January fine wine news round-up

David King – 17th January 2018

The start of a new year and there are many reasons to say “good riddance” to 2017. It seems that most of the major wine making regions of the world have suffered at the hands of Mother Nature. Frost, hail, floods, drought and wildfires – we’ve seen the lot – and so we look forward to what should be a better year in 2018.

The Drinks Business

Natalie Wang (10th January 2017) reported that CITIC International Investments Group and Domaines Baron de Rothschild (DBR) have parted ways on Lafite’s Chinese winery project (Shandong Estate). CITIC cite macroeconomic changes have required them to shift their focus to other areas. For example, they have purchased battery maker Guoan Lithium. They are also actively removing themselves from any partnerships where they are in the minority.

CITIC remains confident in the success of Lafite’s project, praising DBR’s long-term approach and their constant concern for excellence and quality. Christophe Salin (outgoing CEO of DBR) confirmed the amicable nature of the split, saying: “We are very satisfied with the partnership and quality of the work achieved. CITIC IIG team has been efficient and we are grateful for the efforts and contributions to the Shandong Estate.”

CITIC’s 30% stake is valued at RMB 32.56 million. DBR is purchasing CITIC’s shares and expects to own the entire capital of its Chinese vineyard. Founded in 2008, the first vintage of Domaine de Penglai is expected to be released later this year.

Natalie also reports on how Bordeaux estates are rather wary of new Chinese owners renaming the chateaux to appeal to their customers in China. Rabbits, antelope and sheep have very positive connotations in Chinese culture and it’s not just the names but also the images on the labels. For example, the 300-year-old Chateau Larteau is now called Chateau Lapin Imperial (Chateau Imperial Rabbit) by propietor Chi Tong, who also owns World Harvest Far East. The symbol of a white walled mansion has been replaced with a fluffy bunny rabbit! I don’t think this will catch on though, and I hope that the European market is shown some respect by retaining names and labels. We shall see. There are over 8,000 chateau in the Bordeaux region and the Chinese only own around 160 of them.

Lucy Shaw focuses on the appointment of Lisa Perrotti-Brown as the replacement for Neal Martin as the Bordeaux reviewer for The Wine Advocate. Lisa is also the Editor-in-Chief for this esteemed publication and is a highly respected assessor of fine wines. As a former colleague of mine (at Corney & Barrow) many moons ago, I know this high-profile role is in very safe hands.

Winesearcher News

Liza B Zimmerman (5th January 2018) reports on the transformations due in the national shipping market within the USA. The effect on the fine wine trade is potentially profound for the auction houses, which will be treated as retailers and as such will be limited to shipping wines to the 14 free trading states. Wine retailers and wholesalers tend only to deal in the most recent vintages. Fine wine collectors have depended on the auction houses to supply their wines and to take care of the interstate shipping arrangements. No more! We may see some imaginative solutions to the problem in due course.

Wine Spectator 

Suzanne Mustacich (8th January 2018) reports that Chinese businessman Peter Kwok has purchased his 7th Bordeaux estate in the shape of Chateau Bellefont-Belcier (Grand Cru Classe - St. Emilion), which has an envious position on the St. Emilion plateau, but has never really fulfilled its potential. Peter Kwok and his three children are all Francophiles and embrace the traditions of the region. The outlook is bright as investments in their other properties have shown steady improvements in quality. One to keep an eye on.

Daily Telegraph 

Victoria Moore (8th January 2018) looks at Wine Lister, which has taken another step that is making its voice a louder presence in the field of fine wine market interpretation. Founder and CEO Ellen Lister has produced their report on Burgundy just ahead of the 2016 tastings in London and follows on from their previous studies on Bordeaux and Tuscany.

We have seen wines from this region show steady price growth over the last six years. Liv-Ex reports have shown a greater percentage of market share by value than ever before, so perhaps an alternative viewpoint is required to put this into context. Wine Lister scores using their proprietary system, combine data on three areas of a wine's positioning in the market:

• Brand (visible on the wine lists of the most prestigious restaurants & search frequency on winesearcher.com)

• Economics (volume traded through auction, plus long- and short- term price performance)

• Quality (scores from Jancis Robinson, Jeannie Cho Lee, Bettane & Dessauve, Antion Galloni and Neal Martin now of Vinous)

Scores can be collated and compared by region. For example, the scores for the top 50 wines in Burgundy come in at 934 points, whereas Bordeaux scores 920 and Tuscany only 839. Burgundy takes a significant lead for quality and economic performance, but lags way behind Bordeaux for brand strength. This is down to the dilution of brand across several cuvees and each produced in tiny quantities. Restrictions on availability means that they will always be way behind the mega brands of the First Growth Chateaux of Bordeaux.

Time will tell if Wine Lister continues to grow in influence.

Bloomberg

Elin McCoy (4th January 2017) looks at the likely trends for 2018. Namely…

• A continuing rise in popularity for all things Rosé.
• Tasting wines in luxury surroundings rather than a crowded room. A growth market?
• More shopping for wine online. US needs to adapt as China takes the lead here.
• Notable rise in demand through retail for large format bottles. Mostly magnums and double-magnums, however Chapel Down made a 15 litre Nebuchadnezzar - the largest bottle of English sparkling wine ever produced.
• Alternative wine regions to hit the shelves to make up for the shortfall from weather affected regions in 2017:
  • Spain – Ribeira Sacre, Gredos Mountains and of course Rioja
  • England’s rise will continue and thanks to global warming output is expected to increase year on year.
  • Specialist fizz from alternative areas to plug gap left by poor harvests. Cremants from Alsace, Burgundy, Bordeaux, Loire and Jura will be worth a look.
  • The Republic of Georgia and Croatia are gaining a reputation and starting to be taken seriously.
  • The increase in automation in even the most exclusive estates.

Cellar Watch

After a record November, activity in December tailed off due to the holidays. However, Liv-ex reported a doubling in trade when compared with the same period last year. Interestingly, it noted that more trades are being conducted during weekends and holidays. More than 60% of trades were completed automatically and is a sign of things to come.

Lafite-Rothschild helped lift First Growth market share to 26.5% over December, up from 21% the previous month. The 2013 and 2014 vintages were the two most traded wines by value in December. Petrus also traded well, the 2006 vintage in particular.

Bordeaux’s market share did rise to 65.8% by value and just below its 2017 average. It is expected that this figure will remain below 70% for 2018 and will be the new normal. Burgundy dipped slightly to 14.6%, with Italy taking just 7.5%.

All of Liv-ex’s main indices drifted in December...

Major Market Movers: 2007 Vintage

Just to indicate what happens when demand for big brand, ready to drink, Bordeaux takes effect. The virtual shop shelves have been stripped of 2007s. There is very little stock out there matching this profile and an opportunity has been siezed. Big movers…

The Broadening Market. It is interesting when looking at the market in general terms through the eyes of a different currency. In USD terms the market is up 15% (but up only 2% in Euros). The relative value of Sterling will still have a massive impact on the UK market, and until Brexit is finally negotiated and we have left in March 2019 I doubt this is going to change. The range of wines to be traded will continue to broaden...4500 different wines (from 769 brands) were traded in 2017, with just 4000 in the previous year (from 670 brands). There has been a 90% increase in different brands since 2015.

What to expect in 2018. Very dangerous to make predictions but I look forward to seeing how the market reacts to the shift of personnel among the critics, namely Neal Martin jumping The Wine Advocate ship to join Vinous in February. Will Martin’s scores and influence travel with him to Vinous? An interesting situation that will be played out during the 2017 En Primeur campaign.

Is a Burgundy bubble forming? With currency volatility and memories of the crash in Bordeaux prices still fresh in the memory, businesses must be crossing their fingers that they are not holding too much stock if the bubble goes pop!

2017 En Primeur is already raising questions and not about the perceived quality. We already know the style is likely to be early drinking and lacking in depth and complexity. Will it be a nice drink? It’s all about price and whether we get some value. If I refer you to the Major Market Movers piece above, the Bordelaise will have an eye on this detail when considering their pricing policy. They have rarely shown any sympathy towards wine merchants in the past and I am not holding my breath for anything different this time around. It is likely that the famous arrogance will prevail – sorry!