Passion Pays. Nothing like old wine

Elections are over — done and dusted; financial and stock markets are finding stability and investors continue to look for unique and outstanding opportunities.

Fine wine investments have continued to soar and the current Bordeaux 2013 En-Primeur campaign has finally come to an end. Expectations were high due to the last two unsuccessful En-Primeur campaigns, but it appears that this year too, the campaign has failed to live up to expectations.

The main reason for that is pricing. Since fine wine prices skyrocketed during the past few years, Chateaux chose to drastically increase their release prices so as to profit from those huge value increases. But since the first such price increase (2012), the En-Primeur campaign has not been successful.

After two failed En-Primeur campaigns, wine traders and merchants expected release prices to drop back to their normal levels, but that was not the case. Prices were reduced slightly but clearly not enough.

Right ahead of left Interestingly enough, while the En-Primeur campaign failed to lift the market, prices for earlier vintages have increased significantly. Especially, vintages of the late 80s and early 90s seem to be in high demand at the moment. This pattern is understandable as good vintages from those years are running out. The demand is hence increasing for these limited stocks, before they become too expensive. This is already pushing up prices.

This year, in particular, the Bordeaux-classified first-growth stocks, such as the Chateau Lafite Rothschild, Chateau Latour and Chateau Margaux, to name a few, have taken a back seat. The left bank of Bordeaux was always at the forefront. But this year fine wines from the right bank of Bordeaux seem to be leaving their neighbours behind. Wines such as Chateau Petrus, Chateau Le Pin and Chateau Cheval Blanc are also as highly regarded as first growths, but are not classified as such due to their location (right bank).

Demand for these right-bank blue-chips is surging, especially from the US. It seems that investors as well as drinkers and connoisseurs have developed a huge liking for these fine wines and are currently buying as much as possible. Also, since most right bank Chateaux produce less than their left bank counterparts, supply is limited. Getting certain wines of very good vintage in original packaging (OWC – original wooden case) and in perfect condition is almost impossible.

Therefore, it will be interesting to monitor closely the performance of certain right-bank wines this year. Even some not-so-good vintages have shown tremendous growth potential and are being added to investors’ portfolios.

Resilience in every dip The fine wine investment market negatively correlates to stock market performance. This year, with some stock market indices doing very well, it is no definite signal for the fine wine market. These luxury wines have demonstrated in the past that even during economic downturns, values can increase. Due to the luxury aspect of this market, demand does not necessarily decrease; it only slows down. Since output is fixed and cannot be increased, thanks to French Government restrictions, good vintages will always find buyers, thus making high-end wines a recession-proof investment vehicle.

The writer is CEO of Bordeaux Traders. The views are personal.

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