Fine Wine Market 2010 Report

The fine wine market has enjoyed a very busy 2010. Following a slow and cautious 2009, the first quarter of 2010 saw a return to buoyant trading activity. Primary causes were strong Asian demand and anticipated high release prices for Bordeaux 2009, which resulted in increased trading of back vintages as buyers sought value. Liv-ex.com (The London International Vintners Exchange) reported their trade turnover was up 73% on the same period last year and 39% higher compared to the last three months of 2009.

Early April saw the start of the Bordeaux 2009 En Primeur releases, a campaign that was to stretch out to the beginning of July – the longest we’ve ever seen. High release prices did nothing to dampen demand and we saw the expected higher volume of trade in back vintages. Following a quieter July and August, market activity continued to rise into the autumn, reaching a peak with announcements from the two Rothschild stables. While Lafite confirmed they would feature the Chinese symbol for "8" on the label of the 2008 vintage, Mouton commissioned Chinese artist Xu Lei to create a painting for the same vintage. The Asian market responded as expected - with huge demand for both wines, ending the year at an all time high.

Bordeaux trading dominated the Liv-ex exchange throughout the year and was mainly led by recent vintages, including 2006, 2005, 2008.

Finishing the year at its highest level since we began tracking it in 2001 the armit 100 Index’s strong performance has continued almost unabated since the spring of 2009. Posting a healthy growth of 32.4% on the year and 2.5% gain on November’s high at the close of December.

To illustrate how the wine market is performing today we have created the armit 100 Index. This Index represents the price movement of 100 of the most sought-after fine wines. The armit 100 Index is tailor-made by us to suit the armit portfolio and is calculated monthly by Liv-ex, the London International Vintners Exchange, founded in 1999 and now considered the leading market place for the Fine Wine Trade and a trusted source of independent wine price information. The Index is mainly comprised of Bordeaux, reflecting today’s market along with top wines from Italy and Burgundy, reflecting armit’s portfolio and customer selection. To view the full list of the armit 100 index wines click here.

How the Index is calculated

All wines included in the Index are reviewed on a quarterly basis.
- In order to qualify for the Index, wines must have received a minimum score of 95 Parker points and be actively traded in the current market. They must also be physically available in the UK market, so recent vintages that are only trading on an En Primeur basis do not qualify.
- The armit 100 is calculated using the Liv-ex Mid-Price for each component wine. The Mid-Price is the most robust measure for pricing wines available in the market and is calculated by using the mid point between the current highest bid price and lowest offer price on the Liv-ex trading platform.
- The Liv-ex Mid Price for each wine is then multiplied by the wine's average production level - (for example 20,000 cases) - with this figure gradually reducing as the wine ages.

The armit 100’s Performance vs other indices

The table below shows the performance of the wines in the armit 100 over the last five years. We are delighted to see that the armit 100 wines have only been outshone by the world’s insatiable appetite for the go-to investment in times of economic uncertainty, Gold. The performance of the armit 100 over 12 months clearly shows that the fine wine market has left the major stock markets in its dust.

(Percentage Price Growth YTD Jan10-Dec10)

2010 wasn't just the year of the Tiger. It was also the year of Lafite. Lafite enjoyed a record-breaking year - first in an auction room, then on the charts. November 2010 will no doubt be remembered for the reaction to 'that auction' at Sotheby's, Hong Kong, and the announcement that the Chinese symbol for '8' would adorn all bottles of Château Lafite Rothschild 2008. Held on Friday 29th October, lots from the cellars of Lafite sold for more than double the London market price in some instances, and the 2008 vintage increased in value by around 20% overnight in response to the etching of the lucky number eight. Significantly, the trade in older vintages of Lafite has flourished as a result of the huge demand for the Lafite 'brand' and, indeed, Lafite-owned Château Duhart Milon is also seeing renewed interest.

Although First Growths – Lafite & Mouton in particular – continue to be in heavy demand. Record high release prices for the 2009 second wines have been willingly accepted by the market. This has boosted interest in back vintages and consequently pushed prices up across the board. Today, we can't find Carruades de Lafite for example, on the market under £3000 per case of 12 bottles. We have seen wider interest in a growing group of Cru Classe - including Beychevelle, Lynch-Bages & Leoville Las Cases. As the prices of the First Growths continue to climb out of the reach of the regular enthusiast, it seems likely that 2011 will see buying pattern of the Chinese expand their attention to include other strong brands, or even regions. Will Burgundy Grand Crus be next in line to benefit from Asian interest? Super Seconds represent attractive alternatives for brand conscious buyers, especially those that are yet to have been seen on the radar of the investors in Asia.

In mid-December the 2010 edition of the Liv-ex Fine Wine Power 100 was released. This thorough market research features a list of the top fine wine brands ranked by their 'power' in the market place and gives an extensive insight into market forces over the last 12 months. Each brand is ranked on five criteria: the level of trade it attracts on the Liv-ex Fine Wine Exchange; average score from Robert Parker; average price; one year price performance; and weighted production (price multiplied by average production). The wine brands are then ranked on their aggregate score across the five criteria.

The survey found the following major trends:

- Asia continues to dictate the performance of the world’s leading fine wine brands

- For the first time, the five Bordeaux First Growths have taken the first five places in the survey. Lafite tops the table for the second year in a row.

- China’s demand for easily recognisable Bordeaux in large quantities explains the strong performance of high-production left bank Bordeaux brands.

- Second wines have surged up the table, with Pavillon Rouge the highest new entry and Forts de Latour the highest climber. Brand-led demand from the Far East is the reason for the surging prices of second wines.

- Champagne continues to struggle, with sales to traditional markets muted and Asian demand yet to take off.

- The number one brand in 2008, DRC, comes in a creditable sixth. Overall, Burgundy remains steady, although it is increasingly overshadowed by Bordeaux.

- The top brands of Châteauneuf-du-Pape have put in a solid performance; although the headline-grabbing super-cuvées are absent.

- Sassicaia continues to climb the table and is the top-ranked Italian wine, overtaking Ornellaia.

(Excerpts from the 2010 Liv-ex Fine Wine Power 100 Source:Liv-ex.com)

As to what to do next, there are two significant factors to consider. Firstly, the Bordeaux 2008s will be physically available in the coming months and traditionally this brings an increase in demand. Secondly, the trade in older vintages of the most desirable Cru Classé (see the Liv-ex Claret Chip) is as busy as we have ever seen it and in many cases there are still many bargains by comparison to the high prices being achieved by the 2008s and 2009s. The forthcoming 2010 vintage is tipped to be another excellent one and with that in mind the back vintages of the top Château will look even better value. We expect to see some price movement for these as the high demand for wine assets is set to continue.

Increase in Italian trade - led by Sassicaia 2007

In November, the Italian trade achieved just under 5% turnover on the Liv-ex exchange - its highest monthly figure over five years. This impressive performance is the result of keen trade in Sassicaia 2007, showing the continuing and growing demand for this iconic Tuscan estate.

Neighboring Tenuta Dell’Ornellaia also displayed consistent, steady gains, confirming that leading lights of Tuscany are a worthy of a place in any portfolio. It’s single-vineyard, single varietal flagship wine Masseto (100% Merlot) introduced to the Place de Bordeaux in 2009 continues to be considered one of the great Italian wines suitable for any investment portfolio.

In Piedmont, Gaja’s 2007 Barbarescos arrived with their highest Wine Advocate ratings since the fabulous 1997s. And like the 1997s, they also have an incredible capacity to age.

"2009 is at least excellent … somewhat a blend of a very forward fleshy year such as 2000 and a more structured and tannic vintage as 2005"- Robert Parker

2009 is a glorious vintage that can easily stand comparison with the much-celebrated 2007s. Concentrated, rich and with plenty of depth and lots of personality, these wines will bring much joy both early in their lives and after extended ageing. The Rhône is one of the three classic wine-producing regions in France, but is undoubtedly the region that offers the best value for money – and 2009 is unquestionably a vintage that must be invested in.

Burgundy enjoyed the favourable climate of 2009 every bit as much as Bordeaux and the Rhône and the new vintage, launched over the past few weeks, has seen enormous demand. Burgundians have once again shown their long-term thinking as regards to pricing, ignoring the temptation for aggressive rises in favour of a more even model.

With its fractured nature, buying Burgundy requires either a greater degree of homework or more use of well-informed advice, but also in a vintage like 2009, quick decision making. Please call one of the team as soon as you can if you are interested in a selection.

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