Wine Investment Market Updates

I just drafted below newletter for my investment clients. Let me know what you think!

Market Overview: 2011 Q3 & Q4 up until now (Jan 2012)

With the European debt crisis unfolding and the global equity market undergoing a 15-20% correction over the latter half of last year, we have seen a weakening of fine wine prices from around July to August last year up until Christmas time, when trades began to slow down as the festive season came about. The most highly traded First Growths like Lafite and Mouton have undergone a rather significant price correction of an average of 18 -25% across multiple vintages of the last decade, while Super Seconds like Leoville-Las Cases, Pichon Lalande, Montrose, had undergone a price pull-back of about 10-13% average over the last 6 months. This applies also to 2010 en primeur prices.

A major reason behind the correction, in our view, stems from many European collectors who are holding above stocks dumping these fine wines at below market prices. This comes as no surprise to us, as the banking and economic crisis in Europe has left many investors wary of the future and spurred their need to cash out and also to over their losses in other investments. This also explains why in our opinion, China investors have been cautious in purchasing more Lafite and highly-prized wines in the previous Sotheby’s auction back in October, as they were able to find these wines at better prices from alternative sources and wine merchants but also because they have started expanding their appetite towards top Burgundies like the very rare DRCs as well as Super Seconds, which seem to be a better value for money. 

The future looks positive

As these below-market priced top growth wines are gradually getting into the hands of China consumers, who are buying these labels for personal consumption and gift purposes as the Chinese New Year approaches, and hungry investors in Hong Kong and China have been snapping the rest of it up in these upcoming few months, there will most definitely be a slow-down in the price correction, as we are already seeing from the recent trades and what’s been available in the market as of late.

Regarding the Bordeaux First Growths, the major correction is actually good news for potential investors and sophisticated drinkers and collectors, as they who have been put off by the high prices back when the en primeur 2010 were released are now getting re-involved. For the Super Seconds and great labels that fall outside the 1855 classification but are yet highly recognized for their top quality, the slight price correction actually offers much comfort to those investors and drinkers who have been avid supporters of these perhaps lesser-known brands that are of exceptional quality yet amazing value.

Our position thus remains the same: We think the future looks bright for investment wines, and right now is a great time to start revisiting and getting involved in the market, no matter what type of an investor or collector you are, and wherever you are today on your investment timeline.