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  1. Wealth
July 19, 2011

Bordeaux Index: Wine gives sweeter returns in 2011

By Spear's

London, 18th July 2011 – In contrast to the volatility experienced in the global financial market, investors in fine wine have enjoyed steady gains of over 13% during the first six months of the year

London, 18th July 2011 – In contrast to the volatility experienced in the global financial market, investors in fine wine have enjoyed steady gains of over 13% during the first six months of the year. Bordeaux continues to dominate the fine wine market, accounting for over 70% of turnover by volume and nearly 85% by value.

“The health of the wine market in general is reinforced by the fact that Q1 sales rose 15%,” said Gary Boom, founder and MD of fine wine merchant Bordeaux Index.

“Asia remains a key market, accounting for 45% of total sales, with Lafite remaining the wine of choice. Although the region’s share of the global market fell slightly, the overall numbers are solid, given the relative weakness of the 2010 En Primeur campaign.”

Globally, buyers continued to shift focus from the prestigious ‘First Growths’, with a resulting price squeeze for ‘Super Seconds’.

The top performing Super Seconds included the favoured vintages of La Mission (01/04) soaring over 60%, Ducru Beaucaillou (00/03) gaining 40%, while the likes of Pichon Lalande (03/06) and Pontet Canet (03/06) climbed 30%.

“Amongst the First Growths there were notable performances from the likes of Haut Brion (06/01/04), appreciating by over 25%, and several recent vintages of Mouton (04/98/03) came in only slightly lower,” said Gary Boom.

But the downgrading of the 2008 Bordeaux by the highly influential critic Robert Parker prompted several sharp corrections, with falls of 17%, 15% and 16% for Lafite, Mouton and Latour respectively.

“What I found particularly interesting was that for the first time in many years, it was the power-house Lafite that occupied most of the loss positions,” said Gary Boom.

“Taken in isolation, Lafite’s fall is not particularly dramatic – but declines of around five percent for both 2003 and 1986 provided a worthwhile reminder that prices can go down as well as up.”

And in a shift that has been a long time coming, Mouton has resumed its position as the most traded First Growth.

“Part of this ‘promotion’ is undoubtedly attributable to a weakening of Lafite sales but the real story is one of strong and consistent demand, something reinforced by the similarly robust performances of both Haut Brion and Margaux,” observed Gary Boom.

The highly anticipated Bordeaux 2010 en primeur – predicted by many to be a ‘vintage of the century’ – has provided as much puzzlement as reward.

With a weakened pound, price rises of between 10-15% and plenty of competitively priced 09s available, prospects looked dim for this year’s en primeur.

The campaign has seen sales volumes fall by approximately one third – but the total value of sales has shrunk by less than 10%, reflecting both higher prices and a bias towards the most expensive wines.

“Where there was a combination of critical praise and fair (ish) pricing, there’s abundant demand for the upper echelons of Bordeaux,” said Gary Boom.

“This is a marked contrast to the likes of Cos d’Estournel, Leoville Las Cases and Palmer. Here sales volumes dipped markedly as potential buyers were left without a compelling reason to part with their cash.”

The aggregate numbers clearly suggest the Bordeaux system – the chateaux and the negotiants – are withholding a great deal more stock than in previous vintages.

It’s a move some observers claim risks permanently ostracising much of the traditional consumer base.

“The risk of holding so much of their own stock ought to give these aspirant proprietors considerable pause for thought,” said Gary Boom. “Time will tell but one has the feeling that this may be the year that Bordeaux’s self-confidence slipped over to hubris.”

As to the perennial question of whether Asian buyers are interested in en primeur, this year’s numbers are providing considerable encouragement.

“The proportion of sales to Asia by volumes increased from 24% to 32% this year,” said Gary Boom. “Similarly, the proportion of Asian sales value jumped from 32% to 45% for the 2010 en primeur.

“So the answer is clearly ‘Yes’ – Asia does buy en primeur. But its buying is both smaller and more narrowly focussed than its physical wine buying activity.”


Key performance figures:

(1) The Bordeaux Index
June + 1.4%
Year to date + 13.4%

(2) FTSE 100
June – 0.7%
Year to date + 0.8%

(3) Dow Jones
June – 1.2%
Year to date + 7.2%

(4) Gold
June – 2.0%
Year to date + 7.2%

(5) Oil
June – 3.5%
Year to date + 19.1%

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