Post Kahuna Lacuna?

09.08.17

There is a debate ongoing about the impact of Robert Parker’s retirement on fine wine prices: will Neal Martin ever hold the same influence as the great Kahuna? It is time, perhaps, to do a little bit of analysis on the impact of Wine Advocate opinion on wine price movement.

Anecdotally, fine wine investors believe the following:
Parker’s influence is much greater than everyone else’s;
The jury is still out as to the impact of his successors.

Having just been through an En Primeur campaign we know that the market place takes full account of the composition of critical opinion. At Amphora Portfolio Management we suspect that the producers themselves couldn’t give a hoot, preferring their own wine-makers’ opinions as to the underlying quality of their wine. True, some of their release prices seem based on the absorption of hallucinogenic substances, but there is ample evidence that the take-up of en primeur has a lot to do with acceptance by the broad market which takes its cue from what critics have to say.

There was even a suspicion in the recent campaign that the response to one of the releases escalated only after Neal Martin had offered his view, which may be wishful thinking on the part of those participants desperate for a new messiah. As we shall see below, Neal Martin has regraded a lot of Parker scores without there being the slightest impact on the price. But so has Robert Parker himself!

One of the wines that has tripped us up in recent years is Mouton 2003. 2003 is a difficult enough vintage at the best of times, with the market often confused as to its general quality. In Pauillac the appellation score for the year was 95 points, the same as the great 2005 vintage, but in Margaux only 88 against a majestic 98 in 2005, and in Pessac Leognan 88 against 95, so a pretty schizophrenic vintage all round on the Left Bank.

En primeur Robert Parker gave Mouton 2003 95-98 points, which crystallised into 95+ when it went into bottle 2 years later. The passage of time was not kind. When he tasted it again in August 2014 it had become “probably the weakest of the First Growths” for 2003, and the rating was reduced to 91. To us this represented a pretty spectacular decline, and we recommended that investors sell up and move on.

To be quite frank, this is the sort of situation that keeps us humble. Here is Mouton 2003 against the Liv-ex 100 over the last 2 years:

The bottom line is that the market has totally ignored the downgrade, giving us cause to worry afresh about one of the key drivers of this market place!

Yet we know that by and large pricing across the board is consistent with Parker opinion, and that such anomalies as exist do so because for a variety of reasons the fine wine market is not yet totally efficient. We also know that there can be significant impacts when he does change his tune. From the end of 2014 until the summer of 2015 everyone worked themselves into a lather about the forthcoming retrospective tasting of the iconic 2005 vintage.

To refresh the memory, Parker had always been viewed as unduly harsh on that vintage, considering it overly tannic, amongst other considerations. Word crept into the market that he was softening his stance, on the back of a series of private tastings, so in an otherwise quiet overall market quite a few 2005s moved strongly ahead. When the results were published St Emilion emerged triumphant with Angelus and Cheval Blanc both hiked up to 100 points, as were Haut Brion and La Mission Haut Brion over the river.

The chart below captures graphically the impact of these upgrades to the 2005s. The red line is the Liv-ex 100. All the lines above it reflect the newly-graded 100 pointers, those below are Latour (upgraded from 96 but only to 98), and Cos d’Estournel (downgraded from 98 to 97). The points here are twofold: the upgrade to 100 really mattered; anything else, whether up or down, didn’t register. Worse than that, the retrospective having been and gone, there was nothing that vintage could do for an encore, and so, out of favour and out of the news, the performance suffered so badly they hardly participated in the rally over the last couple of years.


An interesting feature of Wine Advocate regrades is that, with the exception of well-trumpeted retrospectives, many pass under the radar, and at Amphora we believe this is the main reason for the indifferent market reaction. In the stock market where everything is analysed ad infinitum, sectors formerly had analysts whose opinions on stocks had a big impact on price movements. I say “formerly” because regulatory stringency has squeezed opinions out of fashion, so everyone now says the same thing.

Everyone doesn’t say the same thing about fine wines, thank goodness, so we analyse the impact when one of the more influential critics does opine, but our analysis indicates that the timing, direction, and degree of regrades tends to condition the market reaction.

We will be talking in more detail about this in future notes, but for now we will end with a chart which illustrates much of the discussion so far.

When the Montrose and Pontet Canet 2009 vintages went en primeur in 2010 they earned (96-100) and (97-100) respectively. On going into bottle in H1 2012 they each received a maximum and the reaction of the market was euphoric:

When Montrose 2010 was bottled it scored a mere 99, and didn’t receive its “full military” until August 2014, which is reflected in August 2016 move in the red line above, moving from £1,370 to £1,600 per case, a decent move but obviously nothing like the earlier 2009s, indeed it has been a persistent oddity that Montrose 2009 has traded at a significant premium to the 2010. We have drawn investors’ attention to this many times and as you can see from the table they have been rewarded on a 2 and 5 year view with significant outperformance.

What now transpires though is that Neal Martin has downgraded all three, the Montrose 2009 to 98 points, the 2010 to 99, and the Pontet Canet 2009 to 98. These revisions took place at the end of February and March this year, and again looking at the table you can see that Montrose 2010 is keeping its nose ahead of the index over 6 months, whilst the others are a tad behind. In no case, however, is the reaction sufficient to conclude that the market has taken fright at the downgrade.

Has anyone noticed? Are these wines now a “sell” or will they be Mouton 2003 revisited? Stay tuned as we look more closely at this feature in the coming weeks.