Market Overview
The market sentiment since June has continued with confidence in First growths remaining low as they continue their downward trend, represented by the liv-ex 50 falling 7.8%. The liv-ex 100, which is supported by the steady Super-Seconds and strong gains from Burgundy, Rhone, Champagne and Italy, restricted it’s loss to 2.4%. This can be attributed to the market seeking great wines to trade outside Bordeaux, and the general trend of the broadening of the conventional market for investment grade wine, with global buyers finding high quality and value outside First Growths.

First Growths
A slow summer was expected with June and July in particular suffering from the disastrously priced 2011 En Primeur campaign, while August is traditionally a quiet month. The start of September has seen a rise in demand with the Liv-ex 50 finding some traction and gaining 1%. Prices for many First Growths – excluding Lafite Rothschild – are nearing pre 2008 levels when Hong Kong abolished import duty on wine. Although Chinese buying has been relatively quiet for a year and reports of their luxury market slowing down broadly publicised, Brazilian and Russian demand is on the increase, while India is promising a large decrease on the import duty of European wine. China will make a steady return and all things considered global demand is healthy, with the number of fine wine consumers and collectors on a steady increase. The only question now is timing the bottom of the market.

The problem is recent vintages, Negociants are being forced to hold 2010’s and 2011’s, while 2009’s are so highly priced that there is a reduced domestic market for consumption. The major concern at present is the 2012 vintage campaign, which if lacklustre could stretch the finances of a number of smaller negociants to breaking point and therefore force them to release distressed stock onto the market. As such, we believe that the short-term investment success of the top wines of Bordeaux rests largely with the Bordeaux trade, although current prices will yield excellent returns over a 3-5 year horizon.

St.Emilion re-classification
This month saw the eagerly awaited re-classificaiton of St-Emilion. The big news was Angelus and Pavie being moved up to join Cheval Blanc and Ausone as Premier Grand Cru Classe A. Noteworthy also was Mondotte entering Classe B.

The recent loss in confidence for First Growths has led more traditional Bordeaux buyers toward Grand Cru Burgundy (Cote d’Or) for investment and consumption. Much is made of the limited supply and restricted boundaries in Bordeaux, yet production in Burgundy is minuscule, with the entire vineyard plot of Chambertin producing less than one quarter of the cases of Lafite. The Cote D’or also produced two great vintages in 2009 and 2010, with the latter restricted to half its normal production. Moreover, unlike the Bordeaux, Burgundy En Primeur prices remain extremely attractive and allocations fiercely defended.

The 2010 vintage becomes physical this Winter and is in huge demand. Back vintages are benefiting from increasing awareness with Armand Rousseau’s plots in Chambertin and Clos de Beze returning over 10% YTD, following Romanee Conti’s 30% rise in 2011 and we expect to see growth for the other great red producers: Roumier, Ponsot, Meo-Camuzet, Leroy, Comte de Vogue, Mugnier, Liger-Belair and Fourrier. While Bordeaux may be the first love of collectors, they retire in Burgundy and there is little to go around.

Few wine countries have undergone as drastic a change as Italy. It fell into the doldrums in the late 19th and mid-20th century, only to be re-ignited in the late 70’s, 80’s and 90’s, adapting by producing modern variations on traditional wines, the most controversial of all the Super-Tuscans, named such to denote all Tuscan wines that did not conform to traditional Tuscan winemaking practices.

Masseto mimics Petrus in that is made from 100% Merlot, grown on clay soils, with a strong oak influence, reduced yields and made in small quantities, (2000 cases year). Since 2008 Masseto has returned over 90%. Sassicaia which is Cabernet Sauvignon dominant received 100 points from Parker in 1985 and is the flagship for Super-Tuscan wine, as such it has returned 40% since 2007. These wines trade at super-second prices, but are the First growths of Tuscany. They also have the advantage of a very large global on-trade business, being offered in all top Italian restaurants lists and a feature on all great wine lists. They also benefit from a growing base of collectors, who want the best wines of Italy in their cellars. Since the start of the market correction the Liv-ex Super-Tuscan Index has seen a rise of 9%. The recent 2009 vintage has recently been review by James Suckling, who gave Sassicaia 98 points, Solaia 96, Ornellaia 96 and Masseto 95. This month we will be doing a special weekly spotlight on 5 Super-Tuscans wines.

Bordeaux First growths are always the go-to wines for new markets and will always fill the cellars of established collectors. However, despite the slow year the market has begun to move into other regions, the allure of these wines and their quality means they can now be cemented as investment grade wines.