Ditton Wine Traders’ fine wine blog

Of course, with hindsight it's easy to come up with a list of outperforming wines. However, chances are that anybody who, at the time, wanted to pursue a strategy of "hot names in back vintages" would have come up with a similar list Moreover, the returns do speak for themselves. Measured over the past year, this strategy would have been far superior to buying 2009 Bordeaux en primeur.

 

Could you repeat this with the 2010 vintage coming up? Who knows. A lot of wines and vintages have already closed a substantial part of the gap to their more expensive peers, be it vintages or other brands. What will – even more so than in 2009 – be extremely important is at what point in the campaign you are able to buy. If you get the top wines at 1st or 2nd tranche, you stand a good chance of doing well. If you need to buy at the "open market" prices, we would like to point out that – at least in the short run – history might repeat itself. 

Some remarks in general – a new investment order?

Where will prices go and what may be the implications for the wider market?

As luxury goods reach new audiences with different values, familiar dynamics begin to change. A buy and hold strategy may well produce strong returns over the long-term, but how much more effective could your investment be if you were to combine this strategy with trying to catch shorter-term trends, with profits re-invested in similar opportunities.

Furthermore, a new investment order of sorts is emerging within the blue chip (First Growths) segment of the market in the apparent catch-up of the other First Growths with Lafite. All have seen steady price rises as Lafite appears to be treading water at the moment. This is most evident with Haut-Brion, which appears to represent a secular mini-trend as it looks increasing undervalued in comparison to its First Growth peers.

Scores (Parker) will continue to account for major price differentials between vintages and chateaux on aggregate. However, we will likely see the continued emergence of exceptions to this rule, evident among those wines where (Chinese) demand is strongest; representing a differentiation within the classed growths market as some chateaux become less sensitive to (Parker) scores and brand-led demand becomes their chief driver of price.

Risk is higher too; price formation would appear to have a higher correlation with emerging market GDP and industrial production indicators than traditional fine wine supply-side economics, raising the risk of a price shock in the event of a sudden drop in demand in these countries. Major merchants, moreover, may depend on China for as much as 50% of their turnover. En primeur too, increasingly presents irregular prices and diminishing returns for considerably higher risk.

Finally, after a year where almost everything went up, the near future looks set to be more discriminating. It will be more important to pick the right stock at the right time. Seeking advice on your wine investment strategies, always a good idea – will be more important going forward. Make sure you ask your favorite fine wine merchant.

By James Swann and Mark Schuringa