Fine wine investors must have been delighted to read the headline ‘Fine wine trounces the FTSE 100’ in the Telegraph on July 19th. This was the report that The Bordeaux Index returned 14pc in the first 6 months of the year compared to the FTSE100 return of 1pc. Investors in fine wine have enjoyed steady gains of during the first six months of the year. The wines of Bordeaux continue to dominate the fine wine market. So despite mixed feelings about the 2010 en primeur prices, things could not be more positive for the fine wine investor.
According to Gary Boom, MD of The Bordeaux Index, the expensive 2010s have created a relative value for older wines and buyers are starting to look for bottles with a few years age instead of buying en primeur. Wine enthusiasts in the Far East are looking at second to fifth growths from older vintages. Buyers in the Far East tend to be consumers rather than investors so as these fine wines are gradually consumed, the value of the remaining bottles can only rise.
Despite concerns from Robert Parker that the global economy is ‘fragile’ and that the image of Bordeaux might be hurt by being too expensive, the Far East remains the biggest market for Bordeaux and there are no signs of this slowing down. The label is very important to the Chinese and consequently wines whose names they have heard of sell out rapidly. Pontet-Canet, a humble 5th growth that consistently performs above its ranking, and whose prices rose by a staggering 39% for the 2010 vintage, reportedly sold out in minutes.
Perhaps Parker is right to have concerns – the global economy may be fragile and there has been a backlash from the 2010 prices, but even in difficult times there will always be wealth and a thirst for quality products. Even if the Chinese market should settle down, the emerging Russian market still looms in the distance. Parker’s concern about the image of Bordeaux demonstrates a sense of responsibility for the wine that he loves, and whose prices he has had more than a hand in raising, if only because producers have so often been accused of basing their prices on his reviews. At a time when Bordeaux was under heavy criticism, it was appropriate for someone of Parker’s authority to step in with a remark that may or may not have an impact on next year’s prices. While growers have a great respect for Parker, they also keep a shrewd eye on the Far East. As long as they know that their wine will sell, they see no reason to cease increasing their prices.
While other alternative investments have floundered through the recession, the fine wine market has continued to soar. As with any investment you should always be vigilant and aware of the global market. Many of the Far Eastern consumers are relatively new to fine wine so their tastes are just developing, and they are beginning to experiment. Sales of first growths to the Chinese might drop off slightly as they start to discover other wines, and there has been some evidence of this trend. Fundamentally, consumers are savvy too and if they can find a way to spend less money on more wine and still have exceptional quality, then they will. Be a smart investor and let your wine investment company advise you on what brands are popular in the Far East and the other emerging markets.