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What does Brexit mean for the wine lover and collector?

by Wine Owners

Posted on 2016-10-24


Market context and performance since June 24th

Serving as a general fine wine market tracker, the WO 150 gained 6% in the year to June (6.5% in the previous 12 months) but is now up 19.8% YTD.


Focusing on the all-important Bordeaux market, the world’s single largest region of fine wine production, the WO First Growth Index was up 8.7% year to date on 24th June, but is now up 23%.

As regards Bordeaux Firsts, this performance is on the back of 4 years of decline, following the bursting of a Chinese-inspired bubble in late 2011. The market in these blue chip Bordeaux bottomed in Q3 of 2015, and has soared since. Chateau Latour, released at £11,400 per case of 12 bottles, is now back within £100 per bottle of that release price.

The rest of the Bordeaux market had tested its lows the previous year, and so its performance year to June 2016 was a slightly higher 10.25%, reflecting the additional momentum gathered over the previous 18 months. Looking at all classified growths, the market is now up 22.5% YTD.


Whereas Bordeaux is a market driven by liquidity and large production volumes, scarcity-driven markets such as Burgundy, Piedmont and cult Californians, have enjoyed a long-term run stretching back 20+ years, and these wine markets have not suffered the roller coaster ride of Bordeaux.

The WO Northern Italy index is up 171% over the last 10 years, the WO Blue Chip Burgundy Index is up 311% over the same period, and the WO California index is up a whopping 427%.




What’s going to be the effect on new releases?

New releases are already more expensive to buy due to the pound buying less euros or dollars.

Brexit will cause new releases of two sought after vintages (Burgundy 2015 and Bordeaux 2016) to rise by 30%+, caused by producer increases of, say, around 10% compounded by the 20% effect of devaluation.

First in line: the impending 2015 Burgundies are due for UK release as futures in January 2017. With a compromised 2016 vintage assuring small production volumes, 2015s from some addresses will rocket to compensate for next years’ lower production.

Bordeaux will follow in April 2017.

Given the UK’s preeminent role in global fine wine trading, Brexit has turbo-charged market performance, and given the relatively recent recovery of Bordeaux markets a boost after a prolonged period of decline.

As the pound falls, assuming a rising fine wine market (key as it means there's strong global demand), the price of secondary market wines will rise since they are cheaper to buy for buyers holding currencies such as HKD or dollars.

This increases the value of collectors' current stock since the market is global. London is still one of the most important global trading hubs for fine wine, if not the most important.

Could price rises kill demand?

Because top burgundy from the best producers can double after first release it is unlikely to dampen initial demand – by much. And if it does there’s always the USA, Japan and other markets that’ll mop up the relatively small volumes.

Secondary market prices of older vintages may rise, pulled up by the higher new release prices. But as they rise, the number of potential secondary market buyers may decrease, causing these scarcity driven markets to become less liquid. As a result, it may take longer to sell your wines at these higher prices. The moral of the story is that scarcity driven markets are not for the impatient seller who needs cash tomorrow. These are better seen as long-term holds.

Bordeaux prices of the new vintage (2016) will also rise when they are released next year. Whether the UK Market chooses to buy or sits this one out remains to be seen.

However, the USA is more or less certain to be buying these futures aided by vintage character of ripe, powerful wines from a hot summer that will suit their palates.

As a consequence, enduring weakness of the pound will place further upward pressure on back vintages.

We predict that recent back vintages will increase sooner than is normally the case (1-2 years instead of the more common 5-7 years), as top Bordeaux producers are becoming principal stockholders in an attempt to capture more of the downstream value of their wines and increase the value of their balance sheet assets.

 


Old school RIOJA dinner - Portland Restaurant, London

by Wine Owners

Posted on 2016-10-17


Guests gathered for a rather special evening of rare, older Rioja vintages at the Portland restaurant, a one-star Michelin restaurant serving food in an informal style of family-service.

The plates were delicious, and although a couple of the starters - buttermilk and smoked cod’s roe - worried the table in light of the venerable bottles, there was no arguing with the deliciousness of every plate served. The main course of beef was simply outstanding, served with melt-in-the-mouth heritage carrots and brown buttered cauliflower.

The wines were opened 90 minutes in advance, and with so many crumbling corks, insecurity got the better of us and we held off decanting until the last minute in most cases.

Starter course 1

Ygay Etiqueta Blanca 1970

2 bottles were served, one of which opened with a musty nose, the other was much more energetic with purer character.

It’s always worth leaving old bones some time in the glass to recover from the shock of opening, and sure enough, the musty character blew off, but without the zest and purity of the second bottle.

Marques de Murrieta Castillo Ygay Rioja Gran Reserva Especial 1970

By comparison the Castillo Ygay, bottled we think in the late 1990s or 2000s, and with a fresh cork to prove it, seemed rather clunky and thick. It was as if the extended barrel ageing has rubbed out its finer lines, leaving it smudged.

There was no arguing with the richer fruit, but where was the definition or class?


 

Starter course 2

Berberana Rioja Gran Reserva 1950

From a private cellar in Richmond, this wine was served from a decanter, having been filtered through muslin to strain a few pieces of crumbly cork that the operator of the Westmark cork puller had failed to pull out cleanly.

Arguably the star of the show, this ethereal wine showed intensity allied to a sense of weightlessness. It improved in the decanter over 2 hours and wowed the entire table.

Rioja GR Honorable Gomez Cruzado 1964

Similarly to the Ygay Etiqueta Blanca, a dustiness blew off with time in the glass to reveal pear drops and an earthy, more savoury character.

Bodegas Bilbainas 1964

Fruity and balanced with an alluring freshness and utterly delicious. A surprise since no one had encountered the producer. One to seek out and is very good value.

Main course

Vina Real CVNE 1964

This was the other wine that vied for wine of the night along with the Berberana.

Energetic, deep and pure. Burgundian texture with a brilliant complexity of fruit that carried though into a long and deeply satisfying finish.

CVNE Imperial Gran Reserva 1964

An absolute dog of a bottle, sadly. Devil’s juice.

Rioja Alta 904 Reserva 1964

A comparatively rich fruit profile on this wine compared to the other wines of the flight, but perhaps somewhat lacking in definition if we were to be critical. This less developed – perhaps worth revisiting in the future?



Cheeseboard

Corral Reserva 1987

Perhaps a touch of rusticity here, but with plenty to like, with a pungent, rose petal quality to the nose.

Corral Reserva 1991

Richer and less evolved than the 1987, this made an interesting comparison. Tasted on its own this would no doubt have seemed excellent, but slightly overshadowed by the context here I fear.

Plus a mystery wine served blind – 1988 Valbuena 5

Elegant and pleasantly evolved with remarkable balance between richness of the Douro fruit and a dry, firm structure reminiscent of cool climate claret, even down to a persistent saline note on the palate lending freshness. Certainly supports the reputation of the producer.




What we learned

1. The dinner challenged the blanket reputation of 1964 as immortal - it isn’t. Delicious though several were, they are not destined to remain so.

2. A common understanding is that Gran Reserva is better than Reserva, that is better than Consecha. Price follows the length of description it seems. Based on this tasting, the length of time aged in wooden vats does not necessarily improve the quality of the wine. The Etiqueta Blanco vs Gran Reserva Especial, both 1970, certainly supports this thinking. Th Etiqueta Blanco was the finer wine, by far.

It doesn’t help that definitions seems to have changed over the years. Our 904 1964 was a Reserva, and possibly all the better for it, whilst other bottlings of the same year are described (in a Bid for Wine auction a year ago) as Gran Reserva. More recent vintages of 904 are described as Gran Reserva.

3. You don’t need to just follow the wines of the biggest Rioja operations, such as Rioja Alta, Marques de Murrieta and CVNE. The least well known producers on this showing delivered very good value for such old wines.


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