The En Primeur 2011 campaign has lost the will to live, spluttering its way towards a miserable conclusion. With the exception of a few wines such as Pontet Canet and Durcu Beaucaillou, most Chateaux released above the price of bottled vintages that are of a similar or better quality , 2001, 2003, 2008. This left the First Growth market without any real direction and sapped the confidence that was being re-built at the beginning of 2012. However, this has only encouraged the broadening of the market and a balanced selection of Super Seconds and top Burgundy producers have returned between 6 – 10% YTD.
The Liv-ex 50 which is composed solely of recent vintage First Growths returned 4% between Jan-March 2012, followed by a recent drop. In particular Lafite has continued its downward trend falling 8% YTD, while the other four, Mouton, Margaux, Haut Brion and Latour have returned 1%, losing most of their gains from the beginning of the year.
This correction offers great opportunistic buying, particularly in older vintages where the supply is scarce. In fact since Jan 2011 the spread ratio between First Growths and Super Seconds has tightened from 6.75 to 1, where the average First Growth case price was £5,800 and Super Second £860 down to 5 to 1, £5,000 to £1,000.
The prestigious vineyard plots and producers on the Cote d’Or, the summit of Great Burgundy, are becoming rarer due to minuscule productions and increased global demand. Historic scarcity of supply has led to a closed En Primeur allocation system, where few scrambling hands grab their hallowed allowance every year. To the credit of the Bourgogne these allocations – at large – find their way to true collectors and rarely see the light of day again; wine funds struggle to obtain these wines preventing speculation and later release. This has created a limited, luxury market of controlled supply and fervent demand. The secondary market for the cases that resurface allows a second chance at securing these wines, both for investment and consumption.
Great Burgundy provides an elegance and subtlety that Bordeaux seldom offers, while the top wines of Armand Rousseau, Domaine de la Romanée-Conti (DRC) and Henri Jayer are far rarer than the top names of Bordeaux, for example Lafite produces 20,000 cases a year and Romanée-Conti only 400!
DRC’s Grand Cru labels have returned 7% in 2012, however, Romanée-Conti has slowed down returning 2.6% during this period, after returning over 42% in 2011. This certainly suggests a broadening of the market within DRC, for example, La Tâche and DRC Richebourg have returned 10% YTD, showing most of these gains in the in last 6 weeks. Rousseau Chambertin and Chambertin Clos de Beze combined have returned 23% over the last 12 months and 5% YTD.
Super Seconds have benefited from constant quality and therefore garnered critical acclaim, which has helped broaden the market and accelerate their global brand status. In times of economic uncertainty European and American consumers turn greater attention to Super Seconds, which offer great quality and value at £60-100 a bottle. In addition their cachet continues to go from strength to strength in the emerging markets, further increasing their consumer base.
Super Seconds are less subject to the speculation that has seen a large correction in the First Growths over the last 8 months, offering stable growth. Since January 2011 the Super Seconds (see growth below) have returned 21%, and have seen 6% so far in 2012, the best performers being Montrose 11.82%, Pontet Canet 7.54% and Pichon Baron 9.32%. While a part of this can be attributed to a jump in prices resu
lting from the 2009 Parker re-marks, the trend has followed across the top 16 investment vintages we track from 1995.
The graph below represents the trading levels of a group of selected wines ranging from Second Growths to Fifth Growths. While the 1855 classification holds true, Chateaux like Lynch Bages, Palmer and recently Pontet Canet show this can be transcended. Indeed, it is prudent to look for Chateaux that offers relative value amongst their peers.
Our strong recommendations for the next few months are: Pontet Canet, Montrose, Pichon Baron, Grand Puy Lacoste, Cos d’Estournel and Leoville Poyferre.
Please contact us for further details – Paul.Hammond@igwines.com
or call on +44 (0) 203 195 8051, US: +1 (347) 318 2197