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Ten years on: Neal Martin reviews Bordeaux 2014

Bordeaux
  • Neal Martin recently reviewed Bordeaux 2014 ten years on.
  • The critic noted that many of the wines have evolved faster than expected.
  • He declared it a Left Bank vintage and gave his highest score to Mouton Rothschild.

Vinous recently published Neal Martin’s assessment of Bordeaux 2014 following two consecutive tastings, including the annual Southwold 10-years-on event.

Martin’s overall impression was that the wines were ‘more unpredictable than other vintages’, and ones to ‘approach with modest expectations’. For him, many of them deserve drinking in the near future, but some are yet to deliver more.

On the question of Left vs Right Bank, the critic noted that the Left Bank has proven to be more consistent. When it comes to best-performing appellations, his pick was Saint-Julien.

Bordeaux 2014 ageing potential

Ten years on, the 2014 vintage has ‘evolved faster than envisaged’, according to Martin. The critic said that ‘it twinkled brightly in its youth, but many of its alumni were not predisposed toward longevity’. He further noted that ‘it certainly lacks the legs of, say, 2010 or 2016, perhaps even 2012 or 2017’.

Martin singled out wines that still have a life ahead of them and will be ‘intriguing to revisit at 15 years’, including Léoville Poyferré, Mouton Rothschild, Lafleur and Grand-Puy-Lacoste.

Favourite wines

For Martin, the wines that have ‘much more to offer’ and sit ‘up the hierarchy’ were Cheval Blanc, Figeac, Ausone and Pavie. ‘L’Eglise-Clinet, Lafleur and in particular, Vieux Château Certan, excel over in Pomerol, likewise Petrus and Clos l’Eglise,’ the critic added.

However, he warned that ‘none of the aforementioned ranks among their best wines’.

A personal favourite from Pessac-Léognan was Domaine de Chevalier. He also liked Pape-Clément and Haut-Bailly. His top-scoring wines can be seen in the table below.

Neal Martin's top-scoring Bordeaux 2014 wines

Mouton Rothschild received the highest score of 97 points. Martin argued that it was ‘contender for wine of the vintage’ and ‘one of a handful of wines that transcends the limitations of the season, partly due to the skills of former winemaker Philippe Dhalluin’.

The critic also said that ‘the 2014 Grand-Puy-Lacoste is outstanding and performed neck-and-neck with the First Growths’.

Bordeaux 2014 – performance since release

While the vintage may not sit up with the very best like 2010 or 2016, many of the wines offer relative value and a lower-than-average entry point into Bordeaux’s top brands.

Moreover, some have delivered handsome returns since release. Beyond the obvious performers of Carruades de Lafite (208.3%) and Petit Mouton (173.1%) and wines like Figeac (164.5%) which have benefited from changing classification, there is considerable growth to be found in some 2014s. For instance, Beychevelle has risen 165.4%, Calon Ségur – 113.4%, La Conseillante – 93.0%, and Canon-La Gaffelière – 80.3%. To see overall brand performances, visit Wine Track.

Bordeaux 2014 performance since release

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

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Inside the USA’s wine investment market

US wines

The following article is an extract from our USA regional wine investment report.

  • Today, the USA is one of the key fine wine investment regions.
  • Its share of secondary market trade has risen from 0.1% in 2010 to around 8% this year.
  • Demand has been stimulated by a string of good vintages in the past decade, high critic scores, and expanding distribution.

Today, the USA is one of the key fine wine investment regions. Its share of secondary market trade has risen from 0.1% in 2010 to about 8% this year, and an increasing number of previously overlooked wineries are now showing investment-worthy returns.

Inside the USA’s investment market

California has long been the driver behind the USA’s ever-growing presence in the fine wine investment landscape, accounting for roughly 99% of the country’s secondary market trade. Buying demand has been largely UK and US-driven and centred around the top names: Screaming Eagle, Opus One, Dominus, Harlan Estate, Promontory, and Scarecrow.

Price differentials

California is the second-most-expensive fine wine region after Burgundy, based on the average price of its leading estates. However, there are big differences in pricing between the region’s top names.

At the time of writing, the average case price of Screaming Eagle Cabernet Sauvignon is £39,117, compared to £7,399 for Promontory, £3,764 for Opus One, £2,773 for Dominus, and £2,719 for Ridge Monte Bello. To explore average trade prices, visit our indexing tool Wine Track.

Price performance

Prices for Californian fine wines have risen slowly and steadily. Over the last 15 years, the Liv-ex California 50 index which tracks the price movements of the last 10 physical vintages across five of the most traded brands (Dominus, Opus One, Harlan, Ridge, and Screaming Eagle) has outperformed both the Liv-ex 100 and Liv-ex 1000 indices. The California 50 is up 166.2%, compared to 71.6% for the Liv-ex 100 and 116.6% for the Liv-ex 1000. Moreover, over the long and short term, California has fared better than Bordeaux as an investment, yielding higher returns.

The best brands for investment

Among the most popular labels, Ridge Monte Bello has been the best-performing Californian wine, up 121.9% in the last decade. It has been followed by Screaming Eagle Cabernet Sauvignon with a 103.3% rise and Harlan, up 91.1%. All the wines in the chart below have risen over 80% in the last decade.

US wines performance

However, other producers beyond the most traded names have also been making waves. Caymus Cabernet Sauvignon has risen an impressive 154.8%, while Dunn Howell Mountain Cabernet Sauvignon is up 137.5% in the last decade. This data suggests that there is a significant number of American wines beyond the most popular names that can deliver healthy investment returns.

California: A 100-point region

Price performance has been influenced by ‘cult’ status and vintage quality. California regularly tops critic rankings as the region with the most 100-point wines. Relatively consistent climate has led to less vintage variation than in other dominant fine-wine producing regions. Major critic publications like Wine Advocate and Wine Enthusiast highlight 2001, 2007, 2012, 2013, 2015, 2016, 2018, 2019, and 2021 as particularly good.

To find out more about the investment market for US wines, read the full report here.

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Navigating currency volatility in the fine wine market

Currency volatility and fine wine
  • Buying demand for fine wine is impacted by the global economy, where currency volatility plays a significant role.
  • Fine wine indices are frequently quoted in sterling (GBP), making the currency’s strength or weakness a pivotal factor affecting both domestic and international transactions.
  • A stronger pound makes UK-sourced fine wines more expensive for foreign buyers, potentially dampening demand and leading to falls in the indices.

Although uncorrelated to mainstream markets, the fine wine market does not exist in a vacuum. Buying demand and investment interest are impacted by the global economy, where currency volatility plays a significant role.

For investors, understanding the impact of currency movements, especially in a market where prices and indices are often denominated in sterling, is crucial. Here’s how currency volatility influences the fine wine market and strategies investors can employ to navigate these turbulent waters.

The impact of currency volatility

Currency volatility refers to the fluctuations in the value of one currency relative to another. For the fine wine market, which is global, these fluctuations can have a pronounced impact. Prices and indices for fine wine are frequently quoted in sterling (GBP), making the British currency’s strength or weakness a pivotal factor affecting both domestic and international transactions.

When the pound weakens against major currencies like the dollar or euro, fine wine prices in the UK become more attractive to foreign buyers. This increased demand from abroad can drive up prices, as buyers look to capitalise on favourable exchange rates to purchase high-quality wines at lower relative costs. Conversely, when the pound strengthens, as is the case currently, fine wine prices can seem more expensive to foreign buyers, potentially leading to a decrease in international demand and a stabilisation or even fall in the indices that track them.

Real-world implications

Consider the aftermath of the Brexit referendum in June 2016, when the pound experienced a significant drop against the dollar and euro. This scenario offered a golden opportunity for foreign investors, particularly from the US and Asia, who found that their purchasing power had increased overnight. As a result, demand for fine wines priced in sterling surged, driving up fine wine prices.

The Liv-ex Fine Wine 1000 Index, which is the broadest measure of the market and tracks the price movement of 1000 of the most sought-after fine wines, showed upward price movement of 14% in the six months following the referendum. Its rise in sterling was uninterrupted until August 2017. In just over a year, the index rose 21.7%.

This trend was largely fuelled by foreign investors taking advantage of the weaker pound to expand their collections.

Sterling’s strength and its effects

On the flip side, periods of sterling strength present a different picture. A stronger pound makes UK-sourced fine wines more expensive for foreign buyers, potentially dampening demand. This has contributed to a fall in the Liv-ex 1000 index, denominated in sterling. However, when seen in other currencies, the fall in fine wine prices is less sharp.

Liv-ex 1000 index in different currencies

The Liv-ex 1000 index peaked in October 2022 in sterling; since then, the index has dipped 17.5%.

But the losses since its peak have been smaller in alternative currencies. The index hit its highest point in euro in June 2022 and has fallen 16.4% since. In US dollar, the index peaked in March 2023; since then, it has fallen 14%. In Japanese Yen, the Liv-ex 1000 peaked in May 2023 and has fallen 10% since.

A global market with local prices

While fine wine prices may be quoted in sterling, the global nature of the market means that prices inherently hold their value in alternative currencies. This resilience is partly because the value of fine wine is not solely dependent on currency movements but also on factors such as vintage quality, brand reputation, and scarcity.

For instance, a classic Bordeaux vintage will maintain its allure and value to collectors worldwide, regardless of short-term currency fluctuations. This universal appeal ensures that while prices in sterling may rise or fall with the pound’s strength, the intrinsic value of fine wines remains recognised across currencies.

Strategies for investors

Investors can leverage currency volatility to their advantage by staying informed about global economic trends and currency forecasts. Purchasing fine wines when the pound is weak can offer significant value, while selling during periods of sterling strength may maximize returns.

Currency volatility is a double-edged sword in the fine wine market, presenting both opportunities and challenges. Whether taking advantage of a weaker pound to acquire coveted wines or diversifying investments to mitigate risks, the key lies in informed decision-making and a keen eye on the ever-changing economic landscape.

Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

 

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The importance of wine storage

wine storage
  • Storage is arguably the most important factor in preserving the quality of a fine wine and is thus fundamentally linked to its value as an investment.
  • A well-documented history of storage and ownership can significantly increase a wine’s value, serving as proof of its authenticity and condition.
  • Storing wine in-bond has multiple benefits, including deferred taxes, easier international trading and guaranteed provenance.

Wine storage has undergone significant transformation over the years, evolving from traditional cellars in private homes to sophisticated, climate-controlled facilities that cater to the needs of serious collectors and investors. The way wine is stored can greatly impact its quality, and by extension, its value as an investment.

Why is wine storage important

A large part of fine wine’s performance as an asset is down to its ability to improve as it ages. If the quality increases in time, so does its value.

Storage is arguably the most important factor in preserving the quality of a wine. If a bottle is stored improperly, the opposite can happen. Fluctuating temperatures, exposure to sunlight, vibrations and humidity can all degrade the quality of the wine and lead it to lose its value.

By storing your assets in professional dedicated wine storage facilities, you can guarantee that when the time comes to sell, it will be in the best possible condition. This will give the final consumer confidence that the wine is of the expected quality, defending its future value.

The evolution of wine storage solutions

Historically, wine storage was the domain of underground cellars, designed to provide the cool, stable temperatures and humidity levels that wine needs to age gracefully. These cellars, often part of private homes in wine-producing regions, set the standard for ideal wine storage conditions: darkness, consistent temperature around 12-14°C (55-57°F), and relative humidity around 60-70%.

In recent decades, technology has revolutionised wine storage. Climate-controlled wine cabinets and refrigeration units can replicate the conditions of a traditional cellar, making it possible to store wine in any environment. Innovations such as dual-zone temperature controls, UV-protected glass doors, and vibration reduction technology have further enhanced the ability to preserve wine at optimal conditions.

Moreover, professional wine storage facilities offer a level of sophistication and security beyond what most private cellars can provide. These facilities are equipped with state-of-the-art climate control systems, backup power sources to protect against outages, and high-security measures to guard against theft. They also offer inventory management services, ensuring that wines are stored properly and can be easily accessed or audited by their owners.

For investors, the use of such facilities can enhance the value of their collection, as provenance – the history of wine’s ownership and storage – becomes increasingly important in the secondary fine wine market.

The role of provenance in wine investment

Provenance is a critical factor in the wine investment market. A well-documented history of storage and ownership can significantly increase a wine’s value, serving as proof of its authenticity and condition. Professional storage facilities often provide detailed records that can be invaluable in establishing provenance, making wines stored in these conditions more desirable to collectors and investors alike.

In contrast, wines stored in private cellars may lack comprehensive records, potentially diminishing their market value, regardless of their quality or rarity.

In-bond storage

Bonded status is what unlocks the secondary market for fine wine.

Storing wine in-bond means that the wine is kept in a secure warehouse under government supervision without the payment of duty or tax. For wine investors, this presents a significant advantage, as it allows for the storage of wine without the financial burden of taxes until the wine is either sold or removed for personal consumption. Typically, wines can be stored in-bond at their point of entry into a country or transferred to a bonded warehouse specifically designated for wine storage. The wines stored in-bond are trade-ready; they sit within the secondary market ecosystem and can be made immediately available for sale and collection.

Implications for wine investment

The ability to store wine in-bond has several implications for investors.

Deferred taxes: Investors can defer tax payments, improving cash flow and reducing initial investment costs. This is particularly beneficial for wines intended for resale, as the duty and VAT (value-added tax) are only paid if and when the wine enters the domestic market.

International trading: In-bond storage facilitates easier trading of wine on an international scale. Wines can be bought and sold multiple times while still in-bond, without incurring tax liabilities until they are finally withdrawn for consumption. This can significantly enhance the liquidity of wine investments.

Provenance and condition: Bonded warehouses are not only secure but are also designed to provide optimal storage conditions, similar to professional wine storage facilities. The rigorous documentation and oversight in these warehouses ensure the provenance and condition of the wine, crucial factors in maintaining and enhancing its value.

Market value: Wines stored in-bond are often more attractive to buyers, especially in international markets. The assurance of proper storage conditions and the ease of transfer without immediate tax implications make these wines more desirable, potentially increasing their market value.

Storing wine with WineCap

WineCap use London City Bond’s newest storage facility, Drakelow. Three and a half miles of tunnels were blasted out of solid rock, as part of the lavish refurbishment of this former nuclear bunker, which started operating as a dedicated wine storage facility in 2023. Highly secure with entirely natural permanent temperature control supported by the latest dehumidification equipment, Drakelow is the natural choice for maturing reserves.

Every wine in our storage facility gets its own unique identification number (UIDS), thus ensuring that each case has clear ownership.

The practice of storing wine in-bond in bonded warehouses represents a critical aspect of the wine investment landscape. As the wine market continues to mature, the importance of professional storage and provenance documentation is likely to grow, influencing both the strategies of investors and the broader dynamics of wine collecting and investing. Whether opting for a meticulously maintained home cellar or entrusting a collection to a professional storage facility, understanding the impact of storage on wine’s quality and value is essential for any serious wine investor.

Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

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How could 2024’s interest rates impact fine wine?

  • If interest rates increase or stay the same, there may be golden opportunities for savvy investors to fill their wine cellars for lower-than-average prices.
  • If the Bank of England starts to drop interest rates consecutively around May, we would expect the fine wine market to show signs of growth around autumn.
  • Rather than focus on short-term economic events, we encourage investors to buy high quality fine wines, and ideally hold them for at least a decade.

Today’s interest rates are 5.25% in the UK. That is a lot higher than most of us are used to. For example, in 2019 they were just 0.75%. But it is reassuring that they have not been cranked up even more over the past months. Consensus among most economists is that the rates will surely come down again in 2024. The question is, by how much?

Unlike the US Federal Reserve, the Bank of England is warning markets not to expect big cuts. As Reuter’s reports, its ‘policy stance assumes a slow fall in interest rates to 4.25% in three years’ time’. However, many economists think that the rates will fall sooner.

Contrary to the central bank, Goldman Sachs predict rates will dip below 4% by the end of the year, marking a drop of more than 1.25%. Experts at Deutsche Bank are almost aligned, anticipating a 1.0% dip in the same timeframe. Andrew Goodwin, chief UK economist at Oxford Economics consultancy, expects the bank to start lowering rates in May. However, other economists suggest that June is more realistic.

In this article, we consider what these different scenarios mean for fine wine investors. When to buy, when to sell and when to hold are all critical questions as we dive into 2024.

If interest rates increase or stay the same

Continued high rates would probably be unwelcome news for most fine wine investors. Dovish policies like this usually led to a stronger pound, making wine more expensive for international buyers if sourcing from the UK market.

Asian and American buyers are a significant part of the fine wine market and cutting them out would probably lead to a dip in prices, as supply outstrips demand.

High interest rates could also temper domestic demand. After all, when the economy shrinks, there is less money for luxury goods. Buyers may opt for better ‘value’ purchases.

The compelling interest rates of savings accounts could also tempt investors away from illiquid assets. Over the short-term, putting cash into a bank account could seem like a safer bet. Even though, of course, over the long-term, the inflation risk is severe.

Ongoing high interest rates would likely create a buyer’s market. For the first few months of the year, until May, we could expect this to continue happening. Around this time, there may be golden opportunities for savvy investors to fill their cellars for lower-than-average prices.

If interest rates decrease by 0.25% – 2%

The most likely scenario is that the Bank of England will gradually reduce rates, starting from late spring or early summer. Most analysts (including Deutsche Bank, Goldman Sachs and Fidelity) seem to be anticipating a drop of at least 1.0%, and the markets have already priced this into products and forecasts. As seen in the news recently, inflation seems to be cooling, creating the right environment for interest rate cuts. For fine wine investors, this makes for reassuring reading.

Shrinking interest rates will make other low-risk investments like gold or savings accounts less compelling. Investors will probably start to feel the pull of more assets with more generous risk premiums. During the second half of the year, if interest goes down, fine wine prices might slowly increase.

A growing economy usually comes with more money to pop Champagne and see the year through in style. We’d expect the fine wine market to perk up in this environment.

Lower interest rates would probably be welcome news for international investors, as this usually signals better exchange rates. In 2021 and 2022, the weak pound and strong dollar stimulated Asian and American markets, boosting fine wine prices.

If the Bank of England starts to drop interest rates consecutively around May, we would expect the fine wine market to show signs of growth by around autumn. Prices would probably begin to creep up and continue rising with each rate cut. This would balance out the market, likely creating more demand and opportunities for sellers.

If interest rates plunge by 2% or more

It seems unlikely that interest rates will ever return to their pre-pandemic lows. Some experts, like those at Fidelity, argue that the previous rates were even kept ‘artificially low’, and overdue a correction. However, as recent years have taught us, unexpected things can happen.

If interest rates nosedive by more than 2% over 2024, it would probably be exceptionally good for fine wine investors. Both global and local demand would likely increase, as we saw in 2021. With the cost of borrowing plunging, we could expect to see more budgets allocated to luxury products like fine wine, creating more of a sellers’ market.

Fine wine investors in 2021 already enjoyed the rewards that come with a weak pound and low interest rates. International buyers leap into the market, creating a surge in demand.

If the interest rates cascade down to 3% or less by the end of the year, we would expect to see demand outstrip supply, leading to a hike in fine wine prices. This would be welcome news for sellers looking to cash-in their returns.

In the long-term, does it matter?

These predictions cover interest rate hikes over the next twelve months. But the real returns of fine wine tend to come in the longer run. As the Liv-ex 1000 index shows, fine wine prices on average have nearly doubled since 2014.

Rather than focus on short-term economic events, we encourage investors to buy high quality fine wines, care for them properly, and ideally hold them for at least a decade. For us, this is the true beauty of wine; its value is mostly intrinsic.

If you’d like to talk to an expert about buying or selling fine wine, we are just a call or an email away.

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Assessing the Burgundy 2022 En Primeur campaign

Burgundy 2022
  • Burgundy prices continued to spiral downwards in January, falling 3.7%.
  • This created a challenging backdrop for the unfolding Burgundy 2022 campaign, which saw about 10% of producers reduce pricing year-on-year.
  • The current market dynamics offer investors a unique window to enrich their collections with both new gems and proven performers.

Burgundy took the spotlight at the beginning of the year with the unfolding 2022 En Primeur campaign. Already in our Q4 2023 report, we questioned the potential of the new releases to stimulate an otherwise dormant market. On the one hand, there was the excitement of the new mixed with high quality and quantity playing to the campaign’s advantage; on the other, much depended on pricing.

Market conditions and pricing challenges

Burgundy prices continued to spiral downwards in January, with the Liv-ex Burgundy 150 index starting the year with a 3.7% decrease. To say that this created a challenging backdrop for the new releases would be an understatement. Prices at release had to come down.

And partially they did. According to Liv-ex, about 10% of the top producers ‘lowered their prices year-on-year’. However, ‘about 40% raised their prices, even if only modestly’. Thanks to greater quantities, allocations were mostly restored.

Burgundy 2022 – ‘a treasure trove’

As the first releases landed, Burgundy 2022 enjoyed a positive reception from critics and trade. Neal Martin (Vinous) advised that ‘if your favourite growers’ price tags seem fair, then I would not hesitate diving in’. He described the 2022 vintage as ‘Burgundy’s latest trick: a treasure trove of bright ‘n bushy-tailed whites and reds in a season that implied such wines would be impossible, wines predestined to give immense drinking pleasure’.

Investment perspective and older vintages

However, prices for older vintages remain under pressure, creating buying opportunities for already physical and readily available wines. For instance, three of Burgundy’s outstanding long-term wine performers have all seen dips between 15% and 10% in the last year. Over the last decade, however, DRC Vosne-Romanée Cuvée Duvault Blochet is up 388%; Georges Roumier Bonnes Mares – 339%, and Armand Rousseau Chambertin – 279% on average.

Burgundy wines performance

Meanwhile, the Burgundy 150 index has decreased 16% in the last year. Still, the overall long-term index trajectory remains upwards, as the chart below shows.

Burgundy index

Searching for value

The current market dynamics offer investors a unique window to enrich their collections with both new gems and proven performers across older physically available vintages.

When it comes to the latest, the Burgundy 2022 En Primeur campaign presents a complex tapestry of quality, quantity, and pricing amidst challenging market conditions. Despite initial price pressures, the adjustments made by producers and the positive critical reception underscore the potential of the new releases. Neal Martin’s endorsement further elevates the vintage, suggesting that for the discerning buyer, Burgundy 2022 provides not just immediate drinking pleasure but also long-term investment opportunities.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

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Four years since Brexit: is the UK still an investment hub?

  • British businesses have suffered declines in EU trade.
  • Billions-worth of investment assets have left the UK, opting for EU states.
  • Bucking the trend, fine wine prices soared to heights of 43%.

By the end of 2019, 70% of Brits were already nauseous of the word ‘Brexit’. But behind the fatigue, there was real fear in the air too. As the customs rules came into effect in 2021, gridlocked lorries clogged the roads to Dover, paperwork mounted, and supermarkets shelves began to look increasingly bare. The end of the single market had begun. The past years have been sobering time. According to the latest poll in January 2024, 61% of Brits would vote to rejoin the EU, up from 55% in summer 2023.

But what about the investment markets, and the performance of fine wine? In this article, we are diving into some of the main impacts of Brexit so far.

Added complexity dampened profitability

81% of UK businesses are still struggling with Brexit admin. For wine traders, the paperwork for a single bottle can stretch to over 90 pages, adding significant workloads. UK manufacturers are particularly suffering, with 96% reporting that the new rules have ‘badly disrupted trade with the EU’.

More compliance means more costs. It is estimated that businesses have spent an average of £100,000 each just trying to export goods over the border in the past years.

The complications have also led to once-loyal European customers jumping ship, with the average enterprise missing out on £96,281 since 2020. Two in five UK manufacturers have experienced declines in export volumes.

‘Brexodus’ carried talent (and investment) out of the UK

It is little surprise therefore that busloads of businesses, staff and operations decided to relocate. Welsh wine exporter Daniel Lambert, for example, moved his company to France in 2022. Lambert supplies some of the biggest British supermarkets, including Waitrose and Marks & Spencer.

Dublin has been one of the major hotspots for financial services, snatching-up the UK’s crown as the English-speaking bridge to the EU. This ‘Brexodus’ as it came to be known was great news for European cities. Germany, for example, enjoyed a 21% increase in direct foreign investment in May 2023.

However, it did not bode well for the UK. By March 2022, 7,000 jobs within financial services moved to the EU. Investment funds left too, with 24 firms planning to transfer £1.3 trillion of assets. Funding for British markets faltered.

As a biproduct of Brexit, the supply of skilled EU workers dwindled too. Today, recruiting European talent is 44% more difficult for UK companies. December 2023 saw the launch of even stricter measures designed to curb the flow of foreigners, although it also introduced higher minimum wages for skilled workers.

Slow growth turns off investors

Brexit was accompanied by the Covid-19 pandemic, political instability, and war overseas. While it is difficult to untangle the impact of Brexit, the UK has been notably slow to recover compared to peers. The Eurozone, for example, has grown at more than double the UK pace.

Increasingly, data suggests Brexit threw a wet towel on the UK’s growth prospects. As Jonathan Portes, Professor of Economics and Public Policy at King’s College London, highlights, ‘both aggregate data and survey evidence strongly suggest that Brexit is at least in part responsible for the particularly poor performance since 2016, with investment perhaps 10% lower than it would otherwise have been’.

2024 analysis by the National Institute of Economic and Social Research corroborates, stating, ‘UK real GDP is some 2-3 per cent lower due to Brexit’. Each household is now £850 worse-off following Brexit, rising to £2,300 by 2035.

The retail wine market has suffered but not fine wine

Since Brexit, supermarket wine has had an estimated price increase of £3.50 per bottle. Perhaps in response, the government recently announced measures to ‘cut red tape’. The definition of wine will change to allow for wine mixing, lower alcohol volumes, and even pint-sized measurements.

The prices of fine wine went up too. Investment grade bottles, such as those traded on WineCap, performed exceptionally well during the turbulent Brexit periods. Many investors found fine wine hedged their portfolios against losses elsewhere.

The graph below shows the performance of the broadest fine wine market measure (Liv-ex 1000) over the past five years.

Fine wine vs FTSE 100

In the run-up to the customs changes, fine wine prices rose during mid-2020. Over the following two years, they saw an increase of 43%. This is in stark contrast to the performance of the FTSE100.

The returns didn’t end there. Because of fine wine’s unique tax status as a ‘wasting chattel’ in the UK, nearly all bottles are exempt from costly capital gains taxes. For those earning over £50,271 a year, this means savings of up to 28%.

To invest or not to invest?

Despite taking hits from Brexit, the UK is still an investment hub. Tourists are returning to London, businesses are battling through the headwinds, and gradually it is becoming clear that there needs to be more cooperation with the EU.

Throughout this turbulent time, fine wine has reached new heights. The (potentially Brexit-induced) combination of the weak pound and high dollar opened the floodgates for foreign fine wine investments. And the UK’s thriving tech scene also created inroads for savvy digital investors to trade fine wine. Investors have made the most of these glimmering opportunities to batten-down the hatches and shield their portfolios against some of the other Brexit difficulties.

If you are looking for a smooth way to invest in fine wine, our experts at WineCap are happy to guide you through the journey. Unlike Brexit admin, we are just a call away.

 

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‘Dragon’ wines for Chinese New Year

Chateau Beychevelle dragon boat
  • The Chinese zodiac has historically impacted fine wine demand in Asia.
  • 2024 is the year of the Wood Dragon, with previous vintages under the same sign being 2012, 2000, 1988 and 1976.
  • We examine the best wines from these ‘Dragon’ years and other associated labels.

As the Lunar New Year draws near, that of the Wood Dragon, the fine wine market is feeling the influence of the Chinese zodiac. Historically, the zodiac has had an impact on buying, particularly in Asia, with increased demand for wines from previous vintages carrying the same zodiac sign or those symbolically linked to it. Which will be the trending ‘Dragon’ wines this year?

Past ‘Dragon’ vintages

The last four ‘Dragon’ vintages were 2012, 2000, 1988 and 1976.

2012

In terms of growing season, the most recent 2012 ‘Dragon’ year was challenging in many fine wine producing regions, including Bordeaux and Burgundy, which led to mixed quality. However, it is widely considered as one of the greatest Champagne vintages this century, with Tuscany and the Rhône also excelling in some areas. Famous 100-point (Wine Advocate) wines include M. Chapoutier Ermitage l’Ermite from the Rhône (rated by Jeb Dunnuck), L’Eglise-Clinet from Bordeaux (William Kelley), Pingus (Luis Gutiérrez) from Spain and Screaming Eagle (Robert Parker) from California.

2000

The 2000 vintage was brilliant in Bordeaux with many of the wines now reaching maturity. This classic vintage saw Parker award Pavie, La Mission Haut-Brion and Pétrus 100-point scores, with Lafleur receiving the same perfect score from Neal Martin, and Cheval Blanc from Antonio Galloni. The 2000 was also another legendary year for Champagne, with highly rated wines including Krug Clos du Mesnil, Louis Roederer Cristal and Dom Pérignon P2. In Burgundy, the vintage was largely seen as one for early consumption due to low acidity, but many of the wines are now drinking perfectly. The appellations that shone were Nuits-Saint-Georges, Chambolle-Musigny and Morey-Saint-Denis.

1988

A great year for the sweet wines of Bordeaux, 1988 Sauternes and Barsac have stood the test of time. Initially considered a Right Bank vintage, Lisa Perrotti-Brown MW (The Wine Independent) recently wrote that wines ‘from Saint-Émilion, Pomerol, and Pessac-Léognan […] should be drunk soon’. 1988 is another vintage to drink soon in Burgundy that produced classic, long-lived wines with good depth of fruit. The year was much more abundant in Chardonnay than in Pinot Noir, and hence better for reds than for whites.

1976

Going back close to 50 years, the 1976 vintage was a mixed bag for much of the wine world. In France, Champagne and Alsace fared better than Bordeaux and Burgundy, and Germany enjoyed a fantastic year. The most significant event was the Judgement of Paris tasting, which put California on the fine wine map. In terms of 100-point wines, Robert Parker’s 1976 favourites were Penfolds Grange and Guigal Côte-Rôtie La Mouline.

Beychevelle – the most famous ‘Dragon’ wine

When it comes to associations, Château Beychevelle is an apt choice for the ‘Dragon’ year as its Chinese name means ‘dragon boat’. The wine’s label also depicts a ship with the head of a griffin. Its 2012 vintage is ‘one of the stars of St. Julien’, according to Parker, who described it as ‘elegant and powerful, rich and intense, but light on its feet’. He recommended drinking it between 2019 and 2051.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

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Q4 2023 Fine Wine Report & 2024 Outlook

WineCap Q4 2023 report

Our Q4 2023 report has now been released. The report offers a comprehensive overview of the fine wine market in the last quarter and a forward-looking perspective for 2024. In a landscape marked by correction and repositioning, it delves into the dynamic interplay of market forces, unveiling both challenges and opportunities for investors.

Report highlights:

  • The fine wine market is navigating 2024 amidst a correction phase, presenting a chance for strategic repositioning.
  • Fine wine prices (Liv-ex 100 index) experienced a 4.2% decline in Q4, reflective of market adjustments amid global economic uncertainties.
  • Increased risk aversion has redirected focus to classic wines and regions, with Bordeaux emerging as a standout beneficiary.
  • Bordeaux’s resurgence, driven by liquidity and a solid reputation, underscores the market’s adaptability to changing dynamics.
  • The upcoming high-volume Burgundy and Bordeaux En Primeur campaigns present opportunities for strategic investment, with pricing strategies holding the key to success.
  • Investors, seeking value and consistency, anticipate potential opportunities in the evolving landscape.
  • As an improving asset in diminishing supply, their emphasis should remain on long-term gains.

Click below to download your free copy of our quarterly investment report.

 

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Fine wine sustainability report (Part II): how can fine wine mitigate risk in a sustainable portfolio?

  • The second part of our report focuses on how fine wine can mitigate risk for sustainable investors.
  • By blending sustainability-linked bonds with fine wine, investors can shield some of their wealth from inflation while having access to a regular income stream.
  • The steadiness of fine wine can help to smooth out the overall performance of sustainable portfolios, hedging against the volatility risks of impact investments.

Fine wine has many qualities that make it an environmentally and socially sustainable asset, as discussed in the first part of this report. And we believe that it can offer even more value as a hedge for sustainable portfolios. Just as with traditional investing, each investor is different. However, there will be some common themes and risks. In this section, we analyse how fine wine interacts with some of the most popular sustainable investments, and where the assets can become greater than the sum of their parts.

Sustainability-linked bonds

For businesses to become sustainable, they will usually need to pay for new infrastructure. This is where bonds come in. Investors finance the projects and receive a regular income from the repayments and interest (known as coupons) over a set period of time. There are many examples of corporate and sovereign green bonds, but probably the most impactful is Orsted.

In 2017, Orsted raised 1.25 billion euros from investors to successfully transition from brown to green energy. The bonds last until 2029. Since then, Orsted has been named the world’s most sustainable company. Today 91% of the energy it creates comes from renewable sources. The aim is to be at 99% by 2025. For context, worldwide this accounts for just 13% of energy. Orsted has also just released a blue bond, which focuses on marine life and oceans.

Sustainability-linked bonds can be built around society as well as the environment. Research by Goldman Sachs found 65% of investors are interested in social bonds, with 29% already invested.

Bonds are a good and relatively low-risk way for investors to generate an income while doing good. But there are some downsides. The main issue is that as bonds set a fixed repayment schedule years – sometimes decades – in advance, inflation can reduce the purchasing power of the income over time. In a usual market environment, central banks aim to keep inflation levels to around 2% or under, which is priced into the bond. However, in recent years, it has shot up to double digits. This can slash real returns for investors, and potentially put them off green bonds.

We believe that fine wine can help to hedge against the inflation risk of sustainability-linked bonds. The two assets complement each other well, as fine wine is less liquid but inflation resistant. By blending bonds with fine wine, investors can shield some of their wealth from inflation while having access to a regular income stream.

Impact investments

There are some businesses and organisations that make a clear and measurable change, while delivering returns for investors. Some environmental examples include investments in sustainable waste management, building renewable energy plants or businesses producing meat alternatives. There are also social movements; for example, venture capitalist firms investing in women and people of colour, affordable housing developers or accessible childcare services. When investments make tangible improvements, they are usually known as impact investments (because they make an impact).

While impact investments can be almost any asset class or risk level, in general they tend to be on the riskier side. By their nature, they are usually fairly new ventures, and can also be subject to incoming regulations. This could mean that the stocks spring and plunge, making sustainable investors nervous.

Fine wine, by contrast, is a low-risk asset with little volatility. We feel that the steadiness of fine wine can help to smooth out the overall performance of sustainable portfolios, hedging against the volatility risks of impact investments.

Overall positioning in a portfolio

Fine wine should not be the star of the show, but more of a supporting act. It is often best placed as a hedge against other sustainable or impactful assets, especially those with inflation or volatility risks. Generally, wealth managers and investors keep fine wine allocations under 10% of the total portfolio.

Stay tuned for Part III – profiling the sustainable investor.