Bordeaux 2018 – Wine Owners 'in a nutshell' review

by Wine Owners

Posted on 2019-04-05


Weather-wise the 2018 growing season was a game of two halves; the first half was excessively wet and was followed by a hot drought through to harvest.

As well as the drought, mildew pressure affected the left bank and Graves, in some cases wiping out 60-80% of the potential crop. The right bank fared better on this front as the clay soils had the upper hand on fighting the drought due to higher levels of water retention.

Merlot was always most likely to be affected by the vintage’s heat, with some properties seeing alcohols rise quickly through fermentation, topping out at 15-16 degrees. Because of this it is assumed that this is a left bank vintage. But merlot came in with the highest alcohols off warmer gravel beds of the left bank than it did on the predominantly cooler clay soils of the right bank.

2018 has produced a singular vintage and one of the most heterogeneous we have tasted en primeur. Estates that tamed the heat, sugar, pHs and tannins resulted in bold expressive wines with massive aging potential, the very best of which may well become legends. Concentration was the word most employed by scribes.

Maybe more than ever, it’s a year where terroir appears to have played a significant part in cutting the grade. However unfair this may seem, the best soils and expositions tended to deliver the best wines and the 1855 classification played out well. As such it’s a year in which Petrus, the First Growths and the best bit of the St. Emilion plateau (Canon, Cheval Blanc, Clos Fourtet) all excelled.


Wine Owners - Haut Bailly


As usual, there were plenty of superlatives being thrown around; Monsieur Tesseron of Pontet Canet claimed “this is clearly the best modern day vintage we have produced, better than ’16 which was better than ’10”. There is little doubt there will be some huge scores from the naturally ebullient.

There are also great disappointments and plenty to avoid. Margaux, Graves and St. Estephe were probably the most inconsistent appellations whilst the others all had their ups and downs.

It’s a hot vintage with big, bold and powerful wines: an absolute joy for some palates but maybe just too much for others. We look forward to the in-bottle tastings but in the meantime let us wait, with bated breath, for the prices!

Top picks by appellation followed by the ‘ones for the notebook’ wines:

St. Estephe: Cos d’Estournel, Montrose, Lafon Rochet

Pauillac: Grand Puy Lacoste, Lafite, Latour, Pedesclaux, Pichon Baron

St. Julien: Branaire Ducru, Gruaud Larose, Lagrange, Leoville Barton, Leoville Las Cases, Talbot

Margaux: Malescot St. Exupery, Margaux, Pavilion Rouge, Rauzan Segla

Graves: Carmes Haut Brion, Clarence de Haut Brion, Domaine de Chevalier, Haut Bailly

St. Emilion: Canon, Cheval Blanc, Clos Fourtet, Petit Cheval, Quinault L’Enclos, Villemaurine

Pomerol: Gazin, Rouget, Petrus, Vieux Chateau Certan

And ‘ones for the notebook’ (good value and/or under the radar): Chantegrive, Chateau de Pez, Croizet-Bages, La Dominique, Lagrange, Langoa Barton, Monbrison, Segla


The March 2019 Market Report

by Wine Owners

Posted on 2019-04-04


In the same way the media in March was completely dominated by Brexit, so was the wine market. Instead of permanent squabbling and jostling for position, however, the main players in the house of wine commons continued to sit on their hands. Fortunately, there was no squabbling, but U.K. merchants continued to be, unsurprisingly, risk averse; some are just not buying anything for stock currently, so the market has continued to ease. The good news is this easing is a result of apathy rather than volumes of stock hitting the market. There is nothing worse for markets than uncertainty and it feels like we are in the epicentre of that storm right now.


MTD YTD 1 Year 5 Year 10 Year
WO 150 Index 306 -0.25% -1.75% 6.93% 58.95% 89.23%
WO Burgundy Index 654 -2.81% -6.54% 21.66% 128.83% 220.77%
WO Bordeaux Index 336 0.27% -0.34% 5.14% 55.61% 103.50%
WO California Index 670 1.51% -1.59% 14.15% 98.52% 316.53%
WO Champagne Index 459 -0.29% -1.47% 4.50% 67.02% 160.82%
WO First Growth Index 278 2.79% 0.38% 3.03% 45.16% 74.95%


The Burgundy Index continues to slide from its Himalayan style peaks, unsurprisingly, but what is really interesting (to me at least!) is the performance of Bordeaux, especially the First Growths. This sub index gained 2.8% in March and is the only one of the indices above to be positive in 2019. Other than the post Brexit referendum and the weak sterling inspired rally of 2016, the First Growths have been in the doldrums for nearly a decade – is this the turning point we wonder? Market commentators have been saying that Burgundy was making First Growths look cheap again for a while now, yet so far there has been little stirring of the sleeping giant.

We have just returned from Bordeaux, having tasted some, but not all, of the 2018 vintage - more on that here separately and soon. A bad outbreak of mildew and a drought later in the growing season led to severely reduced yields in some properties (two thirds in the case of Pontet Canet) which could easily mean some aggressive pricing in some quarters – yes, again!

As usual, les Bordelais were not to be found suffering from modesty or understatement, many to be claiming another incredible success. The heat from the end of July onwards resulted in small, thick skinned berries delivering highly concentrated juice, resulting in well above average alcohol levels. There are few wines coming in at less than 14% alcohol by volume - Mr. Parker must be punching the air! It almost goes without saying but those who managed the vineyard well, picked in time and maintained acidity have performed the best. At a time when winemakers and consumers are reverting to fresher, more elegant styles the timing of this vintage is somewhat ironic. If Mr. Parker’s influence was still intact we may have been looking at Bordeaux ’18 being declared as the first ever Port vintage outside of Portugal!

Overall the 2018 vintage is patchy although there are undoubtedly some very impressive wines. Some prices may work, most will not, and it could just be that our favourite vintage of modern times, the 2016, is about to be made even more compelling than it already is!


Wine Owners wine market report


The February 2019 Market Report

by Wine Owners

Posted on 2019-03-07


February was a relatively quiet month for the wine market. The month started with the Chinese New Year celebrations which meant Asia was quiet and it also contained a European half term break. Sentiment towards Brexit turned, meaning GBP strengthened towards the end of the month, which is never good for the wine market as US$ based bids (U.S. and Asia) automatically adjust downwards. The broad base WO 150 index fell by 2.4%, as did our Blue Chip Burgundy index. In fact, all the indices for the major wine producing regions came off by c.3%.

If recent discussions with the finance and new venture folk surrounding wine as an alternative asset class were anything to go by, this is beginning to look like a good time to buy. Following the Brexit inspired rise of USD and Euro against GBP in 2016, the Bordeaux market has done nothing for almost a decade. ‘Bordeaux bashing’ peaked years ago too - just resentful shrugging goes on these days! En primeur looms but is largely a dead duck, so that is unlikely to provide stimulus to the market but a wall of money certainly might do the trick… watch this space!

We were busy trading 2009 red Bordeaux following various reports published after ‘ten year on tastings’. We blogged about these in general and focussed on one wine separately, Cos d’Estournel. We concluded that, as it continues to split opinion, and received some pretty low scores (93 from Jane Anson of Decanter for example), coupled with challenging price levels why take the risk when there are so many less controversial and comparatively cheaper wines available? There are many names still available on the exchange, from the excellent Cantemerle at c.£300 to Haut Brion and Mouton Rothschild at the cheapest in the market prices.

If you’re looking for decent ‘drinking’ claret buying en primeur made very little sense even back in 2009 which blew apart every previous record ever held for wine sales, anywhere on the planet. Factoring in the cost of storage and capital and the effect of inflation, the very respectable names of Cantemerle, Capbern Gasqueton, Haut Bergey, Lafon Rochet, Ormes de Pez and Potensac are all better value today than they were then! All these names are available on the platform today.

Sassicaia was in focus with the release of the much admired 2016 vintage, Monica Larner of the Wine Advocate awarding the full 100 points and meaning Armit, the UK agent sold out in seconds.

Screaming Eagle ’16 was released and is now offered at £7,250 per 3 bottles in the U.K. market. Not altogether surprisingly, this is making some older vintages looking relatively cheap! The ’17 will not be sold under the usual label due to smoke taint from the Californian wildfires.

And finally, we learnt the sad news that Gianfranco Soldera passed away in the middle of the month. We are planning to honour the magician of Montalcino with a memorial dinner later in the year, possibly in May.



The January 2019 Market Report

by Wine Owners

Posted on 2019-02-07


The broad-based WO 150 Index was flat for the month, as were nearly all the indices. The only real note of interest was the Burgundy Index, dropping by 0.7%. As you can see from the graph below it has been the stellar performer amongst the great wine producing regions of the world. It’s far too early to start calling a general cooling off period but as I have been arguing here it feels right to top slice some of the better performing names and start looking for some laggards.

The numbers in the box below are performance numbers over a five-year period, so all very respectable but nothing comes close to Burgundy. The consistency and lack of volatility must surely be a thing of beauty to the investor and connoisseur alike?


WO 150 index


January is a busy month in the wine world when the latest Burgundy vintage is sold ‘en primeur’. 2017 was a decent vintage (See WO Blog) and has sold through pretty well given another year of testing prices.

The ‘Southwold group’ met in January to review the now in bottle Bordeaux 2015 vintage and there are two excellent reports on the three day session to be found on Vinolent.net and FarrVintners.com. In brief summary, ’15 is maybe not quite the excellent vintage that was first pronounced, certainly when judged by ‘English’ palates but still pretty damn good with some show stoppers therein. At the end of the Farr report there is an interesting table of recent vintages in order of perceived quality.

Here at Wine Owners we are betting more heavily on the ’16 vintage (not yet included in the Farr report) which we believe will move very close to the top of the leader board. Messrs Martin and Galloni of Vinous Media have recently reviewed the 16s in bottle and are waxing lyrical. Our very own meteorology and Bordeaux expert called the ’16 vintage some time back - pre the en primeur tastings even! All subsequent tastings and encounters of the vintage have confirmed our views and we are confident enough to shout BUY. What and when is a much more interesting question - so please get in touch to hear our thoughts.


Correlation

by Wine Owners

Posted on 2017-11-28


Although wine markets have generally appeared not to correlate with the global economy over the last decade, we would not be surprised if this has changed from 2016 onwards and for the next 5-10 years.

Look back in time to the recession of the early 1990s, the Asian Crisis of 1997, the dotcom bust following Y2K, and the Iraqi invasion of Kuwait in 2003; and you will see that all these events that negatively affected global sentiment and equity markets also affected the fine wine market.

Go back further to the oil crisis of the 1970s, and wine plunged then too. But that was a different epoch.

Whilst the fine wine market has further globalized and broadened since the mid 2000s, people are still people: with the same human response to economic positives and negatives; that in turn reflects in levels of investment, spending and so on.

The fact that this is a discussion at all is down to the banking crisis and what happened in the period 2009-2015. Initially as stock markets tanked, the wine market rose, then rocketed in line with commodities and safe haven assets such as gold bullion.

But it was counter-intuitive. The response of the Bordelais in April 2009 was rational, to cut release prices to levels not seen for several years.

This was largely due a discontinuous, one-off event, namely China’s rapid industrialization, and what that did to commodity prices. In our opinion this does not mean that fine wine correlates with commodities. Or gold. As variously has been posited. You could just as easily correlate corruption, grafting and the adoption of fine wine as an alternative store of value for various indirect purposes within China during that period.

Wine is not a commodity. It happens to be one of the most commodity-like luxury collectibles, but that is not the same thing.

Wine is not a safe haven asset like gold bullion. When the world goes south wine warehouses do not fill up.

The basic question is whether wine is a hedge against the economic cycle? Historically it wasn’t. Recently it appeared to be but discontinuities are just that, so it’s not a reliable period upon which to form an opinion. Is the broader base upon which we now sit a game changer, where the laws of supply and demand, and the effect upon that of greater consumption, take over?

Scarcity has relentlessly driven Burgundy and cult Californians to new undreamt of heights, with top Baroli in hot pursuit. Will relative scarcity do the same for Bordeaux, or has the global base broadened at the same time as traditional markets, USA included, have shrunk?

And irrespective of all of the above, will the market continue to punish excessive pricing when things get out of hand?



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A few thoughts on Champagne

by Wine Owners

Posted on 2016-08-09



From an investment perspective champagne has delivered solid if unspectacular gains year on year, as the chart below shows. Since the start of 2011, the WO Champagne Index (pale blue line) has steadily moved up, displaying little of the volatility of the wine market at large, as represented by the WO 150 Index (purple). A 5 year increase of 55% is pretty impressive by anyone’s reckoning in this day and age.



Ask most champagne lovers to name the three most important champagne marques, and the vast majority would plump for Dom Perignon, Krug and Cristal – let’s call them the Three Musketeers. These are by far the most likely to be found in collections, and have international standing as the benchmark for top quality, premium fizz. My question is that if we assume most collectors will hold at least one, if not all three, of these in their cellars if they are champagne followers, which champagne is best placed to play the role of d’Artagnan to their Porthos, Aramis and Athos?

There are several pretenders to the throne. Bollinger RD, Perrier Jouet Belle Epoque, Pol Roger Winston Churchill, Armand de Brignac Ace of Spades – these and a host of others are a match for the quality and cachet of the Three Musketeers, but there is one name that I think stands out, and one whose financial performance and quality cannot easily be overlooked.

That wine is Salon ‘Cuvee S’ Le Mesnil. Despite its relative anonymity – there are many better known marques – this champagne is viewed as the apogee of champagne making by those in the know. Ruthlessly (almost self-defeatingly!) small production quantities and a quality control regime that makes North Korea look like a hippy commune have enabled Salon ‘Cuvee S’ to reach prices that are eye-wateringly expensive across the board. Despite this its prices have moved up more dramatically that most champagnes for vintages from the 1990s, and even more recent vintages from the 2000s have shown growth despite much higher release prices.

So, if you can find it at the right price, Salon ‘Cuvee S’ is perfectly placed to play the role of the Fourth Musketeer. All for one, and one for all…


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The Battle of the Bottle

by Wine Owners

Posted on 2016-08-02


Will it be Bordeaux or Burgundy where the smart money goes in 2017?

It is well known that over the last few years the wines of Burgundy have substantially out-performed their Bordeaux cousins. The chart below vividly represents this:

Since the start of 2012 the Blue Chip wines of Burgundy (purple) have risen consistently year on year to now sit around 50% up in 4.5 years, whilst First Growth Bordeaux (green) has fallen nearly 20% in the same period . An astonishing disparity accounted for by the Bordeaux bubble of 2009-2012 caused by the market discontinuity of early Chinese demand and trade speculation that accompanied it. Even the Bordeaux Medoc Classed Growths (light blue), that withstood the crash in Bordeaux prices far better in general than First Growth royalty, only managed an increase in value of 15% since the start 2012, but this is entirely down to the last 15 months.



So, what do we think of the potential of these three vital segments of the market in terms of future performance? Will Burgundy continue to rise regardless, or will Bordeaux be resuscitated?

This next chart might help put things in context. It is of the same three indices above, but within a timeframe of the last 9 months only:



All indices are over 10% up over this 9 month period. Excellent news. You should also notice the similarities in their trajectories, showing growth in both regions. Again, good news. You should then discern that it is the two Bordeaux indices that are leading the way. To be precise, The Bordeaux Medoc Classed Growth index is up 16.6%, First Growths are up 13.5% and Blue Chip Burgundies are up 11.3%.

Now, of course, these time-frames are arbitrarily chosen, and it could be possible to draw other conclusions by choosing different representations of the same data. But that misses the point. We do believe that the improvement in fortunes of Bordeaux is likely to be a major theme of the next 18 months, and it is reasonable to suggest that increased interest, and resurgent sentiment, in this pre-eminent region may mean Bordeaux prices rising more steeply than Burgundy prices.

The Burgundy market is unlikely to fall prey to the same rapid boom and bust cycles that affected Bordeaux between 1991 and 2014, but we think it is a fair and proportionate response when looking at the prices and bid/offer spreads available to think that the very top of the Blue Chip Burgundy market may have run its course for now, and that to risk increased exposure to Burgundy might not be the best idea if short-term return on investment is your primary motivator.

Yet it's notoriously difficult to call the top of any market, and this viewpoint needs to be set against the severely reduced yields in 2016 in certain parts of the Cote D'Or that will push up 2016 release prices in 18 months' time, and may inflate the very good 2015 releases next January. What effect this has on back vintages remains to be seen.



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Sometimes it pays to take the path less travelled….

by Wine Owners

Posted on 2016-07-25


It is fair to say that in the recent improvement of fortunes in Bordeaux prices, most focus is given to the classed growths of the Medoc on the Left Bank, and the top wines of Pomerol and St Emilion on the Right Bank. The recovery over the last 12 months has been significant, as seen below, with the Medoc Classed Growth Index (the turquoise line) rising by over 23%  and the Libournais Index (purple line) up over 18%. Great news for all those people who have experienced the huge price correction of 2011 to 2014.



But, when looking at Bordeaux as a whole the focus should perhaps swing further south. See what happens when I add the Graves Classed Growth Index (the purple line in the chart, below) into the mix. Over the same time frame the wines of Graves, headlined by Haut Brion and la Mission Haut-Brion, have leapt up by over 30%, outstripping their neighbouring appelations. 

Even when you take into account the Brexit effect, which has seen a weak pound in the past month provide a boost from sterling denominated stock as HK and US buyers pile in, this still represents a huge return to form. The lesson here is to realise that the 1855 classification (which ignores Graves, with the notable exception of Haut-Brion) and finest wines north of the Garonne are not the be all and end all. Look south, towards Graves, and you will find a raft of excellent wines that have improved dramatically in the last few years in many instances (think Smith Haut Lafitte, Haut-Bailly, Pape Clement), and which represent both great quality and great value. It is perhaps important that the gravelly, smoky, pencil lead and pencil shaving notes which characterise the best wines of Graves have few, if any, imitations around the world. Bordeaux blends from other continents tend to mimic the Medoc or the Libourne, and so the terroir-specific nature of Graves wines perhaps gives them a uniqueness that collectors ascribe value to in the same way as they do in Burgundy.



Sometimes it pays to take the path less travelled…. 





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Brexit: what it means for fine wine, and other market trends

by Wine Owners

Posted on 2016-07-21


The past few weeks have seen significant movements and activity within the fine wine market, with the closure of the En Primeur campaigns and the devaluation of sterling kicking the market 4-5% higher.

Whether this situation lasts following the surge remains to be seen, but combined with the upward movement of the market in the preceding few months, and 21 months of increasingly solid gains in the Bordeaux market, it makes for an interesting period.

We've put together our updated set of Fine Wine Predictions for the second half of 2016, including thoughts on the impact of Brexit, tips for collectors, and analysis of buying trends in the market.

We hope you enjoy reading the report, and would love to hear from you if you have any questions, are looking for specific guidance, or want to join the conversation.


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Pre and Post Vinexpo 2016

by Wine Owners

Posted on 2016-06-10


There’s a clear division between 2015 En Primeur releases before Vinexpo Hong Hong and those that have been announced since. It begs the question, why?

It's not just that the bigger Chateaux are the ones releasing later. After all, many important names had released well beforehand.

The answer is what happened whilst the producers were in Hong Kong.



We understand that producers were taken aback by the demand they experienced this year at Vinexpo, and they boarded the flight home with bulging order books.

For every producer who wants to sell the new wines through En Primeur and recognises the importance of providing a future upside for buyers of non-physical stock, there are others who see a new opportunity within the changing global fine wine market.

Bernard Magrez was full of the joys of spring at Vinexpo Hong Kong, confirming he had sold out of his impressive Chateau Pape Clement in 40 minutes.

He was refreshing in his analysis, saying that he knew he’d left money on the table for the merchant and En Primeur buyer, which he saw as a positive for the property’s burgeoning reputation. Surely if you’re going to be part of En Primeur that’s the way to do it: body and soul.

Many others however have been eyeing life after En Primeur for some time, but have held back from backing one horse or another by the generally morose market conditions. With green shoots appearing over the last 12 months, few were in the mood to risk seeing them wither.

But what they experienced at Vinexpo may have shifted the balance further away from genuine, tangible broad-based support for En Primeur.

The Chateaux owners were surprised by the jump in orders experienced for their back vintages. There was a realisation that the wine market in China was coming back after 4 years of austerity and Party approbation.

The politics seem to be loosening up a touch, the consumer is spending again and contributing strongly to GDP growth, imports of luxury goods are steady (and proportionately performing better than exports).

Not that the Chinese buy En Primeur, there’s still almost no market there for it there, but with physical stocks in Bordeaux being soaked up by a sharp uptick in demand, it’s hardly surprising many producers are choosing to hold onto significantly more of the new vintage, so that they can serve the Asian market further down the line.


                                                                                


What a relief it must be to see all those accumulated bottles sell.

If it’s all heading towards producers being the stockholders and focusing on selling back vintages at premium prices, the one thing I’d say to them is, don't confuse the issue by using the En Primeur system as purely a promotional opportunity in the marketing calendar to get press and attention, if you don't care so much if any actually sells. It creates mixed messages.

I am super-impressed by what Palmer are doing in terms of developing sales channels worldwide, focusing on selling physical stock, staging stunning auctions through their negociant shareholder, creating a brand to rival the Firsts - but the En Primeur thing just muddies the water and undermines the brilliance of everything else.

If the recent Sotheby’s auction of Chateau Palmer in Hong Kong points the way to selling En Primeur by the barrel to high rollers with privileged access thrown in, I would surely go down that route as a producer too. The equivalent of £10,800 per 9 litres (12x75cl) before seller commission is simply amazing if you can get it.



“Chapeau”. I raise my hat to the Chateaux who go the full-on brand-building route and do it this well - but why risk the negative sentiment and comments that a perceptually very high En Primeur release price creates? There are simply too many foreseeable consequences: negative comments (mea culpa); anxious merchant emails to clients warning them off; negociants dropping prices during the course of the same day the release happens in a mildly desperate attempt not to be left with expensive stock that might/ will have to be written down; and static or lower secondary market prices that will make consumer buyers feel negative about the brand due to being under water ‘x’ years down the line.

With Asian appetite for Bordeaux on the rise once again, the moment may have arrived when more and more producers will respond to the shift in demand for primary market releases of back vintages by backing the new horse. It’s a complicated decision with a brew of old allegiances, dependent market structures, local friends, brand building, rising land values and a changing global market. Watch this space.


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