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Bright stars: The future of wine investment

Just five years ago you could have been the proud owner of a case of 1982 Château Lafite-Rothschild for less than £5,000. Rewind a further five years and it was yours for just £2,500; go back another half decade and a cheeky grand would have done the trick.  Today you would be lucky to get change from £40,000. 

Yes, you did read that right; forty thousand pounds.  Pretty impressive, for a crate of grape juice.

And yet, whilst the figures in this example may be astonishing, the growth rate is far from unique:  Entry level for Lafite from even the more modest vintages such as 01, 02 & 04 has risen from less than £1,000 to around £7,000 in the last five years, and the top years have grown to command prices well into the teens;  the 96 and the 03 have rallied from a smidgen over £2,000 to £12,500, the 86 from £2,500 to £17,500 and the delectable 2000 from under £3,000 to £20,000. Most astonishing of all, Lafite 08 shot from £3,000 to £9,000 in a single year – and it hasn’t even been bottled yet!    

In fact, remarkably, every Lafite from the 82 onwards has appreciated at least five-fold in the last five years – even the unloved offerings of 84 & 91 – and with no sign of a let-up in the ascension we are now surely mere months from the point at which Lafite from any vintage starts from £1,000 per bottle; the heralded stuff two, three – perhaps four times that.

In the exclusive club of those wines priced at “how much???” and above, Lafite still wears the crown, but her stellar rise certainly hasn’t shamed the other First Growths, each of which can dazzle with their own tales of mind boggling appreciation.   This continuing process has already, to all intents and purposes, set the bar for an investment into a decent case of First Growth claret at £5,000+.

A new opportunity….

Five years ago £2 – £5,000 was the expected requirement to buy a case of good First Growth, but global growth in wealth – particularly (as now well documented) in China – has lead to a dramatic increase in demand, driving prices north at a rate of knots. 

The effect of this process has been to create a noticeable black hole – a price band void – in the marketplace: survey the stock list of any fine wine merchant today and you will be presented with an array of these £5,000+ First Growths, and a selection from the lower classed Crus priced from just a few hundred pounds to rarely more than £2000.  Between £2,000 & £5,000, however, you’ll find the cupboards decidedly bare: Classic market polarisation.  

Of course, the iron law of supply & demand simply won’t tolerate this position for much longer. Whilst the super-rich are evidently perfectly happy to pay thousands per bottle (indeed the more expensive the better if it’s an image driven purchase), there is now a considerable, growing international demographic of wealthy individuals either unwilling or unable to meet the soaring cost of the First Growths, but nonetheless demanding world-class, prestigious, fine Bordeaux.

These individuals are seeking quality and value outside the traditional First Growth market, and so – with our investor’s hat on – we’re presented with some rare and compelling opportunities amongst the lower Crus; all the more so when considering that many are wonderful gems crafted in celebrated estates, dripping with pedigree and in terms of quality, every bit the equal of the First Growth elite.  

Consequently the best offerings from the lower Crus are now finding themselves subject to the very same market forces – exponential increases in demand coupled with tumbling supply – that have had such a dramatic effect on the prices of Lafite and the other First Growths over recent years.  As the market naturally (and inevitably) broadens to accommodate demand, it is here that we at Albany Portfolio Management believe some of the greatest gains will be found in the wine market over coming years. 

In fact, we have been enthusiastically promoting a number of the bright stars that we are convinced will be ‘the next big thing’ to our customers for some time. Take heed; China has noticed these wines and prices are on the move!  Here’s a selection of our top tips:

2005 Pontet Canet

Plucky 5th Growth playing with the big boys.  A new ace winemaking team in the 90s worked wonders and the estate is now producing extraordinary, giant-toppling offerings.   Sits next door to Mouton-Rothschild.  96+/100   (Also worth seeking out 08 & 09)  

Target prices:  £850 (08 £720 / 09 £1,200)

2003 Cos d’Estournel:  

Quality has jumped light-years in the last decade, and now one the most highly regarded 2nd Growths.  Candidate for ‘wine of the vintage’, says Parker: 98/100.   

Target Price: £1,650

2003 Montrose:  Recently graded by Parker at the hallowed 100/100 in a blind tasting – 100 point Lafite from the same vintage £1000 per bottle!  2nd Growth royalty.

Target price £1,500  

2005 Duhart Milon Rothschild: 

Recently taken into the Rothschild stable – which includes heavyweights Lafite and Mouton – and now managed by the Lafite team.  Quality on the rise and oh-so popular in China.  Looks identical to a bottle of Lafite – coincidence?  05 our favourite, but 06, 07, 08 & 09 also good bets. 4th Growth.  94/100. 

Target Price (05): £950

2006 l’Eglise Clinet:  

“Bravo”, says Parker “potentially wine of the vintage”.  With the perfect 05 tickling £5,000, the 06 is looking something of a bargain.  Keep your eye on 09, too. Pomerol.  96/100.   

Target price: £1,400

 
2008 /2009 Clinet:

Unclassified Pomerol making loud noises in very recent vintages. 

Target price 08 (94-97/100): £700: 09 (97-100/100): £1,600

 

Notes: Prices for Lafite cited in this article have been rounded up or down.  Exact figures may be found below and represent the average market price drawn from Liv-ex  www.liv-ex.com at the time of composition. The “Target Price” figures are intended as a guide price one might reasonably expect to pay from a good merchant at the time of composition. 

Av. Lafite prices as reported on Liv-ex in £GBP Sept 05/Sept 10:           

82: 5223/42033 | 84: 780/6000 | 86: 2553/17465     91: 780/7597 | 96: 2180/12790 |
00: 2647/19876     01: 998/7226 | 02: 900/7198 | 03: 2100/12167        04: 901/7153 |
08: 3392/9092

 

Best regards
The Team at APM
+44 (0)20 7851 5544

www.albanyportfoliomanagement.co.uk We believe that investing in wine should be both enjoyable and profitable, but like any traded commodity there are risks and wine can go down in value as well as up. Albany Portfolio Management is not regulated by the Financial Services Authority.

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