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Chateau d’Yquem – 6 months on - 1st April 2011
By Thomas Gearing - Taken from the March 2011 issue of the Wine Investment Newsletter


Up until 6 months ago the sweet wines from the Sauternes and Barsac were banned from being imported to China because they contain more than 250 mg of sulphur per litre. Following the announcement that the wines from famous estates such as Chateau d’Yquem, Climens and Rieussec would officially be allowed into China many commentators predicted that these great wines would experience strong demand from the Asian market which would in turn lead to increasing prices. However, in the short time since this announcement there has been little to no movement in the price or demand for these great wines. This has somewhat gone against the natural conclusion that the wine would gain favour within the Chinese community because of its taste, marketability and prestige – so we are looking into the current state and future prospects of Chateau d’Yquem to better understand its position in the Asian market today.

If we look at the current trading prices of recent vintages of Chateau d’Yquem it’s clear that there has been little to no movement in price since September. Below is a cross section of notable Yquem vintages:

Recent speculation however has seen certain UK merchants talk of large orders being made from the Far East, with one well known merchant claiming to have sold 600 75cl bottles and 1,200 half bottles in one trade to a Chinese customer. Perhaps the demand from the Asian market has only started to take hold now after a 6 month delay, considering there would have been little or no presence of either marketing or physical bottles in the Asian market before September. The world record sale last May at a Christie’s auction in Hong Kong which saw the ‘Liquid Gold Collection’ of 128 bottles and 40 magnums go under the hammer seems to refute this argument however. The lot sold for a staggering HK $8 million (US $1,032,336) – which clearly indicates strong knowledge and appreciation for the wine, as well as demand.

Perhaps the answer lies within the ownership of the Chateau: Louis Vuittion Moet Hennesey (LVMH), the world’s largest luxury goods conglomerate, which bought the Chateau along with St. Emilion Grand Cru Classé Cheval Blanc in the last decade. Their marketing ploy has been somewhat mishandled in the last few years and recent vintages have been released at very high prices in comparison to previous years. Despite this, there is no doubt that parent company LVMH are in the best position to exploit the Asian market – as many of their brands dominate the most-wanted list of Hong Kong, Beijing and Shanghai’s finest. Their well established business network was further enhanced with the acquisition of a majority stake in the Wenjun Distillery - which make a premium baijiu (the traditional spirit of China). These extensive distribution lines within China will undoubtedly help to push both Chateau d’Yquem and Cheval Blanc.

Looking more specifically at the natural marketability of Yquem to the Asian market, it seems this wine has all the natural components for success. Ice wine is extremely popular in China already; China itself is home to the largest Ice Wine estate in the world at Liaoning as well as being a top importer of Ice Wine from Canada. With the many stories of Petrus mixed with coca-cola and Lafite mixed with lemonade, there will certainly be some degree of truth to this, and with this in mind a naturally sweet wine in the style of Chateau d’Yquem would suit the palate!

The wine already has an interesting translation in Chinese, often cited as a pre-requisite for popularity in the Chinese populace (Lafite/Lynch Bages):

The characteristic of Chinese language is that they will try to make the proper nouns with different level of meanings – with Yquem being the perfect example. 滴金 ( 滴 = drop & 金 = gold ) the pronunciation of 滴金 in Chinese is "dict gum" which is similar to d'yquem in French.

Considering the golden hue of the wine itself, the name lends itself very well to the burgeoning wine enthusiasts from the Far East and could well see Yquem emerge as the Lafite of white wines.

Looking more specifically at the vintages of Yquem which offer the best value and growth potential, it’s notable that certain vintages of Yquem have not been scored by Parker – 2002 and 2004 – with the 2004 being of particular interest considering Jancis Robinson and other critic’s high scores. There is no doubting the quality of this vintage, but without the Parker score it has been able to fly very much under the radar! The watershed vintage of 2001, which scored 100 pts and received widespread acclaim, currently trades around £4,500 per case. There could be fantastic growth potential in even the top vintages as in comparison to the hugely popular first growth wines, they are at a considerate reduction. With all this being said, the demand for the wine needs to increase, but if it does considering the Chateau has an average annual production of 60,000 bottles the implication on the prices of back vintages could be significant.

Verdict?

There is no doubt the ingredients are there and the potential is huge, but at the moment it is a case of getting involved before it starts moving.

What we recommend?

If you’re looking for the safe option then look no further than the ‘top vintages’ of 1990, 1996, 1997, 2001, 2007 and 2009.

If however you are looking for a value stock then the 2004 vintage, which currently un-rated by Parker but of undoubted quality, could be the pick at around £1,500 per case.

Conclusion:

With cases varying from £1,500 to £4,500 per case depending on the vintage, then a small allocation of a portfolio to this fantastic wine wouldn’t be a bad move.

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