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4 March 2010A brief update

Up until the Chinese New Year – which started on February 14th - this year has been a rollercoaster. Massive demand, prices increasing rapidly across the board and hardly time to follow up. Apart from Asia, the UK wine investment companies were particularly active, buying the usual suspects but also taking position on seemingly undervalued First Growths and/or vintages. After the 14th though, there was a 10 day lull which, at the end made you think that the market had finally decided that enough was enough.

Not so. Buyers are back with a vengeance. Price increases, if anything, are accelerating. Particularly for Lafite and as ever, Carruades de Lafite. It seems potty and out of control – Lafite 2000 for example now trading at a whopping 16,000 pounds where it was close to 13,000 only 2 months ago. But cases get snapped up as soon as they’re offered. Interestingly, demand and prices for the other First Growths are also on the up. It becomes more and more apparent that – as demand continues to outstrip supply - stock is becoming increasingly difficult to find. And you know what that means... bad news for people who actually like to drink their wine...

In the meantime, the focus is slowly shifting towards Bordeaux, for the 2009 vintage. At the end of this month, the winetrade will descend on Bordeaux to taste the barrel samples and to try and wrestle allocations out of the Negociants. I don’t expect any fireworks until the end of May though, quite likely even the beginning of June – the Chateaux won’t repeat last year's mistake of releasing pre-Parker. Even so, April and May will be filled with speculation, dealmaking and even sales. That’s right, sales. The 2009 is already being sold, as we speak, which to my knowledge is a novelty.

Nevertheless, the window from now until the end of May is an interesting one. With demand from Asia slightly easing off after their New Year frenzy and the En Primeur activity not yet fully started, this might be a good time to pick up your favourites at a decent price. Sorry, that should read slightly less outrageous price. Merchants are likely to value cash over profit in order to build a warchest for the upcoming primeur campaign. So do the Negociants in Bordeaux for whom it’s imperative to have enough cash to buy into the new vintage. Private stockholders might want to cash in the profit on their existing cases in order to take advantage of a new (and very exciting) investment opportunity. Don’t expect prices to fall though – it’s just not that kind of market right now – but they might be relatively stable and therefore negotiable.

On a different note, you might have noticed that we have included a small selection of "super Italians" to our list. Personally, I have always been fascinated by the top Italians from especially Barolo and Tuscany. They are magnificent wines. Demand for them was always confined to connoisseurs and for some obscure reason, the USA. Recently though, there has been increasing interest from other places, causing Sassicaia, Ornellaia and the top Barolo's to take off.

Finally, do not hesitate to get in touch with us. Be it to pick our brain on the wine market, to discuss en primeur buying strategies or to source your favourite wine to drink - we are very happy to help and share our views.

8 February 20102009 Bordeaux – the weather and the wines

The Chinese New Year is only days away now and the Primeur tastings will be held soon, so focus is shifting to the 2009 En Primeur campaign. It's my intention to keep you updated by either writing some insights myself, or by stealing them from somebody else.

In the last category, I have found 2 excellent articles on Jancis Robinson's website. She in turn has used Bill Blatch's vintage report. As Jancis says, "Bill Blatch runs Bordeaux negociant Vintex and is one of the members of the Bordeaux wine trade who is most fascinated by how wines actually taste. For some years he is widely acknowledged as being responsible for by far the most detailed analysis of each Bordeaux vintage and kindly gives us a preview".

The first article is an in depth overview of the weather and the impact on the vines: www.jancisrobinson.com/articles/a201002042.html. It is techy stuff and for those who enjoy that, highly educational. The conclusion is that it has been a "textbook perfect vineyard year. Nobody could have asked for better....the big question is what to do with all that alcohol". 

The second article covers the wines in the various regions: www.jancisrobinson.com/articles/a201002044.html. Comparisons with other vintages are always difficult but Blatch has a go at it:

"Overall, of all the great vintages of the last 100 years, 2009 seems to have more in common with the silky concentration of 1982, 1947 or 1929, rather than the more robust tannic balance of 2005, 2000 or 1928. Yet it does not seem to have all the warm, exotic softness of the extreme heat-wave vintages 2003, 1990 and 1921, nor the more traditional style of the 1945 and 1961..... 2009 is what 1982 or 1985 would have been if the vineyard and the yields had been managed as today, or what the 1947 would have been if the vinification had been controlled as today. All of those historic vintages seem to share the same sweetness of concentrated fruit as the 2009, but in those days, 12.5° for the Cabs and 13.5° for the Merlots was the absolute maximum. These 2009s have, in addition, far higher alcohol levels, which make the vintage – so far – unique. Better? We'll see".

Indeed. Interestingly, he starts with saying "of all the great vintages...". So there you are. The question is not whether 2009 will be great but how great. Prepare for a manic campaign and eyewatering prices.  

31 January 2010The 2009 En Primeur Campaign

From the moment the grapes were picked last year, the hype has begun. For a change, the very high expectations seem justified because the weather conditions were absolutely perfect. A while ago, I found this very refreshing article - which I haven taken from the website of Jancis Robinson - that just states the naked facts. Judging by these facts, conditions have indeed been very favourable if not exceptional. Although to be fair, whether that translates into superb wines depends on the individual winemaker, as Decanter points out: there seems to be a risk of over-extraction. Nonetheless, chateaux, critics and even the wine trade are very positive, some even saying that, in 50 years they haven't seen better quality grapes.

On the Decanter "Bordeaux" microsite, you will find a wealth of information on the quality of the 2009 vintage, so I won't elaborate on it here. Instead, let's have a look at demand, at prices, at availability and ultimately, at a possible buying strategy.

Of course, we have a vested interest in the campaign. We are wine traders, we sell en primeur and we do have very good allocations of the top wines. Indeed, if you consider buying 2009 en primeur and want to do so at fair prices, we do advise you to talk to us and to follow the progress of the campaign on this blog www.dittonwinetraders.co.uk/blog.asp.

First, let's look at demand. Buying en primeur is always popular, unless it's a bad vintage or there's a lot of economic uncertainty. Last year, we had both: the wine critics were critical and uncertainty – in the midst of the worst economic downturn we have seen seen since 1945 -  was so high that many thought there wouldn't be an en primeur campaign at all. Consequently, Chateaux released at historically very low prices (110 euro's). And even those prices didn't start a buying spree, not until Robert Parker released his extremely high scores.

2009 will be different. The economic climate is much more benign and – importantly – less uncertain. Secondly, there is universal acclaim for 2009. Thirdly, Asia is starting to warm to buying en primeur, more so than ever before. I can go on and state a few more differences, but this is quite enough.  The conclusion: demand will be much higher than 2008.

Consequently, prices will be much higher as well. In 2008, most of the first growths released at 110 euro a bottle or 1,500 sterling a case ex London. No chance whatsoever we will see anything close to that. There's much talk about release prices for the first growths being similar to 2005, which was roughly 4,000 euro per case. The first trade at Liv-ex – a reliable gauge for UK prices – was 3,600 sterling. Nobody knows at this point and the economic situation might change, but I think 330 euro a bottle is the maximum Bordeaux can get away with. At that price, there will be buyers (we have quite a few orders at that level already) although it won't be a sell out. Personally, I believe release should not exceed 250 euros per bottle. That would be more than twice the 2008 level, which I feel is a fair level. And if release is at that price, demand will be massive.

There is one massive "but": Parker's scores. If Robert Parker scores in line with expectations, there is no but and all is fine. If he doesn't, the campaign might loose momentum. There is a very interesting dilemma for Mr Parker: he scored 2008 so high that, mathematically, there's hardly room to improve on for the 2009 vintage. For a more detailed analysis on this dilemma, see www.dittonwinetraders.co.uk/blogArchive.asp?mo=4&yr=2009

On to availability. In 2008, it was relatively easy to purchase what you wanted. Even on the first "tranche", there wasn't a massive scrambling – although that changed dramatically when Parker released. Still, it was only a handful of wines that leapt in price: Lafite, Carruades and to a lesser extend Latour. I expect 2009 to be different. Presuming pricing will not exceed GBP 2,600 ( euro 220 per bottle) for the first growths, demand will exceed supply. But, we think this will only hold true for Lafite, Mouton and possiby Latour. For those you would do very well to fulfil your order on the first tranche.

So, what would be a successful buying strategy? If prices are around GBP 2,500:  buy. You should buy at first tranch if you can. Concentrate on Lafite, Carruades, Duhart Milon, Mouton Rothschild and possibly Latour. If you can get allocation at first tranch, buy as much as you can. The Barons Rothschild wines and quite likely Mouton as well, will be worth picking up at second tranche.

That is, if you are investing. If you're buying to drink, 2009 looks to be worth it – provided prices stay within the stated range. Just buy your personal favourites - 2009 will be a very good if not truly exceptional vintage.

30 January 2010The one to watch: Duhart Milon

It's not your traditional investment wine. It's not even new that it receives a lot of attention. So why is this the one wine that I would recommend investing in right now?

Back in May last year, I wrote a post on our blog about Duhart Milon. I argued that it would become the next big thing after Carruades de Lafite. Here's what I wrote:

Duhart Milon, the next Carruades de Lafite?

I think it should be. There are compelling reasons for Duhart Milon to eclipse Carruades de Lafite as the next best thing that Domaine Barons Rothschild, the maker of Lafite has to offer.

What these four wines (the 4th one is L'Evangile) have in common is that they are all produced by Domaines Barons Rothschild. As such, they all bear the famous 5-arrow Rothschild family crest.

These 5 arrows are a bit of gold dust. As I'm sure you are aware of, China absolutely loves Lafite. It's the ultimate status symbol. Why this is so, nobody really knows as is apparent from Jancis Robinsons entertaining article "The Legend of Lafite". In its wake, everything else produced by Lafite basks in the same sunlight. Carruades de Lafite – a nice wine but judging by Robert Parker nothing particularly special – has reached extraordinary pricelevels, as it is considered the "Petit Lafite". With most mature vintages priced at GBP 1,200+, Carruades is as expensive as some vintages of Mouton Rothschild and Haut Brion, both first growths. Remember, Carruades is not part of the Bordeaux Crus Classes classification of 1855. As such, it is remarkable that it commands prices on par with some of the First Growths. As mentioned, the reason for this is because it bears the 5 arrow Lafite family crest.

Lafite produce more wines that are in demand in China: Caro from Argentina – a joint venture with the famous Catena family and Los Vascos from Chile are the ones that get most demand from Asia. There's also l'Evangile, a famous Pomerol priced accordingly, as you can see in above table. 

And then there's Duhart Milon. Easily outscoring Carruades and, especially since 2002 at least as good as l'Evangile, Duhart Milon is much cheaper than both of them. To me it seems Duhart Milon has so far been overlooked by the Asian market. And I think this is about to change, for 4 reasons: One, as China becomes more and more educated about wine, they will pay more and more attention to critics reviews and less to labels. Duhart having higher scores than Carruades, this should shift attention to Duhart Milon. Two, Carruades de Lafite is very dificult to find, now that a very sizeable chunck of production has been bought up by Asia. Three, I have recently been selling more and more Duhart Milon, indicating that demand is picking up. And finally (four) Duhart Milon does also bear the 5 arrow crest.

One last thought: Robert Parker actually scored the Duhart Milon 2008 at 93-95+. Does this best vintage since 2000 look like a good deal to you?

Back to January 2010. In May last year, I also included a table, comparing prices and scores between these 4 wines. Below, you will find the same table and an update on current prices.

MAY 2009
Lafite Rothschild				Carruades de Lafite				l'Evangile				Duhart Milon
Vintage	Parker	Price		Vintage	Parker	Price		Vintage	Parker	Price		Vintage	Parker	Price
2000	100	£9,500		2000	90	£1,500		2000	96	£1,600		2000	90	£550
2001	94	£2,350		2001	87	£1,200		2001	91	£635		2001	89	£410
2002	94	£2,300		2002	87	£1,200		2002	90	£600		2002	89	£370
2003	100	£6,250		2003	93	£1,300		2003	88	£650		2003	92	£500
2004	95	£2,400		2004	90	£1,300		2004	93	£640		2004	91	£400
2005	96	£6,200		2005	89	£1,300		2005	95	£2,150		2005	94	£430
2006	97	£3,200		2006	90	£925		2006	93	£940		2006	92	£300
2007	91.5	£2,000		2007	84	£600		2007	89	£790		2007	87	£250
2008	99	£3,200		2008	92	£695		2008	94	£635		2008	94	£300
JANUARY 2010
Lafite Rothschild				Carruades de Lafite				l'Evangile				Duhart Milon
Vintage	Parker	Price		Vintage	Parker	Price		Vintage	Parker	Price		Vintage	Parker	Price
2000	100	£14,000		2000	90	£2,200		2000	96	£1,600		2000	90	£900
2001	94	£4,800		2001	87	£2,000		2001	91	£720		2001	89	£450
2002	94	£4,800		2002	87	£2,000		2002	90	£625		2002	89	£500
2003	100	£7,500		2003	93	£1,900		2003	88	£650		2003	92	£480
2004	95	£4,400		2004	90	£1,850		2004	93	£640		2004	91	£480
2005	96	£7,500		2005	89	£1,850		2005	95	£1,800		2005	94	£600
2006	97	£4,200		2006	90	£1,800		2006	93	£900		2006	92	£400
2007	91.5	£3,500		2007	84	£1,600		2007	89	£800		2007	87	£380
2008	99	£4,800		2008	92	£1,450		2008	94	£680		2008	94	£500
PERCENTUAL INCREASE
Lafite Rothschild				Carruades de Lafite				l'Evangile				Duhart Milon
Vintage	Parker	Price		Vintage	Parker	Price		Vintage	Parker	Price		Vintage	Parker	Price
2000	100	47%		2000	90	47%		2000	96	0%		2000	90	64%
2001	94	104%		2001	87	67%		2001	91	13%		2001	89	10%
2002	94	109%		2002	87	67%		2002	90	4%		2002	89	35%
2003	100	20%		2003	93	46%		2003	88	0%		2003	92	-4%
2004	95	83%		2004	90	42%		2004	93	0%		2004	91	20%
2005	96	21%		2005	89	42%		2005	95	-16%		2005	94	40%
2006	97	31%		2006	90	95%		2006	93	-4%		2006	92	33%
2007	91.5	75%		2007	84	167%		2007	89	1%		2007	87	52%
2008	99	50%		2008	92	109%		2008	94	7%		2008	94	67%

The price increase for especially Lafite and Carruades is spectacular. Duhart Milon has also done very well, Evangile (as expected) hasn't. Fueled by continuing demand from China, all vintages of Lafite are now well over £4,000 (except 2007) whereas you can't get Carruades below £1,600. The only exception there is 2008, which I'm convinced will increase to well over £1,600 once it will become physically available, in September.

I must admit I didn't expect Carruades to get this expensive. It might still continue to increase but it would seem the upside is now limited. The opposite is true of Duhart Milon. It has taken a while for demand to increase to the point it's really driving up prices, but that process has now begun. Duhart has taken off and both Asian customers and the trade are piling into it.

Duhart Milon has a very similar label to Carruades and Lafite. It is the better wine and given that Duhart is still only 1/4 to a 1/3 of the price of Carruades, it does look a bargain. Now that demand has increased so much, supply quickly dries out and prices have but one way to go...

30 November 2009Le Petit Mouton

 Part of my job (and part of the fun as well) is to find stock of the most sought after wines, at good prices. Often you need to go out and find cases as and when there is demand for them. Sometimes though, the best way to get hold of well priced stock is to anticipate market movements.

 

 

 

 

 

 

 

 

 

 

 

Note that whilst Lafite has increased 4 fold since release, Carruades has by a stunning 8 times! Of course, it doesn’t come much better than this, Lafite being the most coveted wine of the last 2 years and the second label released at just 200 pounds or 20% of the "grand vin".

Now, let’s have a look at the same pair of graphs for Mouton:

 

 

 

 

 

 

 

 

 

 

 

Here, both Mouton and Petit Mouton have more than doubled in the same time frame. Although Mouton at below £800 was less expensive than Lafite on release, Le Petit Mouton at over £300 was more expensive than Carruades. Therefore – even if Mouton will follow the same route as Lafite, it’s highly unlikely that Le Petit Mouton will ever increase 8 fold, like Carruades did (this would take the price to £2,400 pounds....)

Also note that since the price fall stopped earlier this year, Mouton has seen the same percentage increase as Lafite. But Le Petit Mouton hasn’t...

Which leads me to an attempt to predict the price of Le Petit Mouton. Have a look at this:

First growth	2004	RP	Second label	2004	RP	%
Lafite Rothschild	£3,750	95	Carruades de Lafite	£1,850	90	49%
Latour	£2,400	95	Forts de Latour	£850	90	35%
Mouton Rothschild	£1,950	92	Le Petit Mouton	£640	NA	33%
Margaux	£1,850	93	Pavillon Rouge	£500	89	27%
Haut Brion	£1,750	92	Bahans Haut Brion	£440	88	25%

This shows, again for 2004, the First Growths and their second label, their prices and the value of the second label as a percentage of the first.

I think that Mouton will keep on increasing in price. I also think that Le Petit Mouton will start closing the price gap to Mouton and therefore above percentage will go up. Possibly not quite to 49% like Carruades, but let's say 40%. When keeping the price of Mouton constant, this would lead to a price of £800, up 29%. If Mouton would increase to let's say the current price of Latour, Le Petit Mouton would be worth £960 or up more than 50% as compared to the current price.

Now, this is by no means a scientifically justified assumption, but it is quite educational and shows how much and why prices can go up. Wine investment funds do similar comparisons between wines to identify undervalued wines.

I started off by mentioning that part of my job is to find stock of the most sought after wines, at good prices. I think this Mouton and Le Petit Mouton are a good bet and therefore, it won't come as a surprise we have good stock of various vintages of both wines. Check out http://www.dittonwinetraders.co.uk/wines.asp and see for yourself.