Knight Frank Fine Wine Index Update Q1 2018

by Wine Owners

Posted on 2018-03-23


The KFFWII is up 9.6% over the year to March 2018, with a 2% gain in the last quarter.

Knight Frank Fine Wine Index

Consolidation of the market at current valuation levels is on the back of the 24 months to December 2017, seeing gains of 38%.

The top of the market is significantly influenced by Asian demand, where a weak dollar is causing bid prices to fall. Changes within secondary market wine distribution into China may create a degree of uncertainty not seen since 2014.

The outlook for the rest of 2018 is one of subdued growth, with the Sterling-denominated index at risk of downward pressure as the currency appreciates against the US Dollar and Euro.

Bordeaux

First Growths are up just 3.8% over the last 12 months, half of which can be accounted for by the last 3 months. This broadly reflects the rest of the Bordeaux fine wine market (classified growths and equivalents). However, this subdued performance ought not to detract from 3-year performance (43% price growth) in First Growths, and 55% appreciation in the classified growths and equivalents over the same period.

Risers substantially outnumber fallers in Bordeaux, reflecting the market's continued overall growth. Less new wine is being released from chateaux than ever before, and quality is increasingly consistent. These factors point to continued growth during 2018, although it will remain in single figures, as orderly trading patterns continue.

Burgundy

Burgundy values continue to appreciate, with increases of 21% to March 2018, and 4.6% over the last quarter. To date there are no signs of a let-up in the upward trajectory of top producers' Burgundy prices. We’re about to see Burgundy price appreciation break through the 100% mark over the last 5 years, and reach 257% over 10 years.

Northern Italy

Northern Italy (represented in the KFFWII exclusively by Piedmont and Tuscany), is up 9.5% over the last 12 months, of which 2.7% is within the last quarter. The leaderboard is dominated by Monfortino, the standout Italian performer of the last 4 years which is consolidating its position as one of the most investible wines in the world.

Expectations for Northern Italy - Barolo in particular - are that prices will continue to increase into double digits over the remainder of 2018.

Champagne

Vintage champagne has performed well over the year, up a full 10%, and has kicked up 3% in the last quarter.

The best performers are rarer cuvees from such stalwarts as Selosse, Bollinger, Krug and Pol Roger. Over 10 years Champagne has performed even better than Burgundy, up 283%: demonstrating the liquidity that volume can drive, brand values and early consumption patterns.

USA

California’s moderated growth continues, with annual performance to March 2018 of 6.3%, and is up 2% within the last quarter. After years of bewilderingly strong growth (385% over 10 years), fallers are as numerous as risers within the California index, implying further downsides or a relatively flat outlook.

Spain

Top Spanish wines dominated by iconic and traditional large estates in Rioja and Ribero del Douro still represent good value, have good ageing potential, and are produced in large volumes.

These positive trading fundamentals support a market up 8.25% in the last year, and a healthy 3% in the last quarter.

A related effect is that Spanish blue-chips (particularly Vega Sicilia's top wines) are increasingly being traded on exchanges, and markets are being made for these wines through the usual offer and bid mechanisms used by market-makers.

The Spanish index is up 155% in the last 10 years. 45% of that growth has taken place in the last 3 years. The timing of that resurgence coincides with the inflection point in Bordeaux markets in the winter of 2015, when they rebounded from cyclical lows. 


Knight Frank Fine Wine Index breakdown by region


Looking Forward to the Knight Frank Wealth Report 2018

by Wine Owners

Posted on 2018-03-01


Next Wednesday the annual Knight Frank Wealth Report 2018 will be published. As always, the report's primary focus will be on prime real estate, wealth, investments and luxury lifestyle. The latter pair are of particular interest to Wine Owners users, and the team here at HQ.

We have specific interest in the report's wine investment section, of course. This section rests strongly on data from the Knight Frank Fine Wine Investment Index (KFFWII), a custom-built index created by Wine Owners for Knight Frank in 2015. This index of 200 investment-grade wines has provided Knight Frank with detailed market data for the past three Wealth Reports. Last year, the index really came into its own; the Wealth Report 2017 showed wine clearly out-performing all other passion assets.

Of course, we at Wine Owners HQ have a pretty fair idea of what the upcoming 2018 Wealth Report will say about the wine investment market performance. But if anything, that knowledge piques our interest even further. We are very much looking forward to seeing the report live next Wednesday.

The report can be acquired here, and we will report back here in a couple of weeks' time with the key messages, and an update on the KFFWII.





2017 - the year in wine that was

by Wine Owners

Posted on 2017-12-21


Broadening interest

2017 was a fascinating year for the wine market: a year of solid growth, consolidation and even a flash of speculation!

It was also a year of broader consumer interest reignited.

Knight Frank’s global Wealth Report includes analysis of the fine wine market provided by Wine Owners. Wine was by far the best-performing collectible asset of 2016, up 24%. As a result, lots of positive press in 2017 brought plenty of new interest into the market.

Health

After the sharp price increases of 2016, when the Bordeaux market leapt as it rebounded off its 2014 lows following a couple of years of ticking up, 2017 was always going to be a less dramatic year for the classified and blue chip Bordeaux market.

It was encouraging to see a successful 2016 en primeur campaign that saw generally modest increases over 2015 in Euros, even if increases were more substantial for UK buyers due to the weakened currency. Overall gains in 2017 were low single-digit for First Growths (after the 30% readjustment seen in the previous year). Other Classified growths and Right Banks rose an average of 7%.

Such moderation was less evident in the primary or secondary Burgundy market, the latter up 14.5%. What happens next is anyone’s guess, but the top of the market is holding onto 5-year gains of 100%, thanks in part to enduring Asian interest.

Hard luck stories

Burgundy was really hard hit by frosts in 2016. It’s a super vintage, but with many producer cellars that are 2/3rds empty. Only Vosne-Romanée and parts of Morey-St.-Denis and Gevrey-Chambertin escaped the April ‘gel’. Pretty much everywhere else was heavily hit. The night-time freeze hit the Grand Crus and vineyards high up, the morning sun burned the buds of other premier crus and villages plots.

That big reduction in volume does add something to the intensity of the reds most noticeably. They are balanced, intensely redcurrant or blackcurrant in character, saline and fresh, with a vein of blood orange pulsing through them. The whites are fine but don’t quite have the extraordinary rich, bright core of the 2014s, although in their favour the whites show more site specific character at this very early stage.

In 2017 Burgundy narrowly missed a second successive year of April misery, with an abundant vintage of good quality. Instead, Bordeaux was badly affected by freezing night-time temperatures in the last week of April, after a warm spring had encouraged early growth. Some areas on the Right Bank, Graves and parts of the Medoc away from the warming waters of the Gironde were devastated. Chateaux de Fieuzel in Pessac isn’t making any wine in 2017.

What that will do to en primeur pricing next year remains to be seen, but widespread rises are on the cards, probably even those properties who emerged unscathed.

Notable winning regions

Champagne extended its run with top back vintages (where relative scarcity starts to play) racing ahead, up 13% in 2017. The world’s appetite for Champagne remains insatiable.

It was gratifying to see Northern Italy in rude health, with interest for Barolo Crus broadening significantly and prices of the best producers very sharply up this year on the back of a string of good vintages culminating in the highly sought after 2013s.

Speculation

Talking of that flash of speculation, Margaux 2015 announced in November that Margaux would release their 2015 as a special edition in honour of Paul Pontallier, the managing director of the estate who died in March 2016.

We saw the first release from the chateau, offered in individual single wooden cases, at a significant premium to the release price.

Based on the Chateau’s announcement, we saw speculative trading in the wine between EP club members rise and rise, with bids climbing from under £6,000 to £12,000, representing more than a 130% increase compared to the release price to UK consumers of £4,650.

The limited edition black bottles with a variation on the classic Margaux label in gold invited comparison with the 2000 Mouton Rothschild, which attracts a significant market following based on collectability, despite not being in the top flight of Mouton vintages or even one of the best wines of the vintage.

Looking ahead to 2018

If you're interested to learn more about the health of the fine wine market and are interested in our predictions for 2018, you can now download our Fine Wine Predictions 2018 report, a must-read for collectors, wine lovers looking for value, and investors searching for opportunities.


DOWNLOAD PREDICTIONS 2018 REPORT


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We wish you all a very enjoyable festive season, and much vinous pleasure as you open great wine bottles to celebrate and see in 2018.

Best wishes for health and happiness from the Wine Owners team!




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