first half of January is over, we have already seen several disparate views on 2013, which can broadly be drawn down to one simple question – are you bullish or bearish on 2013?

Those who are bullish were buoyed this week by The Wine Investment Fund’s report predicting a positive year, with their central forecast projecting a rise of 14% on the main benchmark index. While those who are bearish are predicting a year of more stagnation and low volumes. A sentiment echoed by Goldman Sach’s Economics Research Team, made easily digestible thanks to the excellent folk at the FTAlphaville.

For those of you yet to make up your minds we offer the following breakdown:

For the Optimists: A Rebound in Asia, the End of the Fiscal Cliff, and a Look Back.

As has been mentioned elsewhere there is an apparent strong correlation between Asian stock-markets and the benchmark index. Irrespective of how strong this correlation is, it cannot be denied that the appetite for risk and the buying power of the world’s second largest economy will have a great affect on wine prices. With a new leadership in place that is adamant in keeping the status quo, whilst rebalancing their economy to avoid a hard-landing (in layman’s terms - to keep their GDP growth above 6%), and looking like it will succeed, we could well see a return to the demand levels of yesteryear as stability sets in.

Whilst it is more speculative on our part, an end to the fiscal-cliff problems that currently beset the U.S. economy would be a boon to the global economy and a boost to market sentiment generally. Admittedly this is a tad vague, but given President Obama’s success in previous negotiations we feel that this is a reason to be optimistic.

Looking back historically, with credit due to Chris Smith et al.  for their aforementioned 2013 report, fine wine is a proven asset class that has performed well in the past and while the usual economist disclaimer of past performance is no definite indicator of future events holds,  it is undeniable that  ”fine wine as an asset class remains very strong”. As Chris Smith continues: “since 1998 only four calendar years have seen negative returns to fine wine of more than 1%. 1998, following the Asian financial crisis and collapse of the hedge fund Long Term Capital Management; 2008, with the credit and banking crisis and the collapse  of Lehman Brothers; 2011 with the eurozone crisis…;and 2012″.

For Pessimists: A Weakening Pound, En Primeur, An End to Chinese Bungs, and No Sign of India.

Starting off with the least pessimistic of the four, the possibility that the Pound will weaken against the Euro over the coming year is fairly likely according to our FX-economist source. There are the few underlying problems that are, or probably will weigh on the pound rising further: including general weakness in UK economy, the fact that the UK’s external balance has deteriorated recently (that is, the current account deficit widening an overall bad sign for global competitiveness), and the remaining fiscal contraction that is bigger for the UK than for the Euro area as a whole. The effect of a GBP/EUR drop to around 1.18 explicitly is that wines purchased from the Euro-zone will be more expensive.

Although we touched on En Primeur in our last post, we didn’t highlight the changes that are happening with this centuries old system; first and foremost the exit of one of the top five First Growths, Château Latour. Given the dismal nature of last years campaign, and if this year is also a washout, will other properties follow suit and sell when and where they want to? Whilst this is less of a pressing question for 2013 specifically, it will be an interesting one to watch, as Latour is not alone in exiting the En Primeur system. Chateau d’Yquem too announced they wouldn’t sell En Primeur. Furthermore, there is talk of the 2012 Bordeaux vintage being both “heterogenous” and of “potential price decreases”. We think it’s still far too early to tell, but if the quality does not match the prices, as last year, then the demand will evaporate and we will see a re-run of 2012.

An end to Chinese bungs may seem like an odd notion for pessimists to pick up on but it’s wise not to discount it entirely. Last September there was an amusing article in the Wall Street Journal in the run up to the 18th PRC Party Congress (the change of leadership in China) about how the lack of certainty was causing a drop in luxury goods’ sales; put simply, “Sales are down because no-one knows who to bribe.” One of the key tenants of the new leadership was that they would crackdown on gaudy displays of wealth and high level corruption that is apparently rife in the country. To that end, they have already begun and it is not unreasonable to posit that with luxury bribes like Louis Vuitton hand-bags and bottles of Lafite falling out of favour, so too will the demand for them across the country.

Finally, India has long been trumpeted as the next China, in terms of growing economies yet to discover the joys of fine-wine, and although there were some positive signals last year, such as the lowering of trade tariffs, it is easy to forget that constitutionally India is still a temperance country, and federally still prohibitive in certain states. Given that the same barrier to entry, exorbitant taxation, still exists we doubt that 2013 will be the year that India takes off.

The View from the Trade: “The wine glass is filled up to the half way point.

Whether you find the above more encouraging or discouraging for the year ahead, we also offer the following small insight garnered from canvassing  the trade.  The prevailing sentiment is overall positive, with prices predicted to rise somewhere between five and ten percent. However this will not be due to any sizeable increase in demand, but a general lack of supply, with total global turnover remaining static.

2013 is set to be an interesting year whether you’re bullish or bearish, and we here at Vinetrade will continue to bring to light all the events that will affect the global fine wine market, right here in our blog.

Will 2013 be the turning point for fine wine prices?

New Year Fireworks on the London Eye

London saw in 2013 with a firework display on the London Eye. Photo by Marcia Taylor.

A Recap of 2012

2012 was for both wine and the greater investment markets globally a meagre continuation of 2011. The unceasing Eurozone soverign-debt crises weighed heavily on everything from consumer-confidence and spending, manufacturing PMIs, to equities and commodities, bonds and investor appetite for risk. However, whilst 2011 was in the words of one commentator “a great stagnation”, 2012 saw some emergence of hope, with a new same-same leadership in place in China, the Eurozone still whole and functioning-ish, the US economy growing slightly, and the world not ending on the 21st of December as many had hoped for thought.

More specifically for wine and fine wine prices, 2012 was a year of ups and downs, with decidedly more downs figuratively speaking - The Bordeaux Index is down 7.3% for the YTD, whilst the Liv-ex 100 Index finished over 11% down for the year. For those who weren’t following the market in 2012 we provide the following recap:

  • The optimism of the start of a new year led to a surge in trading and speculation coupled with a renewed interest in Bordeaux, which had languished unfashionable for much of the latter half of 2011.
  • This boost in market activity was neatly buoyed by Robert Parker’s re-scoring of the 2009 Bordeaux vintage in February as every man and his dog clamoured for any of the 18! newly scored 100-point wines.
  • Unfortunately, either a fear of an over-heating in prices and/or, the realisation that the likes of Smith Haut Lafitte whatever the score is still Smith Haut Lafitte, led to a plateauing in trading in the Spring with anticipation for a successful Bordeaux En Primeur campaign, which was a resounding damp squib.
  • This combined with the ensuing general Summer malaise meant that the markets slumped in the second half of 2012, as they’d done in 2011, and so
  •  It wasn’t until mid September and early October that we saw a return in interest and an edging up in prices. The St Emilion reclassification also buoying trade.
  • The Festive Season provided it’s usual mix of demands and prices rose piecemeal.
  • That is not to say that 2012 was all doom and gloom; Burgundy, Rhone and the Super Tuscans all lifted off the back of Bordeaux’s perceived demise, particularly out east, where demand at auction saw rare Burgundies going for previous unheard of prices and buyers looking beyond the First Growths.

So with the state of the market tentatively hovering around stagnation and prices bottoming at a two year low, are we likely to see a repeat pattern of the events of 2012 or will prices edge up? Looking ahead there are several key factors and events that will affect wine prices, the first of which we cover below:

En Primeur Campaigns – Burgundy 2011 and Bordeaux 2012

The Burgundy 2011 campaign is already under-way as grower offers are starting to drip through and over 25 tastings are being held in the next fortnight. The quick comparisons that have been discussed so far is of a vintage qualitatively somewhere between the density of flavour of 2003 with the freshness of 2007, good although not stellar years, but again with the crop size similar to 2010 (with over-all production down).  As with all campaigns the release prices will cause some retrospective purchasing as speculative buyers look for bargains amongst older vintages, but this is not (thankfully) the vintage of the century. We look forward to providing you with our thoughts in the following weeks.

Bordeaux 2012 will be on everyone’s mind come the start of Spring, as the great and good of the world fine-wine trade and media descend upon Bordeaux to pronounce on the latest offering. Despite prices coming off around 40% from the previous vintage, many felt that 2011 was still too dear and rarely worth the asking price or even inclusion in the cellar. Whilst it is still too early to discern the quality of the vintage, the most important description we’ve heard so far is of a “winemaker’s vintage”. The long and short of this being that those wealthier and more renowned properties will make the better wines despite the difficult growing season and thus charge more for them, as the costs to keep the quality high ramp up. Whether we’ll see a repeat of last year’s prices and cellar-exclusion or a refreshing sea-change from the Bordelaise, where attractive pricing will lead to a bounce in demand for both current and previous years, still remains to be seen.

Wine Critics – Robert Parker and the Wine Advocate

Aside from his usual February vintage re-score of the 2010 Bordeaux vintage, the other factor that is likely to affect prices is Robert Parker’s interesting financial move of selling The Wine Advocate to a Singaporean consortium of investors. The proposed launch of a Chinese TWA will likely lead to a broadening in wine demand as Chinese consumers will have a greater confidence with previously untried brands thanks to the wealth of information available.

The 2010 re-score is also likely to have the traditional effect of uplifting those with good rescores and punishing those that failed to live up to their potential,  followed by the realigning of prices to their respective peers and scores and then an end to the initial price volatility as the vintage becomes physically available to all and sundry.

Finally, there has been mention that Robert Parker will be reassessing the 2003 Bordeaux vintage in the coming months, and as with any rescore we expect prices to fluctuate as they did last year when he re-tasted several vintages of La Mission Haut Brion. Whilst critical opinion is divided on the 2003 vintage it will be interesting to see if these are wines for the long-haul or whether they are over-baked and over-the-hill.

Food for Thought – Looking Ahead

From our perspective, Vinetrade will be tracking the market with great interest over the coming year, our gut feeling is that should global economic fortunes improve then so too will wine prices. We will be following on from this recap blog-post with several more posts, the first of which will be looking at those wines we think will benefit most in 2013 and the key factors related to them: The Asian Financial Markets, the Bordeaux Surplus, The Latour EP-Exit, and more.

Rhone 2011 – A Brief Glimpse

Last week, courtesy of the good folk at Goedhuis, the Vinetrade team were able to taste the first bottled samples of the 2011 vintage from the Rhone Valley, and we’re pleased to say it was not a disappointing tasting. Unfortunately the whites had only just been put in the ice when we arrived and as such we have not included them in this week’s post. Thankfully they’re as good as the reds in many cases.

The Growing Season.

As with all of France, 2011 was a growing season in reverse: Summer conditions in Spring and Spring in Summer. Certainly Spring was one of the driest on record and coupled with hot weather the vines developed quickly; with everyone anticipating an early harvest. Come July however, the consistency abated and the month was marked by warm sunny days interspersed with cold rainy ones (with up to 6cm of rain); thankfully this replenished the vines and restored them to a more normal development cycle.

Unlike Bordeaux and Burgundy where the fluctuating weather continued into August and September, the Rhone Valley was fortunate to have their traditional hot and windy late summer days settle in. This coupled with an extended Indian summer meant many properties had a very healthy, ripe crop, if at times un-even and in some cases necessitated keen quality control. Marc Perrin at Chateau de Beaucastel said: “The grapes were very healthy and the crop yield was fairly large so we decided to carry out a ruthless green harvest to maximise the concentration”.

The Vintage Style.

Overall the vintage struck us as somewhere between 2006 and 2008 in quality, with none of the overtly “porty” richness of the previous two years, 2009 and 2010; one grower remarked that the sweetness and lightness was reminiscent of the 2000.

A decidedly pretty vintage, the wines have body, elegance and firm acidity but were surprisingly light in tannins; even amongst the more structured Cote Roties and Chateauneufs. The main feeling that we came away with was that despite their youth many of these wines were drinking very nicely now! This is definitely a customer friendly vintage that is early rewarding and eminently drinkable, unlike the blockbusters of the previous two years.

 The Wines.

Of the 30 or so that were available to taste, we thought that the below seven merited highlighting:

  • René Rostaing, Cote Rotie Ampodium  - Formerly known as Cuvee Classique, René Rostaing’s blended Cote Rotie did not disappoint this year, with a mixed nose of ripe blueberry and raspberry, greengage and scented violets. The palate is more complex than the nose hints at, with a mouthfeel that is both sweetness from the ripe fruit and savoury notes from the greengages at the same time, with good acidity and almost unnoticed tannins. A good wine, now.
  • René Rostaing, Cote Rotie La Landonne - More complex than the Ampodium and a more intense nose that leaves you with notes of clove and cedar spice, rolling tobacco, sweet plum and blackberry. The entry is really juicy, leading to a savoury mid palate as the mouth fills with the toasted spice notes that you get on the nose and warm finish.
  • Domaine de Colombier, Hermitage - At the moment the nose is dominated purely by sweet toasted French oak. Thankfully the palate is more rewarding than the nose at the moment with sweet, ripe and light red berry fruit notes, good firm acidity, light tannins giving an overall fresh and delightful mouth-feel. The best Hermitage on show.
  • Alain Voge, Cornas Vielles Vignes - Certainly the most interesting Cornas we tasted, with notes of Christmas Cake, clove spice, liquorice and blackcurrant. The entry is light and sweet with almost bracing acidity and a flavour profile that follows the nose, with more of that curranty goodness. The tannins are light and fine and well integrated, and this Cornas goes on for a while. Good stuff indeed.
  • Chateau de Beaucastel, Coudoulet de Beaucastel - Our first impression was reminiscent of tasting Bordeaux En Primeur with heady notes of sweet, gamy red berry fruit and cedar spice jumping from the glass. There is a raisined edge combined with hints of black pepper that give away the fact that this is Rhone. The palate was equally rewarding with similar flavours to those on the nose, a fairly weighty mouthfeel that’s carried by an almost tingly acidity, really light integrated tannins. An excellent example of why the 2011′s are so early drinking.
  • Chateau de Beaucastel, Chateauneuf du Pape Rouge - Unlike it’s baby brother the Coudoulet, the nose on the Chateauneuf was decidedly closed but deep, hinting at a richer, more complex heady flavour profile. The palate is wonderfully smooth with fairly high acidity giving it a succelent mouthfeel. What flavours are discernible hint at dark berry, pepper, perfumed violets and Provençal herbs. The tannins are there, but were almost unnoticeable and the finish was good and long. Drink this Chateauneuf once you’re out of 2008′s and waiting for your 2009′s to come around.
  • Domaine du Vieux Telegraphe, Chateauneuf du Pape Vieux Télégraphe - With a nose that is as dense and as closed as the Beaucastel, this was the other great Chateauneuf we tasted on the day. What flavours we could coax out of the glass were sweet cedar spice, ripe blackberry, blackcherry, tapenade and some hints of cooked game. An equally smooth entry leads to a full bodied palate with fruit notes that follow the nose with more pepper, cherry and sweet spice. All carried by a high acidity, soft integrated tannins and leading to a long finish. You could give this a year or two, but a serious decant should be enough to make this wine delicious now.

When these become physically available we look forward to including them on Vinetrade.

Revisiting Bordeaux 2010 – UGC Tasting 12/11/12

Last Monday the great and good of the UK wine-trade and press descended upon the Royal Opera House, Covent Garden, to (re)taste the Bordeaux 2010 vintage.  With the wines now in bottle and no longer mutable cask samples,  this was an excellent tasting to get (re)acquainted with the vintage, and thankfully the 2010′s are coming along beautifully; an arduous tasting it was not.

The UGC Tasting was an excellent opportunity to see how the wines had developed from their enchantillon (cask) sample. Above Lynch Bages 2010 back in 2011, when it was still in this stage.

The UGC or Union Des Grands Crus de Bordeaux is a federation of the top Châteaux in Bordeaux. Established in 1973 by six pioneering Château owners to promote, not just their wines, but the great wines of Bordeaux. Today the Union has over 130 members/crus, both classified and unclassified, from all of the major appellations within Bordeaux, on both sides of the Gironde river; Medoc, Graves and Pessac-Leognan, Sauternes and Barsac, St Emilion and Pomerol. Whilst the top names, First Growths et al, of Bordeaux along with Châteaux Angélus, Calon Ségur, Cos d’Estournel, Ducru Beaucaillou, Evangile, Léoville Las Cases, Montrose, Palmer, Pavie and Vieux Château Certan were not on show on the day, there were all of the major representatives of the some of the best properties in Bordeaux.

As a vintage, 2010 is undoubtedly up there with the greats and whilst it has been said before, it is a vintage that easily ranks alongside 2005 and 2009 and will doubtless be hailed as one of the all time classics. One of the hallmarks of the year is it’s ripeness and concentration, something that cannot be overstated; even amongst the less storied Châteaux there was a sweetness of fruit and none of the austere bitterness or hollowness that you’ll find in the 2011. If ever you’re stuck on a wine-list, pick 2010 and you should not be disappointed. One criticism of the vintage, however,  that we heard on the day, was over-extraction; lean or “classic” are not the characteristics of the vintage. Certainly this is a vintage that is generous; full in ripeness, sweetness, acidity, body and tannins, although on Monday compared with tasting them from cask, the tannins were noticeably integrated and rarely aggressive.

From a collector/investor point of view, 2010 is definitely a vintage worth having, both in terms of quality and longevity.  However, the Borderlais themselves were well aware of this and so the wines are, to borrow a phrase from a well known lager, “reassuringly expensive”. Given the general price volatility that comes once the wines are physically available, we would advise waiting until the end of the delivery window, round about end of May, before jumping on this vintage, if you have yet to buy. As these wines become physically available we will add them to the Vinetrade list of wines and follow them with interest.

Of the 56 wines, that there was time enough to taste in, the stand-out Châteaux were:  Brane-Cantenac, Lynch Bages, Pichon Baron and La Conseillante; Pape Clement BlancChâteau Coutet and Château Suduiraut amongst the whites.

  • Brane CantenacShowing really well on the day, with a ripe nose of crème de mure and crushed earth hiding beneath the abundant black-currant and blueberry fruit. The palate has a really sweet entry, juicy acidity and a frankly delicious, medium weight body, with a flavour profile that follows the nose but finishes with liquorice and tannins skulking under the opulent fruit. Great stuff for the price.
  • Lynch BagesA highly intense, rich, dense blackberry nose; filled with sweet clove and peppercorn spice, rounded in smooth plum. A soft and light, but juicy entry on the palate leads to an almost bracingly high acidity that carries those same fruit characteristics on and on, through the concentrated mouthfeel and chewy tannins, that balance this cracking wine perfectly.
  • Pichon BaronThick and brooding, a veritable Bordeaux stew of ripe dark fruits including black cherry, blackcurrant, blackberry and prunes, the layers of oak giving off dense but sweet spice. Despite the monstrous nose, the entry to the palate is supple, backed by firm acidity, wonderful, if slightly closed, flavour complexity and great overall balance. The flavours almost finished a bit short, but that is probably more down to it’s youth, than pedigree. A stellar wine that given time will undoubtedly be one of the greats of the vintage.
  • La ConseillanteNot as floral or perfumed as it was En Primeur, but still with great intensity; notes of vanilla, plum and blueberry, warm but not hot. The zingy acidity was what stood out on the palate on the day, but not overriding in its intensity. Integrated tannins lent wonderful balance to this delightfully pure wine. Certainly the best Pomerol on show.
  • Pape Clement Blanc2010 was not just a good vintage for the reds, the dry whites are undeniably gorgeous and Pape Clement Blanc is no exception: notes of lime, cream, marmalade and custard dominate the nose. In the mouth there’s an excellent citric attack with a intriguing bitter note on the mid palate, the finish is as equally zingy as the entry. Ready to drink now!
  • Suduiraut - A classic rich, Sauternes nose of honey, lemon juice, nail-polish, lanolin and toasted brioche. In a Greg Wallacean way, the first thought on the palate was just “Yum!” Unctuous and full, the mouth-feel is wonderfully balanced between the fresh acidity and the lingering sweetness. The flavour follows the nose on and on. Storming stuff.
  • CoutetHaving recently been fortunate enough to try several back vintages of Coutet, this was a really interesting one to try. The nose was quite intense with all the hallmarks of Coutet: honey, acacia blossom, lemon, some hints of botrytis. The palate was almost oily in its richness but with that classic “Coutet blade” of minerally acidity that cuts through the fat, effortlessly balanced and very rewarding.
Also worthy of consideration: Batailley, Figeac, Langao Barton, Leoville Poyferre, Maucaillou, Pichon Lalande and Rauzan Segla.
There were several Châteaux that we had high hopes for, but were either having a bad day or had closed down for the short term; that or it was a root-day

Q4 2012 Fine Wine Market Report

One month into the 4th quarter of 2012 and it’s time to take stock of the situation. Looking around the trade, we have reason to be cautiously optimistic about the fine wine market. Whilst we have seen a general plateauing of prices across the Bordeaux-board, it would seem that the Q3 slide in prices, primarily led by the slump in First Growths prices, has ended. Below are the top points worthy of consideration as we go into the festive season and 2013.

The 2012 St. Emilion Classification.

The INAO (Institut National des Appellations d’Origine) reclassification of St Emilion Grands crus, on the 7th of September, led to the promotion of several properties. Two of which stuck out from the crowd: Chateau Pavie and Chateau Angelus, were both elevated to “Premier Cru Classe A” status. These two are now on par, in the eyes of the INAO, with Chateau Cheval Blanc and Chateau Ausone; whilst Pavie and Angelus have yet to raise their prices themselves to meet their new classmates, you can be sure Gerard Perse will consider the Chateau’s new position for the 2012 release. Interestingly enough, speculation from the trade and wine-owners has already happened with Pavie, where prices across the best past 3 vintages has already started to rise, whilst Angelus has mostly levelled.

The clear effect of the 2012 St Emilion Classification. Pavie Composite (2000, 2005 & 2009) v.s. Angelus Composite.

Château Calon Segur Sold.

Château Calon Segur has been sold to Suravenir’s life-insurance subsidy Credit Mutuel Arkea, in a similar move to Chateau Montrose’s sale in 2006, with JF Moueix of Chateau Petrus again bringing his expertise to the new business venture. Expect to see a similar rise in quality and prices, as with the likes of Chateau Pichon Baron’s purchase by AXA Millesimes, back in 1987, as JF Moueix continues the sterling work of the late Mme Gasqueton.

JG Prats to Leave Château Cos d’Estournel.

JG Prats is leaving his role as managing director of Chateau Cos d’Estournel. Jean-Guillaume is heading to LVMH, and whilst his departure is not until 2013 you can be sure his legacy of rising prices and quality will continue at Cos d’Estournel.

Bordeaux Prices Continue to Level Off.

Despite the slide in Q3 Bordeaux prices, the past 3 months has seen a levelling in the Bordeaux market as wines either reach their own lower limit or their appeal at their respective price point levels off. Amongst the First Growths, Haut Brion has taken the biggest slump in prices since August, with the likes of the 2003 falling over 6% to today’s £2795, whilst Lafite has seen the least price change, the 2005 for instance holding steady at £7450.

2009s Remain in Demand.

Beyond the First Growths, 2009 Bordeaux continues to be in demand with Ponet Canet, Cos d’Estournel and Clos Fourtet all being sought after, primarily we suspect due to Robert Parker’s 100 point score, coupled with the higher availability. The general perception of the vintage is one of quality and longevity and those yet to get on the boat are sorely advised to; now that we’ve seen the post-arrival realignment in prices we expect more stability for this vintage and resistance to extreme price volatility that has previous beset this vintage.

New EIS Companies and a new Fund to Launch.

Outside of actual market prices, there are several things happening that we see as healthy indicators for the future of the fine wine market. Firstly, several new wine companies have sprung up in the past months here in the UK, taking advantage of the government’s Enterprise Investment Scheme, and as they begin trading in earnest demand/activity and liquidity will increase. Secondly, whilst not yet corroborated in the press, we’ve heard news of another new wine fund soon to be launched, undoubtedly taking advantage of the perceived bottoming of Bordeaux prices and the expected demand from newer emerging markets as the global economy improves – Fine Wine is still a long-term investment for many.

The Coming Months.

Finally looking ahead, to both Burgundy 2011 En Primeur and Bordeaux 2012 En Primeur in the new year, we’ve heard mixed opinions about both vintages, but we’re keen to see how these wines fare. 2011 Burgundy coming off the back of two previous excellent vintages, and Bordeaux 2012 having the potential to be excellent, but with Chateau owners comparing it to both 2002 and 2006.

As the trade rolls into the festive season with the usual offers of Champagne, Port and drinking Claret, we expect to see another surge in demand in the new year as the East prepares to celebrate Chinese New Year and the Year of the Snake.

Focus On – Château Coutet

A fortnight ago, two of the Vinetrade team were lucky enough to be invited along to a wine dinner and tasting near Vinopolis in South London. It was hosted by 12×75.com and led by the ever-accommodating Aline Baly, who very generously had brought along not one, but eight wines from Château Coutet. Needless to say they were delicious and whilst we were tempted to include them below, our “seven word wine reviews” just weren’t long enough to do the wines justice.

A selection of some of the better recent vintages of Château Coutet, as well as Cuvée Madame and Opalie.

A Short History of Château Coutet

For those who haven’t heard of Château Coutet before, it is one of several top Sauternes producing  Château in Bordeaux. Sauternes is the one of the most famous sweet wines in the world, vinified from white, rot-stricken, dehydrated, raisined grapes. The rot in question, is often referred to as Noble-Rot and is a result of the rather unique terroir in the Sauternes appellation. Around 25 miles south-east of the city of Bordeaux lies the river Ciron, a tributary of the Garonne, whose waters are several degrees cooler. Where the two rivers meet, the convergence causes Autumnal mists to form, creating the ideal conditions for the noble-rot (Botrytis Cinerea) to form on the grapes, which slowly desiccates them, concentrating the sugar and making for a much sweeter, richer must. This micro-climate, whilst not unique in the world, is restricted to just five communes in the Sauternes appellation, including Sauternes, Barsac, Preignac, Bommes and Fargues.

Château Coutet itself is regarded as one of the finest producers of Sauternes and was classified as a Premier Cru Classe in the 1855 Classification; rated as one of the top nine amongst twenty-one other properties in the Sauternes appellation, and it is one of two Premier Cru château in Barsac, the other being Château Climens. Today the château is owned and run by the Baly family, who purchased the property in 1977, but there is a storied history of wine production going back as far as the mid 17th century, with such historical footnotes as Thomas Jefferson noting that Château Coutet produced the best wines from Barsac.

The Property

Unlike it’s neighbour, Château Climens, down the road with 29 hectares, Château Coutet has a slightly larger vineyard holding of 38 hectares under vine and produces on average around 4500 cases of its top wine a year. All three  of the grape varieties, allowed by the Sauternes appellation rules, are planted; around three quarters Semillon, one quarter Sauvignon Blanc and a smattering of Muscadelle. The vines are located between the Garonne and the Ciron, south of the village of Barsac where the soil is predominately clay over limestone, ideal for these white grapes, and with an average age of around 38 years old per vine. The château building itself dates back to the 13th century and was constructed by the English as a citadel to dominate the surrounding land.

The Wines

Today the Château produces four wines and we were fortunate enough to try an example of each (bar the second wine). The word Coutet derives from the old Gascon word knife, and it is that cutting quality, the way that there’s depth and richness to the palate that is laced through with acidity, that is quintessentially “Coutet”. The four wines each share this characteristic:

The wines we tried were the delicious Opalie 2010, six recent vintages of Chateau Coutet including the underrated ’02, the warm ’04′, the soft  ’08, the distinguished ’97, the luscious  ’07 and raisined ’89, finishing with the 100% Semillon, stand-out Cuvée Madame 1995.

Super Tuscans

Courtesy of several tastings held by members of the London trade over the past fortnight, we’ve been very fortunate to try several different, as well as different vintages of, some of the best Super Tuscans: Sassicaia 2009, Ornellaia 2009, Tignanello 2001 to name but a few. Having been rather impressed by the quality of the wines we thought it’d be prudent to take a look at what makes a Super Tuscan worthy of inclusion in a cellar, and why you should not be without them. In short we’ll be looking at:

  • What is a Super Tuscan?
  • Why should you own a Super Tuscan?
  • Current Market analysis and pricing.

What is a Super Tuscan? – Is it a bird…

The name Super Tuscan started appearing in the English-speaking media back in the early 80s, but the history of them goes back another 40 years to 1944. The first vines for Sassicaia, the original Super Tuscan, were planted by Marchese Maraio Incisa della Rocchetta, from cuttings of Cabernet Sauvignon taken from Chateau Lafite Rothschild, at his estate San Guido in Bolgheri near the Tyrrhenian Coast. The difference with these plantings were not just the pedigree of the vines but also the type. Whilst Cabernet Sauvignon had been planted for centuries in Tuscany, the predominant grape varietal is Sangiovese, with Chianti, Brunello di Montalcino and Vino Nobile di Montepulciano all using strains of it to make world-class wine. Predominantly Cabernet Sauvignon wines weren’t allowed under the Tuscan quality-wine appellation rules, the Denominazioni di Originie Controllata (DOC), and as such Sassicaia was just labelled as a Vino da Tavola, a table wine. Incisa’s nephew, Piero Antinori persuaded his Uncle to sell the 1968 Sassicaia vintage through their Marchese Antinori exporters and Sassicaia has grown in fame since. Other Super Tuscans soon starter appearing, such as Tignanello in the early 70s, created as a more Sangiovese dominated blend by Antinori’s oenologist Giacomo Tachis, who is also credited with Solaia and several other Super Tuscans.

 Why should you own a Super Tuscan?

Apart from the time-honoured phrase, involving eggs and baskets, you should include Super Tuscans in your collection for the following reasons:

  • Super Tuscans are made to age,
  • They’re made with  precision and quality in mind,
  • They’re made in limited quantities,
  • They’re consistently rated highly by the leading wine critics.

Furthermore, whilst Bordeaux has seen a drop in both interest and prices of late, the demand for and performance of the Super Tuscans has never been better.

Current Market Analysis and Pricing – which Super Tuscan is right for me?

Super Tuscans sit in a particular niche within the fine wine market:

  • Not quite as liquid as say, the First Growths,
  • More interesting than the similarly priced 2nd-5th Growths,
  • Not tied to the Bordeaux En Primeur campaign,
  • Not scored by Robert Parker himself,
  • Yet definitely wines that have performed well in the past and
  • That are improving in quality year on year.

Standing somewhere between Bordeaux in terms of taste and appeal, and the Northern Rhone in terms of craftsmanship and typicity, asking which Super Tuscan is right for you is down to price and taste. Currently with a perceived lull in the appeal of the left-bank Bordeaux staples and the more sought-after Burgundies now going for significantly higher prices for the latest vintage, wines like Sassicaia, Ornellaia, Masseto and Tignanello have never looked more underpriced or attractive. Consider, the latest release of Masseto from Ornellaia, the 2009, was around the £2750 mark, compared with the similar scoring Mouton Rothschild’s latest release, the 2011, at £3800, you can see why there’s very little available on the open market. Price-wise the Super Tuscans range from the lower end like Flaccianello at around £380 for the 2009 release, to the mid priced Tignanello at around £500 for the 2009, to the more expensive like Solaia 2009 at around £1450. As with all wines that have the potential for growth, a good score and a good price are key, so consideration must be taken.

The Trouble with Valuing Wine

This week the financial press and wine trade has been abuzz with news that one of the largest wine funds in existence, the Noble Cru fund, is potentially over-valued. The long and short of it is that the valuation method used by the Fund’s advisers is apparently not accurate enough, especially when compared with other independent valuations. ”Why the sudden interest from the press?” you might ask. Apart from the obvious, that ‘potential financial scandals’ sell papers, there is something in this story that doesn’t sit right with the facts. And more interestingly, this story does raise two important economic questions:

How do you value something that is so rare as to be almost illiquid?

This first question is raised in conjunction with a rather pun-filled aside from the FT’s own Lex. While it’s easy to value the more liquid portion of the Nobile Cru portfolio, the fast traded Bordeaux, it’s far harder to correctly value something like a Double-Magnum of Mouton Rothschild 1945, a wine that is considerably rarer and is not in an easy-to-calculate format, as opposed to a 12x75cl bottle original wooden case.

Here at Vinetrade we had a go at a section of the easier, full cases, Bordeaux bit of the Fund. Basing our price data accumulated from the market on the 31st of August and using the Euro Exchange rate on the day of 1.26 to the pound, we calculated that there was a 21.6% difference between their total of €21,076,754 and ours of €17,037,939.

However, market data on the rarest wines is somewhat inaccurate and unreliable, simply because there is little in the way of a market for them. Echezeaux 1985 from Henri Jayer may be currently offered in France for around £3350 a bottle, but the last full case sold, was under the hammer at a recent Sotherby’s Auction for £49350 (or £4127.5 a bottle, 18% difference). The crucial point being that any valuation that is based on auction prices is A) dependent entirely on the context of the Auction (number of buyers, economic climate, simple demand) and B) likely to be wildly different from a merchant’s listed price the rarer the item gets. As one auction-specialist who would prefer not to be named put it:  ” when it comes to the super rare items you have to be a little more open-minded and take into consideration: both the buyer and the seller, historical prices, similar vintages, trading climate, and also who your potential purchaser may be.  Effectively, these wines are worth what someone is willing to pay and if there is a lot of interest on the lot, the price will be driven up“.

How do you realise the value of a wine without selling it?

Without the wine being sold, how do you make a monetary gain or reward and how does this fund actually make money? Specifically, rarer wines will only tell you their real value when they’re sold. Thus, how does this wine portfolio actually generate a return without sales? Or more pressingly, if this fund is on paper increasing year on year, and a performance fee is being paid, what are the checks and balances for the investors who won’t see a return before this fund unwinds for its 5 year horizon? Or, that potentially because the valuations are based upon unrealised, potentially wrong, figures the reward of 20% is erroneous? Of course all of these questions assume that the valuation of the wines is not based on sales.

Whilst finishing this post, a further update to the story broke here, to the extent that, Noble Crus Fund are working on “automatic and scientific valuation system with two renowned finance professors who have no financial interest in the wine market”. How the two finance professors go about addressing the problems above, we will be interested to see, although we question what added experience a renowned finance professor has that an experienced-auctioneer or a dedicated database of wine-prices, such as those collated by Vinetrade, does not have when it comes to valuing wines.

 Addendum: the previous version of this post included a reference to moral-hazard with regards to performance fees paid on unrealized gains. Our intention was not to call into question the nature of open-ended equity funds in general, which do book performance in such a way based on independent benchmarks/valuations (like the London Stock Exchange). It was rather to query how illiquid wines increase in value without being sold and how performance fees are paid on such a perceived increase.

 

Wine Investment in the Tabloids.

The Sun this week published an article (that can be read online here) about investing in wine, and whilst the entire wine trade should laud their efforts for bringing this excellent alternative investment vehicle to their wide readership, we felt compelled to highlight a few inaccurate bits and offer some slightly broader tips with regards to their article.

Firstly: “A £1,000 collection bought then would now be worth a whopping £2,760.

Whilst this isn’t necessarily wrong, it’s rather vague and seems to be a reiteration of the previous comment that “wine” has increased by 176%. To be blunt, which wines have gone up by precisely £1760 and how was that measured? Furthermore, how was this return realised? In life before Vinetrade, brokers would charge upwards of 10% commission to realise your return, netting you £1484 if not less.

 Secondly: “International Wine Challenge Awards, handed almost a quarter of the gongs to supermarket tipples”

Very rarely can you buy investment grade wine off a supermarket shelf, and were you to do so  (Supermarkets have been known to offer the occasional deal on mid-level Bordeaux) there are several more problems with buying investment grade wine this way.

A) It’s highly unlikely that the wine will come with its Original Wooden Case (OWC), and thus be worth less as loose bottles.

B) As you’re purchasing it in a supermarket it will already have the duty and the V.A.T. paid on it, and so it is in a far less appealing state for when it comes to resale and realisation of your returns. Duty Paid stock signifies that the wine might not have been always been stored in ideal conditions, such as a bonded warehouse.

Thirdly: “Five top tips”

Ignoring the fact that there are only two tips and that this section is more of an FAQ, advising people to invest with as little as £500 is somewhat misleading. To make any kind of serious return on such an investment you’d be looking at over 10%, ignoring the fact that if you went through traditional methods you’d lose 10% realising your investment.

What the “Top Tip” hasn’t factored in, and really should, is the cost of storage. Certainly if you kept it in your own personal cellar then there is no storage cost (however see above the problem with Duty-Paid stock). The cost of storage at a bonded warehouse is around the £15 per annum mark, so that if your wine makes a 15% gain over 5 years, increasing to £588, it will have cost you £75 to store it for that long. To seriously invest in wine, consider at least 10 times the amount suggested to make it worth your while.

Fourthly: “Budget” – Prices per bottle?!

We would sorely like to know where one can buy Lynch Bages 2008 for as little as £33 a bottle today, whilst this is a somewhat pedantic criticism of the article we felt we should highlight the error (the cheapest bottle in the U.K. today is around the £70 mark, duty and V.A.T included). The main concern is listing wines by the bottle, as the article mentions in the “top tips”, wines in their OWC are worth more, and certainly to be serious about investing in wine you should only ever buy by the case.

The basics: “speak to a wine merchant

Probably the best piece of advice in the article was advising people to speak with an expert, and so we summarise below the basic points for investing in wine:

  1. Buy the right wines, investment grade wines, from the best of Bordeaux, Burgundy, Italian, Spanish, Champagne, New World Cult producers and not from the aisle in a supermarket.
  2. Buy by the case and store in a bonded warehouse, or better yet, as suggested have someone with experience store it for you, Vinetrade offers this service.
  3. Buy to make your investment worthwhile, consider storage costs, financing costs and inflation, again at Vinetrade we’re more than happy to advise.
  4. Know your exit, how and when do you plan to sell? Often merchants will take a large commission on your investment to realise your return, at Vinetrade we only charge a small handling fee.