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August Fine Wine News round up

August Fine Wine News round up

Categories: Latest News

A Review of The Wine Trade Market and Media News - David King - August 2018

This is our first blog for a while due to the inevitable summer slowdown in trade and a distinct lack of fresh newsworthy material. However, now we are returning to our desks it seems an appropriate time to update you with the latest wine industry news and views.

 

Decanter Magazine

Chris Mercer – 26/07/18 - Burgundy G.C. Vineyard Prices Double in 10 Years

A single hectare of a Burgundy grand cru vineyard could have cost up to 14 million euros last year, according to the latest report from France's land agency SAFER.

To continue the conversation about the sale of vineyards, Chris Mercer’s focus is on the Burgundy region.

“The increase follows several years of soaring global demand for wines from the most prized Burgundy ‘climats’, coupled with high profile vineyard buyouts by wealthy investors in recent years. There is a wide variation in valuation, however. SAFER said that grands crus prices started at an estimated 2.75 million euros per hectare in 2017. Some estate agents believe that SAFER figures can be too cautious, although it is hard to know for sure.

"When Francois Pinault, the owner of Bordeaux first growth Chateau Latour, bought Clos de Tart in Morey-St-Denis last year it was estimated by French business newspaper Challenges that the deal was valued at more than 200 million euros. Clos de Tart has 7.53 hectares of vines. A fee for the deal was never formally disclosed, although it was the latest of several major investments in the region. American billionaire Stan Kroenke, who also owns Arsenal football club, purchased Bonneau du Martray in 2017. Prior to that, luxury goods group LVMH bought Clos des Lambrays.”

To quote Andrew Jefford, “The era of corporate and billionaire ownership in Burgundy has begun.” Chris goes on to say: “There have been concerns in the region for several years about what rising vineyard prices could mean for family-owned producers seeking to navigate a path through French land succession laws." While Burgundy grand cru prices have soared, there remains a significant disparity between the top of the region’s ‘climat’ pyramid and the base. One hectare of vineyard land in the regional Burgundy appellation had a top price of 70,500 euros in 2017 – up from around 45,000 euros 10 years ago – and a low price of 12,700 euros, show SAFER figures.

 

 

Jane Anson (19/04/2018) - Here are the latest Bordeaux vineyard prices

Vineyard buyouts reached a 25-year high in France in 2017, according to the latest figures from France's land agency. Here is what has been happening to prices in Bordeaux...

Jane Anson is raising the point of land value which, in 2017 witnessed a 25 year high in the number of transactions across France. Loire and Burgundy show the biggest rise in numbers of purchases and Champagne the biggest in value (55% of the total value and at more than €38 million).

Transactions: 9600 +

Land area: 16,900 ha

Total value: €1.25 billion up 59.9% from 2016

This includes 10 particularly large trades and looking specifically at Bordeaux the value of sales is the second highest in the country at €12.7 million and some way short of Champagne!

Jane says: “Around 16 purchases by Chinese buyers took place in 2017, a number which is perhaps surprising considering moves by the Chinese government to clamp down on moving money overseas announced in late 2016. We will have to wait and see to discover what effect the freezing of assets of the Haichang Group in the form of 10 (out of their total of 20) Bordeaux châteaux will have going forward. Across all of France, by the way, British buyers represent 41% of international purchases of agricultural land, although the French press release accompanying these figures noted that the numbers have gone down slightly since the Brexit vote.”

 

Average Bordeaux Land Values (left bank only) - according to SAFER

AOC Bordeaux / AOC Cotes de Bordeaux: €16,000/ha (largely unchanged)

Cotes de Cadillac / Cotes de Blaye: €18,000/ha

Cotes de Bourg: €22,000/ha

Graves / Sauternes: €30,000/ha

AOC Medoc: €55,000/ha

AOC Haut-Medoc: €80,000/ha

Pessac-Leognan / St. Estephe: €450,000/ha (some as high as €600,000)

Margaux / St. Julien: €1.2 million/ha

Pauillac: €2 million/ha

SAFER are suggesting that the frost risk for some parts of the region account for the differences and, given the experiences of 2017, I suppose this is understandable. Another contributing factor is the lack of availability in neighbouring more desirable areas like Pauillac and St. Julien and a resulting spill over of interest into St. Estephe where €1 million/ha was reached for the best gravel spots to €350,000 for the coolest clay soils.

Right bank property values vary wildly and makes a nonsense of any attempted calculated valuation. As Jane quite rightly says: “Over on the Right Bank, as we have all witnessed, it is St-Emilion that caught fire in 2017. The prices given by SAFER show how little the average price means, because the range is from €200,000/ha at the lower end to €2.6 million at the highest. Even that is clearly not taking into account the sale of Troplong Mondot in 2017, where we now believe the price was closer to €6 million/ha. The SAFER figures show the St-Emilion average rising by just an extra €20,000/ha, but good luck finding a piece of land to buy outside of the sandy plain for anything lower than half-a-million euros today.”

The range of €900,000 to €4.4 million/ha in Pomerol with an average value of €1.3 million/ha is a 15% rise. This suggests one should look at Lalande de Pomerol at a reasonable €210,000/ha or Montagne-St. Emilion at a give-away €110,000/ha. So why is Fronsac (like Sauternes) 14% down in value to €30,000/ha? When Canon (Fronsac) remains at €110,000/ha it suggest there are serious opportunities to be had in Fronsac, depending on terroir of course.

 

Winesearcher.com

James Lawrence – 18/05/18 - California Wine Goes Global

According to Liv-Ex, the wider world is waking up to California. Here James picks up on latest reports that there’s an increasing global demand for the top Californian wines…

“The cream of California's crop is increasingly attracting collectors from outside of the US, according to fine wine trading platform Liv-ex, which has launched a US-specific index. However, US wines are becoming a more prominent part of the secondary market, from nothing to 3.5 percent trade in five years. There's definitely a general trend for collectors to explore other regions of the world now that the focus on collecting fine wines in Europe and Asia is no longer limited to Bordeaux.

“To that end, Liv-ex launched an index that tracks five of the state's top fine wines this week, the so-called California 50. It monitors the performance of the 10 most recent physical vintages from Dominus, Opus One, Harlan Estate, Ridge Monte Bello and, of course, Screaming Eagle. Yet historically, top-end Napa wine has been a minute part of the repertoire in Europe, even in its most globalized cities – London and Paris.”

James quite rightly talks about the most expensive names often released through “very restrictive distribution channels”. These wines are usually sold direct to a private client “clubs” on a mailing list. The question is, Does that really make them a suitable candidate for a significant presence in the secondary market? From experience, many of these initial buyers will sell immediately to the highest bidder and make an instant and very attractive return.

Liv-Ex Research Analyst Edward Jackson argues that it is similar for the top Burgundy producers. Wine collectors in Europe and Asia are now looking beyond Bordeaux and even France, but I suggest that the current increase in market share (by value) over the last 5 years is less significant when one considers the number of realistically interested parties and the amount of available stock outside of the “club” of original (and normally California-based) buyers of the wine. Becoming a member of this club is almost as difficult as joining the MCC or Augusta National. Of course, this particularly applies to the likes of Screaming Eagle or Harlan Estate. At least the obvious European connections of Christian Moueix (Dominus) and the collaboration of Robert Mondavi and Baron Philippe de Rothschild (Opus one) has at least allowed some of the production to be allocated to the European market.

A change in attitude by the other top estates regards supplying a global market (even in a modest way) would surely cement their brand and rapidly justify the elevated attention by Liv-Ex and their California 50 index. Jackson also admits that the value for money argument needs to be resolved when some critics compare the best from California with the finest Bordeaux wines. At the moment they don’t measure up:

"Whether the best US wines deserve an equal ranking with Bordeaux's best is a matter of opinion. However, currently the market is suggesting that they do. Nevertheless, value for money is definitely out of the question. A bottle of the reliably excellent Lynch Bages 2009 can be yours for less than £150 ($190). Screaming Eagle 2009? Try at least £2500 ($3200), and add a few more pounds for luck.”

 

W Blake-Gray – 25/05/18 - French Giant Gets Napa Outpost

A major French winery owner has made its first foray into Cabernet country.

Blake-Gray talks about the latest purchase by insurance & wine company AXA-Millesimes; already the owner of Chateau Pichon-Langueville Baron in Pauillac (Bordeaux), Domaine de l’Arlot (Burgundy), Quinta do Noval in Portugal and Disznoko in Hungary. Their latest acquisition is the 5000 case producing estate Outpost in the Napa Valley. Details have not been confirmed and a value of $40 million is pure speculation.

Outpost has a number of different vines on its site including Zinfandel, Petit Syrah and Grenache. However, the greatest acclaim was for its Cabernet Sauvignon where The Wine Advocate has awarded 95 points or more to 18 wines (16 Cabernets and two Bordeaux blends).

It seems obvious that AXA-Millesimes are spreading their interest (and risk) when it comes to vineyard ownership and it will be for the long term. According to wine industry analyst Jon Moramarco, managing partner of BW166, "A number of insurance companies have bought châteaux in Bordeaux. They look at it as a long-term hold investment. They can get some income from it while the value of the land appreciates. What I know about French insurance companies, they buy for the long term."

Blake-Gray goes on to point out the price changes made after some glowing reports, but also it highlights the pitifully small quantities produced which ultimately will supply an ultra-niche market: “There may be room to make more profit right away simply by raising prices. Outpost's 2016 Estate Cabernet Sauvignon was released at $85 a bottle; its 2016 True Vineyard Cabernet Sauvignon was $135. Those prices are low for top Napa Valley Cabernet. After the 2014 True Vineyard Cab got 100 points from Robert Parker, the winery bumped up the release price for subsequent vintages by $10, but the market will apparently pay quite a bit more, as the average price for the 2015 – which the Advocate scored 97+, whatever that means – is $245 on Wine-Searcher. Outpost makes less than 500 cases of True Vineyard Cabernet.”

 

Liv-ex Market Report

Not much to report since any changes are skewed by the reduced number of trades and a number of contradictions concerning Bordeaux market share which do not match our own experiences. We can only put this down to the summer break and sections of the European trade being largely inactive from late July through to early September. Let’s see what comes out in the wash, in the meantime here is some interesting data and I expect to see some correction to these figures by the end of September.

 

Liv-Ex Indices

 

Index

Level (31/07)

MOM (%)

1y (%)

5y (%)

YTD (%)

Liv-ex Fine    Wine 50

358

0.0%

3.5%

13.9%

1.3%

Liv-ex      Fine Wine 100

314

-0.7%

2.4%

15.2%

0.6%

Liv-ex Bordeaux 500

321

-0.6%

4.1%

23.0%

1.4%

Liv-ex       Fine Wine 1000

348

0.7%

9.9%

34.5%

5.4%

Liv-ex      Fine Wine Investibles

346

-0.1%

3.6%

19.8%

1.4%

FTSE 100

7,701

0.8%

4.5%

17.2%

0.2%

S&P 500

2,803

3.1%

13.5%

66.3%

4.8%

Gold

930

-1.9%

-3.7%

-3.1%

7.6%

 August Fine Wine News round up

Source: Liv-ex (August, 2018)

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