Tag: wine market

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Price ratio: comparing regional First Growths

  • We compare the price performance of Château Lafite Rothschild to other regions’ respective ‘First Growths’.
  • The rising ratio highlights the increased value to be had in the Bordeaux First Growths.
  • Today, one can get 29 bottles of Lafite for the price of Romanée-Conti and almost five for Pétrus and Screaming Eagle.

How many bottles of Château Lafite Rothschild can one get for the price of other regions’ respective ‘First’ wines?

With changing market dynamics at play that have seen the balance between Bordeaux and other regions change, we examine the price ratio between some of the most popular investment-grade wines.

Below we compare the performance of the Bordeaux First Growth Château Lafite Rothschild to Burgundy’s highest echelon Domaine de la Romanée-Conti, the Super Tuscan Sassicaia, the Right Bank Château Pétrus, the Californian cult wine Screaming Eagle, and the most in-demand Champagne, Dom Pérignon. These are all wines that symbolise and even transcend their geography.  In the same way that Lafite has long been the mainstay of Bordeaux, the other wines are bellwethers for their regions.

The ratio between these wines is somewhat reflective of broader trends within their respective regions. Over the last decade, the ratio has risen consistently, highlighting the increased value to be had in the First Growths, as other regions gather momentum.

How many bottles of Lafite for the price of DRC?

Today, one can get on average 29 bottles of Lafite Rothschild for the price of Romanée-Conti. The ratio has risen considerably since 2013 when one could buy just 14 bottles of Lafite for one DRC. It peaked in December 2022, when it stood at 30:1.

As the chart below shows, the Domaine de la Romanée-Conti index hit a record high in December last year. Meanwhile, the Lafite index has not seen any of the price volatility witnessed by DRC. Year-to-date, prices for both labels have dipped but the fall has been sharper for DRC.

The DRC:Lafite price ratio is somewhat reflective of broader trends within their regions. In the last decade, Burgundy emerged as Bordeaux’s main contender. After Bordeaux peaked at the end of the China-led bull market in 2011, buyers started to seek out other corners of the fine wine world and it was Burgundy that attracted the greatest attention. The allure of rarity and quality meant that demand quickly outstripped already tight supply. Prices for Burgundy peaked, while Bordeaux ran quietly in the background.

For Bordeaux, the period between 2013 and 2015 saw contraction at the tail end of the Chinese correction. The market turned again in October 2015, and since then, Lafite Rothschild has been the second-best-performing First Growth, with some vintages doubling in value. However, it has not managed to catch up with Burgundy’s stellar rise.

Left vs Right Bank

It is also interesting to compare performance within Bordeaux’s Left and Right Bank. Today 4.6 bottles of Lafite gets you a bottle of Château Pétrus, up from 3, ten years ago.

As the chart below shows, Lafite and Pétrus have followed a similar trajectory up to September 2021, when prices for the First Growth flattened while Pétrus continued its rise.

Similar to Burgundy, rarity plays a key role in Pétrus’ appeal and investment performance. Pétrus is produced in much smaller quantities (around 3,000 cases per year) compared to Lafite (around 25,000 cases). Despite commanding a higher price tag, the wine has considerably outperformed Lafite in the last decade.

Dom Pérignon vs Lafite Rothschild

Recent years have seen a surge in Champagne’s market share and price performance. This has been reflected in the performance of its most traded label – Dom Pérignon.

Produced in much larger quantities than Lafite and more widely available, Dom Pérignon has started to catch up with the First Growth. In the last decade, the ratio between them has doubled – from 0.2 to 0.4.

Champagne prices, with Dom Pérignon at the helm, have made considerable gains since the early 2020s. In the last decade, our Dom Pérignon index is up 120%, compared to 20% for Lafite.

Sassicaia vs Lafite Rothschild

Similarly, the Super Tuscans have been getting more expensive. The most liquid and heavily traded group of Italian wines, their performance has been further boosted by critical acclaim and brand strength, with Sassicaia at the helm.

The ratio between Sassicaia and Lafite has risen from 0.2 ten years ago to 0.42 today.

As the chart below shows, Sassicaia has seen stable and consistent growth. 2019-2022 was a period of upheaval for the brand, which benefited from excellent vintages that captured investors’ interest.

Screaming Eagle vs Lafite Rothschild

The price ratio between Screaming Eagle and Lafite Rothschild tells a story of increased volatility, which can largely be ascribed to the Californian cult wine. Screaming Eagle has seen bigger price rises, followed by sharper falls.

Today one can now get 4.8 bottles of Lafite for the price of Screaming Eagle, up from 2.7 a decade ago. The ratio peaked in February 2022, when it stood at 5:1.

California has enjoyed serious investment interest which has been reflected in its market share. Today the region holds around 7% of the fine wine trade by value and is the most important New World player.

While Lafite has come to represent better value when compared to other top wines, this is largely due to shifting regional market dynamics. The First Growth continues to entice buyers with brand strength, high-quality releases and returns on investment.

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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Cautious optimism for Australian wine amid tariff review

  • Australia and China have agreed to a suspension of their ongoing dispute over the steep tariffs imposed on Australian wine since November 2020.
  • The tariffs had a profound impact on demand and price performance of Australian wine.
  • Australia’s best price performers have risen over 40% in value in the last year.

Australian wine tariffs under review

In a significant shift that could redefine trade relations between Australia and China, the two nations have agreed to a suspension of their ongoing dispute over the steep tariffs imposed on Australian wine since November 2020. This development comes ahead of Australian Prime Minister Anthony Albanese’s forthcoming trip to Beijing, marking a potential thaw in the trade tensions that have severely impacted Australia’s wine industry.

While the Chinese government has consented to an expedited five-month review of the punitive duties, which have plummeted Australia’s wine exports from over $1 billion to a mere $12 million, there remains a cautious optimism. Despite this progress, industry experts predict that even if the tariffs are promptly revoked, the Australian wine sector, which has undergone substantial restructuring in response to the lost Chinese market, would still require approximately two years to recuperate and effectively redistribute its current surplus.

Impact on Australia’s wine investment market

The Chinese tariffs, ranging from 180% to 200% on Australian wine imports, had a profound impact on Australia’s budding secondary market. The country has historically been the second most important fine wine player from the New World after the U.S., enjoying greater demand than South Africa, Chile or Argentina.

After a record-breaking year of trade in 2020, Australia’s investment market shrank in 2021. The number of different Australian wines traded on Liv-ex declined 32.2% year-on-year, as demand decreased.

Fewer wines from Australia made it into the rankings of the most powerful brands in the world. Australia’s leading label, Penfolds Grange, dropped in the 2021 Power 100 rankings, from fifth in 2020 to 45th place in 2021. In last year’s edition of the rankings, the wine fell further – from 45th to 55th place, while Henschke exited altogether. Part of the reason is that Penfolds has historically been heavily reliant on the Chinese market. In an attempt to rebuilt tariff-hit business, earlier this year Treasury Wine Estates, owner of Penfolds, announced the introduction of its first China-sourced premium wine.

Australian wine price performance

Since the tariff introduction, prices for some of the top wines have dipped, creating pockets of opportunity. For instance, the average price of Henschke Hill of Grace is down 4% in the last year; similarly, Penfolds Bin 707 is down 9%. While their trajectories are different, the long-term growth trend remains, with over 90% rise in the last decade.

Some Australian brands have seen impressive price performance despite the ongoing trade tension. The table below shows the five best performers on Wine Track in the last year, which have risen between 31% and 41% on average. Clarendon Hills Brookman Syrah leads the rankings, with an average price per case of £1,042. Two Hands Aphrodite has been the second-best performer, up 39%.

The cautious optimism for Australian wine will likely affect its secondary market performance. As demand rises, so will prices. It remains to be seen if a potential tariff suspension will bring back the momentum to a region that has quietened down in the last three years but nonetheless remains an important New World representative.

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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The growing market for alternative investments

  • The market for alternative investments has seen robust growth owing to burgeoning demand for non-traditional assets.
  • Alternative assets offer a hedge against inflation, and often provide investors with higher returns.
  • Some of the main challenges when it comes to alternative investments are accurate valuations and liquidity.

Alternative investments, those that fall outside traditional financial assets like stocks, bonds, and cash, have garnered immense popularity among affluent investors. From classic cars and luxury handbags to fine art, these assets represent both a passion and a store of value. According to the results of our global wealth management survey, fine wine emerged as the most in-demand passion asset. This article explores the burgeoning market for alternative investments, with a special emphasis on fine wine, contrasting and comparing their attributes, risks, and potential.

Alternative investment landscape

Alternative investments, often tangible assets, are known for their rarity, craftsmanship, and cultural relevance. Watches, luxury bags, art, whisky, and fine wine fall under this category, offering diversification for investment portfolios.

The market for alternative investments has witnessed robust growth owing to rising global wealth and a burgeoning demand for non-traditional assets. According to Richard Bacon, Head of Business Development at Shard Capital, ‘in the last two years there has been a tangible increase in how accessible and democratized these assets have become’.

As traditional markets have faced increased volatility, clients have turned to passion assets to safeguard their wealth. Economic uncertainty and inflation have fuelled interest, as these assets tend to retain value over time and provide investors with higher returns outside of their traditional portfolios.

This can be noted in the performance of the luxury goods market, which posted a record year in 2022, reaching a market value of €345 billion, despite geopolitical tensions and macroeconomic uncertainty. This momentum persisted into the first quarter of 2023, achieving 10% growth over 2022, according to Bain & Company.

The luxury group Louis Vuitton Moët Hennessy (LVMH), which owns Champagne houses Moët & Chandon, Dom Pérignon, Veuve Clicquot, Krug, Ruinart and Mercier, also had a record year in 2022, and reported a 15% growth in the first half of 2023.

Alternative assets compared

While alternative investments have enjoyed growing popularity, each asset class operates by its own market dynamics. There are some notable differences and similarities, for instance, between fine wine, art and luxury goods. Below we outline some of the differences.

Investment nature:

  • Fine wine: A consumable and perishable asset produced in multiple quantities (vintage-dependent) with value appreciation due to age, supply-demand and quality.
  • Art: A unique, non-perishable asset, valuing subjectivity and aesthetic appeal.
  • Luxury goods: Tangible assets like watches and bags, offering functional utility and value based on brand prestige and condition.

Value determinants:

  • Fine wine: Producer reputation, age, rarity, condition, critic scores.
  • Art: Artist reputation, uniqueness, historical significance, and condition.
  • Luxury goods: Brand reputation, craftsmanship, condition, and rarity.

Risks:

  • Fine wine: Market fluctuations, storage conditions, and provenance verification.
  • Art: Market trends, authenticity, and condition degradation.
  • Luxury goods: Counterfeiting, fashion trends, and wear and tear.

However, all these assets share common grounds, including tangibility, scarcity and uniqueness driving value, a strong connection to culture and lifestyle, and being a hedge against inflation and economic uncertainty.

Market challenges and opportunities

Some of the main challenges when it comes to alternative investments are valuations and liquidity. Some assets may need longer time to trade compared to traditional investments. Values may fluctuate based on trends, and condition. It is often harder to value a single piece of art accurately, compared to fine wine, which is often made in significant quantities and cases regularly trade internationally.

The main opportunities in the alternative investment market are diversification, their potential for appreciation and pleasure and fulfilment beyond the monetary benefits. Alternative assets offer a balanced and diversified portfolio, mitigating risks from traditional markets. Meanwhile, rarity and cultural significance can result in substantial value appreciation. Beyond financial rewards, these investments offer emotional and aesthetic satisfaction. Navigating the market for alternative investments requires an understanding of the underlying dynamics, diligent verification, and a discerning eye for value.

To find out more about fine wine as an alternative investment, download our special report below.

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Is sustainable wine the next big investment trend?

  • Sustainability in wine encompasses various processes such as environmental stewardship, social responsibility, and long-term financial viability.
  • Sustainability appeals to a growing group of investors who want their money to do good while it grows.
  • Top wineries implementing sustainable practices include Bodega Catena Zapata and Château Pontet-Canet.

The wine investment market has diversified considerably in recent years, with sustainability becoming a core focus. As examined last week, environmental considerations are the number one reason why UK investors choose to invest in fine wine. Today’s article explores the criteria for sustainable wine, its appeal, risks and considerations, as well as the future prospects for this important market segment.

Defining sustainable wine

Sustainability in wine is a nuanced concept that goes beyond certifications like ‘organic’ or ‘biodynamic’ that you might find on a bottle’s label. These certifications are positive indicators but they do not provide a complete picture of a wine’s overall sustainability or its quality. In fact, while organic and biodynamic practices are steps in the right direction, they are not panaceas for all environmental challenges facing vineyards and wineries.

Truly sustainable wines are produced with a broader vision that encompasses not just environmental considerations, but also social and economic aspects. This holistic approach involves responsible land use, ethical labour practices, and a focus on long-term financial viability for producers.

Organic, biodynamic, and sustainable – what is the difference?

Organic wines are made from grapes grown without synthetic pesticides or fertilisers. Biodynamic wines take this a step further by integrating the vineyard into a self-sustaining ecosystem.

Sustainable wines, however, encompass a broader range of practices aimed at the long-term viability of the entire wine-producing operation. Various certifications, such as ‘Certified California Sustainable Winegrowing’, exist to label these wines officially. Organisations such as Sustainable Wine work to enhance clarity around sustainability in the industry as a whole from viticulture to packaging solutions and logistics.

The appeal of sustainable wines

Sustainability appeals to a growing cohort of investors who want their money to do good while it grows. Investing in sustainable wines satisfies this ethical imperative, thereby adding another layer of attraction to the investment.

Studies indicate a rising demand for sustainable products, including wine. This increased consumer demand means greater sales potential and, by extension, a probable rise in value for these wines over time.

Sustainable wines often come with compelling stories of environmental stewardship and community support. This narrative adds a unique selling proposition that can boost brand value and investment potential.

Risks and considerations

Like any investment, putting money into sustainable wines is not without risk. Market volatility, consumer preferences and supply and demand can impact returns as with any other investment-grade wine.

Another risk lies in the potential for ‘greenwashing’, where a wine’s eco-friendly credentials can be exaggerated. Investors must perform due diligence to ensure they are backing genuinely sustainable ventures.

How to invest in sustainable wines

The first step is comprehensive research: utilising online resources, expert reviews, and consumer reports to assess a wine’s investment potential and sustainable credentials. Diversifying your portfolio by including a mix of sustainable wines from various regions and price points can mitigate risks and increase the potential for rewards.

Pay close attention to ratings from renowned wine critics and industry experts. A high rating can significantly impact a wine’s market value.

Sustainability pioneers

Several wineries around the world are setting the bar high for sustainable practices. Frog’s Leap in Napa Valley is known for its organic and dry farming techniques. Germany’s Weingut Wittmann has also embraced organic farming and natural winemaking processes. In Argentina, Bodega Catena Zapata stands out for its sustainable farming and research into high-altitude winemaking. Château Pontet-Canet in Bordeaux is another success story, having converted to biodynamics in 2014 after various setbacks in 2007. Their journey underscores the long-term dedication needed for truly sustainable winemaking.

Future outlook

From water-saving technologies to renewable energy, the wine industry is continually adopting more sustainable practices, pointing to a robust market future. Experts predict the demand for sustainable wines will only grow, particularly as younger generations who prioritise sustainability come of age.

Sustainable wines present a captivating new frontier in wine investment, promising both ethical satisfaction and financial gains. As with any investment, there are risks, but the burgeoning market for these wines, coupled with their unique branding advantages, makes them a trend worth watching. For investors willing to do their homework, the opportunity is ripe for the picking.

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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The brands to watch in the 2023 autumn La Place de Bordeaux campaign

  • La Place de Bordeaux is a three-tier global wine distribution system with origins stretching back 800 years.
  • The autumn La Place de Bordeaux campaign sees the release of over 100 different wines from around the world.
  • Discover the brands released via La Place that have made the biggest gains over the past decade.

La Place de Bordeaux is a global wine distribution system that originated 800 years ago in France. The network was originally a hub used just for Bordeaux’s finest wines, where the château would sell to négociants who then sell to merchants.

In recent years, the system has considerably expanded its operations. Other than the spring Bordeaux En Primeur campaign, today La Place releases wines from other parts of the world in the autumn.

Over 100 different wines from Argentina, Australia, the USA, New Zealand, Austria, China, Italy, Spain, South Africa, Uruguay and French wines from Champagne and the Rhône have joined the marketplace since the first non-Bordeaux release of the Chilean brand Almaviva in 1998.

What is driving the La Place expansion?

By selling through La Place, producers have the opportunity to build a global following for their brands, benefitting from the négociants’ extensive reach and expertise in promoting and allocating wines to different markets. Meanwhile, this process guarantees the wines’ provenance, reduces risk, and effectively manages supply and demand.

Négociants also benefit from the expansion of the system beyond Bordeaux by diversifying their revenue streams and reducing their dependency on the châteaux. This is especially true in recent years, which have seen a declining sentiment for buying Bordeaux En Primeur (for more, see our En Primeur Report: Bordeaux 2022 – Unfulfilled Potential).

The transformation of La Place de Bordeaux also reflects the shift in broadening buying patterns in the fine wine investment market.

La Place brands to watch

This autumn will see the release of close to 120 wines from around the world through La Place de Bordeaux.

Some of the most anticipated releases each year include the Super Tuscans Solaia, Masseto and Bibi Graetz, Californian cult wine Opus One joined by estates such as Inglenook, Joseph Phelps and Promontory, the Chilean Almaviva, Vinedo Chadwick and Viña Seña.

Australian wine, which has faced challenges due to the ongoing Chinese tariffs in recent years, has also been aided by the network, with brands such as Penfolds and Jim Barry making waves.

La Place brands

*Explore the performance of different wines on Wine Track, our comprehensive fine wine index that enables you to identify investment grade wines, spot trends and wine investment opportunities.

The table above shows some of the best-performing wines released via La Place over the past decade. These wines, available at various price points, have delivered an all-round positive performance over the past five and ten years.

Rothschild & Concha Y Toro’s Almaviva has seen the most impressive price performance over the last decade, up 132%. Almaviva prices tend to rise with age, and the highly anticipated 2021 vintage is expected to be among the first releases of this autumn’s campaign.

In conclusion, the network’s continually broadening selection showcases its ability to adapt and thrive in a fluid market, acting simultaneously as an indicator of shifting consumer preferences and investment opportunities. As négociants broaden their range and producers tap into this distribution channel with global reach, the impact is poised to resonate well beyond the borders of Bordeaux.

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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Q2 2023 Fine Wine Report

Our Q2 2023 report has now been released. The report examines the macroeconomic factors affecting fine wine demand, the Bordeaux 2022 En Primeur campaign, recent winery acquisitions and other industry news.

Key findings include:

  • UK and US stocks experienced a positive upswing, but a note of caution prevails for the second half of the year.
  • Major fine wine indices drifted in Q2, partly due to stronger sterling.
  • Fine wine demand remains solid, with wealth managers and financial advisors predicting it is set to increase.
  • Bordeaux enjoyed sustained interest in Q2, due to the release of the high-quality 2022 vintage.
  • The high release prices, however, led buyers to older vintages of comparable quality and the majority of the best-performing wines in Q2 were Bordeaux.
  • Marchesi Antinori took full ownership of Napa Valley’s iconic winery Stag’s Leap, while Joseph Drouhin expanded its Burgundy vineyard holdings.
  • New World releases will likely dominate the Q3 headlines.

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