September 2014 Wine Investment Report
James Pala MD Sure Holdings
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In this months update I would like to comment on the Bordeaux wine market prices. The first growth Bordeaux wines are still under performing in general but there has been some good news that warrants recognition. Despite how many first growth vintages dropped over the past two years there have been some vintages that have gone up instead of down. Below are two examples I wanted to share with you, that may come as a surprise.
Charts courtesy of Liv-ex
Lafite Rothschild – Vintage 1998 which was 5200 pounds 2 years ago and recently traded on the London Vintners exchange at 5300 pounds/case.
Mouton Rothschild – Vintage 2001 was 2600/case 2 years ago, currently the market price is around 2800/case.
Let us not deny that Bordeaux has lost a lot of ground over the last few years and prices are at an all time low, confidence in the first growths especially has been affected. But the question on all our minds is how long can prices continue to decline for?
Upon review of the charts there are some indicators that we may start to see growth in the Bordeaux market soon. If you have money to move in this market and you’re prepared to wait a few years, I believe there’s a very good chance you will prosper. The younger vintages that have dropped substantially in the last few years like the 2005 and 2006 vintages can be picked up for what look like bargains and have had some great reviews and high ratings from critics renown. There is no major reason why prices should drop further I’ll give you some examples of these younger vintages that I am talking about:
Vintage 2005 – Lafite Rothschild traded at 5800/case back in 2007. Recently it traded at 5600/case on the exchange.
The 2005 Vintage – Mouton Rothschild traded at 3350 back in 2007 and recently exchanged hands with merchants at 3300/case.
The 2006 Vintage – Mouton Rothschild traded at 3300 back in 2007, recently it traded at 3000/case.
Many of the first growth vintages like the ones highlighted above are back at the levels they were at when the wines were first released during their En Primeur campaign and in some cases they are lower. So what does it all mean?
Well, you can buy these wines now cheaper than what they were 6-7 years ago before they were even bottled.
Another factor to consider is majority of the owners of these wines from the last six to eight years will be NOT BE prepared to sell them at a loss. And why should they? Top quality vintages from the most prestigious wineries in the world. Most people would rather drink them than give them away at these prices. Prices are certainly more in line with older vintages that people are prepared to pay for and as the charts show some older vintages increased in value over the course of the last two years.
Does the market still believe they are over priced? That only remains to be seen, but given their current levels I would say they promote as a fairly decent investment if you are looking at a three to five year plan. A prudent decision would be to place 5-10% of your portfolio into this first growth market – It’s food for thought. Prices do look like they have finally bottomed out. In any market when it looks so low and the market has no real reason to go down further then it’s usually a sign that it is about to turn around and go the other way.
If you would like to pick up some first growths at their current levels, do get in touch with me and I will be happy to make a recommendation.
Feel free to shoot me an email if you have any questions or comments.
