Investment analysis August 2011
- Monday 18 July 2011
The wine investment market is centred on Bordeaux but could there be change in the air?
Rising sales and a surge in Asian bidders at the most recent Hospices de Beaune auction suggests that buyers may broaden their horizons beyond the usual suspect. Burgundy’s Domaine de la Romanée Conti (DRC) has a proven track record but could it pay to delve deeper?
Admittedly Bordeaux still represents 95% of trade on the Liv-ex fine wine exchange and both demand and prices for Burgundies have not increased significantly in the past year.
However, with fine wine merchants and auction houses revealing a groundswell of interest in Burgundy among Asian collectors during the 2009 vintage campaign, there is a strong case for looking again at the Côte d’Or’s prospects for investment purposes.
The Côte d’Or, however, is more like a minefield than a gold mine. It cannot rely on the brand equity of big names such as Lafite, Latour or Margaux, and each grower produces tiny volumes compared to their Bordeaux compatriots.
This fragmentation is a blessing and a curse, explains Nick Pegna, MD of Berry Bros & Rudd Hong Kong: ‘Burgundy is a huge subject and very compelling; it can interest people but also daunt them.’ In addition, the economics of selling Burgundy don’t stack up for fine wine merchants. Berry Bros, for example, might be allocated 300 cases of a Bordeaux first growth at £7,000 a case on release but only have 25 cases of grand cru Burgundy to sell at £1,000, says Pegna.
Tiny production levels in Burgundy mean those who buy Burgundy en primeur tend to be collectors that hold on to their wines for drinking rather than selling them on the secondary market, hence the small number of trades.
Gary Boom, MD of Bordeaux Index, rightly calls it ‘bitty’. DRC has been one of the only serious investment prospects outside Bordeaux, but that could be expanding.
There are names that are repeated time and again by the experts: Jayer, Rousseau, Roumier and Dujac. Charles Curtis MW , head of Christie’s in North America and Asia, reports strong interest in Roumier and Rousseau’s top wines as well as Jayer’s Vosne-Romanée premier cru Cros Parantoux.
However, there are very few premiers crus that are worth buying for investment purposes, and you are wise to stick to the grands crus. Even then, there remains some caution that even these wines should become an asset in your portfolio.
Pegna admits: ‘For investment, I don’t feel comfortable recommending anything other than DRC.’
Vintage is clearly an important factor when buying Burgundy, and to maximise returns, you should focus on the very best vintages only. For example, if you are holding on to any 2004s, you may have trouble shifting them, but other vintages, including 1996, 1999, 2001 and 2003, are doing well.
If you do want to play safe and buy DRC, older vintages are becoming increasingly popular in Asia and might be worth acquiring following a successful sale of older stocks at Christie’s in March, says Curtis.
‘The Asian market is now opening up to older vintages, which would have been impossible to sell a couple of years ago. Provenance and storage conditions are becoming more important than the condition of
’If you are looking to diversify your portfolio, and decide to explore Burgundy beyond DRC as an investment prospect, there are simple rules to follow, succinctly summarised by Simon Davies of Fine & Rare in London: ‘Buy the best wines you can afford from the best growers.
Stick to the best grands crus, and occasionally premiers crus like Les Amoureuses, Clos-St-Jacques and Cros Parantoux. Buy in the best vintages. Wherever practical, buy original-case lots as early as possible post-release and store them in-bond with a wellknown storage company.’
As ever it’s not rocket science.