by Wine Owners
Posted on 2020-03-17
We live in extraordinary times and what we thought was the perfect storm for the wine market just became a lot more perfect! Since I last wrote, major asset classes have tumbled in value as fear and uncertainty grips the globe. Wine prices look like they have barely moved in comparison to equity indices and the like but the reality of achieved selling prices would tell a different story. This is the nature of illiquid markets.
We have all lived through market crashes before and experience tells us that the aftermath makes for a very good buying opportunity. Admittedly we haven’t had an economic downturn brought about by a pandemic before. We don’t know how long the pandemic will last and how deep the economic hit will be.
We haven’t seen panic in the wine markets, not yet at least, and it’s fair to say that it feels like Hong Kong is waking up a little, in an almost post hibernation sort of way. Comment from friends in Hong Kong gives the impression of calm and that the worst is over. Although social distancing is still in full force people are getting on with the rest of their lives. Given how inactive, wine-wise, that area has been since last July, it’s possible that inventory needs restocking. Political unrest has also been dampened by the virus, so maybe there’s some cause for some springtime optimism in the orient.
Sadly, events in Europe and the west are only likely to deteriorate before they improve. The UGC finally called off Bordeaux en primeur tastings last week. My personal view is that this is a fantastic opportunity to reorganise tastings later in the calendar, giving the infantile wines a chance to develop and settle. The volatility of the major markets should have settled by then as well, inspiring better judged pricing.
Keep well, don’t panic and for those with cash, there will be some lovely opportunities. The Warren Buffets of the wine world will be rubbing their hands in glee!
| Index || Value || MTD || YTD || 1 Year || 5 Year || 10 Year |
| WO Burgundy 80 Index || 747.18 || 1.42% || 2.26% || 6.44% || 142.30% || 238.96% |
| WO Bordeaux 750 Index || 355.72 || -2.99% || -2.55% || 5.97% || 68.01% || 99.65% |
| WO Piedmont 60 Index || 305.5 || -8.39% || -8.13% || -5.73% || 64.89% || 96.22% |
| WO Tuscany 80 Index || 332.03 || 1.75% || 3.42% || 12.73% || 71.79% || 91.86% |
| WO First Growth 75 Index || 252.65 || -6.02% || -6.87% || -7.45% || 36.40% || 46.43% |
| WO California 85 index || 676.29 || -4.38% || -1.36% || 2.15% || 94.66% || 286.76% |
| WO Champagne 60 Index || 478.07 || -0.04% || -0.50% || 3.85% || 60.56% || 146.20% |
| WO 150 Index || 300.54 || -3.60% || -3.45% || -2.42% || 54.98% || 79.82% |
Miles Davis, Wine Owners March 2020
by Wine Owners
Posted on 2020-02-13
Miles Davis, 11th February 2020.
January in the wine world is always dominated by the latest Burgundy en primeur campaign. All the major Burgundy traders host tastings and the great and the good of the Burgundy buying world descend on them, hoping to make the latest ‘discovery’. Tastings this year were from the bumper 2018 crop. It was a very warm and sunny vintage with sunlight hours breaking new records. There were a lot of higher than average alcohol levels around and full, fat and juicy wines! There was plenty of merchant hype with generous descriptors in full flow. I found that seasoned pros were less impressed. The single most interesting fact surrounding the campaign, to my mind, was that one of the biggest merchants was only buying to order and would not be taking any wine for stock. Is this a sign of the times (i.e. the market) or the vintage? I think it’s a bit of both.
As previously described here, the wine market has been under the influence of a fare few geopolitical factors of late. That theme continued in January with the outbreak of the coronavirus in China. Given the proximity of Hong Kong to the outbreak, this is a further blow to the territory and the wine trading scene. Residents are working from home; confidence is low, and demand is thin.
Demand from the U.S. continues to be muted as we expect a further announcement from their administration regarding the Airbus related European tariffs on February 18th. Monsieur Macron has agreed a truce with Mr. Trump, for now, on his digital tax, but although that has gone away no one is placing any bets right now - the merest whiff of a tariff is enough to keep importers at bay. Here is a fascinating (and alarming) table of numbers from the American Association of Wine Economists, clearly showing the impact of U.S. tariffs:
I cannot explain the significant increase in New Zealand and South Africa versus the equally surprising declines for Argentina, Australia and Chile but researching the potential in South Africa is very much on my list of things to do!
Back in old London town merchants are discounting in increased margins to move stubborn stock and the traffic of e-mail offers has been on the rise. The market is desperately short of good news (the ‘Boris bounce’ lasted a full five minutes) and the signs are beginning to tell.
We have now seen releases of Giacosa and Sassicaia 2017. The Giacosa releases included the Barolo Classico, Falletto and the Barbaresco Rabaja from the mega 2016 vintage but the big one, Falletto Vigna Le Rocche Riserva, was from the 2014 vintage. Monica Larner of the Wine Advocate awarded 97 points and wrote “This estate is known for taking its biggest chances in the so-called off vintages. Betting on 2014 has turned out to be a brilliantly contemplated move”. I bought the lot, in all formats, in a brilliantly contemplated move!
I also bought some Elio Grasso 2016s (c. £350 per 6) and magnums of the Runcot Riserva 2013s. This is full blown 100 pointer from the Wine Advocate and only c. 5,000 bottles are made in only the very best years. This grower is becoming more popular and now he holds a perfect score is likely to become more so. One for the notebook.
I wrote very recently that if I had to pick one brand for 2020 it would be Sassicaia – the commentator’s curse! Following superb reviews and having won various awards for the ’15 and ’16 vintages, with price performances in the secondary market to match, Sassicaia has gone and done ‘a Bordeaux’! At £850 per six, this is a 22% increase on the 2016 release price, for an inferior vintage with an inferior score in a troubled market. Priced more modestly this could have sold out in seconds and left the crowd baying for more. As it is, it is very easy to buy at £850 – I prefer back vintages.
More generally, the WO platform has seen a lot of really good quality offers recently. There is a lack of confidence in the short term, collectors are trimming but there are buyers about; they just tend to be playing a bit more hardball than before. Spreads have widened in reflection of this and sellers need to be realistic (not over ambitious) if they want to sell.
Miles Davis, Wine Owners February 2020
by Wine Owners
Posted on 2020-01-16
This article is a follow up to our 2019 year end round-up by Miles Davis, published on the 10th January 2020.
The outlook for 2020
The geopolitical climate will continue to dominate the fine wine market in 2020. Uncertainty continues to hamper confidence amongst wine traders and although our view that the robust long-term fundamentals of wine will play out, there are some short-term issues (more on these below) that need to settle. If these issues, some of which are very specific to the wine market, can settle, we will look back on 2020 as the year of opportunity. Physical assets are doing well, gold is at a seven-year high, and we live in a climate of negative real interest rates. Stock markets are trading at all time highs and there is liquidity in the system, it’s just not finding its way into wine right now. Wine has been underperforming these other assets recently (one-year performances), see here:
The fine wine market continues to develop and change, and is becoming more interesting, with different fundamentals developing for individual markets, making them more autonomous all the time.
A whole new and significant factor is the U.S. and its trade tariffs, not only treating wines from different countries differently, but Champagne differently to still French wines, and wines above or below 14.1% alcohol from the countries on their hit list. Tariffs will influence the underlying markets, so until we have further clarification it is difficult to predict what may happen next.
As a result, I expect the wider market to start the year a little unsure of itself. There are and will always be opportunities within the wine market, however, but perhaps portfolio allocation has never been more important, producer too. And maybe more important than both of those considerations, are prices and relative value. Buying on the bid side of the market will be the key and good buying will be richly rewarded.
A reminder of performance over a five-year period:
I continue to favour Italy, particularly Piedmont and some of the super Tuscans and vintage Champagne. 2016 was an amazing vintage for Piedmont and new releases of Barolo should be considered. Of the major markets, I am generally lukewarm on Burgundy, but keener on Bordeaux where some fantastic older vintages, particularly ’89, ’90 and ‘96, are more available on the market than for some time. I think there will be some amazing opportunities this year in this area. I maintain my view that younger Bordeaux is fully priced, especially block buster vintages of ‘05, ‘09 and ’10 where supply is still plentiful and prices are high. I would be highly selective and very price sensitive in California and other ‘lesser’ investment markets, and always on the look out for lower levels of alcohol.
If I had to name one brand to buy this year it would be Sassicaia.
The issues in 2020
The election result in the UK cleared the UK air after a period of uncertainty and it appears that producers and importers are relaxed, for now, about any Brexit impact.
The possibility of further U.S. tariffs has taken the place of the Brexit uncertainty but the situation there will become much clearer in mid-February, but I cannot believe anyone is going to be brave before then. If the tariffs remain as they are, I think the market will react in a positive way, negatively if they are any more punitive. The fact that the tariffs are only levied on wines under 14.1% alcohol, and thus wines stronger than that are exempt, is largely ignored by the market as an overriding sentiment takes over and the damage is done. Only wines from England, France, Germany and Spain are currently subject to these measures, making the rest of the world, particularly Italy in my view, look more interesting in the short term. France has particularly annoyed the U.S. with its digital tax aimed at the big tech companies and Champagne, given exemption last time round, may be in the firing line. But who knows what is going to happen next on this issue – the uncertainty is somewhat paralysing.
The situation in Hong Kong is also creating uncertainty. The people are scared about the future and feel strongly enough to risk life and limb in protest, and China is not happy. The protests have calmed down from their most violent but there were heavily populated demonstrations at the turn of the year. Last week Beijing replaced their H.K. liaison officer with a senior and trusted aid of President Xi, hardliner Luo Huining, who ominously says that “everyone eagerly hopes Hong Kong can return to the right path." He comes with a reputation for fixing tough problems for Beijing!
The situation is complex, and it is likely the impasse will run and run. China can afford to be patient; it is sitting with the stronger hand and can probably slowly strangle the territory into submission without using undue force. Hong Kong has a long history of migration (especially post Tiananmen Square) and the numbers from now on will make interesting reading. Mainlanders are currently arriving at the rate of 50 a day but how many are leaving? Ultimately, I expect a huge number of democracy loving, wealthy locals will be leaving before 2047 but that this is the dawning of a new era for Hong Kong.
As well as being a lively wine hub itself, Hong Kong has been and is the gateway to China for fine wine and houses a lot of the experience and expertise in the region. More than ever, personnel and the location of businesses are transferable, and Hong Kong may lose market share in the longer term. This does not affect the long-term demand for wine, just where and how it is traded. If China was to open Shenzhen as a free port, for example, the impact would be immediate, and Hong Kong would be shunted sideways.
Other themes and points of interest
The overall share of trade in the wines of Bordeaux has continued to decrease and the 2018 en primeur campaign was another damp squib. 2019 is another good, possibly great, vintage but the Bordelais need to respond accordingly if they want to stop the rot (how many times have we heard that!??). Young Bordeaux wine is still in a state of over supply with warehouses packed; a new lease of life is urgently required and if the Bordelais, by lowering prices, can take advantage of the huge media machine of en primeur to capitalise, they have a chance to turn the worm. I believe they have severely undervalued the power of the en primeur message over the years – we live in hope!
Apart from the devastating fires we have seen in the U.S. in recent years, and Australia very recently, what does climate change mean for fine wine? Although winemakers are learning new techniques to deal with warmer weather the obvious and irrefutable consequence will be higher alcohol levels. Bordeaux 2018 demonstrated this in spades, with most wines well above 14%, and some around 15%. Although a lot of these wines can be well balanced, where the riper, more generous fruit copes with the higher alcohol levels, it does not take away from the fact there is a higher level of alcohol, and that’s not good. Most people, but especially connoisseurs, would prefer their wine to be around 13%. Other than the obvious benefits of scarcity, this is another good reason to favour older wines, they tend to be less alcoholic. I remember 2010 recording higher alcohol levels than we were accustomed to and causing quite a stir at the time - they seem perfectly natural now.
General (more for drinking)
South Africa has been receiving some very good press in recent times and quality is improving. It maybe not yet offering wines for investment, but it is certainly worth dipping a toe. I recently bought Meerlust’s Rubicon 2015 following some massive reviews, for not much money, for example.
Piedmont has had a string of good vintages, and there’s a lot of great quality Langhe Nebbiolo and Barbaresci on the market. Produttori del Barbaresco 2016s are both excellent and good value. Prices for these types of wines are the equivalent of generic Bourgogne.
Climate change is good for Beaujolais. The Gamay grape is a tough little number that needs plenty of sun and warmth. There has been plenty of investment in the region and quality and the number of wines providing pleasure is on the up. Do not overlook the versatile Chardonnay from the area either, a leaner style in general compared to the Maconnais and further north.
2018 Burgundy will provide plenty of easy pleasure but don’t believe all the hype from the merchants. Check alcohol levels, there are some that are too warm but in the main they, especially the reds, are generous.
Try and understand the critics and their scoring. At the Judgement of Paris in 1976, the range of scores, out of twenty, came in between two and seventeen. Some of today’s critics don’t really start at anything below ninety three (out of one hundred) and famous producers in half decent vintages are all north of ninety five. Big scores sell wines and are commercially attractive for nearly all involved – they just don’t necessarily reflect the truth! It has all gone way too far and this observer, for one, has had enough of it.
Wishing you well for 2020!
As ever, if you have any questions or would like to discuss anything wine related, do let me know.
by Wine Owners
Posted on 2020-01-10
A year end round-up by Miles Davis, 10th January 2020.
The wine market in 2019 was dominated by geopolitical factors, and as a result had a rather frustrating year and performance suffered. To re-cap these factors were: trade wars (particularly U.S. vs. China), U.S. tariffs on some European wines, political unrest in Hong Kong, and Brexit. Obviously, Brexit is far from over, but some confidence has returned since Boris Johnson’s majority victory on the 12th December as it spells a clearer way forward, however good or bad that may be! Sterling strengthened and the FTSE responded well to the news. Uncertainty has a terrible influence on confidence and trading, so the result was as good for business and markets within the U.K. as it could have been. This is significant for wine as London is still the centre for secondary market trading and Bordeaux prices have responded accordingly and have firmed up a little. It was too late to save the month, however, and indices slipped in December.
|| Current Value
|| 1 Year
|| 5 Year
|| 10 Year
| WO 150 Index
| WO Champagne 60 Index
| WO Burgundy 80 Index
| WO First Growth 75 Index
| WO Bordeaux 750 Index
| WO California 85 index
| WO Piedmont 60 Index
| WO Tuscany 80 Index
The wider WO 150 index was flat on the year, brought down by First Growth Bordeaux as all the other sub-indices here posted modest gains. Burgundy has at last taken a breather, in the second half of the year, having been on an incredible run for over ten years.
Tuscany has been the best performer in this group, led firmly by the ‘Super Tuscans’, with various vintages of Sassicaia and Tignanello occupying a lot of the top performance spots. Sassicaia has been the beneficiary of some great awards and very high ratings in recent times. All first-hand experiences and second-hand reports of older vintages of Sassicaia have been strong, so it can be concluded this performance is based on merit. Tignanello is a brand that just ‘works’, it delivers enough quality at the right price level and is highly recognised and it can be found on wine lists across the globe; it ticks a lot of boxes, something not easily achieved in the wine world. The huge production levels (127 hectares under vine – Pontet Canet is c. 80 and the average size of a Burgundy domain is 6.5!) has always dissuaded me from investing but maybe it’s time for a change of heart?
Piedmont has performed steadily, the index is +4.6% for the year, and there is no doubt interest in this area is on the up. Various vintages of Giacomo Conterno’s Monfortino took several places in the list of best performers. It is one of Italy’s very finest wines and given it is only produced in exceptional vintages it deserves to be expensive – and it is, at over £1,000 a bottle. The equivalent top dogs of Burgundy and Bordeaux make it look cheap however, and they are made every year, Petrus is significantly larger quantities too. The relative value of Piedmont has been a strong theme for 2019 and there is no questioning the quality. Here is a price comparison:
|| WO Score
|| Price (bottle)
| Giacomo Conterno Monfortino Barolo Riserva
| Giacomo Conterno Monfortino Barolo Riserva
| Domaine de la Romanée-Conti Romanée Conti
| Domaine de la Romanée-Conti Romanée Conti
| Petrus Pomerol
| Petrus Pomerol
Italy and Champagne escaped the wrath of the Trump administration’s 25% trade tariff imposed in October, unlike still wines from England, France, Germany and Spain under 14% alcohol. This may prove to be short lived as the U.S. is now considering more widespread tariffs across Europe, possibly as high as 100%. We await further news on the 18th February. The Champagne index was having a very steady year until December when it gave back half of its 5% gain.
The broad-based Bordeaux 750 Index had a decent year, returning 7.8%. The biggest gainers were largely wines that we would not consider ‘investment grade’ and generally towards the lower end of the price range. The appellation of Pessac Leognan contributes a surprising number, and Margaux. This demonstrates that there’s life in Bordeaux, just maybe more in the ‘drinking’ rather than the ‘investment’ category at present. Of the losers it is interesting to note a significant proportion of Sauternes among the largest fallers – buy to drink only is the continuing message.
by Wine Owners
Posted on 2019-12-09
I have just finished reading the latest threats relating to U.S. trade tariffs. In response to France’s application of a 3% digital services tax on heavyweight U.S. tech companies (you know the ones), DT and his representatives are considering recouping $2.4 billion from France’s premium markets; namely handbags, make up, certain cheeses and sparkling wines made from grapes. These tariffs will not be introduced until the new year if at all, so Christmas is saved at least. These products are possibly facing a 100% tax penalty so it’s out with Vuitton, Chanel, Roquefort and Krug and in with Coach, Maybelline, Monterey Jack and Napa Mumm – maybe Brexit isn’t looking quite so bad for us Brits after all!
How these lists are drawn up I do not know; the cheeses include Edam, Gouda and Parmesan which, as we all know, are not known for their Gallic qualities. Unlike still French wines below 14.1% alcohol, Champagne dodged the tariff bullet in October but may now be hit four times harder. These tariffs are messing up our market and we don’t like it! Tit for tat exchanges cannot be the way forward, and we look and hope for more stable trade agreements globally, but we must live with them for now. We have heard of several ‘swerves’ so far; U.S. buyers storing in Europe in the short term, importers identifying the highest alcohol level of any of a producer’s wine and employing that number universally across the producer’s range and even producers being asked to mark 14.1% on the label!
| Index || Current Value || MTD || YTD || 1 Year || 5 Year || 10 Year |
| WO 150 Index || 315.67 || -1.95% || 1.44% || 2.03% || 62.62% || 91.05% |
| WO Champagne 60 Index || 493.15 || 0.77% || 5.40% || 7.02% || 73.96% || 166.01% |
| WO Burgundy 80 Index || 744.26 || -0.61% || 6.08% || 7.35% || 147.25% || 239.18% |
| WO First Growth 75 Index || 274.38 || -3.16% || -2.76% || -2.65% || 48.45% || 64.45% |
| WO Bordeaux 750 Index || 366.5 || -2.23% || 8.20% || 8.98% || 69.82% || 111.68% |
| WO California 85 index || 679.17 || -3.41% || -0.14% || 0.83% || 98.95% || 296.39% |
| WO Piedmont 60 Index || 335.87 || -1.70% || 5.64% || 6.32% || 81.94% || 125.17% |
| WO Tuscany 80 Index || 312.88 || -2.43% || 6.86% || 10.01% || 61.16% || 86.68% |
As predicted last month, the indices are beginning to tell the story of recent headwinds. It is interesting to note that Champagne was bucking the trend - that will not continue now. All the other main indices drifted down; the Italian numbers surprise me as the wines we are currently seeking to accumulate have shown no weakness in price. Italy remains free of any U.S. tariffs although further scrutiny can be expected.
I expect there to be some continued easiness in the market in the short term, but I would not recommend selling now as I think it unlikely the market will retreat by 10% or more. Spreads have widened a little and bids are currently around 10% (or more) below the cheapest market price. There will indubitably be some very interesting buying opportunities in the coming months for those brave (and clever) enough and it is interesting to note rarer stocks already becoming available. Great 1990 Bordeaux is a perfect example; normally very scarce and difficult to buy, there is some volume available and it is a buyer’s market.
If some of the current headwinds, namely Hong Kong politics, U.S. tariffs and uncertainty surrounding GBP stemming from UK elections, and no deal Brexit fears, died down activity would increase, and the wine market would soon shore up. In the world we live in, with low (or negative) interest rates and where investors buy bonds for capital appreciation and equities for income, wine will make a lot of sense again soon. There needs to be a certain amount of unravelling of these issues first, however.
Please contact firstname.lastname@example.org with any questions.
by Wine Owners
Posted on 2019-11-15
This article is a republished version of one that appeared earlier in the year. Why? Because there’s another reason to sing about the virtues of Italian wines; the Trump administration have recently introduced a 25% tariff on all wines from France, Germany and Spain below a 14.1% alcohol level (Champagne is exempt). This has caused a loss in confidence in the French heavyweights and Bordeaux and Burgundy prices are on the slide. Italy’s cheese industry was the one selected to take the hit in this particular trade war, leaving their wine sector sitting pretty. We’ve been bullish on Italy all year, this adds further grist to the mill.
The Italians are not only the largest wine producing country in the world, they have been making wine for over four thousand years and cultivate over two thousand grape varieties on a multitude of different soils in twenty different regions! They are not bad at food either. Their climate seems to suit most of the finer things in life.
Italian wine being recommended is nothing new, but having it recommended as a collectable asset bearing an investment case is another matter. Ten years or so ago, a few canny collectors realised some of the ‘Super Tuscans’ (red wines typically made of a Bordeaux blend in Tuscany) such as Masseto, Ornellaia, Sassicaia (recent blog) and Solaia were ripe for decent returns. Traditionalists were a bit put out by these glossy new pretenders turning up on the Italian wine scene with their fancy French grape varieties and lots of marketing but it is fair to say they have helped the overall attention given to Italy and, as a result, the ‘Bs’ are blossoming – namely, Barolo, Barbaresco and, to a lesser extent, Brunello.
Wines from the best producers of Italy’s most venerable regions have been collected by the cognoscenti for years but now their appeal is becoming more widespread. The problems of Bordeaux, following an explosive China-driven period, have been well documented in the last decade and in its place, the smaller top-quality regions have been profiting. The indices for the last five years show Burgundy +120%, California +79%, Piedmont +76%, Tuscany +62% and First Growth Bordeaux +47%, the broad base WO 150 is +55% (all nice numbers!).
The reason for Burgundy’s performance is that old tried and tested wine world fundamental of genuine demand outstripping supply - who knew!? I think it is fair to say prices in Burgundy have been coming off the top for nearly a year now. Californian prices were a little more ‘forced’ and are in retreat now, but both these regions produce tiny quantities in comparison to the number of people looking to access these markets and gain exposure. Very widely held Bordeaux has been steady but is beginning to slide in this difficult environment. Piedmont and Tuscany are holding firm to gently positive.
The complex nature of Burgundy, California and Piedmont with their tiny (compared to Bordeaux) vineyards is attractive. This adds to the aesthetics, spurring on both the well-seasoned and newcomers alike, keen to learn more and invest time and money accordingly. More of the written word is more easily accessible to interested folk, and with platforms such as Wine Owners to trade on, the visibility of the product and the liquidity of the commodity has increased.
Grand Nebbiolo from Piedmont is yet to hit the big time, apart from a special few producers, but the word is spreading and there are ‘new’ names coming through; dedicated collectors and the inquisitive are homing in. It is a Burgundian-like network of vineyards, producers, families and reputations and you need to know what you are doing. Famous names like Conterno, for example, have six listings in my favourite reference book: Aldo, Diego, Fantino, Franco, Giacomo (the big one) and Paolo.
Some of the bigger names like Giacomo Conterno famed for his Montfortino vineyard, Giuseppe Rinaldi, Bartolo Mascarello, Bruno Giacosa and Gaja are already highly sought after superstars, with prices to match, but there are a host of others with reputations and demand beginning to swell; Brovia, Cappellano, Fratelli Alessandria, Sandrone, Voerzio and Vietti to name a few.
The ‘Super Tuscans’ of Bolgheri are much simpler to understand, like Bordeaux versus Burgundy, and are produced in larger numbers. The names mentioned earlier are virtually household names (in wine terms!), are less exciting right now overall but tend to deliver very steady returns.
Brunello di Montalcino, made from Sangiovese, is also comparatively easy to piece together in relation to Piedmont. Biondi Santi, Poggio di Sotto, Salvioni and Soldera are the big names with the fancy price tags. The secondary market for Brunello has not yet developed so, for now at least, it is a case of keeping a watchful eye although Soldera has been added to several portfolios already. There are many other less well-known names that have been attracting huge plaudits from the top critics that remain under the radar. This group haven’t matured into the darlings of the market, so far, and back vintages are cheap and well worth consideration.
There have been some excellent vintages in Italy in the last decade or so, attracting fantastic media coverage and now the battle-weary Bordeaux buyers and profit takers of Burgundy are moving in. Another reason for favouring Italian wines in the current climate is that the U.S. and Germany are the biggest export markets, so the market unlikely to be affected by any potential fallout from Brexit.
Most of all, however, these wines are barely scratching the Asian surface as yet and we all know what happens when that changes!
Miles Davis 15th November 2019
by Wine Owners
Posted on 2019-11-07
I wrote at the end of September that the market mood is sombre, it is a bit darker now. It is too early to be reflected in the monthly indices, but blue-chip Bordeaux prices are beginning to slide a little. The ongoing factors that have been keeping a lid on any sort of optimism, namely International trade wars, the Hong Kong political situation and Brexit have now been compounded by upcoming UK elections, in December, and therefore huge concerns over sterling, and US trade tariffs imposed by Donald Trump’s administration in retaliation on behalf of the airline industry (for Pete’s sake!). These tariffs are to the tune of 25%, added to the value of French, German and Spanish wines at 14.1% alcohol or below. Champagne is exempt - god knows why! One could argue that thanks to global warming there’s barely an investible wine made under that alcohol level these days but news like this tends to affect the market as a whole; people will not seek to differentiate one wine from another.
| Current Value || MTD || YTD || 1 Year || 5 Year || 10 Year |
| WO 150 Index || 321.96 || 0.02% || 3.46% || 3.67% || 67.21% || 101.28% |
| WO Champagne 60 Index || 489.4 || 0.07% || 4.60% || 6.22% || 70.83% || 170.94% |
| WO Burgundy 80 Index || 748.85 || 0.20% || 6.73% || 9.37% || 152.68% || 254.40% |
| WO First Growth 75 Index || 283.32 || 0.02% || 0.41% || 0.80% || 54.59% || 76.29% |
| WO Bordeaux 750 Index || 374.87 || 0.10% || 10.68% || 12.29% || 74.33% || 123.98% |
| WO California 85 index || 703.15 || -0.55% || 3.39% || 6.44% || 108.22% || 326.72% |
London based merchants have had little reason to be properly confident in the last few months and these latest two factors are enough to have toppled the balance. The same applies to private clients, be they drinkers or investors, but all players need the feel-good factor to make the wine market tick up. That is simply not around - UK consumer confidence is at its lowest point for six years, according to a recent YouGov poll. So, with the core of the market, in the form of London based merchants, cowering under their desks, the good folk of Hong Kong donning tear gas masks and fighting in the streets and with Uncle Sam’s citizens being asked for a further 25% in tax, there aren’t any hot spots of demand right now. These are all conditions that can, and will, change but for now it is tin hat time.
I have been arguing for a while that recent vintage (anything since 2005), highly expensive (albeit highly rated) wines from Bordeaux are still in huge supply. No one is drinking them as they are either far too young or just too expensive, fit only for the ‘money no object brigade’. Also, with the glut of ‘investment companies’ that existed during the glory days of the Bordeaux market, there are warehouses stuffed full of overpriced claret all over the land. Even the good guys of the wine investment world largely focus on very highly rated claret from good years, quite often without stopping to consider the price.
2009 and 10 First Growths have been my biggest sell recommendations so far this year, but I have expanded those thoughts and now, I would suggest that Bordeaux First Growths and equivalents since and including 2000 are a SELL; also, a lot of next tier down, Montrose and Pontet Canet ‘09 and ’10 for example, notwithstanding their incredible ratings. I would keep anything from 1990 and beyond due to rarity and would sit on the fence for anything in between, although I am sure that prices there will ease a little too.
I do not think the rest of the wine market will suffer to the same extent as Bordeaux, mainly because it’s not nearly so tradeable and doesn’t suffer from the over supply problem; Bordeaux is unique in this and with another great vintage around the corner (early reports suggest 2019 is going to be very good, but isn’t it always thus!) there’s another wall of stock on its way, probably much of it at the wrong price again.
Don’t get me wrong, I love Bordeaux and am very happy to accumulate and drink older vintages. For investing, I just prefer other regions right now, particularly Piedmont, Tuscany and vintage Champagne. Even in these tough trading conditions it’s actually quite difficult accumulating really good stocks of Piedmont at decent prices at the moment.
Below is a quick comparison between some great vintages of Mouton Rothschild versus Bartolo Mascarello, one of the best Barolo producers. Mascarello is not the household name that Mouton is but it is the qualitative equivalent, is produced in tiny quantities (easily less than a tenth of Mouton) and is held almost entirely by the cognoscenti who are likely to drink it themselves. Mouton, on the other hand, can be found in cellars from the cognoscenti to the cretini! The message is clear, and the relative bet to my mind is absolutely nailed on (as they say on the racetrack).
Even taking into account trading spreads and expenses I would happily recommend selling Bordeaux blue chips and reinvesting in other areas. The difference between the per bottle prices of equivalents elsewhere suggest there’s plenty of upside in the trade.
Miles Davis 7th November 2019
by Wine Owners
Posted on 2019-10-08
Is it time to hit the bottle?
At the risk of sounding like a stuck record, the market mood is sombre. It does, however, remain reasonably steady amidst a turbulent sea of macro factors.
Hong Kong is an important market for wine and the ongoing protests are a concern. The original cause of complaint, an extradition agreement between the territory and the Chinese mainland, has long since been retracted but the protests continue, becoming ever more violent. This is about democracy and freedom and the eyes of the world are watching. It is an uncomfortable position for China who cannot afford to handle the situation as perhaps it might in its own provinces but in the long term, remains a very powerful parent. Already the economic effects are being felt; officially occupancy rates in Hong Kong hotels are currently running at about 20%, unofficially they are in single digits. A quick internet search found a room in the territory for US$9 a night, including breakfast!
As we know, Hong Kong, apart from having its own burgeoning wine scene, is currently the gateway to the wine market of China, legally or otherwise. We expect China will open new free ports in time, but the current troubles may just accelerate that process. We think this is a short term problem but in the meantime, trade form that corner of the world is quiet.
U.S./China trade negotiations and Brexit shenanigans continue, and emerging markets are threatened by contagion emanating from Argentina. Thrown in the unrest in various parts of the Middle East and various other more localised scenarios, it’s a right old mess. And what does well in right old messes – physical assets! Here is the Gold price performance so far this year against the WO 150 index.
We’re not saying there is any correlation, delayed or otherwise, between wine and gold but recent financial history (since the last global financial crisis) has made physical and alternative assets increasingly popular.
We live in an era of negative real interest rates, where buyers of roughly a third of the world’s outstanding bonds will lose money if held to maturity and where even high yielding equities with strong balance sheets are not performing – all very sobering! With all this going on, is it time to hit the bottle?
Within the wine world, my investment themes remain the same; focus on regional allocation, combined with scarcity and relative value is the game.
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by Wine Owners
Posted on 2019-09-09
August was much like July with summer holidays being the prime concern for most people. The wider market has felt quiet, maybe because the Bordeaux market is still largely flat, but there are definitely pockets of excitement about and the broad-based Wine Owners Index was up 0.9%. Trade was brisk with Piedmont, Tuscany and Champagne dominating turnover at Wine Owners.
The solid, relative value investment case for the wines of Piedmont has created demand which, in turn, has led to us step up our sourcing efforts. Liquidity is tight, obviously one of the plus points in the investment case, but we have managed to unearth some lovely parcels, particularly some legendary Bartolo Mascarello vintages.
Sterling has remained weak due to the Brexit shenanigans, and this has finally translated into some positive moves for various wine indices. As we know, a weaker pound generally leads to increased demand in the sterling denominated secondary fine wine market, especially from U.S.$ based buyers. Little has come out of Asia, however, as continuing rhetoric surrounding the U.S./China trade wars rumble on and Hong Kong is still suffering from the most vocal political protests in its modern history. They (the people of Honk Kong) have even appealed to Mr. Trump to help!
The largest region within the wine market will always be Bordeaux and it is business in the wines of Bordeaux that is suffering the most from these continuing issues. Many of the other top wine regions are less affected by these global events and market conditions as the wines are less traded, and the supply and demand ratio in a different place. Bordeaux has been looking cheap versus its peers for some time now, and there’s a lot of bad news in the price but the stars need to start aligning. This can and will happen, but when is the big question!
by Wine Owners
Posted on 2019-08-20
A brief and holiday interrupted report for activity in July
The wine market continues to hold its breath. Boris fulfils (what somehow now feels like) his destiny and moves into Number 10 and the pound plummets. It has since recovered a bit but even so, the wine market didn't flinch. As we know, a weaker pound generally leads to increased demand in the sterling denominated secondary fine wine market, especially from U.S.$ based buyers, but maybe not during the hot days of summer? Certainly not when the U.S./China trade wars rumble on, the rhetoric becoming ever stronger, and most definitely not when Hong Kong explodes into the most violent scenes of pro-democracy protest in its modern history. The Brexit backdrop adds to the confusion, so no wonder little happens.
The largest market within wine will always be Bordeaux and it is business in the wines of Bordeaux that is suffering the most from this continued malaise. Many of the other top wine regions are less affected by these global events and market conditions as the wines are more scarce, with the supply and demand ratio is in a different place. Bordeaux has been looking cheap versus its peers for some time now, but the stars need to start aligning. This can and will happen, but when is the big question!
Despite these almost stagnant overtones, trade has never been brisker with July setting a record level of turnover. Numbers of users, bids and offers forever grow. Collectors looking to trim positions have been well accommodated by others adding and reorganising their cellars, something we are seeing a lot more of.
Burgundy continues to look for its feet, Champagne and Super Tuscans gently hum along nicely, and we’ve seen a little demand for some of the new world too.
Here at Wine Owners, Barolo dominated trading in July. Many vintages of Bartolo Mascarello changed hands, also many Bruno Giacosas, Riservas and otherwise. Fratelli Alessandria becomes ever more popular, as does Luciano Sandrone. And there were some big-ticket trades in Monfortino and Ca d’Morissio.
Miles Davis, 20th August 2019