Monthly Archives: March 2013

The Bordeaux En Primeur Conundrum

Posted by WineInvestment.org on March 27, 2013
Cult Wines Ltd News, Wine Market News / No Comments
The Bordeaux En Primeur Conundrum


As the dust settles following the Bordeaux 2010 in-bottle scores and attention moves to the 2012 Bordeaux vintage due to be tasted by the wine trade over the coming weeks, the question and logic of buying Bordeaux en primeur (wine futures) comes into greater focus. A focus which was heightened last week amidst the first ‘non-primeur’ Chateau release by Latour who controversially left the en primeur system last year.

Traditionally buying en primeur, a century-old tradition in Bordeaux, helped winemakers generate an income to help finance their production costs. At the beginning of the last century, most of the power was held by the negociants who bottled and distributed the wines, but over the past 100 years the power has dramatically changed hands and now with most of the top Grand Crus under the ownership of large conglomerates or extremely wealthy individuals – the need for finance to help with production is not so great. So why does this system still exist and who exactly does it benefit?

In April 2012 Chateau Latour, the first growth estate owned by Francois Pinault (the 3rd richest man in France & 53rd richest in the world) announced that it was leaving the en primeur system, a decision that was part of a ‘long term strategy to quit’ said Jean Garandeau, commercial director at the property. Indeed it hadn’t gone unnoticed amongst the trade that over the past decade allocations of Latour each year at en primeur had become smaller – clearly part of this long term plan to eventually leave. The cellars at Latour can accommodate up to 1 million bottles and with the vast financial wealth of its owner behind them, there is little need for them to sell their wines before they feel they are ready. They are of the belief that it’s better for the consumer and over the long-term it’s better for Latour’s bottom line as they avoid collectors, investors and merchants benefitting from their wine’s appreciation. Monsieur Garandeau feels that their decision was ‘a revolutionary moment’ but others are not convinced. Stepehen Browett of Farr Vintners didn’t believe others would follow suit because ‘the negociant system works for them because they have other properties whose wines they want to sell’. For example unlike Mouton and Lafite, that both own other properties in Bordeaux and around the world, the Latour team are very much focused on the three wines produced at the Chateau. So there is less need to leverage off the demand for the grand vin to sell other estate owned wines.

tg2Whatever the future for the en primeur system, it will be without Latour and earlier last week, we did get a glimpse into what the future held as Latour made their first non-primeur vintage release onto the market. Offering three different vintages to the market for their three wines; Latour 1995, Forts de Latour 2005 and Pauillac de Latour 2009. As with the wines sold in the 2011 ex-cellar auction sale, these non-primeur releases  will come with ‘anti-counterfeit Prooftag capsules and a special back label stating that the wines have been released by the Chateau in 2013’ as reported by Decanter.

The price for the grand vin ex-London of just under £5,000 represents around a 15% premium against current available physical stocks on the market. So what are the buyers of this stock getting? A guarantee of provenance – something that ex-cellar auctions particularly in Hong Kong have shown collectors are happy to pay a premium for. It’s clear that Latour, who held a successful ex-cellar sale in 2011 with Christies in Hong Kong, feel this is where the future value lies for their product. But is this worth an extra 15%? As Liv-ex, the world’s leading fine exchange, claimed last week – is a case of 1995 Latour stored in the Chateau cellars really worth that much more than a perfect condition case of Latour 95 that has been stored professionally since delivery in Octavian? I think there will always be those willing to pay that little bit more for this type of provenance, especially from the new emerging markets where counterfeiting and questions of authenticity are greater, but i would question that if this is a glimpse into the future for Latour and is this really benefitting the consumers they have emphasised it’s all for?

If you look at the mechanics of the wine market, the ability for the world’s greatest wines to appreciate injects new funds into the market. If you took a straw poll of collectors who purchased Latour 1995 en primeur and have since stored and consumed it at their own choosing over the past 15 years whether they would preferred to have bought it from the chateau now, I’m pretty certain the answer would be a resounding no. Looking at the historical data, it shows that Latour 95 was initially released to market at en primeur around £450 per case. A collector who purchased two cases, en primeur, and had the negative carry of 15 years storage and insurance totalling around £300 would be looking at a total cost of c. £1,200. If said person decides now to drink one case and re-sell the other, the current market value of £4,250 would leave the collector with £3,050 profit in his back pocket and 12 bottles of perfectly stored Latour 1995 to drink. The fact, that in most cases that capital would then be used to fund new purchases, seems to be wholly overlooked by the majority of Bordeaux when the question of investment and speculation arises.

It’s the wine’s appreciation that inevitably funds collectors’ ability to buy more wine. Selling off part of your cellar to fund new purchases is part of wine collecting. If Latour’s new model sees them eliminate the speculation, will this inevitably hinder them in the future? In recent times the overwhelming clamour from wine critics and traditional buyers, has been for lower prices and more affordable top class Bordeaux – but I really fail to see how Latour’s decision and new strategy will help this. Will they be able to protect their wines for longer and ensure the majority are consumed at the optimum time? Yes.  But are they benefitting the end-consumer by eliminating speculation, in my opinion – No.

For the rest of the Bordeaux estates that will again go through this annual process, the question of pricing will be firmly at the top of the agenda as the world’s wine trade arrive on Bordeaux. The last four en primeur campaigns have been markedly different experiences for consumers and the trade alike.

 

Ahead of the 2008 en primeur campaign, following the Lehman Brothers crash, merchants and trade urged the Chateaux to release at low prices. With the economy and market in a precarious position and 2008 being considered by most as an average-good year, many feared there would be no market for the wines if released at too high a price. The Chateaux heeded this warning with many releasing almost immediately and at low prices. But crucially many did so before Robert Parker’s report was published. So when he reported of a better than expected vintage with high scores to match, prices for wines such as Lafite Rothschild scored 98-100 pts increased dramatically from £1,700 per case to over £3,000 in a matter of weeks. This coupled with the continuing emergence of Hong Kong & China as a major player in the fine wine market, saw prices rise meteorically in a short space of time leaving many of the Chateaux owners (who were encouraged to drop prices) with a bad taste in their mouths. They watched as the market recovered with their 2008 wines doubling or trebling in price. The winners in this scenario were well and truly the speculators, merchants and collectors, the Chateaux were clearly not going to let this happen again.

Lafite Rothschild 2008

When the 2009 ‘vintage of a lifetime’ rolled around 12 months later, there was to be no repeat of reduced prices and with the wine market in the grip of a 2 year Bull run fuelled by the emergence of Hong Kong as the world’s number one wine hub, Chateaux owners were keen to push boundaries. But despite record release prices, even beyond those most expected, 2009 en primeur sold remarkably well across the board. As Robert Parker Jr recently stated ‘there appear to be few 2009s left in inventory, either at the chateau level, the negociant level or at wine retailer shops throughout the world’. The 2009 vintage worked, the quality of the vintage justified the high prices and looking now at current levels for those wines below First Growth level, prices have risen across the board. A 100 pt wines such as Chateau Clinet have increased in value by over 100% (£1,050 on release vs. £2,200 at current levels). Perhaps, one could criticise first growth pricing as many languish around the release price or less, but compared to historic vintages the 2009′s still provide an incentive for buyers.

2010, the second vintage of a lifetime in succession, was released onto the market in June 2011 a time that is now regarded as the end of the bull run and the start of a market correction that carried us into late 2012. As Parker reflects, ‘This vintage came out at incredibly high prices, even higher than 2009s, and a number of major merchants throughout the world refused to buy them, or cancelled their orders once it was apparent that the recession of 2008 was going to keep many of the big spenders on the sidelines, but despite this, many merchants reported record-breaking en primeur sales (helped by increased prices) followed by a market downturn which saw prices soften subsequently. In a vintage that has been widely reported as being one of the first that the Chinese really bought into, this has done little to encourage or convince them to buy en primeur. Recent critic scores and reports, have however confirmed the greatness of the 2010 vintage and despite the top wines remaining highly priced, some of the lower priced grand crus represent great value and as Parker reported ‘given the greatness of the vintage, it is hard to believe they are going to soften any more than they have already. And if anything, given the less than stellar vintages of 2011 and 2012, I suspect prices could increase beyond current levels.’

So with record sales and profits recorded by Chateau on the back of the great 2009 and 2010 vintages, and deservedly so many would argue for producers of a product that’s quality can be so variable on annual basis, why was the 2011 vintage such a disaster? As US wine critic James Suckling wrote on his blog ‘many really blew it with their pricing for 2011 futures, or en primeur, and didn’t drop their prices enough…Most top wine merchants in the world sold less than 10 percent of what they did with 2010 or 2009. Some didn’t sell any 2011′. And this highlights the fundamental flaw of the system. There is little recourse for the Chateau because they sell all their allocations to the negociants, who are obliged to take them to ensure they will get an allocation the next year. The negociants are left with the responsibility of marketing and distributing the vintage, but in 2011 when prices were way above what they should have been it leaves little incentive for buyers and you will therefore find that many of the big negociants in Bordeaux will still be sitting on quantities of 2011 stock, unlike the Chateau owner who has simply sold their wine en primeur.

Chateau Duhart Milon 2011

From the buyers and the market’s perspective, the 2011 campaign lacked ‘incentive’. If you can buy a 2001 or 2008 vintage, both comparable in quality to 2011, for less than the en primeur asking price – then why would you? Unsurprisingly the wines that sold best for 2011 were those that were well priced (Pontet Canet, Eglise Clinet, Lynch Bages, Lafite) but these were few and far between. The issue of how the chateau decide on pricing levels has been argued long and hard, what is clear though and worryingly so is the lack of real market analysis. The 2011′s would have sold and sold well, if priced right. This is something that Suckling would like to see for the 2012 vintage, ‘I suggest 2008 opening prices for the first growths…They did it with the 2008 vintage. Why can’t they do it with 2012?’. Whilst I’m sceptical we will ever see a repeat of 2008, there does need to be a concerted effort from all parties to re-ignite the interest in the en primeur system. They will end up burning bridges with their new emerging markets and following two of the most expensive campaigns in history and one of the most overpriced and undersold, a lot of people may start to become disillusioned.

As simple as it sounds, my advice would be to assess the quality of the vintage in comparison to other physically available vintages and then price to incentivise. The wine market has been buoyant since November posting consecutive monthly market gains and a poorly executed en primeur campaign could a negative impact (as it did last year). On the other hand, a well thought out and priced campaign could completely reinvigorate everyone’s interest in en primeur and further boost the tentative but positive growth we have been witnessing over the past few months.

 

 

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China’s Red Obsession

Posted by WineInvestment.org on March 27, 2013
Cult Wines Ltd News, Wine Market News / No Comments
redobsession


Red Obsession, a new documentary film about China’s unwavering, and growing passion for red Bordeaux wine, was screened at the Berlin Film Festival a few weeks ago. Russell Crowe, who is fast becoming associated with wine provides the narration, working with the creators; producer Warwick Ross, award-winning screen-writer David Roach and Andrew Caillard MW of auctioneers Langtons.

The film explores the harrowing prediction that: “The whole production volume of the entire world will not be enough to satisfy the Chinese market.”

The documentary also features interviews with winemakers, critics, MWs and journalists – and Liv-ex Director James Miles.

China’s Red Obsession

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China to overtake the USA in wine sales

Posted by WineInvestment.org on March 27, 2013
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China to overtake the USA in wine sales


Treasury Wine estates, the world’s second largest wine company, have predicted that China will become the world’s greatest wine market by 2023.

This forecast states that Chinese wine sales will increase from the current figure of 150 million to around 500 million cases in a decade.

Treasury, who represent producers such as Penfolds and Rosemount are planning to increases sales in 60 cities in China within five years, this is a giant leap from the current 16 that they occupy.

Paul Rayner, Treasury’s Chairman explained that: “The track record has been in terms of growth for the last two or three years has definitely been in Asia,” said in the interview. “There’s a huge opportunity for us to take market share with premium wines.”

The dilemma now faced is whether or not supply can meet demand.

Treasury plan to target consumers between the ages of 20 and 45 with annual disposable income of 150,000 to 200,000 yuan ($24,100 to $32,100) a year, selling premium mass market wines.

Source: www.bloomberg.com

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Lucrative Latour

Posted by WineInvestment.org on March 27, 2013
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Lucrative Latour


According to Liv-ex’s Cellar Watch website, the 1995 vintage if Chateau Latour, sold at a 10-month high of £4,100 a case on London’s Liv-ex wine market in the past week.  This follows an announcement from the Chateau this month regarding the release of wines held in its stock earlier this month.

This result provides some well needed respite, representing an 11% increase on a 23-month low of £3,700 reached in March 2012. However, this price is well below the $7,170 a case paid at a Hart Davis Hart Wine Co. auction in Chicago in February.

Source: www.Bloomberg.com

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Wine Events

Posted by WineInvestment.org on March 20, 2013
Cult Wines Ltd News, Events / No Comments
tasting


We are currently in the process of organising a series of exciting wine events for 2013.

These will include; dinners hosted by wine makers, tutored tastings of: specific producers, regions, grape varieties and wine styles. Food and wine matching, and cooperate team building wine tastings.

We have a fantastic tasting room here at our Richmond based office, which will be the location for certain wine education events. We will also be hosting events at prestigious locations in and around London.

Specific details to be announced soon.

E mail: Helen Tate htate@cultwinesltd.com

To register your interest.

We are happy to accommodate specific requirements where possible, please feel free to e mail Helen, or call on 0208 3329386, to discuss this further.

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Parkers scores boosts Bordeaux’s on Liv-ex Index

Posted by WineInvestment.org on March 19, 2013
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robertparker


As predicted, following the recent Robert Parker in-bottle ranking scores, Liv-ex have reported that 13% of all trade by value so far in March is derived from Bordeaux 2010 wines.

Whist the 2010’s still trail behind the 2009’s, the recent surge is the most concentrated activity of the past year, with the five of his 10 “perfect” wines (Latour, Cheval Blanc, Pontet-Canet, Pape Clement and Le Dome), experiencing enhanced trade.

Source: www.thedrinksbusiness.com

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Bordeaux 2012 quality assessment

Posted by WineInvestment.org on March 19, 2013
Cult Wines Ltd News / No Comments
CHAI niv -1


Following a challenging year weather wise, Bordeaux wines are said to be expressing ‘finesse, rather than power’. Dry whites and rosés were said to have enjoyed a superior harvest in comparison with the reds and dessert wines, with major obstacles including mildew, rot, poor flowering and fruit set.

Christian Hostein, vineyard manager at Château Talbot in St-Julien, explained that a high level of rainfall in September, resulted in an explosion of rot in October, despite this he describes the wines as: ‘totally classic Bordeaux’.

Xavier Planty of Château Guiraud, explained that for Sauternes, yields were small and quality highly variable.

Philippe Dambrine, manager at Château Cantemerle, summarised saying that: ‘The unusual power of recent vintages will probably give way to finesse this year, but the 2012 wines will certainly give pleasure in a few years’ time, just as the 2001s and 2004s are doing now.’

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Henry Tang Burgundy collection raises $6.2 million at auction

Posted by WineInvestment.org on March 19, 2013
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christies


Henry Tang, Hong Kong based wine collecting dynast has sold HK$48 million ($6.2 million) from his collection of more than 800 lots of Burgundy wine during a two-day Christie’s International (CHRS) Hong Kong wine auction. The top lot of six magnums of Romanee Conti Domaine de la Romanee Conti 1995 sold for HK$1.2 million.Tang famously became involved in a scandal resulting in him losing a bid to become the city’s chief executive last year. This scandal involved the building of an illegal basement built at his house, which contained a gym, movie theatre and wine cellar.Tang was an integral figure involved in pushing for the dropping of wine imports in 2008, which consequently aided the cities transformation into becoming one of the worlds key destination markets for fine-wine auctions.The auction beat a pre-sales estimate of HK$29 million, which is reflective of the fact that this market is switching from Bordeaux to rare Burgundy following the Bordeaux price slump.

 

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The Bobby Moore Fund & Cancer Research UK – ‘Dining With The Stars’ Charity Event

Posted by WineInvestment.org on March 18, 2013
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Cult Wines


On Thursday January 24th, Cult Wines were pleased to partner with The Bobby Moore Fund, a charity dedicated to supporting Cancer Research UK and the fight against Bowel Cancer, as part of their star-studded fine dining event – ‘Dining with the Stars’ at the Grade II listed building, Gibson Hall in the heart of the city of London.

Roy Hodgson & Jayne Middlemiss at the Bobby Moore Cancer Research Fund

The Black tie event brought together 5 of the UK’s top Michelin-starred chefs headed and organised by two Michelin starred chef Daniel Clifford, including Atul Kochhar, Simon Rogan, Simon Hulstone and brothers Jonray & Peter Sanchez. Alongside the high profile chefs were a number of the charitie’s trustees such as current England Manager Roy Hodgson, who enjoyed a bottle of Tignanello with his dinner donated by the Cult Wines team. Also in attendance were Clive Tyldesley, West Ham United manager Sam Allardyce, Callum Best and TV presenters Matthew Wright and Jayne Middlemiss.

Tignanello 2007 at the Bobby Moore Cancer Research

Cult Wines teamed up with the chefs in the lead-up to the event in order to pair wines with each of the 5 dishes cooked by the chefs. The wines included a 2009 Nuits St. Georges from Arnoux-Lachaux which accompanied the main course of Herdwick Hogget, crispy pickled tongues, our Mead, Turnips and Sunflower shoots cooked by Simon Rogan from 2 Michelin starred l’enclume fame. Whilst the Sanchez brothers desert of tiramisu inspired by Renato’s Número UNO, brought out in spectacular fashion amongst a cloud of coffee bean liquid nitrogen, was paired with the delightful 2005 Chateau Rieussec with the top tables enjoying a 2003 Chateau d’Yquem.

Jonray & Peter Sanchez Cancer Research UK

The event was a fantastic success with the live auction hosted by the venerable Martin Bayfield and the silent auction raising over £100,000 on the evening. The lots included a fantastic Imperial of Calon Segur 2003 – donated by Cult Wines which raised £750 alone.

Jayne Middlemiss

The night was a resounding success and helped raise money and awareness for the Bobby Moore Fund which continues to battle against bowel cancer, as well as the phenomenal work that is done on a daily basis by Cancer Research UK.

 

It was a pleasure to be involved in such a fantastic evening and as one of our main charities, Cult Wines will continue to partner Cancer Research UK and the Bobby Moore Fund in future events and fundraising opportunities.

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2010 Offers Stocklist

Posted by WineInvestment.org on March 12, 2013
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Chateau-Pape-Clement


Please see updated 2010 offers stocklist as at March 12th 2013-

http://www.cultwinesltd.com/bordeaux2010web.html

These wines represent our “strong buy” recommendations following the release of  Parkers 2010 ratings on March 1st, we do not expect prices to remain at these levels for very long and in some cases stock will be difficult to obtain – don’t delay!

These are all offered IB, subject to final confirmation. If you would like to order or would like to speak to an advisor about what would suit your investment needs please get in touch by phone or email – orders@cultwinesltd.com

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