California is at a fascinating stage of its development on the international fine wine market and is a region to watch closely, merchants and analysts believe.
The US west coast state’s secret has been out for decades; it’s 45 years since the late, great Steven Spurrier’s ‘Judgement of Paris’, after all. Yet in 2021 there is a renewed sense of California as an emerging force on the fine wine market, despite various challenges ranging from extreme weather to tight availability beyond US shores.
Within the US itself, California is enjoying a good auction run. ‘We are seeing an uptick in Californian wines that is unprecedented in my 15 years in the business,’ says Charles Antin, Zachys’ head of auction sales.
‘The interest is a bit bifurcated – there is the very high end, the Harlan and the Screaming Eagle; but there is also a concerted effort by folks to seek out mature wines from classic wineries like Diamond Creek and Montelena.’
At the very top of the market, Matthew O’Connell, head of investment at Bordeaux Index, says it is important to consider the different dynamics of super-small-production wines traditionally released via producer mailing lists, such as Harlan Estate, Screaming Eagle and Colgin, as well as producers making larger volumes to different degrees, such as Opus One, Dominus or Ridge.
Prices fell on some ‘cult’ smaller production wines last year in pound sterling terms, O’Connell adds. But he believes this was mainly currency-led and California Cabernet’s journey is still quite positive in general. ‘We like the characteristics of the wines,’ says O’Connell. ‘[However] we’d like a more active secondary market.’
Ridge on the rise
In terms of price movement, ‘Ridge has been the standout in the last few years’, says O’Connell.
Using the merchant’s data from ‘executed transactions’ to create an index starting at 100 in the first half of 2018, Ridge Monte Bello 2013 has risen in value by 71% in the past three years. Harlan 2013 has risen slightly, and Screaming Eagle 2013 has dipped.
At Liv-ex, Ridge Monte Bello has also outperformed its peers on the California 50 index, which has flattened overall in the last two years. The trend reflects how Ridge has previously been undervalued, despite its strong international reputation, says Liv-ex co-founder Justin Gibbs.
Wider selection
A common issue for wine merchants outside the US over the years has been low availability of top California wines, but several market observers see signs of a shift.
Liv-ex saw a 150% increase in the number of California wine names traded by merchants on its global marketplace in 2020 versus 2019, although Gibbs cautions that it’s still early days for California on the secondary market.
The Bordeaux Place is increasingly prominent and sells several California wines to non-US clients. Opus One has been on the Place since 2004, but the list now includes Verité, Joseph Phelps Insignia and Harlan’s Promontory among others.
Georgina Crawley, business development director of UK merchant Goedhuis & Co, says the agency model is also something to watch. She says California has become a bigger part of Goedhuis growth plans in recent years, highlighting its deal to become UK agent for Eden Rift, a resurgent Chardonnay and Pinot Noir star in the Cienega Valley AVA. ‘To do that, we’ve got to have the demand,’ says Crawley.
Several observers note that investment going into California also suggests confidence in the market’s development. Just a few examples since 2015 include Chanel acquiring St Supéry, Alfred and Melanie Tesseron of Château Pontet-Canet in Pauillac acquiring Villa Sorriso (now Pym-Rae), LVMH and Constellation arriving at Colgin and Schrader respectively, and Champagne Louis Roederer buying Diamond Creek.
From California, then, there is clearly plenty to keep an eye on.
Monitor: California sales activity
‘California is experiencing another golden age,’ says John Kapon, chairman of auction house Acker. ‘Auction buyers have definitely revisited the California category in the beginning of 2021, as demonstrated by the growth in Acker’s California regional index of 7.39% in Q1.’
Kapon notes particularly strong demand for post-2000 vintages of Harlan Estate, Dominus and Screaming Eagle, and pre-2000 vintages of Colgin, ‘indicating that cult California wines, and California generally, have been buoyed by the greater success of the market’.
Liv-ex has repeatedly flagged increased trading on US wines, led by Napa, in the past year.
Back in 2015, Screaming Eagle accounted for 68% of California trades by value on Liv-ex. Last year it was 25%. ‘Still huge, given that volumes aren’t massive, but it’s a big change,’ says Liv-ex co-founder Justin Gibbs.
The total value of California trades on Liv-ex has tripled since 2015, he adds, although the average case price has dropped from £4,240 (for 12x75cl in bond) to £2,500 – indicating the market has sought value as demand broadens.
In volume terms, some of the most traded wines last year included Opus One, Caymus, Dominus, Spottswoode, Overture (Opus One), Napanook (Dominus), Lyndenhurst (Spottswoode), Othello (Dominus) and Realm Cellars.
The Bordeaux Index view
Fine wines & spirits specialists Bordeaux Index kindly sponsor this section of Decanter magazine, and provide their view on the market here.
We have seen significantly increased activity in the US over recent years – across all wines, to an extent, albeit it may not compare to, for example, Italy. And there is certainly movement towards greater understanding of and focus on smaller production wines such as Harlan, Hundred Acre and Colgin. New-release distribution of some larger production wines – Ridge, Dominus, Opus One – has changed, too, and this will likely become pronounced across the region over time.
Price performance away from Ridge has been relatively unexciting in the last 12-24 months – US tariffs have meant fewer domestic US sellers of the wines and therefore lower market activity, while at times GBP/USD has weighed on pricing, especially for ‘Screagle’.
In the context of changing distribution patterns and the aforementioned increasing interest in previously less well-known names, we prefer to own Ridge (still), Dominus and some of the above-named smaller production wines.
Tasted and rated for Decanter Premium
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