Italian wine investment: Tuscany and Piedmont

Considering it has one of the oldest viticultural heritages in the world, and vies for top position with France every year as the leading producer of wine by volume, interest in wine investment is a surprisingly recent phenomenon. One reason for this is that – unlike the established secondary markets for fine Bordeaux , Burgundy , Champagne and Rhône – only two of Italy’s 20 winemaking regions produce large proportions of ‘fine wine’: Tuscany and Piedmont . [subscriber-content] Tuscany Tuscany has led the way for Italian fine wine since the advent of the SuperTuscans in the 1970s. The first notable SuperTuscan was the Cabernet Sauvignon-based Sassicaia in Bolgheri. Made for years for private consumption by owner Marchese Mario Incisa della Rocchetta, it was finally released onto the market in 1971 (the famed 1968 vintage). Tignanello followed shortly after; made by Piero Antinori, Mario’s nephew, it was the first Chianti Classico-style wine made entirely from noble red varieties and aged in barriques. [caption id="attachment_452390" align="alignnone" width="630"] Tignanello bottles[/caption] A slew of other SuperTuscans subsequently hit the market over the next few years, made by producers confident that they could produce better wines outside the restrictive DOC legislation. Without a recognisable denominazione on the label to fall back on, however, and without the support of the region’s consorzios (representative bodies), these producers relied on their own marketing strategies and individual reputations. Despite the challenges, SuperTuscans began to gain popularity, welcomed as exotic alternatives to the cellar staples of Bordeaux and Burgundy. By the early 2000s, SuperTuscans were in vogue and highly desirable. In 2011, the fine wine market suffered a 0% major correction, shedding approximately one third of its value over the course of the subsequent three years. The biggest impact of this was felt by Bordeaux which, in 2010, had accounted for a record 95.7% of all trades by value - but by the time of writing in December 2020, the region’s wines account for just 42.2%, according to figures from Liv-ex. [caption id="attachment_452385" align="alignnone" width="630"] Ornellaia bottles[/caption] The rise of Italian wines It was in this climate that Italian wines found a toe-hold on the fine wine market. In 2011, Italy represented less than 2% of market share by value, according to Liv-ex, but by 2019 that share had risen above 8%. The number of Italian wines traded had also increased dramatically, from fewer than 100 SKUs in 2011 to more than 800 in 2019. This increase in popularity and diversity can be largely attributed to buyers seeking alternatives after Bordeaux’s record-high values began to plummet in mid-2011. SuperTuscans were a natural choice: most – though not all – are made from Bordeaux varieties such as Cabernet Sauvignon and Cabernet Franc; they have established brand appeal akin to Bordeaux’s first growths; and most Bordeaux and SuperTuscans are made in sufficient volumes to allow them to be readily purchased and traded. At the time they also offered good value in comparison to Bordeaux. Enter Piedmont By 2017, the fine wine market had largely recovered; however, the landscape was no longer dominated by Bordeaux. Collectors disillusioned with Bordeaux were not only picking up cases of fine Italian wine, but also driving demand for Burgundy as diversification became a watchword for wine investment. Prices for the top wines of the Côte d’Or soon went stratospheric as the few cases of each wine were snapped up on pre-allocation. And here begins the story for Piedmont, which up until 2017 had largely escaped the gaze of collectors. In 2020, however, the region accounts for about 40% of all Italian wines traded on Liv-ex by value. As with the divergence from Bordeaux to SuperTuscans, the spotlight began to shift from Burgundy to Piedmont, as Burgundy buyers were priced out of the market and sought value and availability elsewhere. Similarities between the low-production, high-quality monovarietal Nebbiolos of Barbaresco and Barolo, and the Pinot Noirs of the Côte d’Or attracted buyers seeking complex expressions of highly delineated terroir. [caption id="attachment_452382" align="alignnone" width="630"] Gaja winery, Piedmont[/caption] A fortuitous run of great vintages was the final piece of the puzzle for Piedmont, showing the wines in their best light at exactly the right time to impress its growing audience. While Tuscany experienced slightly more variable conditions, Piedmont enjoyed a run of excellent vintages between 2006 and 2011. Although 2012 was difficult, 2013 continued where 2011 left off and, as Stephen Brook wrote in his Barolo 2016 report in March 2020 : ‘Even though the 2015 vintage had been met with acclaim, it seemed to many that the 2016s were even better – an impression confirmed after tasting the 2016 Barolos.’ Italian wine investment performance Had you the opportunity to purchase a case of Giacomo Conterno’s Monfortino Barolo Riserva 1990 20 years ago, you would be doing rather well on paper today. At the time of writing in December 2020, the 1990 vintage of this extremely rare wine – only made in the best years and in tiny quantities of fewer than 600 cases – has increased in value by 902% since it first appeared on the market in September 1999: a rather dizzying profit of £10,824 per case (12x75cl), before fees. But until a buyer for your wine is found, there’s no way to release this value – and this is where Piedmont in particular has had difficulty in the past. Its low level of secondary-market trading – a consequence of low production volumes combined with high levels of domestic consumption – has made its wine values particularly volatile, with large spreads between buy and sell prices. [caption id="attachment_452386" align="alignnone" width="600"] Sassicaia[/caption] An analysis of market data provided by Liv-ex reveals how Piedmont has eaten into Tuscany’s monopoly on Italian fine wines for investment. In 2016, SuperTuscans accounted for nearly 60% of Italian wine trades by value, but by the end of 2020, this share had been reduced to just over one third, with Piedmont largely filling the void. Investment potential When considering investment potential for Italian wines, one must consider not only desirability (brand/winemaker appeal; production volume; critics’ scores, etc), but also vintage quality. Giacomo Conterno’s Monfortino Riserva 1990 mentioned above is a perfect example of how these factors can work incredibly effectively in tandem. Another example from the same year is Giuseppe Mascarello’s Monprivato Barolo 1990. Monprivato is one of Barolo’s most esteemed vineyards, and Mascarello owns all but 0.87ha of it. Valued at £465 (per 12x75cl bottles) when it first appeared on the market in April 2000, the wine has since increased in value by a monumental 2,054.84%, or £9,555 before fees. Other factors can come into play too, and ‘unobtainium’ can have a significant effect on values – as discussed above with reference to Burgundy’s best wines. The 'unobtainium' factor In the following case, however, the unobtainium factor relates to the estate owner and legendary winemaker Bruno Giacosa, who suffered a stroke in 2006 and sadly passed away in 2018. His Falletto, Vigna Le Rocche Barolo Riserva was a star performer in its own right, a cult wine made only in the best years and recognised by its famous red label. The 2001 vintage had already achieved impressive growth of 291.67% (£3,500 before fees) since its release in March 2007 up to the end of 2017. [caption id="attachment_452383" align="alignnone" width="600"] Bruno Giacosa label[/caption] But Giacosa’s death in January 2018 was the catalyst for accelerated growth throughout 2018, the wine increasing in value by a further 63.83% (£3,000) in just 12 months. This likely reflected buyer realisation that the 2001 was the penultimate wine made by Giacosa’s own hands, as 2004 was the final vintage he bottled before his stroke. At the time, the 2004 charged an 80.76% premium and the 2001 therefore represented good value to buyers. By November 2020, interestingly, this gap had narrowed to 23.93%. Tignanello SuperTuscan Tignanello is one of Italy’s biggest international success stories when it comes to fine wine. Produced in volumes capable of slaking the thirst of restaurant- goers and wine lovers around the world, it’s a prime Italian example of liquidity: volume is high, quality is high, demand is high, and therefore it’s easier to sell. The 2001 vintage, released in February 2004, has increased from a release price of £330 to £1,080 in November 2020, a change of 227.27%. The 2006 vintage, released at £500 in March 2009, had gained £900 by November 2020, an increase of 180%. Tuscany is of course home to plenty of other investable gems too. The 2001 vintage of top-tier SuperTuscans have all seen strong gains since their releases in 2004: Tignanello (+227.27%), Solaia (+259.72%), Guado al Tasso (+279.75%), Sassicaia (+324.62%), Ornellaia (+325.45%), Fontodi’s Flaccianello (329.73%) Masseto 2001, meanwhile, has increased in value by a much more impressive 644.86%, no doubt thanks in part to its much more limited availability and very high scores from critics. Looking ahead It’s telling that Liv-ex’s most traded wine by value in 2020 was Giacomo Conterno’s Monfortino Barolo Riserva 2013, with Sassicaia 2017 and Tignanello 2016 also featuring in the top 10. If 2020 wasn’t the year that Italy got a firm grasp of the markets, it was certainly the year that gave it a leg-up. In December 2020, Italy’s market share of fine wine trade by value stood at 15.3%, up from 8.8% just a year earlier. This can largely be explained by US trade tariffs on many European wines, which are still set at 25% at the time of writing, stifling many ‘bread and butter’ fine wines such as Bordeaux and Burgundy. Italian imports have been left unscathed by this tax hike and have consequently picked up market share. The key question is whether a Biden administration will reduce or reverse Trump’s October 2019 tariff impositions. If the tariffs remain, there’s a real possibility that Italian fine wine will continue to increase its market share as US buyers find value in Italy; and as demand continues to rise, it’s possible that values will follow suit as supplies are stretched. An opportunity, perhaps, for investors. [breakout] Italian wine investment superstars Figures provided by Liv-ex, based on current market prices for 12x75cl format. Prices correct as of 30 November 2020.

Tuscany Masseto, Toscana 2001 £9,996; +644.86% (August 2004-November 2020)

Fontodi, Flaccianello della Pieve, Colli Toscana Centrale 2001 £1,272; +329.73% (October 2004-November 2020)

Ornellaia, Bolgheri Superiore 2001 £2,340; +325.45% (January 2004-November 2020)

Sassicaia, Bolgheri Sassicaia 2001 £2,760; +324.62% (January 2004-November 2020)

Tignanello, Toscana 2001 £1,080; +227.27% (February 2004-November 2020)

Petrolo, Galatrona, Toscana 2004 £1,632; +221.26% (December 2006-November 2020)

Biondi-Santi, Riserva, Brunello di Montalcino 2004 £4,290; +96.43% (February 2011-November 2020)

Piedmont Giuseppe Mascarello, Monprivato, Barolo 1990 £10,020; +2,054.84% (April 2000-November 2020)

Giuseppe Rinaldi, Brunate-Le Coste, Barolo 2004 £4,812; +1,133.85% (May 2008-November 2020)

Giacomo Conterno, Monfortino Riserva, Barolo 1990 £12,024; +902% (September 1999-November 2020)

Bruno Giacosa, Falletto, Vigna Le Rocche Riserva, Barolo 2001 £7,262; +505.17% (March 2007-November 2020)

Gaja, Barbaresco 2006 £2,872; +185.77% (June 2009-November 2020)

[/breakout] Liv-ex is the global marketplace for the wine trade. It has 475 members in 42 different countries, and supplies them with the tools they need to price, source and sell wine more efficiently [/subscriber-content] You may also like: 1996 Piedmont: A retrospective What makes a wine collectible? Michaela Morris: My top fine wines of 2020 Chianti Classico alternatives: Top Tuscany IGT wines