Liv-ex Fine Wine Market Blog

The Super 2006s

The expectation surrounding the 2006 vintage in Tuscany has been building ever since the grapes were first pulled off the vines. And according to the scores from the first major report on the region, by Antonio Galloni of the Wine Advocate, the wines have delivered.

Galloni is effusive in his praise: “Readers who enjoy the best Tuscany has to offer will find no shortage of compelling wines at virtually all price points… the vintage offers incredible quality from top to bottom in all of the region’s main appellations.”

He goes on to describe the wines as possessing “breathtaking richness” in a style that “marries ripeness with structure to a degree that has seldom, if ever, been seen in Tuscany”.

Overall, his scores are extremely good, particularly for the Super Tuscans, which hit a number of historical highs. Masseto (99 points) and Ornellaia (97 points) were awarded their best scores ever by the publication, Macchiole Messorio (98 points), achieved its joint highest score (the same as in the 1997 and 1999 vintages), while Redigaffi (97 points) achieved its best score since the millennium.

It is the score, however, for perhaps the most famous of the Super Tuscans, Sassicaia, that is arguably the most interesting. Its score of 97 places the vintage behind only the legendary 100-point 1985. Also, with around 20,000 cases produced each year, Sassicaia is more easily obtainable than its peers.

The 2006 Sassicaia has been trading well on the exchange, hitting a price of just over £1,000 a case. Although this seems high, a quick look back at previous vintages would suggest it still has some way to go. It remains cheaper than the wines of the late 90s, often by some margin. In the short to medium term the 1998 looks a likely target. Over a longer period, the 1997 is surely not out of reach?

*Liv-ex Best List Price for a 12x75cl case in-bond.

All scores from www.erobertparker.com. Scores from 2003-2006 are by Antonio Galloni, 2000 by Daniel Thomases and 1985-1999 by Robert Parker.

Hong Kong imports: the UK leads France

Most in the wine trade would assume that Hong Kong’s leading wine supplier is France. And they’d be wrong.

According to the latest figures supplied by the Hong Kong Trade Development Council, the biggest supplier of still wine to Hong Kong by value in the first seven months of 2009 was the UK, at close to 80 million USD. This is more than the UK accounted for in the whole of 2008 – and a massive 9 times more than in 2006. This growth has pushed France, which has traditionally dominated the market, into second place.

At first glance these figures seem extraordinary. How can a non-producing nation account for more of a nation’s wine market than Australia, Chile and the USA combined? The reason, of course, is that UK exports to Hong Kong tend to be of extremely high-value Bordeaux and Burgundy (which also explains the appearance of Switzerland on the list). Just one case of Lafite Rothschild 2000, at £12,000, equates to an entire 1,000-case container of a typical mainstream brand (at approximately £12 a case, ex-cellars).

This growth in UK market share isn’t all bad news for the French, of course, as almost all the wine shipped from the UK is, ultimately, French. But it does underline London’s position as the global trading hub of the fine wine market.

Next month’s Liv-ex Market Report will feature a full analysis of the Hong Kong market, including a further look at these figures. Sign up to a Liv-ex Cellar Watch package to receive it.

For those interested in the burgeoning Hong Kong wine market, the forthcoming Hong Kong International Wine and Spirits Fair, taking place in November, is worth taking a look at. Liv-ex will be attending and we will feature a preview on the blog in the coming weeks.

Bordeaux 1986

The Bordeaux 1986 vintage – considered by many as one of the finest in history – has perhaps suffered from being too much of a good thing. The best wines of the vintage are notoriously tannic, brawny and backward – and can be easily overlooked in favour of the more immediately accessible. 

Mouton Rothschild, rated 100 points by Parker and given a window of 2011-2096 – “a huge, monolithic, totally unevolved wine” – is perhaps the ultimate example of this.

The good news is that nearly all the best wines from the vintage are now drinking beautifully and have the added bonus of a long life ahead of them. Neal Martin’s recent note (May ‘09) for Margaux 1986 is but one example: he gives the wine a drinking window of now to 2020 and describes it as “dense and structured” and “compelling” with a “glycerine-rich finish with touches of damson and tobacco. Superb length. Fabulous. 96 points.”

With many of the 1982s now hitting new price highs (most of which the 1986s will surely outlive), the time appears ripe for the vintage to garner greater attention. Indeed, the price of the five First Growths from 1986, in total, has increased 19.5% since the turn of the year (Liv-ex Mid Prices, 31/12/2008 – 31/08/2009). If we benchmark this against the performance of the Liv-ex Fine Wine Investables Index (of which all five wines are a member) which has increased 11% over the same period, we can see this is a very creditable performance. 

This number does hide a wide variation in performance, however. As you can see from the chart below, it has been Lafite 1986 that is in the most credit, with the aforementioned Margaux 1986 in arrears.

Margaux’s price fall is surprising. It is a wine that has always been considered of exceptional quality – Jancis Robinson MW rates it on a par with Mouton with 18.5 points – and it has recently benefited from an upgrade from Parker, who awarded it 98 points (up from 96 previously), in The World’s Greatest Wine Estates (2005).

Nevertheless, if we compare the performance of Margaux 1986 against that of Margaux 1996 – a vintage of similar quality – we can see it has lost touch with its peer. Below is a graph of the two wines’ price ratio over the last five years (the price of the first wine, divided by the price of the second). We can see that despite the 1986 being the more expensive wine for most of its lifetime it now trades at 15% below the 1996, and is someway off its historical price ratio of 0.95. (For more on price ratios, see the September Liv-ex Market Report)

If you are looking to pick up a 1986 and think the Lafite overpriced (or feel the Lafite bull run is drawing to a close ) the Margaux looks an excellent option. As well as being a very fine drop it would appear to have the most potential upside. It is currently available at around £3,500, which makes it the cheapest Margaux in the 98-100 score bracket by almost £1,000.

Liv-ex & Lex

The Liv-ex 100 Fine Wine Index’s 4.6% August increase has attracted widespread attention. It was even discussed in the FT’s influential Lex column on Saturday.

Lex was rather bullish about the market: “While there will always be price anomalies that allow investors to make money out of wine, this bull-run is your classic demand story. Choose the shape you expect the economic recovery to take; then pick your poison.”

Lex is one of the best-read newspaper columns in the world, with an estimated readership of 1.3 million. You can read about its history here.

September Fine Wine Market Report released

In summary, the September Market Report includes:

•  Trading Activity – up 10% y-o-y

•  Liv-ex 100 Fine Wine Index – up 4.6% in August

•  Major Movers – Lafite continues to climb

•  Critical corner – Tuscany 2006: a super vintage

•  Final Thought – a relative view

Log in and find the full report under the Analysis menu.

If you are not yet a subscriber to Liv-ex but would like to read the report, you can sign up here.

Lafite Index update

Last month we introduced the Liv-ex Lafite Index, which tracks younger vintages (2000-2006) of both Lafite Rothschild and its second wine, Carruades de Lafite. As we said then, “the Liv-ex Lafite Index looks certain to move back into positive territory by month end”.

So with August now over, how has it performed?

The index didn’t just beat the previous high, it smashed it - reaching 391 by month end. This is 6% above the previous high set in June 2008 and represents a growth of 32% in 2009.

Liv-ex 100 surges upwards

The Liv-ex 100 Fine Wine Index is the industry's leading benchmark. The value of the index as of 31st August 2009 was 225.45, a rise of 4.6% on the previous month. The index is up 10.0% year to date, and down 14.2% year on year. To bet on the level of the Liv-ex 100 at month end visit Matchbet or to trade futures visit Intrade.

Bordeaux 2009 - the hype begins

A matter of weeks after the 2008 Bordeaux en primeur campaign has come to its end, the fine wine trade's attention has switched to the next vintage. And with the weather in Bordeaux having been excellent so far in 2009, the hype is already beginning to build.

Decanter carried a story earlier this week, provocatively titled "Could 2009 be the next 2005?" , which quotes a number of proprietors claiming that the season so far has been the best since the fabled 2005.

Journalist Jane Anson has been following the vintage via series of videos filmed at the First Growths. The Lafite video can be viewed here, and Latour's here. Both are generally positive.

Robert Parker's bulletin board also carries a thread featuring some interesting comments (and some less so) from contributors who have recently travelled to the region.

Furthermore, anecdotally we have heard from our friends and clients in the regions that the vintage so far has been very encouraging, regarding both its size and quality.

Of course, it is September's weather that will decide if the vintage is an excellent one, rather than merely good. But what would a large vintage of high quality wine mean for next year's campaign, and the market as a whole?

En primeur prices, of course, would surely rise. Particularly from those chateaux that came out early and low this year and were somewhat caught out by the scores of Robert Parker and the eventual market appetite - a group that includes all of the the Firsts. A bumper 2009 will surely be the final nail in the coffin for the 2007 vintage, which will appear as an island of the mediocre surrounded by an ocean of quality. And with the 2008 vintage being rated so highly by Parker, where does he go from here?

Expect news stories featuring notable UK merchants pleading for "calm, rational" pricing from the Bordelais to start appearing in a month or two.

Bloomberg on the "Lafite effect"

Kevin Hassett - director of economic-policy studies at the American Enterprise Institute and a Bloomberg News columnist - tackled the "Lafite effect" in his most recent Bloomberg article.

As we outlined recently on this blog and in our August Market Report, the price of numerous vintages of Lafite Rothschild has soared in recent months.

In his piece Hassett asks the question: "Is the Lafite price spike yet another bubble, or are there sound fundamental reasons?"

In his conclusion, Hassett place himself firmly with the bears:

"It’s a tempting bet, and a risky one. As Lafite prices have soared away from those of close substitutes, Lafite has begun to look -- especially to unsophisticated investors, and those who rely on past correlations -- like an increasingly safe investment, with steady and predictable returns. In fact, the opposite is true. The risk of Lafite prices plummeting and wiping out your investment has skyrocketed along with the price."

Lafite stirs the bulls

In our August Market Report we took a close look at the astonishing performance of Lafite Rothschild over the last year. As we wrote in the report, "no other wine has recovered from the price slump of last autumn so quickly and completely".

To quantify this price growth we created a Liv-ex Lafite Index of recent vintages (2000 to 2006) of both Lafite Rothschild and Carruades de Lafite (see the report for full details). As you can see in the graph below, the index has performed significantly better than any of the main Liv-ex indices, finishing July almost 140 points (or 60%) higher than the Liv-ex 100 Fine Wine Index. At the end of July The Liv-ex Lafite Index was just 4.4% off its all time high.

 

Since the beginning of August, however, the story has continued to develop. The 2000 vintage traded for £11,650 earlier this week, almost £1,000 higher than it did at the height of the market last summer. Its two year trading history is below.

The 2001, 2002 and 2004 vintages also broke into new territory this month, all trading above £3,000 for the first time. The Liv-ex Lafite Index looks certain to move back into positive territory by month end. Lafite has woken up the bulls.