The Wine Market Investment Report 2nd Quarter 2021 (in which we discuss how boring the wine market is, and why boring is good!)
by Juliette Martin
Miles Davis, July 2021
If you are a regular reader, I would not be offended if you stop here as I am only likely to be repeating myself. The overall market is dull, unexciting, but mainly just plain boring. Sure, there are excitements here and there, an attractively priced en primeur release for example, see a snapshot report of that here, but let us stick to boring. What I mean by boring is that the market continues to be slow and steady and gently rising, not booming and busting, peaking and troughing etc. etc. It is calm, well underpinned by global demand - and a good place to be. To date, my two best investments (not including fine wine obviously!) have been in businesses that, could possibly have been described as boring: pensions administration and company records management - what a snore! They never shot up, or plunged, they just gently attracted more clients and more revenue, month by month, year by year, and have both done very well indeed. So, as you can see, I like boring.
Obviously, I jest but the message is clear. Recently I have even found myself telling clients desperate to sell something to hold on – what sort of a salesman does that!? And of course, I could turn out to be wrong. But… I happen to think the market has had its shock absorbers tested to the max and has survived and prospered in this low interest rate environment. In the last couple of years, we have had political turmoil in Hong Kong, the madness of Trump and his trade tariffs (now all lifted), Brexit and the dreaded C word. Clearly people are still drinking fine wine, perhaps possibly finer wine than normal, as less hard-earned cash is being spent in restaurants. The undercurrent to the whole market is firm, blue chip Bordeaux is well bid and is enjoying its best time for quite a while, and all of this is being achieved in an unfriendly exchange rate environment. GBP strength normally stifles wine prices in the secondary market, and vice versa.
Champagne continues to attract a lot of interest and we have traded significant chunks of Krug ‘04, and Bollinger Grand Année Rosé ’12 recently. As I have written before, I very much like Pol Roger’s Winston Churchill cuvée as it not only delivers on the great price/quality ratio, but it is made in tiny quantities compared to its peers. The ’08 has done very well indeed for followers in recent months, up 20% in the last year (price is 12x75cl):
The 2006 now looks good value in comparison at c.£800 per 6 with stocks dwindling, and I have no hesitation in recommending that. I drank the ’02 recently and it was sensationnel! (C. £1,050 per 6). The ’04 also looks to offer value.
It would appear Rosé Champagne is having a great time of it, with Sainsburys reporting sales growth of nearly 200% recently. I mused on the subject a few weeks back (read the article here), and fear I have been missing out over the years!
Highly priced trophy Burgundy has been selling well again after a bit of a lay off through ’19 and ’20 and sensibly priced DRC, Rousseau etc. do not remain on the platform for long. The gap between the very top level of superstars and the middle tier seems to be widening again, surely pointing to value in the more mid division?
White Burgundy deserves another mention, especially given some reasonably heavy frost damage in the region earlier this year. This will lead to lower supply levels and therefore higher pricing. Load up on 2017s from the best stables if you can find them! The best stables continue to outrun the pack, but can this continue for ever? I doubt it.
Highly priced Piedmont has been slightly disappointing of late, whereas lesser money bets in the area have been rewarding. Surprisingly, superb releases from 2016 from some of the biggest names in the region are still available to buy at release price levels, notably Giacomo Conterno’s Cascina Francia and Bruno Giacosa’s Falletto. The former is extraordinary given Conterno declined to make a Monfortino in 2016 due to ‘stylistic’ matters, seems weird to me! Monfortino, acclaimed as Italy’s greatest and certainly most expensive wine, is made from vines within the Francia vineyard and the latest release from 2014 is offered at £750 a bottle, the Cascina Francia ’16 (an epic vintage in case anyone needs reminding!) at £200. I understand that it will never be a Monfortino, but still…There is still a lot of relative value in Italy, as described here, with mega points for little money readily available. For more money and mega points, the Super Tuscans keep travelling well.
Faring much better in recent months is the performance of wine prices from the Rhone Valley, not surprising given that wines from this region have a lot in common with the Italian theme I mention. There are some mega stars, Guigal’s single vineyard Cote Roties, producers such as Rayas and Bonneau (both Chateauneuf du Pape) Jean Louis Chave (Hermitage), Allemand (Cornas), and Jamet (Cote Rotie) to name a few that trade for big money, but otherwise there are some very affordable high scoring monsters that come (very) relatively cheaply. Even the big money wines trade at a massive discount to their Bordeaux and Burgundy equivalents. The one wine that really sticks out for me is Hermitage La Chapelle from Jaboulet. This extraordinary terroir is capable of producing the very finest wines ever made, the ’61 and ’78 for example (discuss). The last eleven vintages have averaged 97 points and are offered at an average price of £125 per bottle, an absolute snip in fine wine terms!! They also offer a fine second wine, La Petite Chapelle, for those who want a gentle introduction. Seasoned investors have had the Rhone pushed at them before and it has not really worked for them, but I think we live in different times now.
Having said that, the last part of the quarter was stifled by an uninspiring 2020 Bordeaux en primeur campaign and most merchants seemed relieved when it was over. The Covid induced price cuts of 2019 genuinely sparked interest in the old dog, but it was largely back to business as usual from the Bordelais and the bashing started all over again. The campaign started well with a great release from Cheval Blanc but by the end the crowd were throwing fruit and veg onto the stage. As diversity spreads there are more and more stages to consider, and good returns are derived from proper opportunity. I am very pleased to see the grand vins of Bordeaux performing well in the secondary market as it lifts the market as a whole but the slavish obsession that the wine industry pays en primeur saddens me – so, it’s back to other business!
As always, please feel free to call to discuss, or bowl me some fast balls. And have a very lovely summer!
Miles 07798 732 543