by Wine Owners
Posted on 2014-12-17
Anticipating buying opportunities
The subdued state of the Bordeaux market offers buying opportunities, such as First Growths from 1996 and right bank wines from 1998 – superb vintages that are coming into an early stage of their long maturity phase. Because of this demand ought to pick up. 1996 in particular looks fair value following declines of 40%, with the exception of Lafite which still commands a premium.
Volatility creates buying opportunities in any market, and wine is no different. When sentiment is negative, markets will tend to overshoot as they readjust. In wine, the very greatest vintages, comprising wines that are most susceptible to high prices at release, are often those that are sold off the hardest.
One such vintage that has been sold down over the last 3 years and yet which is one of the ‘greats’ is 2005. Whether the market has yet hit bottom is hard to judge. What is sure is that 2005 is the next great vintage following 1996 and 2000 that has a huge drinking window.
2005 may have been under-rated by key critics relative to 2009/2010. The likelihood of this vintage seeing improved ratings is greater than a downside, and any broad-based re-rating of them as they start to show their true class will spur price rises. Spring 2015 could well be the turning point for this vintage.
Back vintages of right bank Bordeaux have started to pick up, with the top of the market leading the way. This may have a positive effect on the peer group of right bank, merlot-dominated top wines. Typically production volumes are much lower than the big Medoc (left bank) estates, and scarcity exerts a greater influence on market pricing of older vintages.
This is an extract of our report 2015 FINE WINE PREDICTIONS
by Wine Owners
Posted on 2014-12-15
Bordeaux re-evaluated
Bordeaux’s steady decline from its broad-based peak in the summer of 2011 has led investors to reappraise the role of red Bordeaux, and especially the First Growths within their portfolio.
Whereas before 2010/11 top red Bordeaux might have accounted for 90-95%+ of all wine investments, these days diversification is seen by many as much more important as a hedge against volatility.
Market watchers now see buying opportunities on the back of 4-5 year lows and expect the Bordeaux market to move up in the next year. This is a likely scenario in respect of Classed Growth Bordeaux from the best years and First Growths from the lesser years, barring near-term risks posed by economic and geo-political externalities.
Sentiment towards Bordeaux will improve as prices bottom out. From 2008 onwards many new participants entered a frothy market. Several have now exited (e.g. Wine Networks owned by a Korean Telco) and many of the cold-calling wine investment companies that profited from a fast-rising market have gone bust – all of which have caused price falls to accelerate as stock was dumped. This unwinding has been necessary and essential for the market to resume normal functioning.
Looking ahead, prices of back vintages will start to firm up as channel inventories need to be refilled and as consumer confidence slowly rebuilds. Calling the bottom of a market is notoriously problematic, but back vintages are looking more interesting, right now, than at any time in the last 5 years.
Futures market in the balance
The new Bordeaux release of the 2013 vintage was the damp squib that everyone predicted and confirmed that the en primeur (futures) market is moribund.
Looking forward, 2014 is promised as a good to excellent vintage that would normally see prices rise. This time around it will need to be different: a moment of truth for the en primeur system.
As long as top wines are favourably priced at a discount to 2013 releases, en primeur may spring back into life, and the rest of the secondary market will be given further impetus. To this end a strong dollar will help.
The question is whether Chateaux still value the role the consumer plays as stockholder or whether that role is being taken for granted. There are only two reasons to buy young wine before it is bottled: either because it will be difficult to find in the future or because it’s better value to buy early. For Medocs and Graves, scarcity isn’t an issue, so it has to be much cheaper than when it is available in bottle for consumers to buy en primeur.
This is an extract of our report 2015 FINE WINE PREDICTIONS
